As rupee sinks, exporters feel the heat

Terming rupee hitting life-time low of 59.93 vs dollar as "bad news" for the economy, exporters on Thursday said it will not only raise imports bill but would also lead to volatility affecting their business.

Besides, global buyers are putting pressure on exporters to offer discounts between 10 per cent and 15 per cent, Federation of Indian Export Organisations (FIEO) said.

"This is bad news...the exporters would not gain as it is a volatile situation which has perplexed them and they have not been able to finalise their orders," FIEO director-general Ajay Sahai said.

"We want a stable currency so that the business confidence of exporters is not affected," he added.

Apparel Export Promotion Council (AEPC) said the continuous fall in the domestic currency would not help exporters much as international buyers are asking for discounts.

"We are in an unstable situation. Given the current scenario, we will lose as importers have been asking for discounts and volatility coupled with speculation will impact business sentiments," AEPC Chairman A Sakthivel said.

Talking about decline in rupee impact on India's imports, Sahai said, costlier gold and crude oil imports would widen the trade deficit further impacting the current account deficit which is a government's major concern.

"Despite the effort by the government to control gold imports, the Indian middle income group is bound by societal traditions and continues to buy gold even at higher prices which have increased the prices of gold due to rupee weakening," said D S Rawat, secretary general ASSOCHAM.

The CAD is the difference between the outflow and inflow of foreign currency and is estimated to be around 5 per cent of the GDP in 2012-13 fiscal. The CAD had touched a record high of 6.7 per cent in the October-December quarter.

Trade deficit widened to $20.1 billion in May from $17.8 billion a month ago. Gold and silver imports rose nearly 90 per cent to $8.4 billion in May. Cumulatively, in April-May period, the import of precious metals stood at $15.88 billion.

The rupee hit life-time low of 59.93 to a dollar in early trade today. It later recovered ground and was trading at around 59.7 to a dollar in noon trade.

The US dollar strengthened against major currencies on comments by Federal Reserve Chairman Ben Bernanke that the US Fed may start scaling back its monetary stimulus programme later this year.

Asserting that rupee is not in 'shambles', the finance ministry said on Thursday that the government, RBI and Sebi are alert to the situation and will take actions as warranted.