After breathing easy during the last few months, Indian exporters are again under pressure from various global economic factors, which include large-scale variation in exchange rate, the evolving situation in the Euro zone and slowdown in exports to that region.
Rising costs
Moreover, the rising cost of raw material, including oil, and the expectation of a hike in interest cost have left them worried, reveals a recent FICCI survey on the export sector.
Seeing hard times ahead, exporters have urged the government to look at increasing the duty drawback and continue with other export incentive schemes to tide over the problem of rising input costs.
Similarly, in view of the recent appreciation of the rupee, particularly against the euro, exporters also want the Reserve Bank to peg a fixed currency exchange rate.
“At least for exporters, the central bank should give a facility like that in China of a fixed exchange rate. This will enable them to focus on managing their business and save them from the trouble of managing currency movements,” the survey said.
An overwhelming 88 per cent of the 278 exporting firms participating in the survey said the sudden appreciation in the rupee had affected their margins.
They lost on account of forward contracts that were booked to hedge currency risk. While the dollar has shown a decline of about 12 per cent in the last one year, the euro depreciated by about 18 per cent since December 2009.
Debt crisis
The euro drop is related to the debt crisis in some of the European countries.
According to the survey, uncertainty about the economies of Greece, Spain, Italy and Portugal is causing problems for the exporters.
There are also cases where exporters have been asked to hold back the dispatch of consignments.
Europe accounts for about one-fourth of India's exports, which stood at $176.5 billion in last fiscal.
FTA urged
The survey also reveals that while exporters are trying their best to look at alternative markets, they have asked the government to successfully negotiate a Free Trade Agreement with the EU at the earliest, which could in some way reduce the impact of an otherwise shrinking market in Europe.
