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Will rupee recovery mean a decline in exports?
Mar 31, 2014

In July-August 2013, we saw the Indian rupee crumble to new-lows against the US dollar. While bad for the overall economy, the depreciating rupee came as a boon to exporters who saw their fortunes improve after dismal growth in the April-June quarter of 2013-14. Exports grew by double digits during each month from July to October 2013.

But in recent weeks, the rupee has been witnessing a recovery on the back of strong FII inflows. And for the first time in the last eight months the USD-INR rate closed below the Rs 60 mark on Friday. While investors are hopeful of change in leadership at the Centre, the appreciating rupee is proving to be a dampener for exporters.

As the chart of the day shows, the export growth has turned tepid in recent months. In fact, in February 2014, exports declined by 3.7% YoY. Of course, rupee is not the only factor that determines export growth. As an article in Business Standard rightly points out, factors such as global demand, crude oil prices, the government's curbs on gold imports and the resultant impact on gold exports, as well as the regulatory issues engulfing Indian drug players in developed countries are some important factors that have impacted exports.

Data Source:RBI, Business Standard

This Chart Of The Day was published in The 5 Minute WrapUp - Time to discipline the dominant shareholder?

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