INR against USD at 80; Indian exporters to get relief with rider

In the first week of April 2022, rupee was traded against USD at the level of 75 which has dropped to around 80 now. Indian rupee has depreciated nearly seven per cent in the last three and a half months. Rupee was depreciating when cotton prices hit a record level in domestic and global markets. However, the prices have fallen sharply in the last two months. Garment exporters’ profit margins had been squeezed due to costlier cotton yarn and fabrics.

On the other hand, importers from the US and Europe are decreasing new orders as their retail sales were affected due to high inflation and signs of recession in the entire world. Some reports from Panipat suggested last month that many buyers in the US and Europe had postponed consignments of previous orders as their inventories did not deplete amid slow sales. The exporters were forced to reduce prices to secure fresh orders which further squeezed their margins.

Apparel Export Promotion Council Chairman Narendra Goenka told Fibre2Fashion, “Garment export orders are estimated to reduce by about 10-15 per cent due to challenging market scenario.” According to the exporters who attended trade fairs held in Germany last month, there has been a decline of up to 20 per cent in export orders. Export orders for home textile products from Panipat have been decreased up to 40 per cent. However, trade sources argued that Panipat’s export orders had been increased 40 percent in 2021 after the COVID-19 pandemic of 2020. Therefore, export orders for Panipat based home textiles have come down to the previous average level.

Commented on depreciation of rupee, N Selvaraj, general secretary of South India Mills’ Association (SIMA), said, ‘Exporters will get benefit from weaker rupee against dollar. They will get respite from squeezing margins.” However, exporters said that such benefit will not go to all. Exporters can get some relief only on payment received against previous orders. They are not going to have much relief on new orders as buyers are seeking discounts on account of weaker rupee.

According to industry sources, currencies of most of the garment exporting countries like Bangladesh, Sri Lanka, Indonesia, Vietnam, Turkey, Pakistan, etc have also fallen. Some currencies have witnessed higher down fall against the USD, compared to the drop in the Indian rupee. Therefore, Indian exporters will have to accept demand of buyers for higher discount because of tough competition. So, they are not going to pocket much profit on new orders.

Depreciating rupee will increase prices of imported goods. Some exporters said that accessories used in garments such as zippers and buttons which are imported from other countries will be costlier. It will increase the cost of garment production.

Fibre2Fashion News Desk (KUL)