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Anna Peter

Mumbai , Dec. 5

THE stronger rupee is hitting exporters where it hurts the most — their pocket. The rupee's growing strength against the dollar for much of the year has eroded exporters' margins and is damaging the competitiveness of Indian textiles in the global market.

According to Mr Ashok G. Rajani, Vice-Chairman (Western Region), Apparel Export Promotion Council, the appreciating rupee is posing a serious problem to textile exporters. The rupee's appreciation has shaved 6-7 per cent off exporters' margins on the average. For exporters, raising prices to protect margins could cost them customers. On the other hand, retaining customers mean reduced profits. The countries most likely to benefit should Indian exports prove uncompetitive, would be China, Thailand, Pakistan and Sri Lanka.

Indian exporters are allowed to deal in any foreign currency, but are forbidden from doing their export business in rupees. Trading in rupees would allow them to protect their margins and insulate them from the negative effects of fluctuating currencies. Garment and textile exporters have been meeting officials from the Ministries of Finance and Commerce and are hoping that the Government will come up with a solution.

He added that some exporters found trading in euros more advantageous because it was strengthening against the dollar. Buyers were preferring to buy their consignments in dollars.

They were fixing their prices in two currencies — the euro and the dollar — so that a few months down the line they could evaluate which currency deal offered better value.

Mr Vivek Royzada, Analyst, Mecklai Financial and Commercial Services Ltd, added that more exporters were exploring the option of invoicing in euros because they found that despite the volatility they were getting better realisations.

Indian exporters are trying to diversify their basket, not just opting for euros, which gives them better realisations, but trying to move away from the dollar to even the pound sterling.

Much of the reason is also the dollar's inability to dent the euro's strength and, according to Mr Royzada, the significant yield attraction of the euro.

For years the steadily weakening rupee inadvertently helped exporters reap a larger bonus, by making exports cheaper for foreigners and competitively priced vis-à-vis the exports of rival nations.

Now, however, exporters are in a bind, with many of them just trying to grin and bear the effects of the stronger rupee.

While earlier exporters could quote an additional 3-4 per cent on their prices, now most have to bear the increased burden. In November alone, the rupee rose approximately 50 paise.

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