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Import-heavy goods to turn dearer

business Updated: Nov 21, 2011 21:47 IST
HT Correspondent

As the rupee breached the Rs 52 mark to a dollar, companies with a strong import component warned that their product line could see an upward price revision.

“There is expected to be some increase in the Jaguar and Land Rover products that we import,” C Ramakrishnan, CFO, Tata Motors, told HT. The increase is to be directly proportional to the rupee’s depreciation.

According to Deven Choksey, CEO and MD, KR Choksey Shares and Securities, while foreign institutional investors (FIIs) have turned net sellers, there is also a speculative element in the market which is causing the fall.

“The FIIs fear that if the rupee continues to fall, they might as well take their money out,” he told HT. Choksey said the lack of intervention by the Reserve Bank of India (RBI) could hurt growth.

“The RBI is already too late but if it still doesn’t intervene, it could lead to a further slide in the rupee’s value vis-à-vis the dollar and it’s not a very healthy sign for the economy,” he said. “The government is not taking decisions in time.”

Exporters of services, such as the IT sector would benefit from the depreciation.

“As a net exporter, we will benefit. However, it is a double-edged sword, it can work either way. At one point you benefit, but you may lose also as it keeps fluctuating,” said CP Gurnani, CEO, Mahindra Satyam.

The steel sector is also expected to benefit from the rupee’s decline, according to Sandeep Jajodia, executive vice-chairman and MD, Monnet Ispat.

“The decline in rupee will make steel imports from China expensive, which will allow domestic players to also increase their prices, between 5% and 10%,” he said.
He said Monnet Ispat is not likely to face any pressure as it does not import any raw materials.