The fall of the Indian rupee against the US dollar and other major currencies has brought smiles on the faces of Indian textile and apparel exporters and why not? The Indian currency has tanked and lost nearly 10% in value against the dollar since May 6. The rupee hit an all time low of Rs 59.93 against the US greenback on June 20.
Bloomberg data reveals that between March 28, 2012 and June 20, 2013, the rupee also depreciated against the Euro by 13.21 percent and against the British Pound by 12.23 percent. In the same period the rupee plunged 17.10 percent against the UAE Dirham.
Rising production costs had shrunk the margins of Indian textile exporters and this development has given breathing space to exporters. However most are also acutely aware that this development will also lead to a rise in petroleum prices and in turn raw material prices and in turn inflation, which will squeeze the gains.
Mr DK Nair – Secretary General of the Confederation of Indian Textile Industry (CITI) says, “This is very good for textile and garment exports as we export 30-35 percent of our production, while imports account for just five percent of total production.”
Mr Ajay Kaila, Partner at Noida based First Overseas shares, “A depreciating rupee surely means more rupees to a dollar. In the short term if we can give better rate to the buyer it will give us competitive advantage, so we can expect a surge in orders in the coming season.”
Most of the expert’s fibre2fashion spoke to attribute the fall of the Indian greenback to the improvement in the US economy.
Mr Sanjay Jain – Director of Opera Clothing, says, “The depreciation of the rupee is not India-specific as currencies of other countries like Bangladesh and Pakistan has also fallen. The main reason for this development is because the US dollar has become stronger due to strengthening of the US economy”.
Mr Utsav Pandwar – CFO of Ahmedabad based Aarvee Denims attributes the fall in the Indian currency mainly to the Indian current account deficit, improving economy of the US and depreciation of other currencies against the US dollar.
The Indian textile and apparel exporters are optimistic and expect the Indian rupee to fall further against the US dollar and other important trading currencies.
Mr Jagadeesh of Bangalore based apparel exporter - Concord Creations (I) Pvt. Ltd expects the rupee to fall further to Rs 65 in the next six months, but at the same time also feels petroleum prices too will increase which will nullify the gains to a great extent.
Mr Pandwar hopes it may depreciate further to Rs 62 in the next six months, but thinks it more probably may reverse trends and appreciate from those levels. Mr Ajay Kaila expects the rupee should hold ground around 60 to a dollar, but adds that it all depends on current account deficit, inflation and balance of payments.
Though the gains are apparent, but will global textile and apparel importers not extract their pound of flesh. Imports of textile raw materials will also become costly.
It becomes apparent, when Mr Mahendra Seth – CFO of Mumbai-based Sarla Fibres says, “Depreciation of the rupee is always welcomed by us as we are a 100 percent EOU. However, we also expect our importers to put pressure on us to reduce prices”.
On the impact on textile raw material imports, Mr Paritosh Agarwal – Director of Hyderabad based Suryalaxmi Cotton Mills avers, “Raw material prices have already started climbing and for those importing in huge quantities, the gains may be pared because of the rising costs of imports.”
