Ajit Lakha, who runs a mid-sized garment export business in the north Indian textile hub of Ludhiana, prays daily before leaving for work that the rupee will weaken and the euro recover to cut the losses he is taking on his overseas sales.
"Perhaps God is not listening," he says. "Only a year ago, I was getting 80 rupees for each euro on garment exports to France. Now, I am getting just 67 or 68 rupees."
Thousands of garment, leather, handicraft, and gems and jewellery exporters have watched helplessly as the rupee has appreciated by a quarter against Europe's common currency over the past 12 months.
The result has been India's worst export performance since the global slump of 2009, an early setback to Prime Minister Narendra Modi's 'Make in India' campaign to launch an export-led boom as he approaches a year in power.
To counter slack external demand, Modi's government plans higher infrastructure spending in the budget now before parliament, but lacks the fiscal firepower for a China-style stimulus. Short of alternatives, New Delhi is starting to lean on the Reserve Bank of India to do more on the currency side to restore India's international competitiveness.
"A case is building for rupee depreciation. Otherwise, all indicators show we are entering another difficult year," a senior trade ministry official told Reuters, adding the government expected help from the central bank besides taking other measures.
Merchandise exports, which make up around 16 percent of India's USD 2 trillion economy, shrank for the fourth month in March, with the 21 percent annual decline the steepest since 2009. In part, that reflects the collapse in oil prices - India's main import is crude but its refiners also export petroleum products.
Exports to Europe shrank by near 2 percent in the 11 months to February, reducing its share of total exports to 18 percent and cancelling out gains to the Americas and Africa.
Sales of textiles - a major export to Europe - for instance, have slowed in the current fiscal year after growing 15 percent in 2013/14 year to USD 6.38 billion.
NEED OXYGEN
To be sure, a stronger rupee is not all gloom for Asia's third-biggest economy which imports nearly USD 450 billion worth of goods a year. But the upshot for Modi is that his goal of doubling shipments to USD 900 billion in four years now looks very ambitious.
"India has become uncompetitive in some markets," said Gaurav Poddar, director at Limtex India, which exports tea to the oil-dependent economies of the Middle East and former Soviet Union. "The rouble has really hit us," said Poddar, referring to the Russian currency's collapse last year.
Trade officials say exporters need a helping hand as they are fast losing competitiveness after the rupee appreciated by 11 percent in real terms against a six-currency basket over the year to March.
"Indian exports are in intensive care and immediately need oxygen," said S.C. Ralhan, president, of the Federation of Indian Exporters Organisation (FIEO).
Yet economists say that the RBI already faces a tough task curbing the rupee, as enthusiasm over Modi's business-friendly policies sucks investment dollars into Indian financial markets.
In January and February, the Reserve Bank of India (RBI) bought a net USD 20 billion in the spot forex market.
Any acceleration in dollar-buying intervention would force the RBI to absorb, or 'sterilise,' more of the rupees that it prints lest they leak into the economy and undermine hard-won gains in cooling inflation.
"India can choose to join the global currency war by cutting interest rates – but that is not an option we have, given we are still fighting inflation," said Sonal Varma, an economist at Nomura in Mumbai.
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