 "Yuan depreciation to hurt spinning industry")
The Chinese slowdown would hurt Indian spinning industry the most in the textile value chain. India exports 40 per cent of total cotton yarn to China. This is likely to come down significantly, creating an oversupply situation in the domestic market. Apparel exports are also likely to be impacted due to yuan depreciation.
Since August 2015, yuan depreciated 5.6 per cent while Indian rupee fell 4.5 per cent. Till December, apparel exports grew at just 7-8 per cent, compared with estimated growth of 13-15 per cent.
The weakening of yuan by over 5 per cent and apprehensions of further depreciation of Chinese currency have sparked concerns for the Indian textile industry. China is a major competitor in garments and made-up segments. India is strong in the value-added, hand- embroidered, casual fashion garments consisting of small orders. On the other hand, China is strong in high-value, basic garments.
If yuan depreciation continues, it would threaten Indian apparel exporters as both the countries have access to common markets — the US and Europe, said Rahul Mehta, president, International Apparel Federation and Clothing Manufactures’ Association of India.
The garment and made-up exporters from India are expecting a stiff competition in global markets if China continues its depreciation spree, says Raman Saluja, managing director of Ludhiana-based SEL Manufacturing Company.
Because of low demand from China, Saluja diverted his business to other parts of the world in the last few years. However, with the depreciation of yuan, he faces a fresh challenge.
“Our exports are in most parts of the world except China. But with their cheaper goods, exporters from China may render us uncompetitive in the existing markets. Owing to the slowdown in Europe, our realisations have already been hit by 10-15 per cent. We have lowest cost of production and cannot trim it further. We are helpless,” Saluja told Business Standard.
Cotton yarn exports will see the highest impact. In domestic market, while cotton and hand-made segments would not be affected by yuan depreciation, companies in man-made fibre segment may face fierce challenge if the Chinese resort to dumping. Industry is planning to seek government protection against dumping of cheap Chinese man-made fibre.
“China is not only a competitor but also a major buyer, especially for cotton yarn, which is why the vertical will see impact. This may be offset if China continues to buy from India,” said Sanjay Jain, managing director, TT Ltd.
The vertically-integrated Nahar Industrial Enterprises Limited has reduced its exports to China in the past few months, focusing more on domestic market. “We are bleeding and in some segments operating at razor thin margins. But the competition is going to be fierce in global market as Chinese manufacturers have immense support of their government. They may also resort to dumping in order to utilize their capacities,” said Daman Oswal, Director of the company.
The withdrawal of focus market scheme, duty drawback and interest subvention accentuated the challenges of Indian textile exporters. Yuan depreciation may be the last straw in the camel’s back.
According to Oswal, the government should revisit its decision of excluding spinning industry from the interest subvention of three per cent.
Of the total $40 billion worth textiles and clothing (T&C) exports from India, apparel is worth $16 billion. Yarn, fabric and made-up segments together are worth $21 billion.
Since August 2015, yuan depreciated 5.6 per cent while Indian rupee fell 4.5 per cent. Till December, apparel exports grew at just 7-8 per cent, compared with estimated growth of 13-15 per cent.
The weakening of yuan by over 5 per cent and apprehensions of further depreciation of Chinese currency have sparked concerns for the Indian textile industry. China is a major competitor in garments and made-up segments. India is strong in the value-added, hand- embroidered, casual fashion garments consisting of small orders. On the other hand, China is strong in high-value, basic garments.
If yuan depreciation continues, it would threaten Indian apparel exporters as both the countries have access to common markets — the US and Europe, said Rahul Mehta, president, International Apparel Federation and Clothing Manufactures’ Association of India.
The garment and made-up exporters from India are expecting a stiff competition in global markets if China continues its depreciation spree, says Raman Saluja, managing director of Ludhiana-based SEL Manufacturing Company.
Because of low demand from China, Saluja diverted his business to other parts of the world in the last few years. However, with the depreciation of yuan, he faces a fresh challenge.
“Our exports are in most parts of the world except China. But with their cheaper goods, exporters from China may render us uncompetitive in the existing markets. Owing to the slowdown in Europe, our realisations have already been hit by 10-15 per cent. We have lowest cost of production and cannot trim it further. We are helpless,” Saluja told Business Standard.
Cotton yarn exports will see the highest impact. In domestic market, while cotton and hand-made segments would not be affected by yuan depreciation, companies in man-made fibre segment may face fierce challenge if the Chinese resort to dumping. Industry is planning to seek government protection against dumping of cheap Chinese man-made fibre.
“China is not only a competitor but also a major buyer, especially for cotton yarn, which is why the vertical will see impact. This may be offset if China continues to buy from India,” said Sanjay Jain, managing director, TT Ltd.
The vertically-integrated Nahar Industrial Enterprises Limited has reduced its exports to China in the past few months, focusing more on domestic market. “We are bleeding and in some segments operating at razor thin margins. But the competition is going to be fierce in global market as Chinese manufacturers have immense support of their government. They may also resort to dumping in order to utilize their capacities,” said Daman Oswal, Director of the company.
The withdrawal of focus market scheme, duty drawback and interest subvention accentuated the challenges of Indian textile exporters. Yuan depreciation may be the last straw in the camel’s back.
According to Oswal, the government should revisit its decision of excluding spinning industry from the interest subvention of three per cent.
Of the total $40 billion worth textiles and clothing (T&C) exports from India, apparel is worth $16 billion. Yarn, fabric and made-up segments together are worth $21 billion.