The Hindu Business Line : 8 million will lose jobs, says FIEO chief

Disturbed over the continuing appreciation of the rupee against the dollar in which exporters claim 76 per cent of export is invoiced, the Federation of Indian Export Organisation (FIEO) has pleaded for immediate intervention by the Government to make export a viable operation.

Addressing a press conference with his entire team, the FIEO President, Mr G.K.Gupta, said that the rising rupee value has not only affected traditional exports but also rendered nearly four million people out of work. He cautioned that if the trend persisted, eight million people would lose their jobs before the end of the current fiscal on account of the uneconomic operation of exporting units. He said that the textile industry alone, which provides employment to large number of people, would see a loss of 5.8 lakh jobs in 2007-08.

Pace of growth

Mr Gupta said that even as the Indian currency is appreciating, ‘our competitors’ do not show any appreciation vis-À-vis the greenback, thereby threatening the competitiveness of Indian products and pricing them out of the global market.He said the decline in the pace of export growth was also affecting industrial production, which slipped from 13.3 per recent in July 2006 to 7.1 per cent in July this year.

Stating that the rupee appreciation has not been duly factored in drawback rates announced recently, he said that service tax benefit has also been restricted to only a few services, leaving a host of services outside the purview of refund. He regretted that no decision was taken in making Exchange Earner Foreign Currency (EEFC) account an interest-bearing one as assured earlier.

Rate reduction

Apprehending the massive inflow of dollars in the wake of the recent Federal rate cut through external commercial borrowings and portfolio investment, Mr Gupta said that the dollar might even touch Rs 38 by December end.

Hence, he sought reduction in banks’ prime lending rate by 100-125 basis points to reduce the interest burden and help improve the competitiveness of trade and industry. He also sought reduction in transaction cost through exemption option rather than the refund route for service tax and value-added tax in order to cut down paperwork for trade.

Other members of the FIEO also recounted how the appreciating rupee has impacted their margins, particularly in areas like leather and textiles, and said in supplementary claim for drawback some small software modification could save delays, avoidable paper work and cost.They said refund of VAT is taking six to nine months on an average.

Institutional mechanism

They also sought to set up an institutional mechanism soon through a high level committee headed by the Prime Minister with the Commerce and Industry Minister, Finance Minister, Textile Minister, RBI Governor , and Deputy Chairman of Plan panel, besides PM’s Advisory Committee Chairman and apex export bodies to take on the spot decision to address the grievances of exporters.

On their part, exporters would do well to explore the possibility of invoicing in other currencies or in rupee and use the hedging option to safeguard against the losses in currency gyrations, besides exploring new markets and upgrading products by value addition, Mr Gupta said.

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