Caught up with Raju, my garment exporter friend, over the weekend. When I met him two months ago, he was describing how small exporters like him were slowly getting squeezed by the appreciating rupee, on the one hand, and rising costs, on the other. This time he was setting deadlines, for exit. "I've given myself a year in the garment business," he told me. "If things don't improve, I have to get out."

India's big IT companies are fighting their own battles. Business Standard Research Bureau analysis shows that in the June 2007 quarter, the top four software services companies showed the slowest year-on-year growth in five quarters, at 28.73 per cent. Meanwhile, reports of salary freezes are beginning to flow in. Either way, like in the case of the garment industry, it's the small players who are reeling. It's just that their quarterly numbers don't make headline news.

Elsewhere, in Thailand, the rising baht (7 per cent against the greenback this year over 12 per cent in 2006) is creating similar problems for its exporters. Or worse. Last week, sportswear exporter Thai Silp South East Asia Import Company put up its shutters. The company also put some 5,000 employees out on the streets, inviting mass protests, roadblocks and finally, a reconciliation. Interestingly, the rupee and the baht have both hit 9- and 10-year highs recently. On another plane, foreign portfolio investors are investing heavily in both countries.

Familiar blame games are playing themselves out everywhere. In Thailand economists are accusing the low-cost, labour-intensive industries like textiles, garments and footwear of taking the post-1997 exchange rate crash for granted. The exporters retort by saying the government can't just sit around doing nothing. In India, the government has given in for now by announcing sops worth Rs 1,400 crore or Rs 14 billion (Rs 600 crore or Rs 6 billion of which are speedy refunds). But the initial relief which greeted the move already seems to be fading with smaller exporters saying this is not enough.

Thailand's macro numbers are steady, though. Import-intensive manufacturing like electronics and cars has benefited from the baht and offset high-labour costs. As will India, perhaps, though driven by a strong domestic consumption and investment effect rather than export balancing.

Meanwhile, quota-enriched Bangladesh is set to beat India in garment exports this year. Last year, India did $8 billion while Bangladesh $7.8 billion. Bangladesh incidentally imports most of its fabrics from China while India does not.

I asked my garment exporter friend whether firms like his could switch more to domestic markets. "We supply to some of the well-known Indian brands," he said, reeling off a few names.

"But we are talking orders in the range of tens and hundreds against our capacity to manufacture and export thousands and more," he said, the point being that the domestic market was neither wide or deep enough to absorb his capacity. IT firms too are stepping up their domestic efforts. But the capacity is way ahead of what local markets can absorb, at least for a few years.

Which brings me to a few questions. First, is the export-led growth story beginning to peter out for some countries? Especially those (like India) that are marginal players in scale. Second, have firms failed to establish long-term competitive edges while setting up businesses? Or, to be fair, did they not have enough time? Third and more importantly, is the soft currency-led growth bandwagon a 10-year miracle that is now beginning to turn, along with the currency? It's surely the case in countries like Thailand, so is it in India too?

To take that presumption further, if indeed we were in the midst of a 10-year party where the exchange rate was the star, then what's next? There are some, commonsensical answers. Higher-end knowledge services, including IT, will pull through. They only have two key variables to contend with: falling dollar and rising wage bills. The initial entrepreneurial momentum has ensured that global corporations will rely on Indian companies to provide the support, whether in IT or in newer areas like engineering services. Where the billing rates will settle down is another story.

It's tougher in sectors like textiles, leather, garments, diamonds and other traditional exports. Unlike IT, where all output can be delivered through digital pipes all over the world, garments and the like depend on ports, airports, good-quality power and roads. Neither of these areas is likely to see fundamental change in the next ten years. Unless of course the rupee races back to 46 or more. So the outlook for parts of the economy is quite grim.

Next month, the rupee would have completed ten years in appreciation, if one could use such a term! It was on August 15, 1997, in Goa, that Dr Y V Reddy (then deputy governor of the Reserve Bank) famously said: "As per the real effective exchange rate, it would certainly appear the rupee is overvalued." The statement triggered a nine-year tumble. Dr Reddy might find the tenth anniversary an opportune moment to revisit the rupee. And outline the trend as he sees it for the next few, if not ten, years. A revisit to Goa (in the rains) might not be a bad idea, either.