India is confident of meeting its 2007/08 export target of $160 billion, despite the rise in the rupee, but the government is looking into possible job losses due to the gain, Trade Minister Kamal Nath said on Wednesday. "We will meet the target. I am confident," Nath told reporters.
The partially convertible rupee has gained nearly 8 percent against the dollar since the start of January, and hit a nine-year peak of 40.28 per dollar in late May.
It is Asia's best-performing currency against the dollar so far this year, and was trading around 41.0 per dollar on Wednesday. Small and medium-sized exporters, who account for more than 45 percent of India's total exports, say the appreciation is hurting business and is likely to cost jobs.
Nath told reporters his ministry was setting up a panel of experts to examine the extent of job losses in the export sector, and said he would meet the finance ministry to seek tax rebates to enable exporters to tide over the appreciation.
"Since the loss is felt by small companies and traditional sectors of exports with very high export-employment ratio, we are likely to suffer job losses of 8 million in the current fiscal," G.K. Gupta, president of the Federation of Indian Export Organisations, said after meeting Nath. India's export target of $160 billion for the fiscal 2007/08 year, which began in April, compares with exports of $125 billion in 2006/07. Exports were $10.6 billion in April, lower than $12.6 billion a month earlier.
The exporters suggested the rupee could be pegged to a basket of currencies of competitor countries, including China, Thailand, Pakistan, Sri Lanka, Bangladesh, Vietnam and Indonesia.
The central bank has raised interest rates and bank reserves sharply in the past half-year to help curb inflation and strong credit growth. Gupta said because of this, the cost of export credit had increased by 2.5 to 3 percentage points in the past few months.
"We therefore strongly feel that export credit may be provided at the bank rate, which is presently at 6 percent, in order to sustain export growth," he said. The central bank's main lending rate is 7.75 percent. Cotton textile exporters say the appreciation of the rupee against the dollar has led to declines in value terms of their exports to the United States of 0.4 percent and of 12.6 percent for exports to the European Union.
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