• Exchange rate impact on Export Industry

    Once we understand the impact of exchange rate on Import industry, it is very easy to understand its impact on export industry as well. Exporters use exchange rate just opposite to the importers.

    For export, the players or the companies sell their products or services in US dollars (considering it to be the global standard), after that they sell dollars in the money market to earn in Rupees to fund the operating expenses and pay the salary of the Indian workers. So they earn in dollars and spend in Rupees. For them, the favorable situation will be Rupee depreciation, in which they will get more amounts Rupee after selling the same amount of US dollar, which helps the importer to increase earnings as well as profitability.

    Suppose for a IT services exporter the sell value of its service is 100 USD, which helps it to earn the same amount on delivery of the service. If the current exchange rate is Rs 45 per USD, its income will be Rs 4,500 for that particular service. If the rupee depreciates and exchange rate becomes Rs 46 per USD after one month, then income will be Rs 4,600 after selling the dollars. So there will be Rs 100 direct profit for the IT services exporter just because of the favorable exchange rate change. At the same time too much of Rupee appreciation hurts the exporters severely.

    Because of these reasons, the Indian exporters want lower rupee compared to other currencies to gain the profit while doing currency conversion. The main exporter industries inIndiaare IT services, automobile industry (exporting cars), Food grains, steel, textile etc.

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