Rising rupee weaves tapestry of uncertainty

Chennai, June 28: Rupee appreciation is hitting textile exports, particularly in garments, creating a spectre of uncertainty over the industry, latest statistics show.

According to the Cotton Textile Export Promotion Council (TEXPROCIL), the rupee gained 11.5 per cent between June 25, 2006 and June 25, 2007.

In the same period, the Pakistani rupee depreciated by 0.78 per cent, causing more concern as the country is considered to be a stiff competitor to India in textile exports.

The steep currency appreciation led to 1.48 per cent decline in value terms in India's exports to the US from January to April 2007.

''The rupee appreciation has slowed down exports drastically therby severely affecting production, capacity utilisation and resulting in redundancy in employment,'' TEXPROCIL Chairman Prem Malik said.

''This unprecedented appreciation (of the rupee) will not only lead to a decline in exports but also result in loss of around 5.97 lakh potential new jobs, which includes the loss in direct employment in textiles and clothing industry at 2.72 lakh jobs and more than three lakh in indirect employment.'' Mr Malik also said textile company stocks were likely to be impacted negatively.

''If a company is dependent on exports or if exports account for over 60 per cent of its top line, its stock will be definitely affected,'' he said.

Mr Malik said ''a large number of small and medium-sized fabric producers supplying to readymade garment (RMG) units are facing closure as RMG exports have also declined sharply. ''Besides, a shift in sourcing to other countries is making it virtually impssible to secure new orders.Once a market is lost to a competing supplier in another country, it is extremely difficult to regain confidence and renew contracts.'' He also said other industries such as IT and automobile would not be affected as much since the profit margins were higher.

''The situation has become extremely grim and unless urgent steps are taken, the sector which is the second largest employment provider after agriculture, will be hit hard.'' ''In view of the near crisis situation in the textile industry, we appeal to the government to intervene immediately to increase duty drawback rate by five per cent and reimburse the cost of infrastructural disabilities amounting to seven per cent,'' he said.

UNI