India: Exporters feel the pinch of rising rupee, falling demand

An appreciating rupee, falling global demand and high cost of credit have added to the woes of textile exporters. After falling to Rs 52 to a greenback two months ago, the rupee is now at Rs 47, sending shockwaves amongst exporters who are already reeling under the impact of the global recession. The sector has already seen a drop of 30% in its readymade garment exports, which was pegged at Rs 30,000 crore in the previous financial year.

Says Amit Goyal, president, Confederation of Indian Apparel Exporters (CIAe), “There has been a 9-10% drop in the value of the dollar in two months. Any kind of rapid currency fluctuation brings uncertain news for the industry which has already seen a 20% drop in demand from the US and Europe.” Goyal further adds that he does not see the situation to be temporary. Another exporter from Tiruppur adds, “We will procure orders from June-July. Till then, if the government does not take steps to prevent the appreciation of the rupee, our export realisations will be hit.”

Exporters are crying hoarse that due to lower realisations on exports and if the trend continues, there is going to be a huge erosion of profits in the ensuing financial quarters. “Taking a short-to-medium term view, the situation looks grim. But yet, it’s a wait and watch situation from July onwards when exporters start procuring orders,” says Goyal. He further adds that on exports, the players earn a profit margin of 8-10% when the rupee depreciated nearly 10% against the dollar a year and a half ago, but there is a likelihood of a significant drop not only due to the currency fluctuation but also due to competition from neighboring countries like China and Bangladesh.

The sector has been continuously seeking a bailout package from the government to come out of the financial crunch against the backdrop of currency fluctuation and other related issues that have led to a dip in exports.

The industry has been grappling with issues like dwindling exports, rigid tax regime and high duty drawback rates. The exporter fraternity has a wishlist from the newly formed government at the centre to reduce interest rates for loans procured by them and the introduce a flexible tax regime.