The surging rupee, which has seen a 9 per cent rise since January has been ruthlessly hitting exporters. The government, on its part, has decided to step in and introduce a relief package that should take the weight off exporters' shoulders. But are the exporters fortified?
The relief package includes an interest rate cut for exporters. Which means, the government may give an interest grant of 2 per cent to banks giving export sops to exporters. The RBI will issue a circular for export sops for nine sectors. The sectors that will be eligible for the lower credit include textile, toys, leather and marine exports.
The export sops will be applicable till December 31. Though the move will cost the government Rs800 crore in FY08, the sops will help India meet the FY08 export target of $160 billion.
According to Rakesh Nath, Chairman of the Engineering Export Promotion Council, the export growth target was about 20 per cent, but the relief package would entail only about 15 per cent.
The government has kept export targets unchanged and considering the fact the work on the package is still in progress, it leaves exporters uncertain about long term contracts. The review on the relief package will come only in December depending on the rupee status.
Shah said, "There are a lot of external factors, which are playing now and these incentives are up to December. It still leaves a little bit of uncertainty in the minds of the exporter to get into long-term contracts. So, we can again look at something around October. Exports will again start slowing down from October onwards because we will stop contracting after that."