Exports have Hardly Benefitted from Currency Weakness

Chennai: Export sector is not enthused by the rupee touching 90. Weakness in rupee has failed to lift export earnings in the past as costly logistics, and dependence on imported intermediates erases any currency advantage. Further, weak currency is not good for a country with higher imports.

“The impact of rupee on exports is sector specific. Some sectors which have less imported components stand to gain. But for industries like gems and jewellery or electronics, there is no gain,” said Pankaj Chadha, chairman, EEPC.

However, the data of last ten years has proved that a cheaper rupee cannot compensate for India’s high-cost, over-regulated export ecosystem.

In 2013, the rupee traded at 60 to the dollar and merchandise exports were $313 billion. Today the rupee is near 90 an extraordinary 50 per cent depreciation yet exports have risen only to $440 billion, find GTRI.

A weaker currency should have turbocharged India’s export competitiveness, but the opposite occurred: high input tariffs, rigid standards, QCO-driven supply-chain blockages, costly logistics, and dependence on imported intermediates erased any currency advantage.

“Yet there is room for optimism. The recent rollback of QCOs on key industrial inputs, ongoing GST rate rationalisation, and long-pending labour reforms signal a long-awaited shift toward lowering domestic frictions,” said Ajay Srivastava, founder, GTRI.

“If these reforms are executed with consistency and depth, they could finally allow India’s exporters to benefit from a competitive currency and unlock the scale and dynamism,” he said.

However, a country with a trade deficit does not benefit from currency weakness as it will have to pay more for the higher imports.