By:Pradeep Pandey


A sharp appreciation in the rupee against currencies likethe US Dollar and Euro, and soaring raw material prices, have left theslowdown-hit textile industry hanging by a thread. Nearly half of Indias textile and apparel exports are to the US and European countries, and the rise in the rupeehas sent exporters profit margins and targets haywire.


The rupee ruled at an 18-month high of 44.97 to the dollarand 61.76 to the Euro on Monday on increased flow of foreign currency in theequity market. The domestic currency has appreciated by nearly 14.5% againstthe Euro, and over 5% against the dollar in the past five months. To add to thetextile industrys troubles, cotton and yarn rates have increased by 20-25% inthe past six months on speculative commodity futures trading and an increase inexports to countries like Bangladesh, Korea and China.


Cotton prices have gone up by over 20% to Rs.27, 800 acandy, or 355.55 kg in March 2010, from Rs.23, 200 a candy in July 2009. Yarnprices have increased by 25% to Rs.175 per kg compared to Rs.140 per kg duringthe same period.


Many players such as Gokaldas Exports, Arvind and AlokIndustries have responded by increasing garment prices by up to 12%, but arehaving a tough time negotiating at increased rates with buyers, says PremalUdani, chairman, Apparel Export Promotion Council. October-January orders aregenerally booked in March. In the past 10 days, we have hardly finalised anyorders, said Rajan Hinduja, MD of Gokaldas Export, the countrys largestgarment exporter. He expects profit margins to drop by 20-25% compared to sixmonths ago.


Only recently, companies were looking forward to reneweddemand from the West, after the 2008-2009 economic recession left them out inthe cold and millions were rendered jobless. Textile exports registered adecline of 1.71% to $21.75 billion during April 2009-March 2010, compared to$22.13 billion in the previous years corresponding period, according toAssociated Chambers of Commerce and Industry of India.


Exporters are not able to pass on the increase in yarnprices to buyers, said A Sakthivel, president of Tirupur Exporters Association.Jaipur-based exporters are also feeling the pinch. Our costing has gone up by25-30% a unit due to fabric prices being hiked by 60-70%, said GP Mittal,president of Garment Export Association of Rajasthan.


Originallypublished in The Economic Times, dated 31 Mar 2010