Indian exporters are calling for letters of credit (L/Cs) to become a key with which they should be able to access export credit on preferable terms.

The calls come amidst increasing concerns amongst India's foreign currency earners about the future of exports in the light of volatility in the rupee exchange rate and increased competition.

Volatility

The appreciating rupee, which has gained around 4 per cent during March and April, has created problems for Indian industry according to president of the Federation of Indian Chamber of Commerce and Industry, Y K Modi.

"Recent volatility in rupee exchange rate is a major concern and such appreciation should be avoided," he told a recent meeting in New Delhi.

Threats

Exporters have put forward several ideas, such as a suggestion to peg the dollar exchange value at 45 rupees while some industry leaders have threatened even more drastic measures, including a widespread boycott of export activity from 1 May 2004.

A formal boycott may not even be necessary according to some industry leaders. "Thousands of small exporters have no option but to stop all exports as they are unable to enter into new contracts or even fulfil old commitments due to the extreme volatility in the forex market," president of the Delhi Exporters Association, S P Agarwal has said.

Competition

He said that with intense competition from China and other ASEAN countries, exporters have already started switching their businesses to other areas and warned that with this trend India's share in world markets may decline.

Amongst the association's more measured suggestions is an exemption from service tax for exporters and the availability of instant export credit at zero per cent across the table on production of confirmed export orders or L/Cs.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.