Depreciating rupee boon for Indian manufacturing exporters
Tuesday May 29, 2012 03:46:16 PM,
Priyanka Sahay,
IANS
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New Delhi: While the
depreciating rupee is giving sleepless nights to many, it is a
huge opportunity for India's manufacturing exporters as their
goods are now cheaper in dollar terms, the Federation of Indian
Micro and Small and Medium Enterprises (FISME) says.
"The currency of India's major competitor China is getting
stronger by the day which means their goods are becoming costlier
in terms of dollars," FISME President V.K. Agarwal told IANS.
"The currencies of other competing countries such as Vietnam,
Thailand and Indonesia have also depreciated but much less than
what the Indian rupee has done, thus adding to Indian
competitiveness," he added.
According to Jagannadham Thunuguntla, strategist and head of
research in brokerage firm SMC Global, while firms importing
components are having a tough time, this is a boon for SMEs
exporting products.
"The problem lies in import, but small enterprises who are into
exporting will benefit almost by 20 to 22 percent due to the rupee
depreciation," Thunuguntla told IANS.
He also said that the rupee, which is currently trading at over 55
against the US dollar, will go over 60 in the coming days.
The rupee fell to a record low of 56.40 against dollar last week
owing to the high inflation and huge current account and fiscal
deficits. The currency however has recovered since then and was
trading at 55.60 in the early trade Tuesday.
Economic Advisor in Ministry of Finance Kaushik Basu has also
called depreciation "an opportunity" to export more.
FISME feels that Indian manufacturers must exploit this
currency-generated price advantage to penetrate new geographies
such as the ASEAN group of countries, Africa or Latin America.
Since the 1990s, Indian manufactured goods have been facing
intense competition from Chinese goods in domestic as well as in
global markets. Indian manufacturers have often pointed out that
the key reasons for the dominance of Chinese products were export
subsidy and currency manipulations in China.
Over the last 13 months, however, the Indian currency has
depreciated by around 27 percent against the US dollar while the
Chinese renminbi has appreciated continuously - by 40 percent
since 2005 and by 12 percent since June 2010.
At the same time, the currencies of competing economies have
depreciated only marginally - the Vietnamese dong by 0.4 percent,
the Malaysian ringgit by four percent, the Thai baht by four
percent and the Indonesian ruppiah by eight percent.
(Priyanka Sahay can be reached at priyanka.sahay@ians.in)
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