The domestic textile industry is cautious on the depreciating rupee, which touched a 17-month low of Rs 44.15 against the dollar in intra-day trade on Tuesday.
Textile exporters said they would benefit from the declining rupee, but added that those who had hedged their export receiveables at a higher value stood to lose.
Since textile exports fell 18 per cent short of the 2007-08 target of $25 billion, textile firms have taken a rupee-dollar hedge in the range of Rs 41-43 and booked orders till December-January on the back of looming uncertainty.
| GROWTH BLUES? Projected exports in 11th 5-yr plan | |
| Year | Exports (in $ bn) |
| 2007-08 | 24.02 |
| 2008-09 | 31.17 |
| 2009-10 | 40.01 |
| 2010-11 | 51.07 |
| 2011-12 | 55.08 |
| Source : Working group on textiles industry | |
“It is a good sign for the textile industry, but it is not confident of sustaining growth in the long-term. Players who have hedged a large portion of the currency will suffer as they may not be able to get the full advantage of the depreciating currency,” said Century Textiles and Industries President R K Dalmia. Century recently hedged a marginal portion of its export receiveables. “We cannot hedge more as uncertainty is there,” added Dalmia.
Morarjee Textiles, a part of the Ashok Piramal group, which has hedged a major part of its exports, may be unable to reap the benefits.
“We booked a major portion of the export orders at a level of 41-42 till December. So, we will not be able to take the actual benefits of the rupee depreciation, which we could, had we not hedged at those levels,” said Harsh Piramal, executive vice-chairman, Morarjee Textiles.
Industry experts said taking the depreciation in isolation, the industry may benefit. “But if one takes into account other factors like crude oil, rising cost of man-made fabric, cotton prices, higher interest rates and scaling up of power costs, the whole advantage of the depreciating rupee will get neutralised,” said D K Nair, secretary general, Confederation of Indian Textiles Industry.