A FICCI survey says exporters are exploring Euro-denominated opportunities as their enthusiasm for export performance has been severely dampened.
NEW DELHI: In the wake of strengthening Rupee and consequent pressure on profit margins, Indian exporters are exploring Euro-denominated trade opportunities as their enthusiasm with regard to export performance has been severely dampened, a FICCI survey revealed.
The chamber's survey on exports revealed that a combination of factors like rising costs of raw material and hike in interest rates have jolted the confidence level of Indian exporters despite the positive announcements made in the trade policy supplement for 2007-08.
The exporters are on the lookout for clients and markets where Euro could be replaced as a medium of exchange for US dollar. This move on part of the exporters indicate that over the next few months India's exports to the US may witness a slowdown, while exports to the EU may increase, the chamber said in a statement.
The survey, which drew responses from 304 companies, showed that exports in textiles, gems and jewellery, tea, spices, leather and marine products are extremely price sensitive and the recent movement in the Rupee value has started impinging on their export performance.
Seventy six per cent of the respondents said they had been hit due to the rising cost of raw materials and 75 per cent of respondents felt that the appreciating Rupee is weakening their competitiveness.
The most severely hit are the small and medium enterprises, which unlike large enterprises neither have the option of reducing their cost burden by resorting to external sources of finances nor have the knowledge about safeguarding their currency exposure.
A significantly large proportion of the participating companies had said in several countries and product categories they faced stiff competition from Chinese exporters.
Around 82 per cent of the companies reported that in their agreements with their clients they did not have a clause that allowed revision of rates in case of a sizable adverse movement in the exchange rate.
Several exporters had also shown keen interest to hedge against the exchange rate risk using instruments like forward contracts. Some suggested a short period of validity of quotations for greater safety.
Only 34 per cent of the participating companies had reported that the current overall export conditions were moderately to substantially better vis-a-vis the conditions prevailing in the last six months, the statement said.
A significant 41 per cent of the respondents felt that the current export conditions had worsened vis-a-vis the conditions in the last six months.
Only 60 per cent of the participants were hopeful about a further increase in their export volumes over the next six months.
On the price realisation front, while a significant 63 per cent had reported higher prices for their exports over the next six months, a very large proportion among these said that excessive pressure on margins was compelling them to revise their prices upward.
In fact, 46 per cent of the exporters had reported raising the price for their products by up to 10 per cent over the next six months.
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