'Rupee volatility to impact long term interest of exporters'

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SME Times News Bureau | 11 Jun, 2013
Reacting to Indian Rupee hitting life time low against US Dollar on Monday, the apex export body - FIEO said that this kind of volatility may be good in the short term but would impact the long term interest of Indian exporters.

"Such high volatility creates uncertainty and speculation which hit the economy and business confidence. Depreciating rupee will further widen the Current Account Deficit," President, Federation of Indian Export Organisations (FIEO), M. Rafeeque Ahmed Monday said in a statement.

"Rupee devaluation against dollar will increase both fiscal deficit and Inflation," he added.

Ahmed said that due to contraction in global demand and slowdown in advance economies, albeit encouraging employment data from the US, the depreciation has not benefited Indian exports as can be seen from the Trade Data. Further this will have no impact on the Sovereign ratings of the country.

Elaborating further, he said that buyers are asking for discounts or reducing prices while sectors such as Petroleum, Gems & Jewellery, Electronics, Plastic Products, with high import intensity, are impacted due to increase in input cost.

Ahmed suggested exporters to hedge their risk in such volatile situation and look for profitability from core business. Exchange benefits should be used as icing on the cake added President FIEO.

However despite such a depreciating change seen in Rupee, FIEO expects no change in the RBI’s Policy stance as of now.