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Exports zoom but Europe crunch looms

business Updated: Jul 01, 2010 20:50 IST
HT Correspondent
HT Correspondent
Hindustan Times
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The country’s exports grew 35.1 per cent in May to $16.1 billion (Rs 74,060 crore), recording positive growth for the seventh successive month and triggering hopes that the worst might be over for embattled traders. However, the crisis in the Euro Zone could act as a potential road-bump.

Last May, exports had contracted by more than 30 per cent as shrinking world demand had affected India’s handicrafts, gems and jewellery, leather and textile exports severely in the last one year.

The downturn in exports started in mid-2008 when retail orders from the European Union and the United States crumbled due to the most crushing economic meltdown worldwide causing widespread unemployment and changing consumer-spending behaviour.

The European debt crisis, however, could potentially hurt the recovery in India’s exports.

“We need to regularly review our strategy in view of the setback in the Euro zone recently,” A. Sakthivel, president, Federation of Indian Export Organisations (FIEO), said.

Sakthivel said the depreciation of euro would provide fierce competition to Indian products in countries where they face competition from Euro nations.

The Euro has depreciated by about 17.5 per cent against the rupee since November last year.

However, for exporters, the Chinese government’s decision to allow its currency — the Yuan — to strengthen could not have come at a better time.

India’s exporters have had to compete with their Chinese counterparts who are aided by an undervalued yuan.

This, exporters said, unfairly drives down the price of Chinese products and makes them impossible to compete with.

Last week, China allowed greater flexibility in exchange rates that strengthened the Yuan against the dollar.