NEW DELHI: Ajit Lakha, who runs a mid-sized garment export business in the textile hub of Ludhiana, prays daily before leaving for work that the rupee will weaken and the euro recover to cut the losses he is taking on his overseas sales.
“Perhaps God is not listening,” he says. “Only a year ago, I was getting 80 rupees for each euro on garment exports to France. Now, I am getting just 67 or 68 rupees.”
Thousands of garment, leather, handicraft, and gems and jewellery exporters have watched helplessly as the rupee has appreciated by a quarter against Europe’s common currency over the past 12 months.
The result has been India’s worst export performance since the global slump of 2009, an early setback to Prime Minister Narendra Modi’s ‘Make in India’ campaign to launch an export-led boom as he approaches a year in power.
To counter slack external demand, Modi’s government plans higher infrastructure spending in the budget now before parliament, but lacks the fiscal firepower for a China-style stimulus. Short of alternatives, New Delhi is starting to lean on the Reserve Bank of India to do more on the currency side to restore India’s international competitiveness.
“A case is building for rupee depreciation. Otherwise, all indicators show we are entering another difficult year,” a senior trade ministry official told Reuters, adding the government expected help from the central bank besides taking other measures.
Merchandise exports, which make up around 16 percent of India’s $2 trillion economy, shrank for the fourth month in March, with the 21 percent annual decline the steepest since 2009. In part, that reflects the collapse in oil prices – India’s main import is crude but its refiners also export petroleum products.
Exports to Europe shrank by near 2 percent in the 11 months to February, reducing its share of total exports to 18 percent and cancelling out gains to the Americas and Africa.
Sales of textiles – a major export to Europe – for instance, have slowed in the current fiscal year after growing 15 percent in 2013/14 year to $6.38 billion.
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