The Hindu Business Line : Rupee appreciation may hit cotton textile exporters

Mumbai Apri 27 On current reckoning, rupee appreciation could cut into the earnings of cotton textiles and apparel exporters. The target set for cotton textile exports for this fiscal is $5 billion. "We will, in all probability not reach this target," said Mr Prem Malik, Chairman, Cotton Textiles Export Promotion Council (Texprocil). "Consequently, the next year's target of $6.3 billion will not be achievable either," he added. Over the last month the rupee has appreciated against the dollar by nearly 8 per cent.

Slowing Down

India faces competition in the textiles sector from China, Pakistan and Bangladesh. While China's currency has appreciated slightly in the past few weeks, Pakistan and Bangladesh's currencies have dropped by 1-2 per cent, making them more competitive. "At the company level, this is a very disturbing situation. Some contracts have also been cancelled," said Mr Siddhartha Rajagopal, Executive-Director, Texprocil.

Local inputs form 97 per cent for the cotton textiles and apparel industries. "It is an industry where there are no benefits from imports," said Mr Malik.

Texprocil has pleaded with the Government to stop the slide of the rupee against the dollar. If not, it could lead to projects under the Technology Upgradation Fund Scheme (TUFS) being stranded with investments slowing down.

Currency Appreciation

A recommendation has been made for reimbursing duties and transaction costs to the exporting units. "This move is imperative for us to be more competitive. We need to export goods and not taxes," said Mr Malik.

It is also likely that the rupee appreciation will result in a rise in cotton imports.

"The rising rupee has made imports more lucrative and in the long-run hurt growers," said Mr Malik.

In 2006-07, Indian textile units imported around 7-8 lakh bales of cotton.

A strong rupee is expected to reduce export receipts of apparel exporters by 6.3 per cent from Rs 20,484 crore in the first half of 2006-07 to Rs 19,181 crore in the first half of 2007-08.

Mr Vijay Agarwal, Chairman, Apparel Export Promotion Council, said: "The currency appreciation loss is usually borne by the exporter, at the cost of reducing profit margins."

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