Mahesh Desai, chairman of engineering exporters body EEPC, said the impact of currency depreciation will come with a time lag.

A sustained depreciation of the rupiah against the greenback in the wake of the Russian-Ukrainian crisis will significantly help exporters in sectors where dependence on imported raw materials is limited. However, sectors (including oil, gems and jewelry and electronics) where domestic value addition is limited, may receive only limited relief, trade experts and exporters told FE.

But if the national currency experiences high volatility, as it has over the past couple of days, the gains could be reversed. Benefits for domestic exporters also depend on the movement of currencies of India’s competitors in the global market.

The national currency had weakened by around 1.5% against the dollar this year until Thursday, when Russia began military operations in Ukraine. However, the rupee pared its losses on Friday and gained 0.6%. However, the national currency has weakened slightly more this year, compared to those of some other countries (see chart).

Importantly, according to the RBI’s Real Effective Exchange Rate (REER) index, based on the export-weighted average of around three dozen currencies, the rupiah was “overvalued” by more than 4% in January.

Ajay Sahai, managing director and managing director of exporters’ umbrella body FIEO, said: “While generally the depreciation of the rupee will help our exporters, at the same time we need to see the level of depreciation of the currencies of those countries with which we compete on the export market.

Renowned textile expert DK Nair said the depreciation, if prolonged, “will help our exporters, especially in sectors like textiles and apparel where our dependence on imported raw materials is minimal.” Raja M Shanmugham, Chairman of Tirupur Exporters Association, also shared this view. Rupee depreciation will only help if it lasts longer.

Mahesh Desai, chairman of engineering exporters body EEPC, said the impact of currency depreciation will come with a time lag.

Goods exports have the potential to exceed the ambitious $400 billion target set for current finance, trade and industry minister Piyush Goyal, said on Thursday. Exports were down 7% in FY21 from a year earlier to $292 billion as a result of the pandemic. However, global demand for goods has improved significantly this fiscal year following an industrial recovery in advanced economies.

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