The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has stated that any depreciation in the rupee on account of China-led turmoil in the global financial markets should only be welcome sign for India, or else Indian exports will suffer more at the hands of China and other emerging countries witnessing a correction in their currencies.
According to ASSOCHAM, the major challenge is coming from China in various forms with a sizeable influence on the currency valuation. The devaluation of the RMB, the third in the last five months, will negatively impact Indian firms which have export exposure to China in sectors such as steel due to a volatile change in terms of trade. The devaluation will make Indian exports expensive to the neighboring country, affecting competitiveness. However, India must ensure that its exports recover their competitiveness even in the midst of the global slowdown, the chamber noted. Therefore, the country should allow its currency to depreciate to help exports remain competitive.