“China calibrates exchange rates, but we’ve left it to be market determined. I really don’t think government should be intervening... we did away with (this practice) as part of reforms,” Commerce & Industry Minister Kamal Nath said here. “I know the industry will be pained, but it needs to look for increasing efficiency and cost effectiveness,” he said replying to a question by an Indian American on what the government was doing to protect IT firms from rupee rise shock.
The Indian currency has risen nearly 11 per cent against the US dollar in 2007 and about 14 per cent in the past one year. The country’s central bank has not intervened much as this makes imports cheaper, helping it control inflation in the world’s second-fastest growing major economy.
Relief to IT sector
However, the appreciating rupee has also hurt exporters, particularly software companies, which derive more than half of their revenue from the US. Besides, the government is aiming at merchandise exports of $160 billion in 2007-08, but the target may be scaled down if the rupee continues to harden.
Mr Kamal Nath said IT companies have been enjoying tax concessions for too long, which has led to a disconnect between the IT sector and rural India.
“Other sectors like pharma, auto components and even agriculturists say if we had had the same benefits (as IT firms) we would have grown by the same level.” He, however, said the government would see how it can give some relief to the IT sector.

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Centre rules out FDI in retail
New York, Agencies: The Centre, on Monday, ruled out opening the retail market to foreign investors in the near future.
Union Commerce & Industries Minister Kamal Nath said FDI will not be able to replace the unorganised sector in the retail area.
‘’It is not (about allowing) FDI, the issue is that of large versus small retailers,’’ he said at the first ‘Pravasi Bharatiya Divas New York 2007.’
Asked if this meant large retailers would have to be prepared exit a market which is estimated to be worth $330 billion Mr Kamal Nath said “That is not under my ministry. Ask the Consumer Affairs Ministry.”
The government, he said, would only allow incremental growth in the sector. In this regard, he revealed that he had informed Wal-Mart, US-based retailer, which recently entered into a tie-up recent with Bharti Enterprises, that it could get more Business-to-Business (B2B) work in India for its back-end operations.
The minister, however, added that foreign investors were free to put their money for creating logistics or providing back-end operations an area where the government allows 100 per cent FDI.