According to industry officials, the rupee falling to a record low of 93.86 against the dollar may provide some benefit to exporters, but this benefit is likely to be neutralized by rising input costs. This decline may boost exports of textiles, leather, agricultural products, carpets, handicrafts and some engineering goods. About 60 percent of India’s merchandise trade is denominated in dollars, and this decline will help traditional sectors like textiles and leather, which are less dependent on imports.
Which sectors can get relief?
Federation of Indian Export Organizations Director General Ajay Sahay said in an ET report that the rupee’s level of 93.86 gives a slight competitive advantage to Indian exports by helping them get better prices, especially in sectors like textiles, leather, agro products, carpets, handicrafts and some engineering goods. He said this could support margins or market share in price-sensitive markets. However, some of this advantage is offset by rising import costs, especially for sectors dependent on imported inputs, such as electronics, petroleum, gems and jewellery, and chemicals. Apart from this, rising crude oil bills and inflationary pressure also have an impact.
How much could exports decline?
EEPC India Chairman Pankaj Chadha said in the report that there may be some benefit from this, but there will not be any huge benefit. We expect a 20 per cent year-on-year decline in merchandise exports in March, because 16 per cent of our exports go to the Middle East, and that has been impacted. He said that the input prices of scrap and energy have increased, due to which there is difficulty in running the furnaces. According to industry estimates, there are only about 15 per cent exporters who have not hedged their currency, and only they can benefit from the rupee’s depreciation.
How much increase in input cost?
A representative of an export promotion agency said that overall, this is a little positive in the short term, but is not going to bring any huge change, because structural factors are more important for growth in exports. Exporters also pointed to additional pressure from rate cuts and value caps under the ‘Rebate of Duties and Taxes on Exported Products’ (RoDTEP) scheme. However, agricultural and processed food products have been exempted from this. The government reinstated these benefits on Monday. TT Limited MD Sanjay Jain said in the ET report that there has been an increase of 10-50 percent in the input cost, so the overall situation is still bad. This 1-2 percent relief will just reduce the pain a little. This fall in the rupee has come at a time when India’s merchandise exports fell by 0.81 percent to $36.61 billion in February.
difficulty of export
The government expects that the month of March may be difficult for goods sent abroad. Mahavir Sharma, founder of Oscar Expo Design LLP, an exporter of wooden furniture, carpets and silver jewelery in Jaipur, said in the report that the fall in rupee can benefit only the goods in transit for a short time, otherwise the import of things like dye, chemical and wool becomes expensive, and the cost of electricity, diesel or petrol used in washing also increases.