By IANS
New Delhi : Appreciation of the rupee that has hit nine-year highs against the dollar is a “matter of concern”, Commerce Minister Kamal Nath said Thursday even as exporters lamented that the steps taken by the government so far were inadequate in addressing their woes.
“The rising rupee is a matter of concern. The government is very much looking at it and it needs a new response,” Kamal Nath told reporters on the sidelines of a conference here.
“But no, there will be no change in the export target,” he added, when asked if the government would be looking at revising the export target of $160 billion in 2007-08.
The rupee Thursday traded as high as Rs.39.89 a dollar, following a reduction in US interest rates. Experts say this is expected to hit the country’s exports hard, especially as it comes on top of a slowdown in the US economy.
In order to offset losses that Indian exporters are facing, the government this week announced reimbursement of service tax paid by exporters for port, road transport and rail services.
The government in July had also announced an incentive package of Rs.14 billion for exporters but the industry was not impressed.
“The packages announced by the government has not been able to offset our losses,” Ganesh K. Gupta, president, Federation of Indian Export Organisations (FIEO) said.
“The way the rupee is rising, it would be negating not only the exports but wipe them out,” Gupta told IANS, “I think now it is time the Prime Minister intervenes and takes up the matter seriously.”
In a similar vein, the Federation of Indian Chambers of Commerce and Industry (FICCI) said feedback from members shows that the position in which Indian exporters find themselves in has further weakened.
“As a result, the export performance of the country in the next six months would not show an encouraging trend. In several segments of the industry, exports have slowed down considerably resulting in significant losses to the exporters,” said FICCI president Habil Khorakiwala.
As a result of the Fed rate cut, more money is likely to flow into the Indian market, in addition to the record inflows so far in the year, thereby putting more pressure on the rupee.
Foreign institutional investors (FIIs) have bought a net of close to $10 billion worth of stocks this year and foreign direct investment more than doubled to almost $20 billion last fiscal.
Consequently, industry bodies want Reserve Bank of India to lower interest rate and intervene in the foreign exchange market more aggressively since inflation is on the decline.