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Rupee appreciation hurting competitiveness of Indian exporters: CII
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SME Times News Bureau | 14 Apr, 2010
The rupee appreciation has hurt the competitiveness of Indian exports and further appreciation should be prevented, said Chandrajit Banerjee, Director General, the Confederation of Indian Industry (CII) in New Delhi recently.
"The recovery in Indian exports is still at a nascent stage and further appreciation of the currency especially with respect to our competitors will hurt the prospects for India’s exports," said Banerjee
The rupee has appreciated sharply over the past year with the INR moving past the Rs 45/USD mark after having fallen to levels of around Rs 50/USD a year ago. During the past year, the rupee has also appreciated against other currencies including the Euro, the Chinese Renminbi and the Japanese Yen.
In its representation to the RBI on the forthcoming Monetary Policy announcement, CII has expressed its concern that the appreciation in the exchange rate is not consistent with the widening of India’s current account deficit over the last two years. Even with a recovery in exports, the current account deficit is likely to increase in 2009-10 compared to the previous year.
Thus, the currency movements are being driven essentially by capital flows which tend to be volatile. The current environment of easy liquidity in global markets, resulting from exceptionally low interest rates being maintained by major central banks, has led to large inflows into emerging markets such as India.
CII observed that if RBI tightens monetary policy, there is a risk of a further surge in these flows, which will be attracted to higher yields.
Indian equity and debt markets have been particularly susceptible to such surges even in the past, when the exchange rate has appreciated substantially in the face of such inflows. This has affected the competitiveness of Indian products, especially when the Chinese currency remains pegged to the dollar, they said.
CII has recommended that the RBI should intervene in the currency markets to stem any further appreciation in the rupee.
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| Customs Exchange Rates |
| Currency |
Import |
Export |
US Dollar
|
84.35
|
82.60 |
UK Pound
|
106.35
|
102.90 |
Euro
|
92.50
|
89.35 |
| Japanese
Yen |
55.05 |
53.40 |
| As on 12 Oct, 2024 |
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