New Delhi: Finance Minister P Chidambaram has ruled out any more sops for the exporters hit hard by the rising rupee asking them to get used to stronger currency as dollar inflows would continue to grow. The government had announced a Rs1,400 crore package in July for exporters.
“We have taken note of the short-term pain of exporters and have given them a package. But we hope that they will quickly adjust to the new level of rupee,” Finance Minister P Chidambaram said.
Exporters are demanding more sops to deal with rupee appreciation against the US dollar, complaining that their realisations have gone down due to the rupee effect and the prices they are quoting for new orders are turning away customers.
The rupee has appreciated about 9% since March. From the lows of over Rs45 in October-November last year, it is now ruling slightly above Rs40.
Commerce and Industry Minister Kamal Nath also supported the exporters on 7 August stating that the government was thinking of a new package for exporters. “The appreciating rupee has impacted exports and we are seized of the matter,” he said.
The Finance Minister, however, said there could not be a situation where the economy grows but rupee remain weak. Exporters should take this into account while booking new orders, he added.
“When they book the new orders, they should factor these things into account. You cannot say the economy should grow but the rupee should not become strong,” he said. US currency because of dollar’s weakness.
“It is only vis-a-vis the dollar that the rupee has become strong. Rupee has not become very strong against other currencies,” he said.
Exporters feel the rupee appreciation has made the export target of $160 billion (Rs6,48,960 crore) for the current year difficult to achieve as overseas sales growth is gradually coming down and for the month of June it settled at 14% as against 23% in April.
The value of dollar against the rupee is coming down as fund inflows are increasing and the Reserve Bank of India is not buying dollars to check the rise in the domestic currency. The central bank has reduced its intervention because it wanted a check on money supply that was fuelling inflation.
India’s reserves have mounted to about 225 billion dollars thanks to huge inflows from foreign institutional investors, who have remained bullish on stock markets, and foreign direct investments going into industry and services.
Besides, the country is receiving big chunks of remittances from the non-resident Indians. “How can you tell people do not bring money into India. Can you tell exporters do not bring the money into India... Can you tell families do not remit money into India?” he asked.“No developing economy can say I do not want capital inflows into the country. China does not say that. We have to learn to manage these inflows. It is difficult... it exacts a cost. But we must factor all that and learn to manage inflows,” he said.