The Hindu Business Line : `Shift to euro is tough choice for exporters'

EVEN though the euro emerged as the most preferred currency, after the US dollar, for billing by Indian exporters, the exporting community feels that a move to the euro as an alternative currency is a difficult choice on the ground.

This has been highlighted in a study on `Impact of rupee appreciation on Indian exporters' undertaken by the Federation of Indian Chambers of Commerce and Industry (FICCI).

The study has revealed that in the light of recent developments in the exchange markets, 89 per cent of exporter-respondents have cast their vote in favour of the euro as a transaction currency in lieu of the US dollar. However, a move to an alternative currency would be a difficult choice on the ground, the respondents said.

The change in the billing currency requires both the parties to a contract to agree on change in transaction currency. Indian exporters are not in a strong position here and may find it difficult to move towards another currency, the study said.

A related point is that in case of certain commodities, international trade is conducted only in dollars. Government support is called for, but not in the form of maintaining a weak currency, the study said.

Regarding the present mode of billing, the study revealed that the current heavy dependence on the US dollar was reflected by the exporters' concern with regard to the situation at hand. More than 73 per cent cited the rupee appreciation as a `very serious' problem.

The most significant impact of the appreciating rupee is the pressure on margins, with 86 per cent of the respondents complaining of the same. This was followed by the need to resort to cost-cutting measures and pressure on revenues, which were bothering 59 per cent and 50 per cent of the respondents, respectively.

While nine per cent felt that the pressure would force them to look for the untapped markets, five per cent suggested a renegotiation of contracts. A significant aspect of the billing practice of exporters is that none of them have any in-built protective clause in their contracts, which could perhaps have saved them from unpredictable change in (Rs-USD) exchange rate. Keeping a protective clause is not a standard practice and the reason perhaps could be that no one thought about such an appreciation.

With regard to support from the Government, the exporters pointed out that export financing in foreign currency should be made available more widely. Further, the Government should compensate freight cost escalations and subsidise the exporters more by an increase in DEPB rates.

They also urged the Government to restore provisions under section 80HHC of the Income-Tax Act and bring down the customs duty on import of capital goods to zero per cent. Further, the respondents also said that there should be a check on the rising steel prices and also the increasing ocean and inland freight rates. Finally, there is a need to provide sustainable competitive edge to Indian exporters through improved infrastructure, especially port facilities, highways and power availability.

More Stories on : Forex | Exports & Imports

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
`Shift to euro is tough choice for exporters'

Allahabad Bank touches highest volume on NSE

I-Sec net up 52 pc at Rs 165 crore

United Bank cuts rates for educational loans

United India products at Syndicate Bank branches

Dena Bank plans Rs 80-cr float

Canara Bank opens ATMs

Pay revision: AIBOC firm on better terms