Commerce secy urges Reddy to check Re’s rise

NEW DELHI: The commerce department has written to RBI governor YV Reddy seeking the apex bank’s intervention in checking the rupee’s appreciation to bail out exporters. With a constant Chinese Yuan and the currency of competing economies like Pakistan, Bangladesh and Thailand depreciating, Indian exporters are getting squeezed out of the international markets, commerce secretary GK Pillai has said in a letter to the RBI chief. The commerce department had also approached the Prime Minister, earlier this week, for his help in dealing with the situation.

Speaking to ET, commerce department officials pointed out that the department had held a number of meetings with exporters on the problems that they were facing due to the sudden appreciation of the rupee.

“The department has communicated to the RBI that it believed the appreciating Rupee was not likely to check inflation in the short run but would significantly reduce the operating profit margins due to reduced price competitiveness in the international market,” an official said. The Rupee, which fell below Rs 41 to a US dollar last week, depreciated slightly on Friday to Rs 41.21 against the dollar.

The letter urged the RBI to take appropriate measures to arrest the appreciation of the Rupee with immediate effect as it could have long term implications for the export sector and employment.

What is making things worse for exporters is the fact that currencies in competing country economies like Pakistan, Bangladesh and Thailand were actually depreciating against the US dollar while the Chinese Yuan remained constant, sources said. “It is a double whammy for exporters.

Although they are realising less from their exports, there is no way they can increase prices as their competitors are in a position to bring down their prices with their currencies depreciating against the dollar,”an official said.

The small scale exporters are facing greater difficulties especially due to the increased credit costs apart from the appreciating Rupee, the letter pointed out. It added that the RBI needed to take appropriate measures to arrest the appreciation of the Rupee with immediate effect as it could have long term implications for the export sector and employment.