Rising rupee leads to loss of comparative advantage: Mittal

NEW DELHI: Seeking a cut in interest rates to partially negate the impact of rising rupee, CII President Sunil Mittal has said that Indian exporters are losing their comparative advantage as local currencies in other markets have not shown similar upswing against dollar as rupee has.

Countries which compete with Indian exports in textiles, apparels and leather have a comparative advantage on the local currency front as against US dollar as their respective currencies have appreciated at a lower rate than rupee, he said.

"While the rupee has appreciated by 11.8 per cent in the last one year, the Chinese yuan has appreciated by 3.6 per cent, Pakistani rupee has appreciated by 0.3 per cent, Bangladeshi taka by 3.2 per cent and the Sri Lankan rupee has depreciated by 4.6 per cent, thus making Indian exports in these vital sectors dearer since January this year," Mittal said.

Cheaper imports and high interest rates have also affected domestic sales of consumer durables, he said.

In case of steel, chemicals, petro-chemicals and auto components, countries that are competitors to Indian exports such as China, South Korea and Thailand have a comparative advantage when compared to India due to lower rates of appreciation of their respective currencies, he said.

Mittal said that IT and ITeS sectors are at a fairly disadvantageous position when compared to competing countries.

"Reducing the interest rates would not only help Indian industry including exporters to reduce their costs, but would also reduce the interest rate arbitrage opportunities and thus help to moderate inflows of US Dollars. It is time that RBI and the Government take measures that will help arrest further appreciation of the Rupee," he added.