The Hindu Business Line : Strong Re: EEPC sees negative impact on exports

Rising worries
Engineering exporters began feeling the impact of a stronger rupee from mid-April
The average export growth rate had fallen to 23.92% in dollar terms from around 30% during April 2006-07

MR RAKESH SHAH

Kolkata June 15 The Engineering Export Promotion Council (EEPC), whose members account for one-fifth of the country's total exports at $26 billion, is of the view that even though the export growth figures from April 2007 onwards do not show the full impact of rupee appreciation, there were enough indications now that engineering exports may be impacted negatively in the coming months.

According to the EEPC, most engineering exporters were certain that if the rupee touches 40-level or dips below in June (remaining period), they will not get into new contracts for the time being.

The council has based its fears on a quick survey carried out by it in April of (export growth) some 52-member companies in the large, medium and small categories.

Mr Rakesh Shah, Chairman of the council, told Business Line that when rupee appreciation takes place for an extended period of time, Indian engineering exporters do find it tough to export to the competitive markets in the US and the EU, especially at a time when export credit cost and domestic prices of steel and other raw materials are also north bound.

Stiff global competition

He said in an extremely competitive scenario, especially when the Chinese companies are flooding the global market with bulk exports, it was virtually impossible for Indian exporters to pass on the increased cost of production to the foreign buyers.

Engineering exporters, he felt, began feeling the impact of a stronger rupee from mid-April, and this got accentuated from end-April.

The rupee breached the 41-barrier from mid-April, before it came back to rest just over 40 around April 25. As per the DGCIS data released on June 1, it is estimated that during April, the country's export growth was 23.06 per cent in US dollar terms and 15.39 per cent in rupee terms. According to Mr Shah, the full impact was likely to be felt in May and June, when the final figures come in.

Citing sensitivity to exchange rate variations as a typical characteristic of Indian commodity exports, the EEPC Chairman said this was because a large number of engineering exporters were `low or no import' exporters, being mostly in the SME sector.

He said their volumes do not economically justify import of raw material inputs such as steel, copper, nickel and so on.

He said the survey found that the average export growth rate had fallen to 23.92 per cent in dollar terms from around 30 per cent during April 2006-07, raising genuine fears of a possible negative future trend.

The fall in export growth rate in rupee terms in April, it is stated, was much sharper.

More Stories on : Engineering | Forex | Exports & Imports

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