Apparel exports to come down

The incessant rise of the rupee against the dollar is taking its toll on the exports of textiles and apparels.

"Rupee has already appreciated by over 5-6 per cent. This is having a deteriorating impact on apparel exports. If rupee continues to strengthen, our target of reaching $10.2 billion in the current financial year (2007-08) will not be met," said Vijay Agarwal, chairman, Apparel Exports Promotion Council (AEPC).

According to the RBI, textiles and textile products recorded a deceleration in exports across all the product groups during April-October 2006, with the exception of man-made yarn and staple fibre.

Official sources in the Synthetic & Rayon Textiles Export Promotion Council (SRTEPC) said that uncertainty was gaining ground among the exporters and they were eyeing the new Foreign Trade Policy to be announced this week with optimism. The SRTEPC had set a target of $2.3 billion for 2006-07 which has been reportedly achieved. "Till March, it was okay. But now we suppose impact will come gradually," sources said. Outside commitments had to be fulfiled and such a scenario might hamper the growth, they added.

"As a result, many garment factories across the country will have no option but to close down. And in order to help ourselves, we will have to import garments. Our competitors including Indonesia are better placed than us," said Agarwal.

According to the US Department of Commerce, Office of Textiles and Apparel, the deceleration was more in terms of price as India's export of textiles and apparel to the US in value terms decelerated by 5.6 per cent (against an increase of 25.9 per cent a year ago), even while in quantity terms, exports have increased by 13.9 per cent during April-December, 2006-07 (against 21.7 per cent increase a year ago).

Prem Malik, chairman, Cotton Textiles Export Promotional Council (Texprocil), has called for urgent steps to rein in the unusually sharp appreciation of the rupee witnessed in the last 9 months. Economists are of the view that if there are no suitable monetary interventions on the government's part, the rupee could appreciate further.

The strengthening of the rupee is particularly detrimental to a low import-intensive and price-sensitive industry such as textiles. According to textile players, the profit margins in textiles and garments exports are relatively lower than those in other commodities.

"If the value of the rupee appreciates further, our competitiveness will be severely blunted leading to further decline in exports of textiles and garments and shortfall in achieving the targets," they added.