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Falling Rupee Alarms Industrialists
Importers of raw materials and semi finished goods have been particularly vulnerable as in addition to the prices, the tax burden also mounts
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The falling value of the Indian Rupee against the US dollar, has caused deep concern and anxiety in business circles. Industrialists fear that their profitability would decline and costs will shoot up. If this dismal trend continued unabated, the economy too would be dented, was the general consensus of opinion.
From Rs 78 till a few weeks ago, the current value of Rupee has fallen steeply to Rs 79.05 per dollar and may in fact touch the Rs 80 level soon. Business interests said the falling value of the Rupee in the international market could have long term detrimental effect on the economy. The Rupee value has been falling for past two years and this could indirectly hurt all sectors of the economy.
Importers of raw materials and semi finished goods have been particularly vulnerable as in addition to the prices, the tax burden also mounts.
Delhi businessman Ananjay Agarwal was worried as the free fall of the Rupee could hit his import business. The steep rise in costs is a matter of grave worry, he said. But since the international scene and other factors responsible were beyond control, nothing much could be done, Agarwal added. He said import prices trigger a rise in custom duties leading to increased costs of finished goods.
Leading footwear exporter Sanjay Dang of the UV Overseas, said while the rupee value against US dollar had declined, it was generally strong against the Euro. While we pay in dollars for imports of raw materials or machines and components, we get paid in Euros for our shoe exports to European countries,he explained.
Some businessmen feared that since we pay in dollars for our imports, our economy could get a hit. This was particularly true in the case of petroleum and crude as also electronic items. Increase in the price of petrol and diesel will have a triggering effect on production of domestic products which were set to become more expensive.
Further, those going abroad for tourism or studies will be affected.
Take a look at this falling graph of value of Rupee against the US dollar.
2014, May 29 it was 58.93
2015, May 29 it was 63.73
2016 May 30 ……66.97
2017 May 30….64.66
2018 Oct 4 it was 73.79
2022 June 10 it was 77.85,
while on June 22, 2022 the value was 79.05 per US dollar.
Ishan Sachdeva of Viola Exports said conducting overseas business these days had become risky and unprofitable due to currency fluctuations. Business takes a hit whenever the rupee falls against the dollar. Usually when we contract orders with overseas buyers rates are fixed in US dollars, but by the time the orders are executed, the fall in currency value hits our earnings. That apart, government policies also keep changing. The benefits promised under various schemes, largely remain confined to papers only. In the larger interests of the exporters as well as the country’s economy, the government of India should come out with a policy package to cushion our losses, Sachdeva added.
While importers have expressed concerns, exporters are happy and upbeat, as they stand to gain from the falling value of the Rupee, which in real terms means higher profits from exported goods or services. Jagan Gupta, executive director of a leading medical devices manufacturing company of Mysore, Glowtronics, said “often more rupees to a dollar act as an incentive and our profits go up to neutralise rising costs of production. Tourists also like to visit India, as dollars which they bring can buy more goods and services here.”