Rupee depreciation that may result from Middle East events: EEPC India

Rupee depreciation that may result from Middle East events: EEPC India

Agency News

Kolkata, Jan 9 : In the wake of adverse geo-political situation in the Middle East, Indian rupee may be witnessing some volatility but depreciation of home currency does not always help exporters, as a contrarian trend was witnessed for several months in engineering exports during the current financial year, an EEPC India analysis has shown.

The analysis of the trade data till November, 2019 during the current fiscal pointed towards quite a few months when the rupee saw depreciation but exports did not go up; rather a declining trend was witnessed.

For instance, while depreciating rupee for April, May, June, July and August should have helped engineering exports to grow, reverse happened in this period. But for May, exports contracted during all these months.

The fall in shipments during August was quite severe, by close to nine per cent even as Rupee depreciated by 2.30 per cent during that month. ' The currency play can make a difference along with several other factors, but it is not the only factor in securing our competitive advantage.

Thus if rupee depreciation results from troubled geo-political situation in the Middle East, it may not of advantage; rather the trade disruption can be much more severe for shipments to the region " said EEPC India chairman Ravi Sehgal.

The currency advantage can occur if a persistent trend is maintained over a long period of time. However, that too has to combine with several other factors like cost of raw material and capital and the transaction cost.

Engineering exports aggregated USD 51.07 billion during April-November 2019-20 as against USD 52.15 billion during the same period last fiscal, registering 2.06 per cent decline. Due to global slowdown, the shipments to Middle East too were contracting. "The disruptions can cause further setback," the EEPC India cautioned. (UNI)