SME Times News Bureau | 04 Nov, 2009
A Sakthivel, President, Federation of Indian Export Organisations (FIEO) while commenting on the calibrated approach of the RBI towards policy rates stated that the rupee movements are making it difficult for MSME exporters to quote to foreign buyers.  

Early on Tuesday, the rupee was down by 10 paise at  47.06 a dollar  and last week on Friday ended at 24 paise higher (Rs. 46.96 a dollar).

The FIEO Chief stated that both inflation predicted at 6.5% (with an upward bias) and foreign capital inflows are creating an upward pressure on interest rates and volatility in the rupee movements respectively.

Further, the volatility in the emerging markets  led the Brazilian authorities to re-introduce the IOF  levy (a tax on the foreign financial transactions), a measure designed to contain the appreciation on the Brazilian currency, (a 2% levy on foreign transaction including equities). China on the other hand has kept its renminbi at interest rates comparable to the US & EU. In such a scenario the interest rate differential between India and the rest of world are 600 to 700 basis points making a stable currency difficult.

Sakthivel said that while FIEO would not advocate any such measures which would hamper capital inflows  a low cost rupee window at 5% for exports and a "dollar" window  at LIBOR +0.5% (similar to the Buyers credit being offered for imports by Banks) would help the MSME export sector to tide over the existing global crisis.