Textile exports in crisis, garments worst hit

New Delhi, Mar 25: The spectre of gloom and doom looms large over the textile industry, the primary culprit being the unceasing appreciation of the Rupee which is hitting hard exports from this sector, especially those relating to garments.

Industry representatives cite statistics to prove their point.

They say even as textile and apparel exports to the United States increased 7.49 per cent in volume terms during January-March 2007 against the year ago period, it declined by 0.43 per cent in value terms, pointing to the declining unit value realisation.

It is for the first time in several decades that textile exports to the United States have shown negative growth in value terms, resulting mainly from the hardening of the rupee. China, however, has shown impresssive growth in both volume (24.86 per cent) and value (46.47 per cent) terms in the same period.

The Confederation of Indian Industry (CII) and Garment Exporters Association(GEA) are pushing the government for evolving an effective exchange rate management policy which will mitigate the impact of currency appreciation.

The spokesmen of these organisations say exporters are also facing the problem of rising cost of production due to continuing high level of inflation.

GEA Secretary-General Surinder Anand says textile exporters are being forced to underprice their products to compete with countries whose currencies have depreciated.

Mr Anand said appreciation of the Rupee against the dollar has been about 10 per cent, thus adversely affecting the growth rate and profit margins of garment exporters.

''It seems the gloomy picture would continue for some more time unless the Government takes immediate corrective measures to manage the currency exchange rate fluctuations by adopting an effective exchange rate management policy,'' he says.

The Association said neither the Annual Supplement to the Foreign Trade Policy 2007 nor the RBI Credit Policy for 2007-08 have provided any specific measures nor a comprehensive export promotion strategy to reverse the recent downturn in garment exports. ''The Government has not given due consideration to various representations submitted by the garment exporters for grant of adequate fiscal relief to meet the new challenges of increasing international competitiveness,'' the GEA said.

Exporters say if the Euro is replaced as a medium of exchange for dollar, there would be more stability in the prices and it would be easier for them to hold their position in the international market.

A Ficci survey recently pointed out that exporters are on the lookout for EURO dominated trade opportunities due to the Rupee moving Northwards.

The textile export sector has made out a case before the Finance Ministry to take immediate steps, in line with the recommendation of the Ministry of Commerce, to exempt exports from Service Tax and grant adequate and necessary fiscal relief to compensate exporters for the financial hardships on account of upward movement of Rupee against the dollar.

The textile exporters have been crying wolf over the rising transaction costs.

''Readjustment of the rupee is imperative to protect the long term interests of the exporters. RBI needs to intervene immediately in the currency market to curb undesirable movements of the rupee,'' the GEA said.

UNI