EEPC Raises Concerns Over Appreciating Rupee May Hurt Exports
KOLKATA: Leading exporters' body EEPC India has raised a red flag against the debilitating impact of sharp rise in rupee against dollar in the last three months on exports, which may slip off from the recovery path, if the situation persists further.
"While rupee seems to losing marginal value in the last few days, thanks to some reported dollar by the RBI, the central bank should ensure that the liquidity coming in droves in the Indian equity and debt market must not harm our fundamental strength in exports," Chairman of the engineering exporters' apex organisation, T S Bhasin said.
Since the first week of January, rupee has gained by close to six per cent, eroding significantly the exporters' margins and more importantly the competitive edge against India's trade rivals in the international markets.
"While India should always be a preferred destination for the foreign investment; the latest flood of inflows is coming in the equity and stock markets in the backdrop of the Emerging Markets again finding favour with the global fund managers and some corrections in the US markets, which had seen a huge run up after Mr Donald Trump assumed office."
"RBI and the Government are requested to keep a close watch since exporters cannot afford such volatility with pressure of value erosion," Mr. Bhasin said.
He said what is more disconcerting is the fact that the rupee is gaining ground and eroding the exporters' competitive edge when exports have picked up smartly in the last few months. In fact, engineering exports managed to grow by 47 per cent in February despite rupee strength; but going forward, with this kind of strength of the domestic currency, it would be tough, Mr Bhasin said.
He said, the rupee is certainly over-valued since the rally in the stock market at present is liquidity driven and not backed by domestic corporate earnings, even though about seven per cent GDP growth holds good promise.