India witnessed the second highest appreciation in its currency against dollar at 8.35 per cent between January and June 2007, decelerating India’s exports proceeds to $145 billion against the targeted figure of $160 billion for 2007-08, revealed Associated Chambers of commerce and industry of India (Assocham) Eco Pulse Study (AEP).

Brazil leads the currency appreciation scenario with a 9.28 per cent appreciation, in a study undertaken on ‘Currencies of Competing Countries’ comprising China, Taiwan, Brazil, Indonesia, Malaysia, Hong Kong, Pakistan, Russia, Thailand, Bangladesh, Indonesia, South Korea and Singapore.

The appreciation in Singapore, Bangladesh, Indonesia, Pakistan and South Korea is less than 1 per cent and quite insignificant. On the other hand the currencies of Hong Kong and Taiwan are depreciating which is a major concern as India competes with both these countries.

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 says the AEP study. “The modest rupee appreciation would contain export growth and if corrective measures are still missing, the rupee might fall below 40 against dollar in the next few weeks,” said V N Dhoot, president, Assocham. According to the study, the major export sectors that come directly under appreciation threat are IT services, textiles, leather, sugar and pharmaceuticals.

The study revealed that the appreciating rupee would dampen the export competitiveness by at least $15 billion in the current fiscal itself. Exporters may not be able to sustain the currency appreciation, as it is higher and happening very quickly. The single most important factor contributing to the declining growth rate had been the persistent and significant appreciation of rupee vis-à-vis dollar by about 9 per cent. Realisations are also taking dip because of the appreciation and the mostly hitting the SME exporters segment as they operate on thin average margins, said Dhoot.