By IANS
New Delhi : Strengthening of the rupee against the US dollar is slowly and steadily eating away Indian exporters’ profitability as they are being priced out of major export markets, says a survey by a leading industry chamber.
The rupee has been rising since last year and the government’s cooperation in helping the exporter by way of relief packages has turned out to be a complete failure, said the survey conducted by the Federation of Indian Chambers of Commerce and Industry (Ficci).
The survey, carried out among 293 firms across the country in sectors ranging automotive, consumer durables, food and food processing, leather, marine products, gems and jewellery, consumer goods, textiles, handicrafts, metal and metal products, heavy engineering, IT, and pharmaceuticals and chemicals, showed that a whopping 98 percent were facing adverse impacts on their export performance.
“Several exporters have complained that the cost of availing the benefits in terms of time involved simply outweighs the benefits. Further, companies have also mentioned that while the rupee has appreciated by almost 12 percent over the last one year, the benefits announced by the government would provide relief only to the extent of three to five percent,” Ficci said.
Several companies have complained of being priced out of the market coupled with an increasing absence of new orders.
Almost 42 percent of the firms have indicated a major slowdown of exports in the next six months, while another 17 percent have reported being priced out of the market.
As many as 60 percent of the companies surveyed said they would not be able to contribute to export growth in the near future.
“The reduction in the export business has taken a toll on the capacity utilisation levels of companies,” the chamber said, adding that a year ago nearly two-thirds of the participating companies were utilising more than 80 percent of their capacities.
This reduction in the levels of capacity is leading to huge job losses, Ficci said.
Nearly 45 percent of the participating companies have reported that their bankers have over the last few months tightened lending norms and reduced the amount of foreign currency loans extended to exporters.
The industry body has also suggested certain measures for the government for an effective implementation of the relief package by allowing service tax exemption benefit on logistics cost for transportation of goods to ports.
It has also urged extending the duty entitlement passbook scheme (DEPB) and increasing duty drawback rates, while reducing interest rates service tax exemption benefit on logistics cost for transportation of goods to ports.
While the situation is increasingly grim for Indian exporters, it seems the government’s target of achieving exports of $160 billion at the end of fiscal 2006-07 will remain a dream.