The Hindu : Business : Rupee rise: 'issue to be taken up with Finance Ministry'

Online edition of India's National Newspaper
Saturday, Apr 10, 2004

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Business

Rupee rise: 'issue to be taken up with Finance Ministry'

By Our Special Correspondent

NEW DELHI, APRIL 9. The Union Commerce Minister, Arun Jaitley, has assured exporters that the issue of rupee appreciation against the dollar will be taken up with the Finance Minister, Jaswant Singh, and the Governor of the Reserve Bank of India. He gave this assurance yesterday at a meeting with the exporting community.

According to the President of the Federation of Indian Export Organisations (FIEO), M. Rafeeque Ahmed, the Minister also said a mechanism would be found to resolve exporters' problems regarding the issue of taxing the Duty Entitlement Passbook (DEPB) scheme, an export incentive. During the meeting with the FIEO delegation and chairmen of several export promotion councils, Mr. Jaitley said taxation of this incentive would be discussed with the Chairman of the Central Board of Direct Taxes since the problem had arisen due to a technical omission rather than on substantive grounds.

Addressing a press conference soon after the meeting with the Commerce Minister, Mr. Ahmed said exports would be badly affected by the rising rupee and would lead to widening of the trade deficit. He said the FIEO had suggested that the Government should provide credit in dollars and fix the dollar-rupee rate for exporters for one year.

Regarding the spurt in export growth in recent months, he said the negative effect of the hardening rupee would be felt in the longer term over the next six months. While Mr. Jaitley was sympathetic to exporters' concerns, he had pointed out after the meeting that market forces would determine the issue of the rupee-dollar exchange rate.

Mr. Ahmed said the FIEO would also be meeting the RBI Governor on this issue next week. Highlighting the problems being faced by the exporting community, he said exporters were at risk of losing established markets due to appreciation of the rupee.

Exporters were reluctant to sign new contracts due to volatility in the foreign exchange markets.

Apart from suggesting that the rupee be stabilised with suitable intervention by the RBI, he proposed that the RBI should open a `dollar window' from which banks could borrow dollars when approached by exporters. He also sought the implementation of the Gold Card Scheme, which was announced in January.

Besides, he felt that the existing restriction on hedging could be re-looked by the RBI so that exporters having long-term contracts could offer for hedging to protect against exchange loss. A plea to reduce transaction costs was also made by the delegation, he said.

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