Indian textile sector is going through tough times which are taking the wind out of Indias corporate sails. The domino effect of recession and rupee appreciation prove to be the Scylla and Charybdis, pressing down the Indian textile sector.

Recession Cannibalizes Textile Exports:

Indian textile industry is facing the quandary of economic downturn. The ongoing recession is taking its toll in the export figures of the country. Started during the mid of 2008, the economic erosion swapped off the garment exports as the developed economies of US, and EU began to feel the pinch of the devastating meltdown.

Prior to the onset of recessionary trends, India was experiencing a high growth trajectory ranking one among the top five textile and apparel exporters. The housing bubble of the US has accelerated and spread into textile and apparel sector, thereby declining their sales. Clothing retailers of US and EU have slashed their orders due to a slump in consumer spending trends. The domino effect of the global turmoil is crippling the garment exports and resulting in layoffs and shut downs.

Recent figures reveal a dip of 15.4% during the first quarter of the present fiscal year. Apparel exports constitute 30% of the countrys export earnings. Exports were down by 10% to $20 billion USD in 2008-09 over the last fiscal. Growth in the textile and clothing segment is predicted to be sluggish during 2009-10. The estimated average annual growth will be around 7%. Exports are likely to fall to 11.1% in 2009 to $26.15 billion USD.

Is Rupee Appreciation a Mixed Blessing?

Adding a cruel twist in the tale, the country is witnessing a period of sharp rupee appreciation causing a further decline in the textile and apparel exports. Since 2007, a gradual appreciation in the rupee value has hit the profit margins of the textile manufacturers. High interest rates, and increase in the cost of inputs have infected the bottom lines of the industry. Economic analysts predict that Indian rupee is likely to appreciate further against the US dollar in the coming months.

On the contrary, arguments also exist that rupee appreciation is a welcoming situation for companies with overseas borrowings. They benefit due to reduced interest payout occasioned by the appreciation in Indian currency. Stock indices are able to sale new peaks due to the mounting currency value. It is also believed to soften the force of inflation.

Fibre2Fashion had an exclusive interview with Mr. Gautam Hari Singhania, Chairman and Managing Director, Raymond Ltd.

• Being a part of the diligence, what is your perception about the textile industry?

"The Indian economy has been growing by about 8 to 9 percent and if this momentum continues then we will see a very bright future for India. The Textile Industry has been a major contributor to India's growth and it is one of the largest employers in India."

• Has the industry been hit by rupee appreciation?

"The appreciating rupee is already impacting the industry. The Government should consider the case of the textile sector with topmost priority and should encapsulate incentives for the industry in the forthcoming budget to provide a fillip to dwindling exports."

"The rising value of the rupee against the major currencies is the biggest challenge for the sector as the exports have almost lost the comparative advantage on the pricing front. The situation has further worsened because while the Indian rupee has appreciated by 12-15 percent, the currency of Pakistan, Bangladesh and China has appreciated marginally thereby making their industries significantly more competitive than ours at least on the commodity side."