ExportsThe rising rupee, which has appreciated by 11 per cent during the last 12 months, has raised doubts on achieving the $160 billion export target set for 2007-08. Appreciating rupee have hit the textile and leather sectors the hardest. Brokerage firm AnandRathi in a report on the impact on the textile sector said the recent rupee appreciation had taken a toll on the existing thin margins of textile players. “Companies with high net exports will be the worst sufferers. Higher interest rates will hurt the bottom line aggressively as textiles is a working capital-intensive sector,” it said.

A recent CII survey echoed the same opinion, textiles and apparel export companies had witnessed a decline in total revenue, operating income and net profit margin.

Launch of Linen ClubCoincidently I work in Textile industry (Jayashree Textiles, A Unit of Aditya Birla Nuvo Ltd., manufacturing and export Linen fabric under brand name “Linen Club” both directly and through RMG exporters) and thats too for its export division; I have witnessed how India’s leading Linen exporter have 30% less orders compared with last season up to this month. Strong rupee is hurting the profitability of exporters (Garmenting units who are our customers) and eroding their competitiveness and we are losing orders to competitors such as China, Thailand, Vietnam and Indonesia.

With a view to ameliorate the worsening conditions of the textile sector because of the appreciating rupee, the government is considering the following measures:

 

  • Restructuring of the TUFS scheme

  • 5% interest reimbursement

  • 10% capital subsidy

Why is textile industry the worst hit in a rupee appreciating scenario? Being competitive mainly on account of the labour cost arbitrage, this is highly vulnerable to exchange rate swings. About 85% of the trade is invoiced in dollars. The ripple effects will mostly be felt in Textile machinery industry, Cotton farmers.