Rising rupee against dollar may derail exports recovery: EEPC

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SME Times News Bureau | 12 Apr, 2017
The Engineering Export Promotion Council (EEPC) of India on Tuesday said the debilitating impact of sharp rise in rupee against dollar in the last three months might derail the exports recovery.

"While rupee seems to losing marginal value in the last few days... the RBI should ensure that the liquidity coming in droves in the Indian equity and debt market must not harm our fundamental strength in exports," said EEPC Chairman T. S. Bhasin.

Rupee has gained by close to six percent since the first week of January, eating into the exporters' margins and eroding the competitive edge against India's trade rivals in the foreign 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 Donald Trump assumed office," he said.

In fact, engineering exports managed to grow by 47 percent in February despite rupee strength; but going forward, with this kind of strength of the domestic currency, it would be tough, Bhasin said.

According to him, 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 percent GDP growth holds good promise.

Bhasin said RBI and the government were requested to keep a close watch since exporters cannot afford such volatility with pressure of value erosion.