Mixed impact of rupee fall on textile exports: ICRA

Given that China enjoys dominant position in international export markets, India will see increased pricing competition which will affect the profitability of Indian exporters, ICRA said. 

The Dollar Business Bureau

Depreciation of the rupee will not have a broader implication on India’s textiles exports but will bring a competitive pressure from China due to devaluation of Chinese currency, according to the Investment Information and Credit Rating Agency of India (ICRA). China’s decision to devalue the Yuan on August 10, 2015, has led to depreciation in the currencies of other apparel exporting countries, including Indonesia and Vietnam. Any fluctuation in their currencies will affect export competitiveness in the market. "As China’s Yuan has depreciated more than the Rupee and given that China enjoys dominant position in international export markets, India will see increased pricing competition which will affect the profitability of Indian exporters," ICRA said in statement. The credit rating agency said: "However given that Rupee has depreciated more than that of other competing countries, and India’s share in overall trade is relatively small, it is expected the export volumes may not be impacted severely." In the Financial year 2015, India’s apparels and made-ups exports accounted for approximately $21 billion, up from 52% in 2014 to 57% in the current fiscal. India's overall textiles exports recorded a growth of 12.2% to $16.8 billion in 2014-15, but exports of cotton and cotton yarn declined because of low demand in China. “India’s share in global apparel exports is estimated to be less than 4% as against China, which enjoys a dominant share of about 40% in world’s apparel exports, predominantly because of its strong man-made fiber industry,” said the credit rating agency. India’s contribution to global apparel exports has been stagnant, at about 3-4% over the last decade. India is the world’s largest cotton producer, and its apparel exports to the USA constitutes of about 70-75% of cotton apparels. The USA and the European Union (EU) imports about 60% of the world’s apparel exports. In 2014-15, raw cotton exports contributed about 70% of the total fiber exports from India. India, along with China, Vietnam, Bangladesh and Indonesia are the major apparel exporters. India has to compete with these Asian countries for its apparel exports. India’s fabric exports have gone up by about 6% in 2014-15. It is largely exported to China, Bangladesh and Sri Lanka. Due to the insufficient cotton and yarn in Sri Lanka and Bangladesh, they import fabric, cotton and yarn from India. “Given that Rupee has depreciated more than currencies of other exporting countries (such as Bangladesh and Vietnam), it is unlikely to result in a significant decline in export volumes and hence in the overall share of India in global apparel and made-ups exports,” ICRA said.  

September 09, 2015 | 5:54pm IST.

The Dollar Business Bureau - Sep 09, 2015 12:00 IST
 
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