Ashok Dasgupta

Call for direct market intervention by RBI

FIEO wants cut in interest rates

Pharma sector seeks relief measures

NEW DELHI: With the rupee soaring to a nine-year high against the U.S. dollar, various mauled sectors of the exporting community on Friday voiced an orchestrated demand for a bailout package along with immediate intervention by the Reserve Bank of India to stem further appreciation by the Indian currency.

Triggered by the US Fed announcement of a 50-basis point cut in interest rates, the rupee peaked to its nine-year high of Rs. 39.88/89 to the U.S. dollar on Thursday and hovered steady at Rs. 39.87/88 in the foreign exchange market on Friday, a level that is viewed as much higher than the exporters’ ‘shock-absorption’ limit of Rs. 42 a dollar.

The dollar mayhem, especially in recent days, has severely affected the fortunes of most sectors of the exporting community such as IT, agriculture, textiles, steel, mines and pharmaceuticals by way of significant erosion in profit margins.

Spearheading the exporting community’s demand, Federation of Indian Export Organisations (FIEO) President Ganash K. Gupta pressed for direct market intervention by the RBI to support the eroding dollar along with a cut in interest rates to stem the flow of foreign funds. “We want immediate intervention by the RBI,” he said.

Moreover, a cut in the prime lending rate (PLR) would not only reduce the cost of borrowings but also check the flow of overseas funds.

Mr. Gupta pointed out that the advantage of pre-shipment and post-shipment credit at 4.5 per cent below the PLR had been offset by the hike in benchmark interest rates. Besides, the Government, he said, had not implemented the package for exporters that was announced in June.

The IT sector’s apex association Nasscom noted that the Government should extend the tax sops under the Software Technology Park of India (STPI) scheme for 10 more years.

“One step that will send a positive signal to the industry and investors is the extension of tax incentives by 10 years under the STPI scheme,” it said in a statement.

Farm sector

Picking up the cause of the farm sector, Agriculture and Processed Food Products Export Development Authority (APEDA) Chairman K.S. Money said: “The appreciating rupee will certainly impact the country’s agricultural exports”. Speaking on the sidelines of a seminar, he pointed out that since the country’s imports of farm products were less than exports, the impact would be more profound.

Similarly, apprehending a hit in export realisation, the domestic steel sector asked the Government to review the DEPB scheme to protect the exporters’ interests. According to Indian Steel Alliance (ISA) President Moosa Raza, the rising rupee would “impact on the export realisation of our leading steel producers and the Commerce Ministry has to take account of this.” Echoing similar apprehensions, JSW Steel Vice-Chairman and Managing Director Sajjan Jindal said: “Our exports would be affected and on value addition we may lose out. The Government should ensure that interest of the steel industry was secured.” He also felt that the appreciating rupee could render steel imports cheaper and thus hit the domestic producers.

Domestic iron ore miners also lamented that their export revenue had slumped by about Rs 1,000 core owing to the rising rupee and demanded abolition of export duty to offset their losses. Federation of Indian Mineral Industries (FIMI) President R. N. Baldota said that the export duty coupled with a soaring rupee rise had served a “double whammy” to miners and could lead to more trouble in the absence of some relief.

Also fearing a loss in export revenues is the pharmaceutical sector and it has asked the Government for relief measures in line with those being extended to nine select industries. In a letter to Commerce and Industry Minister Kamal Nath, Pharmaceutical Export Promotion Council (Pharmacia) has sought relief measures such as higher DEPB rates and six per cent rate on post and pre-shipment credits to all exporters.