The Indian business houses need to gear up and prepare themselves to tide over short-term and medium-term obstacles in the form of Rupee appreciation. Exchange parity or stability in the foreign exchange market is the domain of the Reserve Bank of India and the responsibility ultimately rests on its shoulders. However, what is imperative is dissemination of information and initiation of appropriate measures to guide the Indian trade and industry.

The Indian rupee appreciated by 12% in the last nine months from around Rs. 47-48 to Rs. 39 plus. This was the fastest appreciation since the last three decades. Indian exporters have become restive over the falling proceeds of their export realizations in terms of the rupee. It is almost a reversal of the trend as it was the dollar which had an upper hand against the rupee and the export community was a happy lot with increasing returns due to a continued appreciation in the value of dollar. The sudden turn of the events has jeopardized all the plans and strategies of the export houses in more ways than one. Of course, this rendered a blow to their business plans and disturbed their liquidity position as well as profitability.

The maneuverability or the cushion, if any, on their international quotations, has been blown off implying a precarious level of competitiveness in the global markets. The situation has become worse because of the stiff competition offered by the Chinese counterparts. Exchange rates are left to the market forces and are bound to fluctuate in the short-term, creating some imbalance in the payment positions on exchange terms. They are subjected to corrections in the medium and long-term period due to the changes in the pattern of spending, trade and consumption.

A favorable correction in the context of the Indian economy is possible when there are reciprocal moves between the countries and participants in the matters of international trade. As domestic investments are offered to foreign participants, individuals and entities, the correspondent territory overseas should open up for investment by Indians as well as corporate Indian entities. Exchange rate parity is a desirable situation whereas in a free market economy, it prevents a fixed exchange currency system. The Reserve Bank of India (RBI) follows a floating currency or exchange system leaving much leeway to the market forces. At the same time, RBI will monitor fluctuations within the bands that can be comfortably absorbed by the industries.

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