According to the Study, the major export sectors that come directly under appreciation threat are IT & services, textiles and leather.
IT and Services Industry: The IT industry will loose its competitive ground, as the currencies of the major competitors China, Vietnam, Hong Kong and others are not appreciating in comparison with Indian rupee.
China had an appreciation of 1.82%, whereas Hong Kong had a depreciation of .19% and the appreciation of rupee by 8.35 % is a major concern for the IT industry.
The appreciation of Rupee by 8.35% is affecting the realizations and competitiveness of IT software and services export segment. The SMEs exporters who operate on thin margins are badly affected on realizations because of high appreciation of the rupee. In the high global competitive market hardening will dampen the prospects of the exporters.
Textiles & Leather: Indian textile exports faces competition from China, Bangladesh and Pakistan, in the region and their currencies have appreciated insignificantly compared to rupee. The US is the biggest market for the textile sector, which is having a slowdown in the economy as US growth had gone down to 0.6 percent in the first quarter and rupee appreciation by 8.35 %will further reduce the competitiveness.
Pakistan and China are performing better than India in textiles sector as compared to India because of the competitiveness on price and their currencies are not appreciating as high as Indian rupee.
The depreciation of Taiwan currency, which is a competitor in leather exports besides China, is a major concern. China's currency had appreciated by only 1.82%, and Taiwan's currency had depreciation by .91%
Further says Mr. Dhoot that appreciating rupee would dampen the export competitiveness by at least US$ 15 billion in the current fiscal itself. Exporters may not be able to sustain the currency appreciation, as it is higher and happening very quickly.
The single most important factor contributing to the declining growth rate had been the persistent and significant appreciation of rupee vis-à-vis dollar by about 9 per cent. Realizations are also taking dip because of the appreciation and the mostly hitting the SME exporters segment as they operate on thin average margins.
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The Associated Chambers of Commerce and Industry of India
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