Rupee at 80: Textiles, gems & jewellery upbeat, but gains may not sustain

With the rupee breaching the psychological barrier of 80 to a US dollar, both gems and jewellery, and the textile sectors are upbeat. The caveat, however, is that the gains may not be outright, and for some may be short-lived.

Textiles & Readymade Garments

Textile industry players indicate that the weak rupee will help the industry, which is a net exporter, to the extent of 5-10 per cent rise in profit margins. However, industry sources also say that the gains may be short-lived as customers will demand revised rates in upcoming orders.

“Textiles is a net exporter; hence rupee depreciation is clearly beneficial for the industry. It will improve the competitiveness of the industry that is hit badly due to high cotton prices,” said Sanjay Kumar Jain of Delhi-based TT Ltd.

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"International buyers have begun asking for price discounts. However, raw material costs too have softened. As rupee touches 80 to a dollar, the net benefit accruing to textile exporters could be at least 10 per cent," said Narendra Goenka, chairman of the Apparel Export Promotion Council (AEPC).

Within the textiles and clothing (T&C) sector, however, while the natural fibres segment, led by cotton, is estimated to enjoy at least a 10 per cent fillip in margins for exporters, the man-made fibre (MMF) segment may not be so lucky.

“This is because while natural fibres, especially cotton, are produced in significant quantities within the country, imported cotton has fallen in recent times. However, this has not been so for the MMF industry which uses imported raw materials that are derivatives of crude oil which has been ruling high for some time,” said Rahul Mehta, former president and mentor to the Clothing Manufacturers' Association of India (CMAI).

India had seen a 41 per cent rise in textiles and apparel exports to $44.4 billion in 2021-22.

“Rupee at 80 will give us a temporary benefit of around 5 per cent for at least three to four months. Buyers have already started negotiating and are expected to go for revised rates during the next order,” said Raja M Shanmugham, president, Tirupur Exporters Association.

Gems & Jewellery

As for the gems and jewellery sector, the depreciation of rupee is giving a cost advantage for its units. "Those who deal only in dollars such as those importing rough diamonds and then exporting polished ones, will continue to benefit in terms of administrative and other costs,” said Dinesh Navadia, former president of Surat Diamond Association and regional chairman - Gujarat for Gems and Jewellery Export Promotion Council (GJEPC).

“With both inward and outward payments being in dollars, the units have a higher disposable amount to spend in rupees for domestic expenses including salaries and other costs. Hence, it is a win-win situation," Navadia added.

However, the industry is also wary of rising interest rates, both within the country as well as in western markets like the US.

"The Federal Reserve is set to hike rates again in the US and India may follow suit to beat inflation. But already talks of recessionary trends have begun. If the rates continue to rise, then industry margins will be under pressure and we won't be able to enjoy the benefits of the depreciation for long," said Vipul Shah, vice chairman of GJEPC.

India's gems and jewellery imports, including rough diamonds, grew by 9.9 per cent in $ terms and 14 per cent in rupee terms for the April-June 2022 period on a year-on-year (YoY) basis to stand at Rs 52,310 crore or $6.77 billion. Exports grew 8.7 per cent YoY to $9.98 billion during this three-month period.

Clearly, given the moving parts in the two industries – textiles & garments and gems & jewellery, the jury is out on how much and how sustainable the gains will be.

Pointers

-Readymade garment exports grew by 30% YoY to Rs 16,020 cr in FY22

-Overall, textiles and apparel exports grew by 41% to $44.4 billion

-Gems & jewellery exports increased by nearly 40% in FY'22

-RMG exporters anticipate 5-10% fillip in margin with Rupee @ 80 against dollar

-Diamond industry hopes for easing in domestic administrative costs