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Kamal Nath worried over rising rupee

The minister seeks PM's intervention to prevent the country's competitiveness because a cheaper dollar makes imports easier and exports tougher, reports Gaurav Choudhury.

business Updated: May 08, 2007 20:52 IST

The strongest rupee in nearly a decade may be a good news for importers and those who see the currency as a symbol of economic prowess, but Commerce Minister Kamal Nath is a worried man. He has sought Prime Minister Manmohan Singh's intervention to prevent the country's competitiveness because a cheaper dollar makes imports easier and exports tougher.

“The commerce and industry minister has written to the prime minister expressing concern over the rising rupee and requesting his intervention," Commerce Secretary Gopal K Pillai said at a meeting organised by the Federation of Indian Export Organisation (FIEO).

"People are aware at the highest level and something is being done.We will take action and it is of concern to us," Pillai added.

The exact nature of the intervention sought by Nath, however, is not known.

The merchandise export target for the current year (2007-08) has been set at $160 billion and $200 billion for the next year ( 2008-09). Exports during 2006-07 touched $125 billion.

Although commerce ministry officials maintain that the government has factored in the appreciation of rupee in setting the target, economists and trade analysts felt that an economic slowdown in the US and the strengthening of the rupee in the second half of 2006-07 has had an impact on export competitiveness.

Some exporters, particularly of information technology (IT) services and textiles, have reported losses between the period of invoicing and realisation of proceeds due to the rupee, which has been hovering at less Rs 41 to a US dollar in recent weeks.


The textile industry, one of the largest employment generators in India, appears to be the biggest hit by the appreciation of the rupee and has reported a 6.3 per cent dip in exports during the last four months. The Apparel Export Promotion Council (AEPC) has pointed out that export receipts of apparel exporters decreased from Rs 20,484 crore in the first half of 2006-07 to Rs 19,181 crore during the second half of the year, given the same level of exports.

Economists say that with the Reserve Bank of India (RBI) apparently limiting its intervention and allowing the rupee to strengthen further in the new financial year, a loss of competitiveness will hurt exports, particularly those of low value-added goods.

The impact of the hardening rupee on the India’s oil import bill has also to be watched with caution due to a volatility in the global crude oil prices. During the year, India‘s net import of crude oil and petroleum products grew by over 17 per cent to an estimated Rs 1,64,107 crore, accounting for 21 per cent of total imports.