Staff Reporter

Focus on West Asia and the European Union

Small, medium companies hit

Rising cost of raw materials

NEW DELHI: The strengthening of the rupee against the U.S. dollar has hit exporters hard, forcing them to adopt various mechanisms like forward contracts, shifting to other currencies and establishing protective clauses in their contracts to safeguard their interests, states a survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI).

“The concern is widespread among small, medium and large companies alike. The members of the exporting community have indicated that they are now taking steps to fortify their defences. Robust rupee has emerged as the most crucial stumbling block for a large number exporters and the outlook for the next six months does not look bright,” said the survey conducted in the first quarter of the current fiscal.

“Exporting more to regions such as West Asia and the European Union, a strategic move to partially nullify the impact of the strengthening rupee vis-a-vis the U.S. dollar, is also being resorted to by some exporters,” it said.

The top five regions identified by the survey participants where strong movements in export volumes are likely to take place in the next six months include West Asia, Africa, Southeast Asia, the UAE and the European Union. Exporters saw rising prices of raw materials a major constraint in staying competitive at the global level as a majority of them have been hit due to the rising cost of raw materials, it added.

Besides the appreciating rupee and the rising cost of raw materials, the other issues that figure in the top five impeding factors listed by the participating companies include increase in the oil prices, competitive environment and the rising cost of credit.

While the exporters have welcomed the relief package announced by the Government, its impact on export movement will not be pronounced because of the overriding influence of rupee appreciation on their overall earnings.

Several exporters have cited a reduction in the interest rate on pre-shipment and post-shipment credit as an important measure.