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Strengthening Rupee Taking Toll on Indian Textile Industry
Jan 30, 2008

With the Indian rupee rising to new highs against the US dollar, the textile industry in India has been reeling under the impact with drastic job cuts and shrinking profits.

The soaring value of the rupee took textile exporters in India by surprise in 2007 making it difficult for them to keep up with the global competition. The rupee rose more than 12% against the dollar (US), compromising the profits for textile exporters resulting in many units having to shut shop due to their inability to accommodate the increase, reported The Economic Times.

The export target for 2007-08 was set at US$ 25 Billion by the government. But the effect of the appreciating rupee was visible for all with the first quarter from April to June 2007 registering an over 14% drop in exports of textiles and clothing to US$ 4.01 Billion; an 18.23% decline occurred in April 2007 alone. Textile exports in 2006-07 were recorded at US$ 18.73 Billion which meant a shortfall of around 5% of the target of US$ 19.73 Billion, reported The Economic Times.

The rising rupee against the US dollar has also implied higher costs of Indian apparel, driving US and European retailers to divert their orders to mills in countries with weaker currencies, including Pakistan, Bangladesh, Sri Lanka and Vietnam. Apart from the escalating rupee, textile firms also had to cope with high interest, raw material prices and lack of infrastructure. Another major problem was incessant power failures making textile companies turn to diesel, pushing up operation costs even further.

Industry experts found that owing to falling profits and exports, textile exporters had to lay-offs employees on a wide scale. Workers in excess of 35,000 found themselves unemployed as a result of the lack of competitiveness in the Indian textile industry.

In the opinion of a research analyst at RNCOS, “The textile industry in India has a prime role to play not just in the domestic economy but internationally as well, in addition to generating vast employment opportunities (it’s the second largest employer after agriculture). With the rupee rising to record levels, stagnation is likely, not to mention severe job cuts and declining exports of textiles and clothing, without immediate preventive measures of a drastic nature. There is a dire need for government intervention in the form of waivers of certain export duties or channeling funds to the companies.”

Related Market Research Reports:
Booming Women Apparel Market in India
Booming Men Apparel Market in India