For quite sometime, there has seldom been any peacetime for Indian garment exporters, who have been chased by one problem or the other, all the time. They have alternately suffered from the appreciation of Indian Rupee or its depreciation, generally to their disadvantage, as both of these could be a boon to the exporters, only if these occur at right time. But that was not to be.

First, it was the low level of depreciation of Indian Rupee, which touched Rs.51.23 a dollar in March this year but started appreciation to Rs.46.10 a dollar, causing a loss in receivables from the exports by almost 10%. This kind of volatility was kept in view by the exporters while booking fresh orders for Spring/Summer 2010, which were generally finalized export order in August and September 09 at Rs.48.50 providing for a reasonable margin of appreciation of Indian Rupee. The orders were booked by the exporters, on the basis of this calculation, keeping in view the competitive prices by countries like China, Bangladesh and Sri Lanka while providing for reasonable appreciation of Indian Rupee. However, he recent and contino9us appreciation of Indian Rupee has made exporters unhappy as this has squeezed the exporters margins.

This has given rise to the demand of apparel exporters to hike the duty drawback rates to offset the losses due to appreciation. Says Rakesh Vaid, Chairman AEPC. The Rupee has already strengthened by 10 per cent. The industrial, the financial institutions and experts are expecting that it will further strengthen up to 12 to 15 per cent in a few weeks; thereby making our exports less profitable and less competitive. He has recommended that duty drawback should be increased 8 to 10 per cent at present to 13.25% of the FOB. He has added that garment exports during April to August 2009 have dipped by 7.39 per cent to $ 4.18 billion from 4.51 per cent on the year-on-year basis. With this pace, the country will not be in a position to touch an expert performance beyond $ 9 billion, he anticipates, as against the apparel exports out of India totally $ 10.17 billion during 2008-09.

It is not for the first time and the garment exporters have suffered alternatively from the changes in the value of Indian Rupee, but this time, the situation is different. The world appears to be breaking through the recession and the US has declared that the recession is over and this does kindle the hope that with this, our exports to the US should pick up, even if not restored to the targeted glory for the current and next fiscal year.

Vaid has pleaded with all concerned in the Government like ministers and secretaries for Finance, Commerce and Textiles besides the Deputy Chairman of Planning Commission seeking immediate hike in duty drawback at 13.25 per cent. He has reminded the Government that China has been able to offer much better prices since its exporters have been granted drawback refunds many times in the past one year from 11 to 17 per cent of their FOB value.

The statement made by Vaid stating that The United States and he European Union, which constitute a majority of Indian garment exports, are still reeling under the global economic recession is, however, not borne out by the fact that the US has officially declared that the recession is over. However, it is true that the impact of recession being over is nowhere to be seen in the matter of garment exports; at least the feel good factor on the garment imports has not yet percolated down to the US retail market and so the case with the EU market, another major export destination for Indian garments.

What about New Markets?

I think the observation of Vaid that the Governments efforts to penetrate new markets of Latin American, the Middle East and the Oceanic countries are on, But it will take a long time before we set our foot firmly in these markets. As a matter of fact, there are hardly any statistics available to reveal what progress, if any, has been made, either in terms of our efforts and their end results. However, whatever statement has been made by Vaid seems correct. Hence the importance of our getting back to traditional markets.

The Hopes on US

Is US out of the cluches of recession? Officially, yes but all other indicators point to a depressing scenario. We, in India, have the huge deficit in compiling information on the garment exports and probably this is likely to continue, impacting our chance of making a quick but dependable reading of the trends, which are indeed important. In fact, on this depends the timeliness and adequacy of relief, which must be considered by the Government. This is vitally important to keep exports floating.