Indian exporters will be able to gain greater access to markets having faster depreciating local currencies like the south-east Asian countries if the Exim Bank lines of credit are denominated in rupees instead of US dollars. The importers in these countries will be free of exchange rate risks against a fast appreciating dollar. Export contracts were free to be denominated in any currency before 1991. In July 1991, the government notified that "all export contract invoices need to be denominated in freely convertible currency." However, the notification also stated that the government may relax the stipulation for appropriate reasons.

Exim Bank has recently written to the commerce ministry fordenomination of export contracts in rupees after many exporters represented that importers from many south-east Asian countries are cancelling their orders on fears of their local currency depreciating heavily against dollars. Most of the trade is financed by the Exim banks of respective countries. The trade finance, nearly 85 per cent of the value of export/import, is financed by the Indian Exim Bank and the Exim banks of the importing countries. The repayment is scheduled, in most cases, to over one year period. With uncertainity on exchange rates still very much alive in south-east Asia, importers are reluctant to take the risk of large dollar-denominated credit exposure. Most of these countries fear another round of devalaution and depreciation if the Japanese yen falls below 150 against the US dollar. India lost substantial business last year on account of depressed south-east Asian markets. South-east Asia accounts for about 20 per cent of Indian exports. In 1997-98, Indian exports to Indonesia fell by26 per cent, Thailand by 24 per cent, Malaysia by 8 per cent and South Korea by 18 per cent compared with the previous year. The principal beneficiaries of reverting to free export contract denomination would be exporters to south-east Asian countries. The main Indian exports to south-east Asian countries are cotton yarn, iron & steel, instrumentation and chemicals. Though the government has pegged a high 20 per cent growth rate for exports in this fiscal, the situation continues to remain as bleak as before. In the first three months of this fiscal, the extent of funded export credit from Exim Bank, the principal export financing agency, has reported a 48 per cent drop.