Mon, Apr 23, 2007 - Page 11 News List

Rupee's rise against the US dollar hurts India's export firms

AFP , NEW DELHI

Despite the stronger currency, the government forecast a 28 percent rise in merchandise exports to US$160 billion in the financial year that ends next March, and said the target would have been higher if the rupee had been weaker.

The red-hot outsourcing business, which earns most of its profits in US dollars, has especially been feeling the pinch after getting used to fat earnings margins. The sector now is having to look at new ways to be competitive to offset the rupee's gains.

While the four top IT service providers, whose annual turnover crossed the US$10 billion mark this financial year, have been upbeat about prospects, analysts say rupee gains could reduce margins by about 150 basis points.

The currency's outlook is "a major factor in the forward growth of these companies," said Harit Shah, analyst at Mumbai's Angel Broking.

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