INSUBCONTINENT EXCLUSIVE:
The year-to-date gains for information technology stocks have outpaced the broad market index.The dark cloud hanging over the economy from
the rupee's rout is not without a silver lining.The currency's double-digit drop against the dollar this year is helping the nation's
services exports, according to HSBC Holdings Plc's chief India economist Pranjul Bhandari
So much so that the share of services exports, which mainly comprise software, has climbed to 7.3 per cent of gross domestic product in June
from 6.8 per cent in March 2017, she said.That growth is reflected in the stock market, where the year-to-date gains for information
technology stocks have outpaced the broad market index
While the MSCI India index is up about 4 per cent, the information technology index has jumped nearly 33 per cent.It's also helped to
underpin the world's fastest growth rate of 8.2 per cent in the June quarter given the services industry's 55 per cent contribution to
the overall economy.The boost to services exports from a weaker currency is in contrast to overall shipments, which historically haven't
benefited much from a weaker rupee.The rupee is Asia's worst-performing major currency so far this year and that comes amid a global trade
war that threatens exports
If anything, a slide in the rupee has ended up inflating the country's import bill.According to Bhandari, the main deterrents to goods
exports, which account for 60 per cent of overall shipments, are domestic bottlenecks, in particular the hit from the cash ban and the
chaotic introduction of a nationwide consumption tax
Global growth and exchange rates are also factors."Exchange rates matter, but the least of the three, because India's import content of
exports are rising," Bhandari said."On the other hand, the exchange rate matters much more for services exports," she said
"In that sense, 2018 is special
World growth is up and the exchange rate is more competitive than before."
