Business Daily from THE HINDU group of publications
Friday, Sep 21, 2007
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Business Daily from THE HINDU group of publications Friday, Sep 21, 2007 ePaper |
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Industry & Economy
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Exports & Imports ‘Rising rupee hits small exporters badly’ Our Bureau Mumbai, Sept. 20 Indian exporters have been badly hit by the appreciating rupee. Sectors like textiles, chemicals and IT amongst others will bear the brunt of the domestic currency gaining against the US dollar. Small exporters, who have limited access to hedging products, are the worst hit, say experts. Difficult timeMr Arvind Sonmale, Managing Director and CEO, Global Trade Finance, a provider of international factoring, domestic factoring and forfaiting services said that it is a very difficult time for exporters. “For exporters the situation has gone from bad to worse. It is a vicious cycle as high interest rates will bring in more funds into India and will lead to a further appreciation in the rupee,” he said. Small garment exporters in places like Coimbatore and Tirupur will be the worst hit. Most of them have no scope to modify their purchase orders, which have been fixed at earlier rates and hence have no room to hedge the risk, he explained. Clause inclusionExporters should now look at including a clause that would cover rupee appreciation, in their agreements, similar to clauses to cover inflation, Mr Sonmale said. If the rupee appreciation continues, Indian exporters may also have to start to look at other markets gradually and reduce their dependence on the US and start invoicing in currencies other than the US dollar, he added. Long-term gainsWhile the strengthening rupee will hurt exporters in the short run, in the long run it will help strengthen the industry, said the chief risk officer of a bank. “The rupee has gained due to the fundamentals of the economy and exporters will have to cop on their own steam,” he said. While large corporates with savvy treasuries are doing structured currency deals in order to hedge themselves against the appreciation risk, small and medium exporters would be hit the most as they suffer from the disadvantage of scale, the official pointed out. One way for them to reduce their individual losses would be to adopt the cluster approach and gain marketing experience in the overseas market, he added. More Stories on : Exports & Imports | Forex
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