Rupee depreciation troubles Indian apparel exporters

31 May '12

2 min read

Normally, any depreciation in the value of the Indian currency against the US dollar is welcomed by garment exporters. But, not so this time as the situation is different.

The value of rupee has fallen so sharply during the last few weeks that the importers are now seeking renegotiation of the contracts already singed by them a month or two ago.

The rupee-dollar conversion rate was at above Rs. 56.16 per one US dollar on May 30. In comparison, the rupee was trading at Rs. 51.84 per one US dollar on April 18 this year.

Speaking to fibre2fashion, Mr. A Sakthivel, Chairman of Apparel Export Promotion Council (AEPC), said, “Exporters benefit if the weakening of rupee is up to 3-4 percent. But, if the weakening is more than that, buyers ask for reduction in prices.”

“When an export contract is signed, exporters usually buy dollars for one-third of the booked amount on the same day when the order is booked. For another one-third amount, they hedge the currency in the forward market. So, it is for the remaining one-third amount that the importers are seeking renegotiation,” he explains.

In financial year 2010-11, India's apparel exports stood at Rs. 11.4 billion. The garment exports increased to about Rs. 13.4 billion in 2011-12.

“However, the growth in clothing exports in 2011-12 was not due to rise in volume of exports. It was because of increase in prices of raw material and weakening of the rupee,” reveals Mr. Sakthivel.

“At present, the order book status is not looking bright for most apparel exporters. We have submitted a memorandum to the Government seeking some benefits,” he mentions.

Fibre2fashion News Desk - India

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