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Yuan devaluation may hit India's spinning industry
15
Jan '16
India's spinning industry in the textile sector runs the risk of taking a hit due to the downturn in the Chinese economy. China accounts for 40 per cent of India's total cotton yarn exports which is likely to come down and create a glut in the domestic market, according to a newspaper report.

The Indian apparel exports are also likely to be impacted due to a depreciation of the Yuan. India's garment exports had been growing at a rate of 7-8 per cent till December of the current fiscal against an anticipated growth of 13-15 per cent, the report said.

India's apparel exports to markets like Europe and the US have been sluggish due to overall economic slowdown. The weakening of Yuan by 3 per cent and apprehensions of further depreciation of Chinese currency has sparked concerns for the Indian textile industry as China is a major competitor of garments and made-ups and importer of cotton yarn from India.

Of the total $40 billion worth textiles and clothing exports from India, garment exports are worth $16 billion, while yarn, fabric and made-ups together amount to $21 billion.

India's strength lies in the value-added, hand-embroidered, casual fashion garments consisting of small orders, whereas China has its strength in high value, basic garments. If depreciation of Yuan continues, Indian garment exporters could be affected as both countries have access to the common markets of US and European Union, said Rahul Mehta, President International Apparel Federation and Clothing Manufactures' Association of India.

Echoing his views, Raman Saluja, a Ludhiana-based exporter said, even as Indian garment and made-up exporters were tapping newer markets following stiff competition from China, the currency depreciation could upset their apple carts owing to the slowdown in Europe. According to Saluja, their revenues had already been hit by 10-15per cent and there was no further scope for cost-cutting.

According to industry experts, while cotton yarn risks the biggest hit, the cotton and hand-made segment in the domestic apparel market is likely to remain unaffected from the Chinese currency depreciation. According to Daman Oswal, director of Nahar Industrial Enterprises Limited, it was high time the Indian government revisited its decision of excluding spinning industry from the interest subvention of 3 per cent.

The textiles industry is apprehensive that the withdrawal of focus market scheme, duty drawback and interest subvention had accentuated the challenges of Indian textile exporters and Yuan depreciation could further aggravate the situation. (SH)

Fibre2Fashion News Desk - India

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