Hyderabad: The eight per cent drop in the home currency against the US dollar this year so far is creating tremors across all the industry verticals as every one per cent fluctuation in the rupee impacts operating profit margin in the range of 30-40 basis points (100 bsp is equivalent to 1%).
This is a favourable position for exporters but disadvantageous for importers.
Telangana is not only a bulk drugs hub in the country, but also the second largest IT exporter. The Telangana chapters of CII, IACC and Tapci are pulling up their socks to mitigate the impact of rupee volatility, while expressing concerns over the surge in cost of external commercial borrowings (ECBs). Registering an eight per cent fall, the Indian Rupee nosedived to an all-time low against the US dollar to Rs 69.09 on June 28. Previous record low was Rs 68.865 in November 2016.
CII Telangana chapter chairman Sanjay Singh said, “The rupee’s fall is not good for the country. Everything will become expensive.”
Outflows of FPIs coupled with increased demand from importers and banks is keeping the pressure on the rupee. Pharma and other manufacturing companies that use imported raw materials in production are already feeling the pressure of the rupee fall.
Telangana Association for Pharma and Chemical Industries is urging the Centre and state government to encourage local manufacturers by extending incentives and relaxing banking norms.
N.V. Narender, TAPCI official, says: “We see huge impact on all imports of raw materials. Forward contracts will also be affected. Overseas loans, ECBs will be impacted. Cost of production will rise and this will further reduce margins by one-third.
“We request the Centre to basically discourage imports of raw materials by encouraging local market. For this, NPA norms should be relaxed. So, we can competitively produce raw materials, when compared to China.”
