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| Rupee fall: Importers of Indian goods may demand discounts | |
| Dilip Kumar Jha / Mumbai December 14, 2011, 0:17 IST | |
Price of import-denominated commodities like copper and coal to rise.
 While the falling rupee benefits exporters, they are also likely to face increased demands from their importers for a discount on this ground.
The rupee has fallen 21 per cent against the dollar since August, closing at 53.23 against the dollar on Tuesday, a record low. India’s big exports are of handicrafts, gems, jewellery, textiles, industrial machinery, leather products and chemicals.
“The Rs 125,000-crore readymade garments sector is poised to gain. But, importers would start negotiating for discounts from exporters’ profit,” said D K Nair, secretary-general of the Confederation of Indian Textile Industry.
However, only 20-30 per cent of exporters would accept such a negotiated price. The import component in this sector is only five per cent of overall raw material, said Nair.
Jewellery is another sector where gain is expected from the rupee’s dramatic fall. According to Rajiv Jain, chairman, Gems & Jewellery Export Promotion Council, every drop fetches a higher value for their exported items. Although, import of raw material will be costlier, this industry can safely pass it on to consumers. However, the extent of gain would be confined to the value addition bit, since the domestic jewellery industry imports its raw materials, gold and diamonds, this being 70-85 per cent of the value of each jewellery item.
Pukhraj Sethiya, consultant, Pricewate-rhouseCoopers, feels the price of import-denominated commodities like copper concentrate, coke and coal is likely to rise, limiting demand in the long run. Leading metal companies such as Hindalco and Sterlite import huge quantities of copper concentrate for smelting. With the rupee depreciation, the import cost of the raw material may go up but they export nearly 70 per cent of the finished metal.
Ganesan Natarajan, president and chief executive officer of Ennore Coke, a producer for consumption in the steel industry, said, “The rupee’s fall will impact our industry badly, despite half of the imported coke, of nearly five million tonnes, being hedged to nullify the impact of currency movement.” Steel produced by using coking coal is largely used for domestic consumption. Hence, the impact would be severe on all user industries, he added.
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