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Brexit-battered £ to hit Indian SMEs
NEW DELHI: Raja Shanmugam, partner and one of the promoters of the Tamil Nadu-based garment exporting firm Warsaw International is unsure about how much he will
NEW DELHI: Raja Shanmugam, partner and one of the promoters of the Tamil Nadu-based garment exporting firm Warsaw International is unsure about how much he will earn this year.
The garment manufacturer, which inked export contracts to the UK four months ago had no idea that Britain’s exit from the European Union (EU) would lead a dramatic fall in the pound and erode his anticipated earnings.
The British pound has fallen almost 12% since Brexit against the rupee. The currency has fallen to 31-year lows against the dollar and many investors have warned that Britain, now, faces years of uncertainty in trade to investment.
Shanmugam has, however, opted for currency hedging — a mechanism to minimise foreign exchange risks — for a part of his exports. But the remaining will fetch him less money.
But there are thousands of such small-and-medium enterprises (SMEs), which export their goods to the UK, and have not hedged their deals.
While, the overall economy remained resilient to Brexit, the government may consider providing a breather in the form of monetary support to such SMEs, according to sources. “We will do our best to ensure that the impact is minimal,” a government official told HT.
“We have taken up the issue with Niti Aayog and have requested that there should be some support for the SMEs that are dealing with currency volatility, something many did not anticipate,” said Anil Bhardwaj, secretary general, Federation of Indian Micro and Small & Medium Enterprises.
The share of micro, small and medium enterprises in India’s total exports is estimated at around 43%. SMEs also manufacture the bulk of the textiles exported out of India — the sector accounts for 24% of the country’s total shipment to the UK.
The sector may come up for discussion when the government starts discussions on its free trade agreement (FTA) with Britain – a move that is aimed to boost bilateral trade. India’s FTA with the European Union, discussions for which began in 2007, has not yet fructified.
