During the first week of the New Year 2010,the Indian Rupee touched a new high against the US Dollar to reach 46.22per Dollar. Although this was a good New Year greeting from the Rupee toimporters in India, it may not have pleased the exporter so much. Since thenthe Rupee has been hovering consistently around 46.2 Rs. values and in therecent weeks, it has appreciated overall.

In this article, we will concentrate on theIndian textile exporters. Hardly anyone understands the variation in foreignexchange rates better than the Indian textile exporting community as theirbottom lines routinely depend on this factor. With globalization and opening ofglobal textile markets under the World Trade Organization, this variationhas been affecting their businesses more frequently than ever before. In therecent time also, the appreciation of the rupee against the USD, a currencywidely used in trade from this part of the world, has hurt the textileexporters. According to Apparel Export Promotion Council, the adverseeffect on margin has been in the range of 8 to 10%.

The variation in exchange rate that adverselyaffects the textile manufacturers profits may be due to seeming unrelatedfactors such as increase or decrease in capital inflows in the form or ForeignDirect Investment or Foreign Portfolio Investments or RBI intervention asthe case may be. The woes of the exporters arent limited to the rise of Rupeeagainst the USD. Domestic inflation and rising raw material prices exertfurther strain on already dwindling profits. For instance, there is a risein cotton prices globally which makes the procurement of good quality rawmaterial, expensive.

Simple calculation of currency realization permeter of exported fabric will reveal the loss or gain of profits with unitvariation of the foreign exchange rate. But the real question to ask is why theIndian textile exporters are so dependent on these factors for his survival? Asimplistic explanation is that they are competing on price. Of course,technically any exporter will get affected by rising of domestic currency valuebut for this variation to become a life threatening issue, is a matter of highconcern.

The roots of this issue lie in the formulationof corporate strategy and business strategy and have to do with valueproposition of the company. Companies which failed to either innovate or moveup the value chain in the long run, so that they can command a premium on theirproduct rather than playing a volume and price game, often find themselves inthis situation.

Traditionally, China has been known to competeheavily on price and it successfully dragged manufacturers from other countriessuch as India, Bangladesh etc in the price competition. It would be unfair toblame everything on the Chinese because fact of the matter is that we had togive in, for the lack of a stronger value proposition.

Supply and demand factors which determine theprice of raw cotton which fall under the broadly traded commodities are beyondthe control of an average exporter. Although India has strong credentials asfar as installed manufacturing capacity and past performance of textileexports in concerned, a lot more remains to be done in terms of havingcontrol over the market, which is an agreeably challenging task.

Macroeconomic factors or indicators such as inflation and agricultural yield asa percentage of GDP may not be influenced directly by individual textileexporters but business can surely do well to reorganize their valueproposition.


  1. &sec=article&uinfo=<%=server.URLEncode(2339)%>" target="_blank">http://www.wto.org/
  2. &sec=article&uinfo=<%=server.URLEncode(2339)%>" target="_blank">http://www.aepcindia.com/
  3. &sec=article&uinfo=<%=server.URLEncode(2339)%>" target="_blank">http://en.wikipedia.org/wiki/Foreign_direct_investment
  4. &sec=article&uinfo=<%=server.URLEncode(2339)%>" target="_blank">http://www.texprocil.com/Soaring-cotton.html

About the Author

Theauthor is Co-founder of Textilestock.in; he holds multiple years experience inTextile industry and was responsible for leading the business developmentinitiatives in an export house from Delhi.