Hit by the depreciating rupee against the dollar, exporters here called for steps to stabilize the exchange rate and improving effeciency across all sectors to achieve sustainable growth.
The current dollar volatility was bad for exports as companies could not go in for price negotiation against export value.
Worst hot were the small and medium enterprises (SMEs) who have limited product range, said K T Chacko, director of the Indian Institute of Foreign Trade at a seminar on the global financial crisis organised by EEPC India in Kolkata on Friday.
One way to overcome the current crisis was to go in for inclusive banking, resource mobilisation and growth-oriented financing, he added. More than $63 billion had been sucked out of Indian capital market in the last few months following the global financial crisis originating in US. This led to a liquidity crunch and a slump in the domestic market. The crunch resulted in the depreciating rupee.
Exports stagnated as volatility in foreign exchange rates and fluctuations of the rupee value against the dollar hit price negotiations as well as margins.
Exporters were also hit by a fall in demand in the global market, high capital costs and interest rates and rising cost of production. There was a 69.5 per cent increase in interest cost year-on-year, eroding profits. A survey of over 50 engineering export units revealed that engineering exports had seen 14 per cent reduction in profit, the worst hit being SMEs.
Engineering exporters were aiming for growth in net sales, said Chacko. Management of volatility, inflation and high interest rates were interlinked, he said. Rupee volatility could be controlled by the government and the movement restricted to a narrow band width, giving respite to exporters, through fiscal support.
This apart, export credit limit could be enhanced to 15-25 per cent by banks and state governments for easy and faster repayment of reimbursements.
