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From the President’s Desk…..
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My Dear Fellow Exporters,
As exporters we are used to bear fluctuations in exchange rates. The rupee gained by 8 to 9% between 2002-03 and 2005-06, yet, we never made any hue and cry about it. But the current appreciation of 8.5% in just about few months over an appreciation of 8.7% during the last fiscal is hitting the exporters very hard, more so because most of us are working on single digit margin in today’s fiercely competitive global market. The export profits are thinning fast and we are losing out to competition. Many exporters have already started diverting their products to the local market which might prove injurious to our economy in the long run.
The export statistics has also begun to reflect the impact of hardening rupee. From an escalating growth of over 25 percent in the last three years, it appears, now our export is taking a downward curve. According to the figures released by the Department of Commerce, export growth has decelerated to 5.2% in January, 7.8% in February and 8.84 % in March 2007, and it needs no expert analysis to find out that the single most decelerator is the appreciating rupee.
An internal study conducted by the Commerce Ministry reveals that the textile industry, one of the largest employment generators in the country, appears to be severely hit by the hardening of rupee. The industry has registered a 6.3 per cent fall in exports during the last four months. Apparel Export Promotion Council also corroborates that the receipts by apparel exporters have decreased from Rs 20,484 crore in the first half of 2006-07 to Rs 19,181 crore during the second half of the year, despite the fact that export figures remain at similar levels for both the periods.
What is true with textile industry is also true for leather, engineering, pharmaceutical and a host of other products because most of our export products are price sensitive and predominantly invoiced in US dollar. Trade leaders are fast losing their optimism to achieve the challenging export targets that have been set for the current financial year.
There has been a talk about intervention by the RBI to arrest the trend. But given the hard economic reality of today, such intervention may prove inflationary. So the government should deliberate and find another mechanism to offset the losses to exporters. All taxes and duties, levied by federal or state government, should be refunded to exporters expeditiously to maintain their competitiveness. Further, export credit may be extended to them at the Bank Rate as Prime Lending Rates have already moved northward. EEFC account may also be converted into an interest bearing account allowing interest rate at par with fixed deposit of 3-6 months tenure. Transaction cost can also be reduced substantially with the implementation of EDI by all agencies involved in foreign trade.
Our Commerce & Industry Minister has already conveyed his concerns over the issue to the Central Bank and has written to the Prime Minister seeking his intervention in the matter. On his part, he has indicated to launch a scheme for refund of taxes and levies to offset the impact of hardening rupee on exports while speaking to reporters after the inaugural session of the 3rd GCC-India Investment Conference in Mumbai on 29th May. We request the government to do the needful well before the small and marginal exporters of the country join the bandwagon of suiciding peasants.
Yours sincerely,
Ganesh Kumar Gupta
PRESIDENT
