Converting Magazine

Mark Spaulding

Will exchange rate make India less competitive?
January 29, 2008

The strengthening of the Indian rupee against the US dollar is starting to have an impact, not only on outsourcing providers over there but also the ability of Indian converters to undercut home-grown converters over here.

The rupee has risen about 12% in the past year, making the dollar worth only INR39.29 as of today. One expectation is that outsourcing providers based in India for everything from IT-software development, call centers and business processes will be adversely affected, says Alan Rodger, a research analyst with London-based Butler Group. The vast majority of outsourcing contracts between Western countries and India are in US dollars or UK pounds, so it will be the India-based providers that will suffer the immediate effects rather than their customers. Those with existing contracts are somewhat safe; those negotiating new ones will either need to raise prices or make 12% less money in the short and longer term.

In the past decade, Indian primary converters have come on board (in many cases with the latest technology, too) to flood the market with products ranging from cheap commodity films to higher-quality printed laminates. India's contribution to the US flexible-packaging trade imbalance is no secret. 

But now with exchange rates favoring the dollar, and no hint of a turnaround in sight, will Indian converters and their products become less competitive? Isn't it ironic that one of the primary reasons that made India a popular place to outsource things (cheap labor and manufacturing, protection against the rising cost of the rupee) is now getting turned on its head?

Who'd have thought? Let me know what you think. Send me a Comment.

Posted by Mark Spaulding on January 29, 2008 | Comments (0)