Exchange Rates impact not just Exporters but Employment, Investments and Economy as well

A brainstorming discussion on 'The Rising Rupee' was organized by the Indian Merchants' Chamber and its Economic Research and Training Foundation, under the auspices of 'The Viewpoint Hour' on 16th May 2007.

The outcome was a wide spectrum of views on what could be the most appropriate exchange rate policy for India.

In his Introductory Remarks, Mr Niraj Bajaj, President, IMC flagged some important issues of concern for the IMC and its members.

Mr A.V. Rajwade, Risk Management Consultant said that India's trade deficit is worsening sharply and could touch $ 100 bn next year. Exchange rate determination mechanism need not be looked at from a narrow perspective of BoP and exports but from a broader perspective of promoting growth, investment and employment. Over-reliance on capital account is risky. Use of instruments like MSS (market stabilization scheme) impose a cost on the fiscal, which can be calculated easily. However, economists are not calculating the cost of non-intervention on investment, jobs and growth.

Mr. K. Harihar, Head Treasury, DCBL projected the rupee dollar exchange rate to be around Rs 42.50 to Rs 43 by the year end.

Dr. Ashima Goyal, Prof. IGIDR said that our exporters have to focus on productivity improvements. While in terms of a basket of 6 currencies, the rupee has appreciated, yet in terms of a basket of 36 currencies, it has not appreciated.

Dr. Subramanian, Enam Securities was extremely bullish about the prospects for the Indian economy, which he said will grow in double digits in the coming years. Exports are not currency driven but competitiveness driven.

Mr G. Chandrashekhar, Editor (Agri), Business Line said that a weak rupee has fostered protective competitiveness. Exchange rates cannot be looked at in isolation and have to be viewed along with import tariffs.

Mr Suresh Kotak, Past President, IMC said, that China imports raw cotton from India and has become more competitive in the field of textiles. India, on the other hand, is not constrained by resources but by inadequate availability of infrastructure (power).