The trade imbalance between Kenya and India is expected to widen in the coming months as the rupee continues to weaken against the US dollar, analysts said. A weak rupee means Kenyan exports to India – priced in dollars – have become more expensive risking a slowdown in their consumption in India. In recent weeks, persistent shocks in the Indian and Pakistani economies have seen other currencies, including the Kenyan shilling, strengthen against the rupee, making their exports cheaper while raising the cost of imports. The Indian rupee last week depreciated to its lowest level of about 66 units to the dollar – having dipped by the single largest margin in 18 years last Monday. This year alone the shilling has gained 21 per cent against the rupee, according to official Central Bank of Kenya data. In Pakistan, which is Kenya’s largest tea market, the rupee has lost 20 per cent of its value against the greenback in the past two years, making Kenyan exports more expensive. These huge currency swings are already frustrating Kenya’s efforts to increase the volume of her exports to India and close the huge trade gap that has widened in the past three years as India expanded its trade with East Africa’s largest economy. A weakening rupee has been blamed for last year’s 20.2 per cent drop in the value of Kenya’s exports to India. Kenya exported goods worth Sh7.5 billion down from a high of Sh8.1 billion the previous year, showing waning competitiveness of local goods in the Indian market. Indian exports to Kenya rose to Sh187.7 billion over the same period, causing a major trade imbalance between the two countries. The list of Kenya’s exports to India includes salts, vegetables, roots, tubers, tea, leather and wool. The country imports refined petroleum oils, medicine, iron, electric power machinery, textiles, food processing machines and motor vehicles from India. Analysts have linked the rupee’s downward slide to growing demand for the greenback and decreased interest from foreign investors in India’s weak economy.
Posted on: Mon, 02 Sep 2013 07:43:59 +0000
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