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Hapless exporters see darker days ahead
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Bikky Khosla | 22 Jun, 2010
A fluctuating exchange rate, the debt crisis in Eurozone, rising input costs, and a possible interest rate hike by the Reserve Bank of India in its forthcoming review has once again put the exports sector under severe strain. After months of disappointment since October 2008, the sector was showing some signs of revival from November 2009. However these hurdles now threaten to make life miserable for the community.
While the hapless exporters are unable to comprehend as to how to cover their impending losses, they feel that the government needs to do much much more to help them survive these conditions. For instance, exporters are urging RBI to give a facility like that in China of a fixed exchange rate, which will enable them to focus on managing their business and save them from the trouble of managing currency movements.
Meanwhile, buyers in Europe are holding back orders apprehending that the economic recovery will be slower than expected, with many cases coming to the fore, wherein European buyers have asked exporters to hold back the dispatch of consignments.
Moreover, with many buyers refusing to take delivery of the consignments, exporters are being compelled to take temporary terminals for parking goods in the EU region which has added to their costs. And that's not all. The fluctuations in the rupee value vis-a-vis the euro is also undermining the country's export prospects. Several exporters tell me that payments which used to be earlier realized in 3 to 4 months from the shipment are now being realized between 6 to 9 months.
With India's trade with the European Union accounting for nearly a quarter of the country's total foreign trade, the current momentum in the country's exports is likely to be hit if the current situation in the continent persists or worsens further.
Back home, there are strong indications that RBI is likely to deregulate the interest on export credit, thus allowing banks to decide the lending rate of export credit, which I believe will increase the cost of credit and in turn will make exports uncompetitive. Amid growing hurdles, continuing to regulate export credit to ensure that the cost of export credit does not increase under the new system will be the only sensible decision for the central bank to take.
I think the country's decision makers need to take positive steps to reduce the impact of an otherwise shrinking export market. Probably increasing the duty drawback and DEPB rates to help the sector tide over the problem of rising input costs can be the first step.
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Europe fighting back still the last year slowdown
Anupma Sancha | Sat Jun 26 06:10:18 2010
Keeping in mind the Fiasco of Economy last year and gradually gaining the momentum reminds me that "Slow and Steady Wins the Race" .Hope that things will continue to improve for exporters in the coming financial year too.
strong rupee
Niranjan Gajendragadkar | Fri Jun 25 07:24:37 2010
I fully with the CEO's views regarding adapting Chinese method of fixed exchange rates.For upcoming exporters and those wishing to enter the foreign trade will have second thoughts to enter the business.A lot of institutes teaching international trade have musroomed all over the country promising the students of better returns if they enter a export-import busines by creating a rosy picture of the same .
On the other hand small exporters are facing difficulties to get preshipment finance as the banks have started asking for a collateral,which has resulted in putting many business in jeopardy.
Strong Rupee
Milan Mehta, Mumbai | Thu Jun 24 05:44:12 2010
With Rupee going to be still stronger in coming days vis-a-vis other important currencies, it is better that Exporters do introspection, work out strategies and not depend on Government only all the time.
Think of importing Cheaper Raw material, Intermediate due to the currency problem and develop Export Products which are more competitive.
Think of locating their manufacturing units where the operational cost is less.
Think of switching to better technologies to reduce waste, increase productivity and sales, thereby reducing per unit cost.
Innovate, Redesign, Branding, etc..are also many unique ways to increase Exports in the present situation.
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Re: Strong Rupee
K. A. Basha | Thu Jun 24 10:54:37 2010
Yes, I do agree with you and this is the mantra of any industry leader to the exporters but where is the level playing field for emerging entrepreneurs.. . ? Today only the big players of any commodity can survive. The best option for small players is to become the good suppliers to them. For a small or medium manufacturer-exporter going in for better technology, innovation, designing, branding etc., are very difficult to even think about. First of all the finance is a big problem for them. The bankers are not at all coming forward to help them and without finance it is very difficult to think about such mantras... Is that right ?
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Misleading & Uninformative
Faraz Alam | Thu Jun 24 04:54:02 2010
This article has been very poorly researched. China does not have a "Fixed Exchange Rate" as purported by the Author. As a matter of fact the INR is not free floating as the article implies.
Moreover, the author takes a very myopic view of the International trade. Surely, he does realize that having DEPB rates hiked etc. can actually result in Anti-Dumping sanctions from the EU (as in case of China) and instead of making the Exports Sector resilient and robust, expose it to structural weakness and inevitable uncompetitive.
Hapless exporters see darker days ahead
Rupak Bose | Wed Jun 23 10:18:59 2010
Can the Chinese model for taxation be examined vis a vis ours. For industrial & export growth it may be a worthwhile excersise.
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Re: Hapless exporters see darker days ahead
Saravanan Raghavan | Thu Jun 24 03:28:11 2010
It will be good to examine the real competitors ie., china's Model of Taxation ... if the current system is crushing our Exports.
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Re: Hapless exporters see darker days ahead
K A BASHA | Thu Jun 24 10:36:00 2010
Do you have the details of Chinese taxation. So that we can compare it with our taxation and find the difference
= K. A. BASHA
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