In a survey carried-out by FICCI, textiles, garments, electronics, handicraft, machinery, bicycle, chemicals, processed foods, carpets, auto components and medical instruments are the sectors in which profitability and competitiveness of Indian exporters have been significantly eroded due to rupee appreciation and rising interest rates. Together these 11 sectors constituted around 50% of India's total exports, said FICCI.

The survey assesses the impact of rupee appreciation and rising interest rates on the competitiveness of Indian exports. The survey report has been submitted to NMCC (National Manufacturing Competitiveness Council).

The FICCI Survey noted that export prices of Indian products in these 11 sectors has become uncompetitive to the extent of 10% to 12% on an average vis-à-vis competing countries' products as a result of rupee appreciation. Export realizations of Indian exporters have significantly come down in the last few months. Also, higher interest rates have eroded the profit margins of the exporters to the tune of 11% in some cases, observed FICCI survey. Profitability has significantly fallen in most cases, for instance in case of manufactured items of metals (like steel utensils, tableware, kitchenware etc.) profitability has come down from 12.6% to as low as 1.6%, FICCI survey pointed-out.

In case of readymade garments that constitute 8.2% of India's total exports, rupee appreciation has made Indian garments uncompetitive to the tune of 8 to 15% in terms of price in the international market and buyers are increasingly sourcing their requirements from neighbouring countries like Bangladesh, Pakistan etc, said FICCI. According to FICCI survey, minimum fall in the level of exports is reported to be 20% and maximum is 50% in case of garments for the month of April-May 2007 compared to last year. Cost of working capital and term loans has become dearer and is likely to affect the profit margins by 2 to 5% in the garment sector, noted FICCI. In case of textiles, export realizations are down by 6 to 6.5% and in terms of price exports are uncompetitive by 8 to 10% vis-à-vis competing countries' exports. Especially the exports of cotton yarn are adversely affected as the buyers are shifting and sourcing more from Pakistan. Level of exports is reported to have fallen by 25 to 40% for some textile units for the months of April-May 2007, according to FICCI survey. Manufacturers are also reconsidering setting-up of their new projects, FICCI observed.

In case of carpets, profitability is likely to be affected by 2.75 to 3% due to hardening of interest rates and fall in export level can be seen to the extent of 15 to 25% for the month of April 2007. China, Pakistan and Iran have already gained some of the market share of Indian exporters in world market as a result of rupee appreciation.

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