subject: Out of the red zone, but respite a far cry for SME exporters [print this page] Even though the export sector has moved into the positive zone and sops have been announced for select sectors to boost competitiveness, problems for the SME export sector in India are still far from being over. The strong appreciation of the rupee as compared to the US dollar and stiff competition from China continue to trouble small-scale exporters.
Worrying factors
After plunging for more than a year since the global economic downturn, export figures of key sectors surged for the second straight month in December 2009. Exports recorded a 16% year-on-year growth to touch US$14.6 billion, which cheered several small units engaged in the export sector. However, the growth recorded for two consecutive months do not mark the end of all miseries for the SME export sector.
The volatile rupee movement has put SME exporters in a fix, making it difficult for them to ink contracts. Besides, the rupee rally in recent times has adversely affected the bottom line of several small exporting units.
Volatility of the rupee against the US dollar has eroded the margins of several small-scale units and also compelled them to adopt a wait and watch mode before making any strategic decisions, said ST Kurian, proprietor of Anchor Leathers, a mid-sized leather company in Chennai.
Moreover, Chinas effort to prevent yuan from appreciating in value terms in recent years and its strategy to flood the foreign markets, including India, with its low-cost goods is posing a serious threat to SME export-oriented units.
Chinas strategy to inundate the markets by exporting cheaper goods has come into direct conflict with Indias interest of exporting better-quality goods in global markets and is challenging the competitiveness of small-scale exporters in diverse sectors, said Arun Samanto, proprietor of Snigdha Enterprises, a small-sized food product exporting unit in Kolkata.
Therefore, despite the surge in exports witnessed in the past couple of months, it is advisable that SME exporters tread with caution and exercise prudence considering the swing in rupee movement.
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Out of the red zone, but respite a far cry for SME exporters
