New Delhi: Depreciation of the rupee against the US dollar is providing limited benefits to domestic exporters due to the high import content in shipments and uncertainties in the global market, according to experts.
While a weaker rupee typically boosts export competitiveness by making Indian goods cheaper in global markets, certain factors are limiting potential gains. They said many exporters rely heavily on imported raw materials, and the increased cost of imports due to the falling rupee offsets much of the advantage.
“As a result, despite the rupee’s decline, exporters are finding it difficult to capitalise on the currency movement,” international trade expert Biswajit Dhar said. The domestic currency has depreciated over 4 per cent since the level of 83.19 on January 1 last year.
The rupee logged its steepest single-day fall in nearly two years and ended the session 66 paise down at its historic low of 86.70 against the US dollar on Monday, weighed down by a stronger American currency.
Sharing similar views, Sanjay Budhia, Chairman of the CII National Committee on EXIM, said while a depreciating rupee against the US dollar is often perceived as a boon for exporters, a closer examination reveals that the benefits are relatively modest and is largely offset by various cost factors. “The depreciation of the rupee leads to an increase in the cost of raw materials, components, and other inputs that are denominated in dollars. This rise in input costs erodes the competitive advantage gained from the weaker rupee,” Budhia said.
Furthermore, expenses such as shipping, insurance, and marketing are also dollar-denominated, thereby negating the benefits of a depreciated rupee, he added. “Also we have to factor in that the currency of other competitive countries such as Chinese Yuan, Japanese Yen, and Mexican Peso against the US dollar have depreciated more in the same period vs Indian rupee,” Budhia, who is also MD of PATTON
Group, said.