Weak Re to boost export, import substitution: Credit Suisse

Fall in rupee is likely to bring opportunities for the domestic economy by boosting exports and substitution of import in the near future, a Credit Suisse report said.
 
"We believe India's trade should start to change now as the economy re-anchors...the fillip to inflation and subsidies have already been felt, the opportunities though will be more visible over the next 18-24 months as companies generally hedge and it takes time for supply chains to reconfigure," the report said.
 
Giving an estimate of opportunities, the research report said around USD 60 billion of exports can be increased due to weak rupee, while USD 60 billion of import can be substituted.
 
"We estimate about USD 60 bn of imports can be substituted and USD 60 bn of exports could see a boost," the report said.
 
Indian rupee is now hovering around USD 55 level which is likely to make exports from the country competitive with substitution of imports due to expensive imports.
 
Referring to import substitution, the report said the opportunities for substitution exist only in those areas where domestic manafacturer can't compete on cost.
 
"The rupee being down by a fourth against the dollar over the past twelve months should create opportunities...either by allowing for immediate substitution or, in a smaller way, by accelerating the set-up of new capacity. In particular, we focus on the USD 61 billion of imports where the primary reason is cost," it said.
 
"We believe categories like diesel gensets, textile-related machinery, household appliances, furniture, tyres, penicillin/cephalosporin intermediate manufacturers and sectors aligned to the growing of pulses and oilseeds are
potential beneficiaries of import substitution," it added.
 
Similarly, the report also said exports will get benefitted due to competitive advantage, low cost of labour and weak rupee.
 
As per the report, sectors like auto and auto components, agriculture, bulk drug exporters, jewellery and service exports will be benefitted from the weak rupee.