Exporters fail to reap benefits of a weaker rupee
With the import components of major exports becoming costlier and significant goods and service tax (GST) refunds yet to be released, Indian exporters claim the benefits of a weaker rupee are eluding them.
The rupee has reduced by 15 per cent since the start of the year. Continuously falling for the past six months — the longest such stretch since 2002 — the currency ended at 74.28 to the US dollar on Wednesday. A weaker currency generally denotes better prospects for exports as goods become competitive vis-a-vis competing nations.
"But contrary to popular perception, this depreciation has not benefited exports to the extent that the public expects, since a lot of exporters have already hedged their risk while exporters taking credit in foreign currency are being asked to surrender the equal differential in cash owing to exchange rate fluctuation," Federation of Indian Exports Organizations (FIEO) President Ganesh Kumar Gupta said on Wednesday. Exporters are also yet to receive Integrated GST refunds worth ~80-100 billion. On the other hand, states continue to refuse input tax credit, which have piled up to 150 billion, he added. Getting states to pay up their share of the levy has also remain difficult. States such as Andhra Pradesh, Uttar Pradesh, Bihar and Chhattisgarh have said they are out of funds to pay exporters, he added.
This continues to disproportionately hit small, medium and micro traders, who are still overlooked by banks while providing trade credit, Gupta added. On the other hand, competing economies are not far behind.