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The rupee’s free fall may cheer garment and textile exporters temporarily but they are not getting carried away, as inflation and pricing pressure from global buyers threaten to cut the party short.
Exporters are concerned about the “dramatic” fall in the Indian currency. Says Charath Narsimhan, Managing Director of the Chennai-based Celebrity Fashions, “The volatile rupee could go back as quickly as it fell. The impact can be truly felt only if the momentum sustains.”
According to A. Sakthivel, Chairman, Apparel Export Promotion Council, and owner of Tirupur-based Poppys group, the rupee has fallen “so much, so rapidly” that exporters are scared buyers will start negotiating price reductions.
Exporters have to resist these moves, advises D. K. Nair, Secretary, Confederation of Indian Textile Industry. “When wage and power costs went up, nobody compensated us,” argues Nair.
There is the fear of inflation raising its ugly head again. “While the rupee fall works for me, inflation will surely catch up,” says Vijay Mahtaney, Managing Director, Ambattur Clothing. For export firms, such as Poppys and Celebrity, which have hedged part of their orders, the rupee slide may not benefit completely. But any gain is welcome now, says Sakthivel.
Economic slump
The depreciation comes at a time when the garment industry has been hit hard by the global economic slump. With the US economy improving and demand in Europe too picking up, export orders have started to look up. The current “disenchantment” in the Bangladesh exporting community, with the recent fire incidents and labour unrest, has also aided Indian exporters with orders gradually moving to competing countries, including India.
According to Thyagu Valliappa of Bangalore-based Sona Valliappa Textiles, Indian suppliers have re-instilled confidence in American and European buyers. “Especially after what happened in Bangladesh, global buyers prefer to work with India.”
The prospects for the industry are clearly good, says Nair, who expects garment and textile exports to grow to $40 billion this year. Last year’s exports are estimated to touch $30-32 billion, down from $34 billion in 2011-12.
> swetha.kannan@thehindu.co.in
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