Indian Rupee Devaluation Good News For Global Sourcing & Export Manufacturers

July 19, 2013 Posted by India Briefing Reading Time: 2 minutes

Jul. 19 – The devaluation of the Indian Rupee is having a positive effect on foreign investment in many of India’s manufacturing areas, especially as the Chinese RMB is rising. Both local Indian production and exports are seeing positive outcomes, as is foreign investment into the country.

Due to the steep slide in the rupee this year, India is now one of the cheapest sourcing destinations in the automotive industry, pushing out rivals such as China and Mexico. For globally focused manufactures in the automotive industry this has been a great boon. Executives in companies such as Renault, Nissan, Ford and others say India is now one of the cheapest places to source auto-parts and cars from.

“India is now one of the cheapest places in the world because the rupee is sliding while the Chinese renminbi is getting stronger so it is good for production and export. Although there are some components, particularly electronics, which can only be sourced from China, in other respects it has made Indian components more competitive,” said Vincent Cobee, Corporate VP of Datsun’s business unit.

Furthermore, the devaluation of India’s Rupee should also help its export prospects.

“We don’t have 100% of our cars localized so there is some negative impact of the rupee depreciation but it is also a fantastic opportunity and long-term we are, in any case, accelerating localisation,” said Gilles Normand, chairman of Renault Asia Pacific. “In fact we are now taking the opportunity of the rupee devaluation to export. We are exporting vehicles from India to the United Kingdom and we will start to do so to Africa soon.”

Additionally, on-the-ground experts have further stated that the depreciation will also support foreign direct investment coming into India.

Chris Devonshire-Ellis of Dezan Shira & Associates India comments that “while there are always businesses that are impacted by currency movements, by and large the devaluation of the Rupee is having a positive effect on FDI into India. It is making India exports far more competitive on the global market, and for component manufacturers in all industries India is finally beginning to live up to its potential as a viable and sustainable manufacturing hub.”

“Our practice is handling increasing volumes of international clients into India, partially as a result of the devaluation, but also due to rising Chinese costs and the increasing awareness of India as a consumer market in its own right. We are seeing existing foreign investments increasingly used to fund additional production lines, as well as new investors entering the market. If the Rupee can remain relatively stable we can look forward to an interesting hand over from China to India in export driven component manufacturing,” Devonshire-Ellis further states.

Chris Devonshire-Ellis is the Managing Partner for Dezan Shira & Associates India. The practice was founded in 1992 and has 17 offices throughout India, China, Hong Kong and ASEAN. Please contact the practice at india@dezshira.com or visit www.dezshira.com.

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