Apparel exporters were hit hard by recession. Now, risein the price of cotton, and a resulting increase in the fabric prices aredriving nails into their coffin.

 

The stinging pangs of recessionhave already hurt the textile exporters forcing them for retrenchments andlayoffs. They were in for more surprises when rupee value started appreciating.Latest addition to this list is the spike in cotton prices, and a resultingincrease in the fabric prices. Cotton prices have soared up to 15% in a year.Price of 360kg of cotton candy costs Rs.24, 500, and manufacturers believe thatthis s the steepest price, ever.

 

During the recent past commodityprices have gone up, and cotton is not a commodity with unmixed blessing. Priceof cotton has gone up in the recent past as international contractors werebooking commodity for imports. Increase in the price of cotton had led to asubsequent increase in the rise of fabric costs. This has come up to 42% in thepast one month.

 

Yarn constitutes 30-40% of thecost for a single garment, and apparel making is the expensive part ofproduction. In the apparel industry, cost of the fabric constitutes 60% of itsgarment price. They make 50-60% of the export values. With the increase inthe price of cotton, and decline in the price of yarn, apparel manufacturersare having a tough time.

 

Garment exports experienced adecline by 7.32% during the period of April to September. It met with a sharpfall in exports from $5.22 million during the same period in the previous yearto $4.84 billion. Increase in the price of fabric has forced many exporters toopt for a cut in production.

 

Does the situation favor China?

 

Fabrics such as polyester knitfabric, and other blended fabrics are available in China for a less expensiveprice.Sourcing options are from China is available for the importers for 5-10% less cost comparatively over India. Though all Indian fabrics cannot be substituted, still there is a possibility thatimporters might look at China as an option. For the Indian exporters who areholding orders, negotiating prices for the new orders likely to be executed inthe coming months will become intricate. Rising value of rupee has also led theimporters to think about importing from China, thereby saving their inputcosts.

 

Due to global turmoil, anddeclining trend of retail sales in the importing countries, apparel exportersare already running their business in losses. Rising prices of cotton with aconsequent increase in the fabric costs and a consequent increase in fabriccosts is taking a heavy toll on the garment exports, affecting the alreadywafer thin profit margins. An export industry providing job opportunities for3.5 million workers directly and 3 million people indirectly serving as thesixth largest exporter in the global perspective is currently going through arough patch.

 

References:

 

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