Export-oriented companies need to exercise caution due to the rising rupee, said K V Kamath, chief executive officer and managing director, ICICI Bank.
MUMBAI: Indian manufacturing industry has taken off on a good note from 2002, but export-oriented companies need to exercise caution due to the rising rupee, said K V Kamath, chief executive officer and managing director, ICICI Bank.
He said the Indian currency would continue to appreciate further in future. “If I were in company management, I would allow at least Rs 2 per year or Re 1 a year strengthening,” he told corporates and industry representatives, implying that companies should be prepared for a Re 1 rise in the Indian unit against the dollar per year. The rupee has risen 13.7% over a year.
Speaking at a manufacturing summit organised by the Confederation of Indian Industry, Kamath said the manufacturing sector, which clocked a growth rate of 12.5% in 2006-07, is a star.
“From 1997-2002, manufacturing reinvented itself in terms of processes, quality, cutting costs thereby becoming a good industrial machine. Anybody who grows is a star (according to the Boston Consulting Group growth-share matrix) and manufacturing is surely a star as it is growing by leaps and bounds,” he said.
He said that increase in demand for products has played a major role in this upsurge with consumers from the service sectors like IT, ITeS, telecom, financial services and media driving this demand.
On the economy, Kamath said that 10% gross domestic product growth is a given. “I have been saying this right through that we are set for a long period of growth and we need to only think of 10% plus in future.”
He cautioned export-oriented manufacturers to brace themselves for the rupee appreciation and chalk out a strategic plan for facing the rupee-dollar matrix. Rupee appreciation increases the dollar price of Indian goods in global markets; thereby squeezing the margins of exporters, many of them belonging to sectors like textiles, leather and handicrafts.
Hence, many small-scale companies have gone on a retrenchment drive in order to fight increasing costs.
Kamath advised companies to invest largely in human resource to make it industry ready.
“Financial capital in not a challenge anymore as our markets are strong. What we are facing is the severe dearth of talented human capital and hence we need to enter into tie-ups with universities and customise programmes to suit the industry’s requirements.”
ICICI Bank has an agreement with Manipal Academy for Banking and Insurance to train people in banking.
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