Export sector hit on rupee appreciation against dollar : FIEO
23 Nov 2009
The export sector has taken a hit due to the phenomenal rise of the rupee recently, with the massive influx of foreign funds into the domestic stock markets, according to the Federation of Indian Export Organisations(FIEO).
The rupee has gained about 4.8 per cent against the dollar in the past few months even as it plumbed to a new 150-month low on 11 November against major world currencies.
According to its press release which quoted FIEO president A Sakthivel, it is estimated that the rupee may strengthen to around 44 to a dollar creating problems for the micro, small and medium enterprises export sector dealing with a price-sensitive, recession-hit global market.
The US government has indicated keeping interest rates low for the next 12-18 months to spur growth. This would spark a massive inflow of a weakening dollar into to emerging markets like India through carry-trade.
According to the release, "While lower interest rates may help the US economy, in India and other emerging markets, inflationary pressures are becoming more acute every day.''
Sakthivel said that the foreign funds purchasing $15.77 billion Indian stocks this year has led to rupee appreciation by 4.8 per cent.
He added that the dollar influx was not unique to the country and other emerging markets were also experiencing similar problems. However, in Brazil and Taiwan the governments have imposed controls by way of taxes on such inflows.