The Hindu Business Line : Rupee rise gives Bangla, Pak exporters an edge

The Pakistani rupee is at 60.60 against the dollar, slightly weaker than 60.30 a year ago. The Bangaldeshi taka is at 68.50, tad up from 69.20 a year ago.

Radhika Menon

Mumbai, Sept 25 While the Indian rupee has appreciated to a nine-year high against the dollar, its neighbouring counterparts the Pakistan rupee, the Bangladeshi taka and the Chinese yuan have a different story to tell.

The Indian rupee has appreciated by around 13 per cent in the past one year- the currency which is at 39.80, was at 45.95 in September last year.

However, the political turmoil in Pakistan and Bangladesh has meant that these currencies have not seen much movement against the dollar. This is bad news for India’s exporters, since Bangladesh and Pakistan are strong competition in textile exports.

The Pakistani currency is at 60.60 against the dollar, slightly weaker than 60.30 a year ago.

The Pakistani rupee has, in fact, fallen around 6 per cent since 2003 when it was at 57.

The Bangaldeshi taka is at 68.50 against the greenback, slightly stronger than 69.20 a year ago.

Blow to textiles

Mr R.V. S. Sridhar, Vice-President (Treasury), Axis Bank, said “Indian textile exporters will be the worst hit as Pakistan and Bangladesh are our competitors in this segment. Similarly, exports of agricultural commodities like rice will also be affected,”

According to analysts, in the case of industrial exports, chemicals and engineering goods, the rise of the rupee has meant a partial erosion of profits . For textile exporters, however, the currency’s appreciation in the past one year is threatening to wipe out the business.

“The margins are very thin at 5-10 per cent in the case of textile companies and garment exporters and the appreciation will really wipe out these businesses. Bangaldesh, especially, is a close competitor,” said Mr Arvind Sonmale, Managing Director, Global Trade Finance.

He added that many textile exporters are not keen on taking overseas orders and are focusing on the domestic business.

Exporters should put in a currency fluctuation clause to hedge against such risks. They should change the currency of invoicing to euro, he advises.

Among the other currencies, the Chinese yuan is at 7.5025, against 7.90 last year. The currency is highly regulated and hence not strictly comparable to the rupee.

“With the rise in the rupee, big retailers will quickly move to another country for sourcing cheaper goods,” said Mr L.V. Prasad, Chief Forex dealer, IndusInd Bank.

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