Rupee slide hurting exporters; more decline likely: FIEO
The rupee Friday crashed below the 74-level against the US dollar for the first time ever after the Reserve Bank of India kept its key policy rate unchanged.
Exporters' body Federation of Indian Export Organisations (FIEO) Friday said the rupee depreciation is increasing the cost of imported capital goods, inputs and various services used by exporters paid in foreign currency, particularly the freight charges.
He further said though the domestic currency has depreciated by over 13 per cent this year, the trends in non-deliverable forward (NDF) market indicate that further fall is not ruled out particularly as short-term debt share in India's external debt is increasing.
The rupee Friday crashed below the 74-level against the US dollar for the first time ever after the Reserve Bank of India kept its key policy rate unchanged.
The domestic currency was quoted 55 paise lower at 74.13 against the dollar soon after the RBI announced its monetary policy.
"Buyers are asking for sizeable reduction in prices, on account of rupee depreciation, as depreciation of buyers' currencies have also increased the landed price in their own country," FIEO president Ganesh Kumar Gupta said in a release.
He further said the most vociferous are the buyers from the Middle East, Africa and certain parts of Asia demanding deep cut in prices, while such demands from buyers in the US and Europe is sparingly received.
"This puts exporters in quandary, if he has hedged himself thus not benefiting from weak rupee yet forced to cut prices," said Gupta.
The rupee depreciation is further tightening the liquidity as the foreign currency component of export credit already availed gets revalued at a higher value in terms of Indian rupees, according to him.
"This has resulted in the exporter being asked by the banks to reduce their exposure by part payment or where the export credit limit is not fully disbursed, the available limit reduces, depriving exporter of funds which is extremely bad for exporters," added Gupta.
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He further said noted that extreme volatility in currencies should be stemmed to help the economy including exports.
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