Exporters wary of picking up orders

THE RUPEE RISE - Part I

India's exports
Curency		(in %)
Dollar		85
Euro		5
Pound & Lira & Franc		5
Others		5

Retail exports, textiles face a squeeze on margins.

A Noida-based Wal-Mart supplier is in a fix. Impressed by the quality of the 60,000 decoration pieces in steel he had supplied, the world's largest retail chain had asked him to ship another 300,000 pieces.

Wal-Mart is still paying him $6 per piece. But, with the rupee appreciating from 46 to a dollar to 43.50 since his last supply, his per unit realisation is set to decrease from Rs 276 to Rs 261. At the same time, steel prices are up by almost 50 per cent.

To export or not to export. The strengthening rupee against the dollar has put India's exporters in a quandary.

As almost 85 per cent of the country's exports are marked in dollars, exporters are realising less for each consignment as the rupee gains ground. At the same time, exporters cannot afford to turn down orders with other countries in South Asia offering stiff competition.

So far, the fall in the dollar is not pinching. Despite the rupee appreciating by over 9 per cent in the last 18 months, exports have climbed up 14.75 per cent to $53.07 billion during April-February 2003-04. But the precipitous fall in the dollar value could impact future exports.

Ask M Rafique Ahmed of Farida Shoes. He is reluctant to accept a $8-10 million Wal Mart order to supply shoes, thanks to the falling dollar. "Exporters don't know how to factor the appreciation of the rupee because you either get the order or you leave it for someone else. If the appreciation continues, we are going to lose many such orders and that is very scary," he says.

The plight is much the same in the textile and apparel sector, India's largest export products. With appreciating rupee, garment exports from India have decreased 5.42 per cent to $4.45 billion during April-February 2003-04, though in quantity terms there is a 2.48 per cent increase.

"In the last eight months our margins have come down by 6-8 per cent," says Shakthivel, Apparel Export Promotion Council (AEPC) chairman.

Adds Snehdeep Agarwal, managing director of Bhartiya International, the country's largest exporter of leather garments: "We are competing against the Chinese and their currency has been stable. The minute we increase our prices to offset the loss in margins, the Chinese players, whose costs are stable, jump in and bag the orders. In the last one year, the rupee has appreciated nearly 8 per cent against the dollar, which has straightaway meant a loss of 8 per cent margins and also loss of new business."

The government seems perturbed about the issue, but is ruling out the possibility of the Reserve Bank of India stepping in to rescue the exporters. The commerce ministry is, however, seeking tax breaks to help the exporters compete at a time when the rupee is appreciating.

Meanwhile, some companies have initiated efforts to control the damage. Maruti Udyog managing director Jagdish Khattar had recently said the company was in talks with its distributors, specially in Europe, to transfer some of its current billing in dollars to euros in view of the fall in value of the dollar.

Hyundai Motor India president BVR Subbu says after billing Santro exports in dollars, the company is now looking at a more appropriate currency in view of the appreciating rupee.

Ford India vice-president (external affairs) and director (sales) Vinay Piparsania says future export transactions need to be monitored, if the value of the rupee maintains its rising trend against the dollar.