New York: The Indian government on 24 September asked companies to increase efficiency and cut costs to remain export competitive in the wake of strengthening of the rupee against other currencies.
“China calibrates exchange rates, but we’ve left it to be market determined. I really don’t think government should be intervening... we did away with (this practice) as part of reforms,” Commerce and Industry Minister Kamal Nath said here.
“I know the industry will be pained, but it needs to look for increasing efficiency and cost effectiveness,” he said replying to a question by an Indian American on what the government was doing to protect IT firms from rupee rise shock.
The Indian currency has risen nearly 11% against the US dollar in 2007 and about 14% in the past one year. The country’s central bank has not intervened much as this makes imports cheaper, helping it control inflation in the world’s second-fastest growing major economy.
However, the appreciating rupee has also hurt exporters, particularly software companies, which derive more than half of their revenue from the US. Besides, the government is aiming at merchandise exports of $160 billion in 2007-08, but the target may be scaled down if the rupee continues to harden.
Nath said IT companies have been enjoying tax concessions for too long, which has led to a disconnect between the IT sector and rural India.
“Other sectors like pharma, auto components and even agriculturists say if we had had the same benefits (as IT firms) we would have grown by the same level.”
He, however, said the government would see how it can give some relief to the IT sector.
India seeks investments from Americans, NRIs
India went the whole hog seeking investments from Americans as well Indian-Americans, as it launched a four-day programme to promote India as a brand and a credible destination for parking funds.
While the country’s capacity to consume $475 billion in infrastructure development over the next five years has been well articulated, External Affairs Minister Pranab Mukherjee and Commerce and Industry Minister Kamal Nath highlighted the investment opportunities at separate events as part of the Incredible India@60 week.
“New York was not chosen by accident for organising this event. It was a deliberate choice. It is the heart of the US and melting pot of diverse cultures,” Mukherjee said, launching the four-day event, which he dubbed as an outstanding endeavour to highlight opportunities for trade, investment and tourism.
At the Pravasi Bharatiya Divas New York 2007 on Sunday evening, Nath said quoting a study: “75% of all Foreign Direct Investments in India were profitable and 15% were breaking even.”
While this establishes the fact that investing in India is profitable, he said the country needed to grow in technology-based manufacturing unlike China that is into mass manufacturing.