Commerce Ministry working on better exchange rate policy to boost exports

The commerce ministry is concerned over continuous slowdown in exports and is working on the three important pillars that is exchange rate policy, alignment of freight rates with global standards and a liberalised visa regime to boost exports of goods and services in the long run. In a draft Cabinet note circulated earlier to seek views of different ministries, it has suggested that a mechanism be formulated to ensure the rupee-dollar exchange rate reflect realistic value of the domestic currency. This is important because the rupee, which is apparently overvalued and destroyed the competitiveness of Indian products in the global markets.

The ministry has argued that adjustments in exchange rate policy are needed as it is important to increase competitiveness of the products. The exchange rate policy should be based on inflation differential and trade deficit. Currently Indian currency’s real effective exchange rate (REER) is viewed as overvalued compared to several countries like Mexico, South Africa, Argentina and Brazil. Some countries try to keep their currencies undervalued to gain competitive edge in the international market.

As regards the freight rates, India needs to align them with those in the competing nations. Often manufacturers and exporters have to bear the cost of high freight rates. Regarding the visa regime, the Commerce Ministry is proposing several steps such as giving long term and multiple entry visa to businessmen in order to boost India’s services exports. The ministry has already suggested these measures to the home ministry. All these steps are aimed at increasing the country’s share in the global trade. It is aiming to increase its share to 3.5 per cent from the current 2 per cent by 2020.