Exporters pin hopes on rupee slide

New Delhi, March 14: The depreciation of the rupee against the dollar would come as a welcome relief to exporters who had been hit hard by the weak demand in the global market.

The rupee traded around 51.52 to a dollar on Friday with some analysts saying it could touch a new low of about 53 to 56 against the greenback in the coming weeks.

Analysts said the weak rupee would make Indian goods price-competitive, especially when exports had plunged 16 per cent in January. Moreover, trends indicated that merchandise trade was unlikely to go up this fiscal.

The government has scaled down the export target for this fiscal to $175 billion from $200 billion because of global recession.

FIEO said the depreciation of the rupee was a positive thing for exporters. The trading community would be able to compete with Beijing as the Chinese Yuan had not depreciated substantially like the rupee. The textile sector is definitely benefiting as far as the US and European markets are concerned.

G.K. Gupta, former FIEO president, said, “The weakening of the rupee against the dollar is a good sign. If it continues to be in that range for some weeks, exporters will be benefited.”

Labour intensive sectors such as textiles and garments, gems and jewellery and leather will benefit, analysts said.

“The rupee has fallen by over 25 per cent in the last eight to nine months. Projections of further weakening will bring back the competitiveness of exporters who have been losing market,” said Rakesh Vaid, chairman of the Apparel Export Promotion Council.

Analysts said the weak rupee would help the country step up its exports in the global markets and would provide protection to domestic enterprises as imports will become less profitable.

K.T. Chacko, director of the Indian Institute of Foreign Trade, said, “For exporters to reap the full benefits of the weakening of the rupee, the currency has to be in that range for a reasonable period of time as export contract and price contract deals take time.”

Goldman Sachs said the rupee would remain weak over the next three months because of the economic slowdown and weak sentiment owing to a high fiscal deficit and a recent downgrade of India’s rating outlook by S&P.

Barclays Capital said the rupee might depreciate further to hit 56 in three months as the slowdown would arrest the inflow of the dollar.

Exports during April to January were up 13.2 per cent to $144.27 billion from a year earlier, while trade deficit during the period stood at $99.1 billion from $66.8 billion a year ago.

Source: http://www.telegraphindia.com/