SME Times News Bureau | 18 Mar, 2019
Exporters' association FIEO has
expressed concern over the rising value of Indian Rupee as it may hit
exporters.
Turnaround in political
sentiments, FPI flows coupled with the expected large inflows from rights
issues and the merger and acquisition deals,
reduced geo-political tensions, stabilisation in oil prices have
driven the rupee appreciation to a 9-months high said FIEO President Ganesh
Kumar Gupta, and the rupee could stay strong, as the flows continue.
The
RBI's decision for a currency swap to infuse rupee liquidity is expected to
bring down hedging cost, prompting inflows in the short end of the corporate
debt thus augmenting the supply, observed FIEO Chief.
Such sharp
appreciation is causing concern both amongst the exporters as well as importers
as uncertainty in the exchange rate is driving volatility. Exporters who have
contracted at Rs 74 to a Dollar but could not hedge it, due
to non -availability of limit by the banks, tend to incur huge
losses, he said.
Similarly those
who imported at Rs 74 to Dollar for exports few months back, will now
get Rs 68-69 upon exports resulting in setback to them, Gupta pointed
out.
This is a
new and additional challenge faced by the exporters who are struggling with
contraction in global demand, liquidity challenge at the domestic
turf and fierce competition from other competing currencies said Gupta.
The
informal withdrawal of MEIS to apparel and made-ups have also jolted their
exports.
He urged
that while pegging is not possible, extreme volatilities should be managed
through interventions so that the exchange rate continues to provide requisite
competitiveness to Indian exports since Rupee is nowhere near its real
effective exchange rate.
The FIEO
President said that in the given situation, Rupee is set to appreciate further
giving a jolt to our export efforts and therefore, it should be ensured that
Rupee remains near 70 to a dollar.