New Delhi: India Inc. is divided whether the Reserve Bank should take steps to protect exporters from the appreciating rupee that will adversely affect their profits.
While leading business chamber CII says the domestic industry would have to accept a strengthening rupee in the short term, FICCI, Assocham and exporters’ body FIEO want RBI to intervene and check the sharp rise in the currency.
The rupee closed at an eight-year high of 42.90/92 on Thursday against the dollar, raising concern the profits of exporters, particularly software companies, could be hit.
“While the supply side measures take effect, industry might have to accept appreciation of the rupee in the short term, even if it means that exports are hurt a bit,” CII President R Seshasayee said in a statement.
However, Federation of Indian Export Organisation President Ganesh K. Gupta said: “We are terribly disturbed because of the rise in rupee.”
He said while large exporters can protect themselves by hedging, the smaller ones would be hit hard. RBI must buy dollars to protect the country’s exports, he added.
Echoing similar sentiments, FICCI and Assocham insisted that exports, especially in the IT sector and labour-intensive sectors such as textiles and leather, must be protected.
“Rupee has been hardening for a long time and even in a short run of three to six months, exports have to be taken care of,” FICCI Secretary General Amit Mitra said.
Exports from labour-intensive sectors are growing at 8% against the overall growth of 20%, he said.
Assocham also said RBI should keep a close eye on the situation and ensure the exports do not suffer.
“RBI should not be a mere spectator and intervene at appropriate time to take corrective measures,” Assocham Secretary General D. S. Rawat said.
Expressing concern over the appreciating value of the rupee over the dollar, exporters from North India said similar slips of the Indian currency will drastically impact their business in the near future.
In a survey conducted by industry body PHDCCI, exporters from north India said the upward movement of rupee against the US dollar would make their goods more expensive in the overseas market, hence adversely impacting their future exports.
“Strengthening of the rupee is particularly detrimental for the low import intensive and price sensitive terms such as textiles especially when competitors such as Pakistan has not witnessed a similar currency appreciation,” the chamber said.