The government’s ambitious plan to achieve a 30% jump in textile and garment exports to $43 billion this fiscal and partly offset the impact of a domestic slowdown may go haywire. A 9.3% appreciation of the rupee since its lowest in August may restrict the pace of textile and garment export growth to a moderate range of 10-15% this fiscal, especially in the absence of any major policy intervention and the withdrawal of an up to 4% incentive on yarn exports in September, senior industry executives said.
After a marginal drop last fiscal, textile and garment exports logged a 12.5% year-on-year growth in the April-July this fiscal to $9.11 billion on the back of a depreciating domestic currency and a recovery in US demand. In rupee terms, the rise in exports during the period was more substantial, at 17.6% to R51,863.64 crore. Overall textile production gained 3.2% between April and August, showed the Index Of Industrial Production data, suggesting that exports contributed much to the textile sector expansion this fiscal while domestic demand remained muted. So any threat to exports this fiscal may curb the entire sector’s growth.
“The rupee dropping to the 68 level against the dollar was more of an aberration and the current level of the domestic currency seems to be a reasonable one. However, any further appreciation or wild swings from this point would hurt export prospects as the sector can absorb currency risks to a limited extent only,” said DK Nair, the secretary general of the Confederation Of the Indian Textile Industry.
Senior industry executives said textile and garment firms usually hedge 30-40% of their revenue in the currency market to beat risks, although some heavily export-oriented ones like Welspun hedge more.
Dipali Goenka, managing director, Welspun Global Brands, said: “We hedge around 60% of our revenue while the remaining 40% is kept open as a risk-mitigation strategy. Hence, we are not much affected when the rupee appreciates and, similarly, we do not gain much when the rupee depreciates... This ensures that we have predictable revenues to a significant extent.”
Welspun, Asia’s largest home textile company, draws more