Falling rupee builds safety wall for SMEs
Be it a toymaker in Uttar Pradesh or an ancillary unit in south India, small and medium enterprises (SMEs) are silently cheering the crash of the rupee to a lifetime low of Rs 54.2 to a US dollar. Debobrat Ghose reports. Manna from heavenbusiness Updated: Dec 18, 2011 23:08 IST
Be it a toymaker in Uttar Pradesh or an ancillary unit in south India, small and medium enterprises (SMEs) are silently cheering the crash of the rupee to a lifetime low of Rs 54.2 to a US dollar.
The sliding rupee has sent policymakers into a tizzy, but the situation could prove a blessing in disguise for SMEs, as their bane, cheap imports from China, would become 15-20% costlier.
"On one hand the falling rupee has provided succour to Indian manufacturers, who face competition from Chinese imports. It has also made Indian SME-dominated exports competitive vis-a-vis Asian competitors," Federation of Indian Micro & Small and Medium Enterprises (FISME) secretary-general Anil Bhardwaj told HT.
Manufacturing cost in India is higher due to infrastructure and other bottlenecks. The weakening rupee has provided the cushion that Indian SMEs needed to make them competive. Entrepreneurs are optimistic that instead of buying Chinese or imported inputs, even big corporates would prefer to buy from domestic manufacturers.
"Often we buy Chinese items to manufacture our products, due to its cheaper rates, but now we can go for domestic ones and expect the domestic market to grow," says Baburam Choudhary, a Jodhpur-based entrepreneur who makes healthcare equipment and tools.
"Since the dollar rate has increased, we can compete in the international market by reducing our prices by 5-7% or working on a thin margin and earn profit," said Bangalore-based Mohan Suresh, director, Techno-spark Industries.
The scenario is not without downsides. "Though export realisation will be higher (20% more in terms of money), the country needs to balance the inflationary pressure," cautioned chairman, National Small Industries Corporation, HP Kumar.