Dollar strength against rupee no panacea for export growth: EEPC India

Kolkata : India's engineering export growth slackened to 9.4 per cent in July even as the rupee continued to depreciate against the dollar during the month, demonstrating that a stronger dollar does not always lead to export momentum, the EEPC India said on Monday.

The Engineering Export Promotion Council (EEPC) of India said engineering exports had grown by 18.92 per cent in April this year, 14.59 per cent in May, 14.17 per cent in June and then by 9.37 per cent in July.

"Our view has been that it is a stable currency which helps exporters, providing them with predictability of dealing with the buyers. Any fluctuation and volatility on either side does not help," council's Chairman Ravi Sehgal said.

The EEPC paper noted the rupee depreciated by 6.56 per cent in July as compared to 5.19 per cent in June.

"But did exports grow at a higher rate too, and was there a currency depreciation advantage? No, exports in July, this year expanded at a lesser pace of 9.37 per cent than 14.17 per cent in June," it explained.

In any case, the rupee depreciation to plus 71 to a dollar level in August should be seen in the context of January 2017, when the average exchange rate was Rs 68.08 to a dollar which reversed to 63.64 in January this year, it said in a statement.

When the rupee was 68-plus to a dollar in January 2017, engineering exports grew by about 12 per cent but when in the same month of 2018, when the rupee became stronger and exporters could have got the disadvantage of a weak dollar, these exports grew at a higher pace of 15 per cent, the council said. It noted that a stable currency is the best bet for exporters.

According to EEPC India, the present depreciation of the rupee should get a contextual perspective that it is not the Indian currency alone which has lost ground. Currencies of major emerging markets have seen value erosion against the US dollar, giving level-playing to exporters of all these countries.

"When everyone else is on the same footing, extra advantage does not really accrue. The key lies in improving the domestic efficiency levels so that the cost of production is brought down. The dollar appreciation conversely is also making the raw material for exports expensive," it added.