US downgrading will hit India's exports: FIEO

The downgrading of the United States, the world's largest economy, by credit rating agency S&P, from `AAA' to `AA+' (See: S&P lowers US rating from `AAA' to `AA+') will have negative implications for Indian exporters, according to the Federation of Indian Export Organisations.

"While the overall impact of the downgrade will be mixed for India, it certainly is not good for Indian exporters," FIEO president Ramu S Deora said.

The world's largest economy sinking deeper into recession and the Euro zone getting caught in the debt crisis do not augur well for Indian exporters, an FIEO release quoted Deora as saying.

He said any fall in import demand in the US is sure to adversely affect India's exports to the country in the third and fourth quarters of the current financial year.

There is also the possibility that the downgrading will lead to further appreciation of the rupee against dollar, thereby blunting our competitive edge, Deora said.

He said even if the US government moves to increase taxes in a move to curtail its deficit, it would only further reduce the disposable incomes of the people under the tax net, which would in turn reduce consumption and affect India's exports to that country.