Manufacturing businesses that import raw materials and components from countries with currencies that have appreciated against the Indian rupee will see their production costs increase. This could lead to an increase in the prices of their finished products, which could make them less competitive in the domestic and international markets. However, manufacturing businesses that export their finished products to countries with currencies that have appreciated against the Indian rupee will see their revenue increase, which could lead to higher profits.
To mitigate the negative impact of the updated Customs Exchange Rate Notification, manufacturing businesses can consider the following strategies:
Hedging: Manufacturing businesses can use hedging strategies to protect themselves from the adverse effects of exchange rate fluctuations. For example, they can use forward contracts or currency options to lock in an exchange rate for their future imports and exports.
Sourcing from multiple suppliers: Manufacturing businesses can also reduce their risk by sourcing raw materials and components from multiple suppliers in different countries. This will help them to avoid relying too heavily on any one supplier, which could make them vulnerable to exchange rate fluctuations.
Improving efficiency: Manufacturing businesses can also improve their efficiency to reduce their production costs. This can include measures such as reducing waste, streamlining operations, and negotiating better prices with suppliers.
Impact on trading businesses
Trading businesses that import goods from countries with currencies that have appreciated against the Indian rupee will see their margins decrease. This is because they will have to pay more for their imports, but they will not be able to increase their prices by the same margin without losing customers. However, trading businesses that export goods to countries with currencies that have appreciated against the Indian rupee will see their margins increase. This is because they will be able to sell their exports for a higher price in Indian rupees.
To mitigate the negative impact of the updated Customs Exchange Rate Notification, trading businesses can consider the following strategies:
Hedging: Trading businesses can use hedging strategies to protect themselves from the adverse effects of exchange rate fluctuations. For example, they can use forward contracts or currency options to lock in an exchange rate for their future imports and exports.
Diversifying their product portfolio: Trading businesses can also reduce their risk by diversifying their product portfolio. This will help them to reduce their reliance on any one product, which could make them vulnerable to exchange rate fluctuations.
Focusing on niche markets: Trading businesses can also focus on niche markets where they have a competitive advantage. This will help them to command higher prices for their products, even if their import costs increase.
In addition to the strategies mentioned above, businesses can also consider the following to mitigate the impact of the updated Customs Exchange Rate Notification:
Using technology: Businesses can use technology to improve their efficiency and reduce their costs. For example, they can use e-commerce platforms to reach a wider audience and reduce their marketing costs. They can also use cloud computing to reduce their IT costs.
Upskilling their workforce: Businesses can also invest in upskilling their workforce to improve their productivity and innovation. This will help them to increase their output and revenue, even if their costs increase.
Collaborating with other businesses: Businesses can also collaborate with other businesses to reduce their costs and improve their efficiency. For example, they can share resources, such as warehouses and transportation facilities. They can also collaborate on marketing and sales initiatives.
By taking these steps, businesses can mitigate the negative impact of the updated Customs Exchange Rate Notification and remain competitive