Fall in rupee will hurt exporters: Govt

"Firms that have ventures abroad are likely to be affected by eurozone crisis," govt said.

The government today said fall in the value of rupee will hurt exporters in the long run and companies that have ventures abroad are likely to be affected by the eurozone crisis.

“The Indian business houses/companies having their ventures abroad are likely to be affected by unfolding of the eurozone crisis. Depreciation of rupee could increase the cost of foreign currency debt service in rupee terms,” Minister of State for Finance Namo Narain Meena said in a written reply in the Lok Sabha.

However,he added that rupee depreciation could also increase the value of incoming dividend/profits,remittances in rupee terms.

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Replying to another query,Meena said,”Though in the long run,the rupee fall would benefit exporters through higher export earnings,the decline in the value of rupee would have detrimental effects in the short run”.

India’s export growth slowed to 10.8 per cent in October from 36.5 per cent in the previous month.

He added that the depreciation of the rupee makes oil and other imports more expensive.

“Besides,the rupee cost of servicing foreign debt would increase,which would mean higher pressure on corporate balance sheets and on the government budget,” he said.

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Meena further said a number of steps have been taken by the government to stabilise the rupee and shore up the capital market.

“The recent policy initiatives include,increase in all- in-cost ceiling for trade credits; liberalisation of External Commercial Borrowing norms; requirement to bring into the country proceeds of ECBs raised abroad for rupee expenditure; raising of FII investment limit in corporate and government securities and raising of interest rates on non-resident Indian deposits,” he said.

In order to augment dollar supply,the RBI also lifted the USD 100 million cap placed on banks’ net foreign exchange supply position in the market.