12 April 2004 01:20
Service Sector Set To Take Bigger Hit: FIEO
The sharp rise of the Indian rupee versus the US dollar is expected to affect exports of various services like
information technology and software more than the export of physical goods, according to the Federation of Indian Export
Organisations (FIEO). FIEO chairman SK Jain said, commodity exports will not be affected immediately in the shorth term,
since any decline in rupee realisation can be covered forward. However, if trend continues for a longer period, exports
would definitely be affected as commodities would become dearer in dollar terms. Mr Jain, who is also managing director
of leading tea export house LNJ International Ltd, said there is hardly chance for the rupee to gain further since the
Reserve Bank of India has promised to step in. He said the FIEO plans to meet the ministries of commerce and finance to
convey the worries of exporters on the expected decline in export incomes. He said the government has already withdrawn
a number of benefits being enjoyed by exporters earlier. These include the special import license, income tax benefits
and certain other facilities. As for the duty-entitlement passbook (DEPB) scheme, although it is still available it has
has lost its attraction because the premiums have shrunk. Mr AR Basu, managing director of Beeyu International Ltd,
another leading export house for tea, coffee and rice, expressed his deep worry on sharp fall export income. Mr Basu
said that risk cover under the forward exchange booking with a bank is allowed only against confirmed orders. But all
exports are not conducted against confirmed orders. The FEB is not available for open- credit exports or exports against
sporadic enquiries. This apart, the forward exchange rates as projected by the banks for two monhts or three months do
not appear attractive to all. For example, Mr Basu said, Beeyu exports tea and rice at a fixed rate in dollar value.
"So we lose a substantial amount on the rupee value," he said. He said that, since 60 per cent of Russia’s
export value to India is met in the rupee, under an agreement between the two governments, tea exports will not be
affect much, at least up to 2005. The rupee-rouble agreement ends in 2005. Exports of foundry materials seem to be the
worst affected by the rising rupee. The vice-chairman of the Indian Foundry Association, Mr GD Agarwal, who runs a 100
per cent export-oriented foundry, said his net export earnings have gone down by 12 per cent during the last one year as
the rupee rose against the dollar. The March-April slide will lead to a further drop in earnings and could lead to a
negative income. In his business, India’s main rivals in the US market are China and also Brazil. According to Mr
Agarwal, China will take advantage of the easy dollar phenomena as it has an agreement with the US to keep the exchage
rate between dollar and the Chinese currency fixed for six years. This apart, the foundry owners are being hammered by
the increase in prices of foundry-grade pig iron, which often overtakes the price quoted at the time of order booking.
Leather goods exporters are also expecting a sharp drop in realisations, particularly since the bulk of their business
is done during February-March. Mr Girish Kalyani, manager of Rajda Industries & Exports Lted, said these two months
are the peak period for leather exporters as they scramble to meet targets fixed earlier. No one had expected the rupee
debacle. Leather goods exports go mainly to Europe, and even the Euro has fallen against the rupee from Rs 56.80 to Rs
54. Mr Kalyani said exporters, banking on the trends in earlier years, had covered only part of the export value.
"Although our exports have gone up to Rs 42 crore during 2003-04 from Rs 38 crore the previous year, in real terms
the gain has been two per cent rather than 10 per cent," he said.
[Financial Express] |
RUSSIA IN FACTS
