Rupee fall: Exporters rush to meet shipment schedule

The impact of a depreciating rupee on a net-importing country like India is too well known to be repeated. A depreciating rupee makes imports expensive, and for a net-importing country, the import bill baloons. Two major import items are crude oil and bullion.

Between April and November 2011, the import bill for bullion stood at $41.4 billion, 56 per cent higher than the same period last year. This can be partly explained by increased demand, but the import bill would have been lesser in value had the rupee not fell so sharply. Between August 1 and end-December 2011, the global spot gold price fell 0.9 per cent. However, in India, the price rose 19 per cent. It is not a coincidence that the rupee fell 19 per cent during the period.

There has been much interest in the recent spurt in guar gum and guar seed prices. Part of this has been because of higher export demand. It may be noted that India exports almost 90 per cent of the guar gum produced in the country. The depreciating rupee has made this additive attractive to international buyers.

The timing of the currency depreciation is also important. For example, the cotton season runs from October to September. Arrivals start in December and the peak marketing season is April. The recent weakening of the rupee has also seen cotton exporters scurrying for 'cover' in order to meet the shipment schedule later during the peak marketing season. If the rupee had not been declining, it would have moderated the demand pressures in the domestic market for cotton.

India is a major exporter of spices and the recent weakening of the rupee has reportedly boosted overseas demand of certain spices like pepper which registered 33 per cent growth in quantity and 115 per cent growth in value in the April-October period of 2011 as compared to the same period last year.

TANUSHREE MAZUMDAR, Senior Economist, NCDEX