Exporters urged to cover assets as rupee may rise further

As further appreciation of the rupee over the US dollar looms,exporters are being urged to cover their assets with banks immediately after finalising orders in order to prevent losses. Although many sectors have found firm footing this calendar year,Director General Foreign Trade RS Gujral said further appreciation of the rupee amounting to 10 per cent or more would take a large bite out of sectors already leaning on thin margins this fiscal.

Although the export picture is looking brighter now,as demand from other emerging markets has started filling the void left by the weakened economies of the west,the Ministry of Commerce and Industry has already ushered in a fresh doze of financial support amounting to Rs 625 crore. But with the rupee already having appreciated by 6.07 per cent since November,the first month exports showed positive growth after 14 months of decline,concerns are that government subsidy will not be enough to withstand another jump in rupee growth. Thin margins in sectors like handicrafts,etc,would be adversely impacted by appreciation of around 10 per cent and the governments incentives will be insufficient in the light of excessive strengthening of the rupee in those

still weak sectors, Gujral told The Indian Express.

Although economists are projecting rupee appreciation of around 4.5 to 5 per cent through December,the Federation of Indian Export Organisations (FIEO) is instilling a sense of urgency among exporters. The problem is that only 60 per cent are covered while 40 per cent is always subject to exchange-rate fluctuation, said Ajay Sahai FIEO Director General. The point is that most of the exporters are getting the feeling that they must be ready for this appreciation. Even when the rupee touched 40,they were better prepared. But when the rupee was at 40 in 2008,you could have imported raw materials at lesser price. Thats not the case now.