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Exporters also hit by global financial crisis

Though the dollar has been steadily getting stronger against the rupee, it is not exactly translating into big profits to the exporters back home, reports Atul Mathur.

business Updated: Oct 12, 2008 00:27 IST

Interacting with European buyers online at his Okhla export unit, Ajay Sahni is not very excited. Though the dollar has been steadily getting stronger against the rupee, it is not exactly translating into big profits to the exporters back home.

“Conversion rates are internationally monitored. Our buyers have started haggling on rates on fresh orders and some are even pressing us for revision of rates on the previous orders,” said Sahni, director of SMS Exports.

In fact, claimed Sahni, volatile market is never healthy and it has adversely affected the export market.

The company is a garment export unit of Weavers India with a turnover of US $ 20 million. It exports women’s wear to various European countries.

“The overall business is down. We are not getting the kind of orders that we used to get. The importers have adopted the wait-and-watch policy,” added Ajay.

“When the rupee was stronger earlier this year and even in 2007, we lost about 10-15 per cent of our profits. Also, buyers too shifted their focus to countries like China and Bangladesh and we suffered an additional loss of about 20 per cent in our business. Overall, the exporters are not actually jumping with joy as people might perceive,” said elder brother Jagdeep Sahni, who is also a director of the company.

While the rupee weakening against dollar is a positive development for exporters, it has badly affected the importers. The accessories used in the garments exported by Sahnis, like yarn and patches, are imported from China.

Domestic factors like inflation and increase in labour cost has further cut down on profits of the company.

“Minimum wages paid to skilled, semi-skilled and unskilled labour have increased from August 1. Due to inflation, the cost of raw material has also gone up causing an increase in production cost by 15 to 20 per cent. Domestic factors have also nullified the benefits of the strengthening of dollar,” said H.R. Sahni, managing director of the company.