When the country’s external trade, backed with growth momentum in the economy, is trying to move to a higher trajectory, the ongoing phenomenon of appreciation of the rupee is apparently slowing down the pace of export growth. In recent years, India’s export has been rising at an average of 20 per cent. But with the hardening of the rupee, country’s export competitiveness has been gradually eroding. Since March this year, the rupee has risen sharply, by  about 9 per cent against the US dollar, to a nine-year high. As the latest trade data shows, while the export grew by 18.5 per cent in dollar terms during July this year, it grew by a mere 3 per cent in rupee terms. In June, the export grew by less than one per cent in rupee terms.
While the increasing raw material costs and the increase in interest rates have accentuated the cost pressures, the appreciation of the rupee in nominal terms is also affecting the competitiveness of Indian exports. In a bid to give relief to the exporters, the Centre has announced a Rs 1400 crore package. Though the government has a role to play in boosting the overall productivity and competitiveness of Indian exports through necessary policy initiatives,  the exporters should learn quickly to adjust to the reality of a strong rupee. The buoyancy of  the Indian economy, which has already crossed the trillion dollar mark in GDP, and the sustained economic and industrial growth have catapulted India to the league of 12 largest economies in the world. Hence, in the emerging international financial architecture, the rupee will no more be perceived as a weak currency as had been the case till date.
The only answer to ward off the effect of a strong rupee is to further enhance competitiveness of exports by cutting down the manufacturing cost. At the same time, the exporters—especially those belonging to small and tiny sectors—must adopt different hedging mechanisms to stall currency volatility. The government too should play a more pro-active role in addressing their concerns, as they are handicapped by many problems like the bottlenecks in infrastructure and the non-availability of cheap credit. The government assistance is also required to effectively tackle non-tariff barriers erected against Indian exports, which have now become more subtle than in the past.