Resilience of garment exporters helps to tide over crisis

19 Aug '08

8 min read

In the beginning of this year, India joined the ranks of 12 countries with a trillion dollar GDP in nominal terms. When the GDP was growing above 9%, consequently for 4 years, unfortunately, sub prime crisis in USA and spiraling oil prices globally have played a havoc role on the economy of India, which has resulted into an increase in inflation rates and has also dented the prospects of a continuance of 9% GDP growth of the country.

Another major concern in this year was that India had attracted not only Foreign Direct Investment but also Foreign Institutional Investments, thanks to boom in the stock market and ultimately copious inflow of dollars into the country had led into appreciation of rupee against dollar in an unprecedented way.

To overcome the rising inflation and also contain the ill effects of large Foreign Capital Inflow, RBI was intervening and was repeatedly raising mainly the Cash Reserve Ratio (CRR) and Repo Rate, which resulted into firming up of interest rates.

Based on the prevailing scenario, everyone from economists to banks and internationally reputed financial consultants had predicted that rupee would touch Rs. 36 against dollar before end of 2008 and maximum number of exporters had gone for forward booking and hedging and a few have even resorted for exotic derivative deals.

The movement of rupee in quite the opposite way to the prediction has not given any desired benefit to the exporting units since most of the garment units have entered into forward contract for six to nine months. It is not out of place to mention that, through out the year, FII's have left in a hurry after the stock market crash and in the mean time more damage was done to the exporting units of the country, especially the garment sector.

A few banks sold the exotic derivatives product to the exporters with some attractive offers but unfortunately, they never revealed the negative part of the product. It is very essential for garment exporters, in future, to be very careful when dealing in these kinds of financial products.

For the very first time in the history of Tirupur Exports, total shipments have declined from Rs. 11,000 crores in 2006-07 to Rs. 9,950 crores in 2007-08, a reduction of 10%. And, if Tirupur's average annual export growth rate of 15% is taken in to account, 10% negative growth in exports actually means a net export loss of 25%.

Apart from monetary losses in exports, there were job losses to the tune of 15,000 in Tirupur exporting units against the shortage of work force often being faced by garment units in other places across India and other countries.

However, the well-known resilience of the exporters came to the fore, which was quick enough to taking all kinds of steps to trim down the costs and trying various measures to sustain in the competitive global market.

There are various niche markets available globally and the exporters need to tap it well and one among them is the production of garments made out of organic cotton. The objective of the technology mission is to help the exporting community to go in for wider range of products in different kinds of fabrics to cater to a wide and a larger market.

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