Rupee Appreciation to result $15 bln fall in exports in 2007-08

New Delhi, July 7 (UNI) The appreciation of the rupee is finally taking a toll on exports and an Assocham study today estimated their decelaration to 145 billion dollars against the targeted figure of 160 billion dollars for 2007-08.

The study brings out that Brazil is the only country which led the appreciation of currency followed by India with the rupee appreciation as much as 8.33 per cent in the period January 2007 to June 2007.

On the other hand, currencies of Hong Kong and Taiwan are depreciating rapidly, which is posing a problem for Indian exporters in the global marketplace.

The study titled Currencies of Competing Countries' comprised of China, Taiwan, Brazil, Indonesia, Malaysia, Hong Kong, Pakistan, Russia, Thailand, Bangladesh, Indonesia, South Korea and Singapore.

The appreciation and depreciation vis-a vis with dollar of all these competing countries is a determinant and key parameter to the growth of Indian exports.

The RBI Annual Policy 2007-08 also does not address the problem faced by the exporters, the study claimed.

The modest rupee appreciation will contain export growth and if corrective measures are still missing, the rupee might fall below 40 against dollar in next few weeks, said Assocham President Venugopal N Dhoot.

According to the study, the major export sectors that come directly under appreciation threat are IT and services, textiles, leather, sugar and pharmaceuticals.

IT and services industry will loose its competitive ground, as the currencies of the major competitors China, Vietnam, Hong Kong and others are not appreciating in comparision with Indian rupee.

The appreciation of rupee is affecting the realisations and competitiveness of IT software and services export segment. The SMEs exporters who operate on thin margins are badly affected on realisations because of high appreciation of the rupee, said the study.

Indian textile exports faces competition from China, Bangladesh and Pakistan and their currencies have appreciated insignificantly compared to rupee. The US is the biggest market for the textile sector, which is having a slowdown in the economy as the US growth had gone down to 0.6 per cent in the first quarter and the appreciation will further reduce the competitiveness.

Of the top five sugar exporting countries in the world, India is competing with China and Thailand. The International Sugar Organisation (ISO) had pegged the surplus at around 5.8 million tonnes in November 2006.

In its quarterly report released in February 2007, the ISO said global sugar output is estimated at 160.2 million tonnes against a consumption demand of 153 million tonnes.

Indian companies may lose their competitiveness in the pharmaceutical sector to the competitors like China and Eastern Europe. Rupee appreciation will impact the profit margins and the pricing, the study further added.

Erosion of prices of generic and non-tariff barriers are also seen as hurdles to Indian Pharmaceutical exports.

Realizations are also taking dip because of the appreciation and the mostly hitting the SME exporters segment as they operate on thin average margins, the study added.

UNI