New Delhi, April 19, 2007 -  Indian exporters are suffering due to appreciation of rupee.  A survey by the United Nation’s Economic and Social Commission for Asia and Pacific (ESCAP) has listed exchange rate management as the biggest challenge that will have to be countered by the region’s growing economies. 

The survey, which was released by commerce and industry minister Kamal Nath , pointed out that the major currencies are likely to appreciate on the back of large capital inflows due to speculation and a slowdown in the US economy.
 
Nath, however, played down the impact of the sluggish US economy, maintaining that the interdependence of the Indian economy and the US is minimal. “India’s growth is domestic market-driven and though there are vital linkages of export with overall growth, our economy is not China or US-centric. Hence, the impact of their economies on ours will be relatively less,” Nath said.

A day before the announcement of the annual supplement on foreign trade policy, the commerce and industry minister conceded that the appreciation of the rupee with respect to the dollar is a cause for concern and the government will take steps to address the issue. “The strengthening of our currency by 9 per cent over the last year has hurt our exporters and the matter has been brought to my notice. We will speak to exporters and discuss what can be done,” he said, adding that the cheaper dollar has posed a serious threat to higher imports as well.

There is already the threat of a widening trade deficit, which may in turn put pressure on the current account deficit. Imports into the country have already grown by 35 per cent while exports have increased by only 22 per cent. The survey projects an overall positive outlook for developing economies in the region, with India tipped to grow at 9 per cent, a shade lower than last year’s 9.2 per cent.

The growth is expected to be led by services and accelerating industrial production, though interest rates are likely to move up over the year and fears of over-heating are likely to result in higher domestic prices. “The Asia-Pacific region has been the engine for overall global growth with the developing economies in the region accounting for more than one-third of global growth in 2006.

 We forecast relatively softer growth across the region at 7.4 per cent compared to 7.9 per cent last year, but expect the economic dynamism of the recent years to continue. The growth will be led mainly by China, India and Japan though there are concerns of a new downturn in Japan’s economy and overheating in China,” said ESCAP Executive Secretary Kim Hak Su. He added that India would do well in the long-term if its economy is led by services and not exports.

http://www.indianexpress.com/story/28725.htmlONOMIC 

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