Falling rupee spins a new story for textile exporters

Written by Shaheen Mansuri | Mumbai, May 9 | Updated: May 11 2008, 03:33am hrs
After taking a hit in exports for nearly a year owing to a strong rupee, the Indian textile industry finally has some reason to rejoice. Over the last one month, the rupee has been continuously depreciating against the greenback and has moved down from Rs 39.73 in April to Rs 41.10 as on May 9, lending some respite to the industry. Although the industry had set an export target of Rs 50,000 crore last fiscal, only Rs 35,000 crore of exports took place during the period, owing to appreciation in the domestic currency.

According to Amit Goyal, president of the Confederation of Indian Apparel Exporters, May-June is the time when dealers across the world, especially in the US, place orders to Indian textile players. The slide in the rupee will help exporters secure more garment orders unlike last year, when players had to down their shutters due to the surge in the value of the rupee against the dollar. Moreover, the Chinese currency has appreciated against the dollar. If the current trend is anything to go by, a parity might be maintained between the dollar-rupee at Rs 41 to Rs 42.

Meanwhile, the fraternity is likely to see an upsurge in the export figures this year due to the falling rupee.

Currently, the Indian apparel industry exports 50% of its textile to the US, 30% to the European Union and the remaining 20% to smaller countries like Japan, South Africa and some cities in the Far East.

Goyal added that last year, even the Chinese yuan was stable against the dollar so the exports from India was affected nearly 15%. However, in the past few months, Yuan has appreciated against the dollar by nearly 7%, which will again help the Indian exporters leverage a better price for their products against their Chinese counterparts.

India's textile and clothing exports have fared better than China's in the first two months of 2008. While China's export declined 2.5% in January and February, India's grew 8.5%.

India exported textiles worth $20.5 billion in 2007-08, falling short of the targeted $25 billion. The target for the current fiscal is yet to be finalised.

Textile analyst Fasiha Shaikh from Parsoli Corporation explains, The fall in the rupee assumes significance as it comes at a time when the exporters were badly hit in the past few months. However, the exporters will receive an advance payment for their orders now at Rs 41 but it is unsure at what rate they will receive their post-delivery payment. If the exporters fix a price now for the payment to be received later, they will then be in a profitable position."

However Prakash Thakkar, managing director, Jal Exports said, "As per my assessment, none of the fraternity members know in what direction the rupee will eventually go. In the short term, it might depreciate and the positive impact can be gauged, but in the future it's a 'wait and watch' situation.

The domestic textile sector is likely to attract investments of Rs 1,50,600 crore over the next five years, generating 1.73 crore jobs, on the back of several policy measures taken by the government.

Earlier, the government had said it might review the export target of $50-billion by 2010-11 for textiles in the wake of rupee appreciation and global economic slowdown impacting the sector's growth.

Admitting that rupee appreciation and slowdown in the US economy had impacted the country's textile exports, textiles minister Shankarsinh Vaghela had said on Sunday, "We are doing everything possible to achieve it (the export target). However, we may review it if the need arises." He added that he was hopeful that export figures would improve.

"Strengthening of the currency is good for the country's economy but on the flip side it harms exporters. There was a slowdown in exports for some months. However, things are now looking up and exports would be back on track," Vaghela said.