Exporters suffer as buyers demand discounts

While the exporters were happy with depreciating Indian

rupee against the dollar, their happiness has not lasted long. With the Indian rupee continuing its depreciation against the dollar, exporters who were earlier cheering for getting more rupees for their exports, are now worried as foreign buyers are pushing them for bigger discounts.

“The excitement of the depreciating rupee against the dollar is short-lived, because buyers have started pressurizing us to offer the maximum discount on export of products,” said Director General of Federation of Indian Export Organizations (FIEO) Ajay Sahai. “Depreciating rupee is not a thing to cherish as input costs have gone up substantially. We do not subscribe to the view that the rupee depreciation would give unexpected gains to exporters. We will like the rupee to stay stable, at around Rs 46-47,” he added.

Similarly Chairman of Apparel export promotion Council (AEPC) A Sakthivel said, “To some extent it is (fall in rupee) good for exports but it would affect in long term as the buyer would ask for more and more discounts, which would affect our profit margins”. He said buyers would always want their suppliers to reduce the price after they come to know that exchange rate fluctuation is giving good “returns” to exporters.
But a worrying factor is that the buyers are asking for discounts without placing more orders. This is mainly because of a weak demand scenario in the key markets of Europe and the US. Such a trend may exert pressure on merchandise export earnings that touched a high of $303 billion (over Rs 16500 crores) in 2011-12.

Meanwhile, the Finance Ministry said there was no need to panic and the slide would be contained when there is certainty in Eurozone recovery. “Rupee is falling due to global factors. There is no need to panic. The fall might continue till there is a certainty about the eurozone recovery. RBI is keeping a watch on it,” a finance ministry official said. Global risk aversion is putting pressure on the domestic currency as foreign funds are pulling out money. Besides, a widening current account deficit and concerns of investment in India is also putting pressure on the rupee. The Indian rupee has lost about 10 per cent since it touched its peak in February. To check the sliding rupee, the Reserve Bank had last week asked exporters to convert half of their foreign exchange reserves into rupee to make available dollars in the market.