Rising rupee hits 11 sectors
A ficci survey has said the appreciation of the rupee and the rise in interest rates have hit profits of 11 sectors, including textiles, auto components, chemicals, processed foods, machinery and medical instruments. These sectors make up nearly 50 per cent of India’s exports.
The survey revealed that profitability of manufactured metal items, such as steel utensils, tableware and kitchenware, has dipped to 1.6 per cent from 12.6 per cent. The survey has been submitted to the National Manufacturing Competitiveness Council (NMCC).
Rupee appreciation has made Indian garments costlier by 8-15 per cent, the report said. As a result, international buyers are increasingly sourcing garments from neighbouring countries such as Bangladesh and Pakistan. "Cost of working capital and term loans has become dearer and is likely to affect the profit margins by 2-5 per cent in the garment sector," the survey said. Ready made garments constitute 8.2 per cent of India's exports. Realizations in chemicals have fallen 3 per cent in March, 8 per cent in April and 12 per cent in May this year. Chemicals make up over 8 per cent of the exports.
"Hardening of interest rates has increased cost of production by 1.5 to 5 per cent in this sector and profitability has reduced from 4.3 to 10 per cent," said the survey.
The impact of rupee appreciation and hardening of interest rates has been severe in the electronic sector also. Cost of working capital has increased by 2 per cent and cost of production by 3 to 4 per cent. Profit margins have been reduced from 4.8 per cent to 8.8 per cent.
The survey said there has been a sharp fall in the export of processed foods. In April-May 2007, the fall in export turnover has been in the range of 10 per cent to 17 per cent for various items in the category of processed foods.
Source: The Telegraph, New Delhi
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