Mumbai/New Delhi: After the Sensex, it was the turn of the rupee to rise to dizzy heights. Raising concern among exporters and IT companies, the rupee on Thursday pierced through the psychological level of 40 and closed at a new nine-year high of 39.88 against the dollar.
Though importers will benefit from the sharp appreciation of the rupee, it will bring down the earnings of exporters and IT companies, which get a major chunk of their revenue from the US market.
"Rupee appreciation is a concern. We are going to look at it," PTI quoted Commerce Minister Kamal Nath as saying.
The rupee appreciation was attributed to heavy capital inflows mainly induced by the interest rate cut by the US Federal Reserve.
The rate cut brightened the prospects for high-yielding currencies like India, a Forex dealer said, adding foreign investors would now prefer to invest in these high-yielding assets rather than low-yielding ones.
"It seems that the government is taking half-hearted measures to help exporters. The steps taken by the government are not sufficient and it should intervene immediately to protect exporters," PTI quoted FIEO President Ganesh Kumar Gupta as saying.
Nath also said that the government would review the performance of exports in November, but ruled out immediate scaling down of the 160 billion dollar export target for the current fiscal.
However, according to the NASSCOM, the BPO segment would be the worst hit while large IT firms with robust margins may absorb the impact. It demanded concessions form the government to make up for adverse impact on the revenue.
"One step that will send a very positive signal to the industry and investors is the extension of tax incentives by 10 years under the STPI scheme," NASSCOM said in a statement.
Shares of IT firms bore the brunt of the rising rupee. The benchmark BSE Sensex rose 25 points, while IT index dipped 100 points as most counters such as TCS and Wipro fell. ICRIER Director Rajiv Kumar said the rupee vaulting below 40 was not good for the economy, as it would hurt exports and slowdown the GDP growth.
"RBI has a difficult task in the face of currency appreciation and it will be well advised to go along the US Federal Reserve and cut interest rates," he said.
The Indian unit has gained over 11 per cent so far in 2007 and Thursday's closing was the highest since May 13, 1998 when it had ended at 39.85 to a dollar. But a few analysts said the currency could rise further to Rs 36 level in a year.
Member of Prime Minister's Economic Advisory Council Saumitra Chaudhuri said the rupee appreciation is the consequence of the volatility, which is likely to continue. "Although rupee-dollar rate is important, we should look at other rates as well," he said.
Director of Foundation for Public Economy and Policy Research Mahesh Purohit said "the rising rupee will adversely affect different export-oriented sectors, particularly IT".
Comments
0 comment