Indian currency has gone into tailspin presenting a golden opportunity to exporters to book supernormal profits. However, a rupee in distress doesn’t necessarily imply benefit to all thriving on foreign currency. Export-based industries in Jharkhand who are minting money amid the chaos are worried about curative measures that the devaluation of currency entails.
For rice mill owners, a higher gain in Indian currency is an obvious outcome of depreciating rupee vis-à-vis the green buck, widely used for foreign trade, and helps in making up the losses incurred on other occasions. The positive impact on a company is usually imminent in the prevailing situation. “The effect is immediate. Orders are quoted at higher prices in Indian currency however it remains same for an overseas customer paying in Dollars,” said General Manager Finance & Operations, Amit Sekhsaria.
Mica industry has got a shot in the arm since the free fall of rupee began. Jharkhand being among the leading Mica exporting States in India is likely to benefit because of exports becoming cheap and cost remaining the same. “Devaluation helps exports and we are not exception to the rule,” said Vineet Jalan Export Manager of Giridih based Jalan Mica Exports.
Interestingly, exporters fear that a sliding rupee without any resistance will inevitably lead to corrective measures by government and financial institutions thus making profits shrink. Hence, the necessity to stabilize the currency is necessary to make exporters sustain the profit level. “Over a period of time the gain is offset because of increased cost of operations and cost of funds provided by financial institutions,” maintained Sekhsaria.
However, even amid the free fall Mica companies remain insulated to any level that a rupee touches to signaling that devaluation is beneficial for the industry. “Irrespective of the level a rupee goes down to our net income surges by at least 5 per cent. This is a norm for the industry where contracts are made keeping in view the trajectory the rupee will follow,” added Jalan.
Notably, trade associations are not gung-ho about declining rupee and are skeptical about any positive effect on the State’s economy. According to Jharkhand Small Industries Association (JSIA) a weak rupee is boon for rice mills while its bane for others. “Rice mills are likely to make good profits provided the demands (in international market) persist,” said president JSIA, Arun Khemka.
Meanwhile, industry associations rued lack of exporting units in Jharkhand as a result of poorly implemented industrial policy. The State has largely remained an import based economy with only handful of companies that can claim to have taken advantage of ongoing currency devaluation. “There are very few companies in the State that can be termed as exporters. So, the effect of devaluation on exporters is difficult to ascertain,” said president Federation of Jharkhand Chamber of Commerce & Industries, RK Tibrewal.