rediff.com

Weaker Rupee & Exports: FIEO Highlights Complex Reality

Share on:

By Rediff Money Desk, New Delhi   Jan 24, 2025 19:12

The Federation of Indian Export Organisations (FIEO) says a weaker rupee isn't a simple solution for boosting exports, highlighting the complexities and potential drawbacks for Indian businesses.
Weaker Rupee & Exports: FIEO Highlights Complex Reality
Illustration: Dominic Xavier/Rediff.com
New Delhi, Jan 24 (PTI) A weaker rupee is often seen as a boost for Indian exports by making goods more competitive globally, but the reality is more complex, the apex exporters' body FIEO said on Friday.

Federation of Indian Export Organisations (FIEO) President Ashwani Kumar also said the recent depreciation of the domestic currency against the US Dollar represents a complex economic scenario with mixed outcomes.

"A weaker rupee is not a one-size-fits-all solution to boost exports. A strategic, multi-pronged approach is needed to address the root causes of depreciation while mitigating its adverse effects," he said.

Explaining it further, he said, that if the rupee depreciates by 2 per cent and the currencies of key competitors decline by 3-5 per cent, Indian exporters lose competitiveness in global markets.

"This relative disadvantage erodes any potential price advantage Indian goods might gain," Kumar added.

The domestic currency has depreciated over 4 per cent last year.

The rupee closed at 86.22 (provisional) against the US dollar on Friday, weighed down by a stronger American currency.

Kumar added that the depreciation also results in a rise in input cost, exchange rate volatility, inflationary pressure, and external debt burden.

Many Indian exporters depend on imported raw materials and components. A weaker rupee significantly raises these input costs, often nullifying the perceived benefits of depreciation.

"Fluctuating exchange rates create uncertainty, making it difficult for exporters to price their products competitively and plan for the long term," he said adding that the depreciation inflates the cost of imported goods like oil and commodities, driving up production costs and fuelling domestic inflation and this reduces consumer purchasing power.

He added that a weaker domestic currency increases the cost of servicing foreign currency-denominated external debt, creating additional pressure on businesses and the government.

Exports contracted for the second month in a row by about one per cent year-on-year to USD 38.01 billion due to global uncertainties, while imports rose by about 5 per cent to USD 59.95 billion.
Source: PTI
DISCLAIMER - This article is from a syndicated feed. The original source is responsible for accuracy, views & content ownership. Views expressed may not reflect those of rediff.com India Limited.

TODAY'S MOST TRADED COMPANIES

  • Company Name
  • Price
  • Volume

More »

Moneywiz Live!