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Increase in the value of Rupee combined with rising interest rates has resulted in erosion of profitability and competitiveness of Indian exports by up to 12 per cent, according to a report by the Federation of Indian Chambers of Commerce and Industry released on Tuesday.
The report, submitted to the National Manufacturing Competitiveness Council, noted that prices of textiles, electronics, handicraft, machinery and auto components, which constitute around 50 per cent of the country's total exports, have become uncompetitive by 10-12 per cent as compared to other countries.
Higher interest rates have eroded the profit margins of the exporters to the tune of 11 per cent in some cases. Profitability of steel utensils, tableware, kitchenware has come down from 12.6 per cent to 1.6 per cent, the survey said.
Readymade garments that constitute 8.2 per cent of India's total exports have become uncompetitive to the tune of 8-15 per cent in terms of price in the international marketand buyers are increasingly sourcing their requirements from neighbouring countries like Bangladesh and Pakistan.
Fall in the level of exports is reported to be between 20-50 per cent in garments for the month of April-May 2007, compared to last year with profit margins getting affected by 2-5 per cent, it said.
In textiles, export realisations have come down by 6-6.5 per cent. Export level has fallen by 25-40 per cent for some textile units for the months of April-May 2007.
Hardening of interest rates has reduced the profitability of carpet makers by 2.75 to 3 per cent and their exports have fallen by 15-25 per cent for the month of April 2007.
China, Pakistan and Iran have already gained some of the market share of Indian exporters as a result of rupee appreciation, the Ficci report said.
Export turnover in chemical sector has come down by 11-16 per cent in the April-May period. Hardening of interest rates has increased the cost of production by 1.5 to 5 per cent, according to the report.
Profit margins in electronics have declined from 4.8 per cent to 8.8 per cent and around 25 per cent fall in the level of exports has been reported.
In case of processed foods, 10 to 17 per cent fall in the export turnover has been reported for April-May and exports are expected to fall by over 20 per cent in the next 3 to 4 months.
Likewise, the level of exports could fall by 50 per cent in case of Machinery and Handicraft items.
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