The editorial, “Strong rupee, weak exporters” (August 23) points out the woes of the labour-intensive textiles and leather sector caused by rupee appreciation and declining profit margins and export strength.
It is impossible to correct the situation through exports unless the government devises initiatives to lessen the burden on exporters and help raise their profit margins. At the same time export prices should remain competitive with those of currency-depreciated countries such as Bangladesh, Vietnam and Indonesia.
There is still a yawning gap between what is said and what is done. Efforts to push exports have been one-sided so far; what is needed is easy capital for exporters to deal with the situation, as controlling exchange rates is not in the hands of the government. Trade financing should be made easier and could be along the lines of ease of doing business in India. Finance should be available to exporters on easier terms so that their cost of production is reduced. Import-intensive export products have a fractional benefit as imports of inputs are available cheap due to rupee appreciation.
For making export finance available at affordable rates, the government should rope in Export Promotion Councils (EPC) and Commodity Boards to play the role of trade financiers. These days some shipping companies provide trade finance to importers and exporters; still the cost of availing trade finance — be it LC, SBLC, discounting LCs, transferring LCs, pre- and post-shipment finances via banks — has increased due to rupee appreciation and high bank rates due to the large volume of non-performing assets. EPCs and Commodity Boards in collaboration with banks and lending institutions should get bulk finance at zero rates and this should be provided to member exporters of repute as trade financing facilitators on agreeable terms.
The commerce ministry, which is granting Market Development Assistance to EPCs, exporters and importers, should have a separate fund to facilitate trade financing to importers and exporters via EPCs and Commodity Boards. The suggestion to set up such a fund is similar to that of the Trade Infrastructure for Export Scheme; it can correct the imbalance brought on by rupee appreciation and help exporters become competitive.
A Sathyanarayana via email
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201 · E-mail: firstname.lastname@example.org
All letters must have a postal address and telephone number