It has been cheaper to leave Imports open

We all know that the Rupee has been a depreciating currency. In particular, it has depreciated 113% from a low of 39.16 in Nov-07 to 83.45 in Dec-23 over a period of 17 years. Therefore, it is natural for any risk averse Importer to hedge his payables.

However, data over the last 17+ years shows that had the Importer left his payables open, he would have actually have been better off, paying less than what he paid after hedging, as seen in the table alongside.

The open Dollar-Rupee market average has been 60.6841 since April 2006. This has been 35 paise or 0.57% cheaper than having hedged with Forwards, in which case the average Import Net Effective Exchange Rate (NEER) would have been 61.0334.

Forward Rate minus Dollar Rupee Actuals

Two points are to be noted here:

While many are reluctant to pay the forward premium or the cost of hedging, they do not have the data to support their hunch. Our research provides the statistical backing to the hunch.
Although data proves that Open Imports have been cheaper than hedged imports, emotions take over, making it impossible not to panic and cover Imports at a high level after a sharp bout of Rupee depreciation.

So, the need for some systematic solution for hedging Imports still remains, which avoids both the panic driven mistake of covering at high levels and the high costs of consistently hedging with Forwards.

The solution lies in the KSHITIJ Hedging Method, which is discussed in the next page.

Kshitij imports are cheaper than open imports even

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