China change signals relief for Indian exporters.

For embattled Indian exporters, still nursing the wounds of the global economic downturn, the Chinese government’s decision to allow yuan to strengthen could not have come at a better time.

India’s exporters have had to compete with their Chinese counterparts, who are aided by an undervalued yuan. This, exporters said, unfairly drives down the price of Chinese products and makes them impossible to compete with.

“We expect Indian exporters of textiles, chemicals and light engineering goods to benefit from such a move,” said Chandrajit Banerjee, director general, Confederation of Indian Industry.

“China’s allowing its currency exchange rate to be a little flexible is good for exports from other developing countries including India,” said Amit Mitra, secretary general of industry chamber Federation of Indian Chambers of Commerce and Industry.     

China overtook Germany as the world’s largest exporter in 2009 with shipments worth $1.2 trillion ( Rs 48-lakh crore) transported to the rest of the world during the recession hit year.

India’s exports during 2009-10 stood at $168 billion after exports contracted for 13 consecutive months in wake of drying order books and shrinking world demand.

“What happens to exchange rate over time, we are evaluating the impact and that, in turn, will have an impact on both trade and capital flow. So you got to wait for some time and see how this clears out,” Reserve Bank of India deputy governor Subir Gokarn said in Mumbai.

Finance Secretary Ashok Chawla said the government would wait and watch the impact of China’s announcement on greater flexibility for the yuan.

Source : hindustantimes.com