The massive influx of foreign funds into the Indian stock market has strengthened the rupee by about 4.8 per cent, thereby hurting Indian exports, the Federation of Indian Export Organisations (FIEO) said today.
"It is estimated that the rupee may strengthen to around 44 to a dollar creating difficulties to the MSME (Micro, Small and Medium Enterprises) export sector, which is dealing with a price sensitive recession-hit global market," FIEO President A Sakthivel, said in a press release.
The US government has indicated keeping interest rates low for the next 12-18 months to spur growth, which would lead to massive inflows of a weakening dollar in emerging markets like India through "carry trade".
The US dollar has been on a downswing for over a year now and hit a 150-month low on November 11 against major world currencies.
"While lower interest rates may help the US economy, in India and emerging markets, inflationary pressures are becoming more acute every day with foreign funds purchasing $15.77 billion in Indian stocks this year resulting in appreciation of the rupee by 4.8 per cent," Sakthivel said.
He said this has hurt exports in India and other emerging markets such as Brazil and Taiwan, the governments of which have imposed controls by way of taxes on such inflows.
Source : Business Standard