Future tense, exporters face new setbacks

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Bikky Khosla | 27 Oct, 2008
Despite the festive season, exporters are trying hard to find ways and means to bring some cheer amidst the prevailing gloom. But all seems in vain! Inflation has come down marginally, RBI has taken certain positive steps and the rupee too has depreciated against the dollar, but the impact is yet to be reflected in the cash registers of exporters.

Amidst these changes, exporters are now facing a new set of problems. While the rupee has breached the psychological barrier of Rs 50 per dollar recently, the export community is in the grip of a fear psychosis as they understand that a weak currency will invariably foster inflationary pressures. Authorities now have to think of a stable exchange rate of the rupee which will lessen exporters' anxiety.

On one hand the realisation of the US dollar in Indian rupee has increased, on the other hand Euro's realisation has decreased by nearly 6 to 7 percent. So exporters who were looking at EU as an alternative for the US, are now having second thoughts.

Because of the weak rupee import-dependent export production is also proving costlier than ever. Moreover, sectors like the auto components are facing another problem. Automobile companies now feel that with commodity prices dipping globally, vendors should go for a price revision. Most of the auto giants are evaluating options by which their suppliers can offer them a price advantage from the falling commodity prices.

That's not all! Overseas buyers who are aware of the rupee-dollar exchange rates are starting to negotiate orders which are causing several sure-shot deals to fall apart. I think buyers are missing a vital point that although the rupee has weakened, inflation has fallen only marginally and is still above 11 percent. This means input costs for exporters have still not fallen to comfortable levels.

And when we look at our key export markets - European Union and the US - they are still in recession resulting in fewer orders with reduced spending by consumers in these developed countries. The situation is likely to remain so in the near future.

Exporters are therefore being forced to compromise at lesser prices and are thus not being able to reap the expected profits.