Mumbai: Export body, the Federation of Indian Export Organisation (FIEO), on Monday said the hardening of the Indian rupee may hit margins of smaller exporters worse than those of bigger players.
FIEO President A Sakhtivel said the rupee's volatility has kept the MSME (Micro, Small and Medium Enterprises) export sector on tenterhooks as exporters are worried about their net realisations falling into a negative zone.
"While the large exporters manage to hedge (which also comes at a cost), smaller exporters have to make do with a mark-up on their export pricing," Sakhtivel said.
The US dollar ended dearer against the rupee at Rs 46.29/30 per dollar on October 16 at the close of the forex market.
The rupee has appreciated over five percent against the dollar in the last six months, while the dollar has remained weak against most major currencies, as a feeble US economy delayed the dollar's recovery.
The worry over net realisations falling into negative zone is also triggered by the fact that exporters work on leaner margins in present times, he said.
"The only possibility could be cheaper dollar loans as against LIBOR (+3.5 percent or more practically) in the given circumstances," Sakhtivel said.
The London Interbank Offered Rate (Libor) is a daily reference rate based on interest rates at which banks borrow unsecured funds from other banks in the London wholesale money market.
Bureau Report
First Published: Monday, October 19, 2009, 20:56