Director General of Foreign Trade (DGFT) R S Gujral on Friday advised the exporters to opt for finalising the trading contract in the denomination of rupee and learn to hedge against foreign exchange volatility in view of hardening of rupee against US dollar.

“Exporters have been facing a difficult situation; but they’ll have to learn in which currency the denomination of the contract will need to be entered into and it’ll have to be in rupee,” Mr Gujral told at a meeting organised by the Engineering Exports Promotion Council (EEPC).

For all future contracts, the exporters would urgently require to learn the art of hedging against the volatility of foreign exchange. This is more pertinent as India is progressing towards cent per cent convertibility on capital account where market forces will be determining the rupee rate. This apart, it is just not feasible for the government to compensate the exporters for the loss suffered due to strengthening of rupee against the US dollar, he pointed out.

Export woes
Mr R P Sehgal, Chairman of EEPC claimed that the sharp volatility in the exchange rate within a short period has increasingly been making exports highly unviable. If this trend prevails, engineering exports in 2007-08 may remain flat at the previous year’s level of $27 billion and such flat growth is expected to hit the country’s export target at $160 billion this fiscal.

Mr Gujral also said exports cannot be fully insulated against foreign exchange upheavals and an intervention by RBI at this stage to stabilise rupee has been fraught with the risk of a sudden increase in liquidity in the market.