 "Govt nudging trade partners for currency-swap deals")
“We need to look very seriously at the possibility of currency swap with some of the countries. This will not only help stabilise the rupee but increase availability of credit for the exporters, especially in the SME (small and medium enterprise) sector and will also push project exporters and support the labour-intensive sectors … Currencies of all the major emerging economies are falling, but in percentage terms, the rupee’s fall has been sharpest,” said Sharma during the Board of Trade meeting here on Tuesday.
He added he was going to take up the proposal with Finance Minister P Chidambaram soon, and announced the formation of a task force that has been mandated to submit a report within a month. The task force, which will be headed by Rajeev Kher, additional secretary (trade policy division), commerce department, has been mandated to give the report within a month. Members will be from the department of economic affairs, department of financial services, the Reserve Bank of India, State Bank of India, EXIM Bank and the business chambers.
A currency-swap deal takes place between the central banks of two partner countries, under which the banks would give each other dollars to stabilise their local currencies, in case of need.
Rana Kapoor of YES Bank said: “India needs to identify two or three or more countries and regions to get into long-term swap facilities. This was successfully done with Japan during the 2008-09 crisis. Swapping is a good option because India provides a long-term consumer market. India should look at bilateral swaps to be entered into to build confidence that there is no shortage and there are currencies available waiting to be tapped. This is a very important point to be discussed and rationalised further.”
In the first four months of the financial year, the rupee slumped by almost 20 per cent. Sharma said exporters are not able to fully utilise the benefits of the falling rupee because of high import intensity in the exported product.
According to Rafeeque Ahmed of the Federation of Export Organisations (FIEO) , exports will surpass the target of $325 billion in FY14 and a turnaround is expected from October. This is for the second time that Sharma has convened the Board of Trade meeting to assess export performance. However, the government is not expected to dole out incentives before November, officials said, until and unless the measures that were announced previously are fully realised.
During the meeting, exporters urged the government to urgently address some of concerns as a short-term measure by reducing the transaction cost for exporters. The commerce ministry has also constituted a committee on this issue under Director-General of Foreign Trade Anup K Pujari, who is expected to submit the committee’s recommendations by October.
According to the Confederation of Indian Industry president and executive vice-chairman of Infosys, S Gopalakrishnan, transaction costs in India add 10-12 per cent extra cost, which need to be reduced.
Apparel Export Promotion Council has asked for a duty credit scrip at the rate of five per cent for the sector, currency-swap facilities, as well as changes in service tax, income tax and labour laws.