 "Brexit, weak global demand hurt pre-Christmas exports")
As Diwali shopping enters its last leg in India, Christmas buying is beginning to take off across the world. But hundreds of Indian textile and leather exporters, which supply to international retail chains such as Zara, H&M, Tom Taylor, Mother Care and Abasic for their peak Christmas sales, have been saddled with weak order books.
Brexit, or Britain’s exit from the EU, is being blamed for the significant fall in exports during a season that makes up for a large chunk of the industry’s annual business.
Brexit had impacted purchasing power in the EU and Britain, pointed out executives dealing with the setback. Orders for the winter season, comprising Christmas and Back to School, has dropped by around 10-25 per cent.
According to the Tirupur Exporters’ Association (TEA), last year’s textile export turnover was around Rs 23,000 crore, making it an average of Rs 5,800 crore per quarter. However, during the last quarter, when shipments to Europe started for the winter season, exports declined by 10-15 per cent, said T R Vijayakumar, general secretary, TEA. Customers had reduced spending because Brexit had hit the EU economy, officials said.
While ongoing orders had been badly affected, subsequent bookings were also stalled, they added.
There is enough demand, but Tirupur exporters are not able to convert it into orders because the prices buyers are quoting are not viable. Vijayakumar added that the beneficiaries of this were Bangladesh, Vietnam and other textile exporting countries.
A high yarn price, availability of yarn, import duty on man-made fibre, and high labour and interest costs make Tirupur products almost 20 per cent costlier than Bangladeshi textiles.
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Bangladesh not only enjoys a duty-free status, exporters there receive support from the government when it comes to power and raw material.
The 20 per cent fall in the pound had added fuel to the fire, said Vijayakumar, whose company exports knitwear worth Rs 125 crore to Europe.
The situation is also similar for the country's $6.4 billion leather exports.
Rafeeque Ahmed, chairman of the Council for Leather Exports (CLE), said the uncertainty over Brexit and the steep fall of the pound over the past week were affecting India’s exports to the UK and Europe.
The UK and the EU account for 14 per cent and 65 per cent, respectively, of India’s leather exports.
India is also expected to face competition from Bangladesh and Vietnam, which benefit from free trade agreements as against the 7-8 per cent duty Indian exporters' need to pay. Availability of raw material locally, cheaper labour, and low interest rates and power tariffs, also work against Indian exporters.
Ahmed said the industry needed to emerge from negative growth but that was not possible in the current circumstances, despite the fact that exporters were working at zero margins.
While exporters are looking at new countries like Japan, Australia, New Zealand and South Korea, there are difficulties in diversifying into other markets in a short period of time as it involves more marketing, which is not possible because exporters are not making money.