Is the Indian Textile Sector at the Grey area?

Indian textile sector is going through tough times which aretaking the wind out of Indias corporate sails. The domino effect of recessionand rupee appreciation prove to be the Scylla and Charybdis, pressing down theIndian textile sector.

Recession Cannibalizes Textile Exports:

Indian textile industry is facing the quandary of economicdownturn. The ongoing recession is taking its toll in the export figures of thecountry. Started during the mid of 2008, the economic erosion swapped off thegarment exports as the developed economies of US, and EU began to feel thepinch of the devastating meltdown.

Prior to the onset of recessionary trends, India was experiencing a high growth trajectory ranking one among the top five textile and apparelexporters. The housing bubble of the US has accelerated and spread into textileand apparel sector, thereby declining their sales. Clothing retailers of US andEU have slashed their orders due to a slump in consumer spending trends. Thedomino effect of the global turmoil is crippling the garment exports andresulting in layoffs and shut downs.

Recent figures reveal a dip of 15.4% during the firstquarter of the present fiscal year. Apparel exports constitute 30% of thecountrys export earnings. Exports were down by 10% to $20 billion USD in2008-09 over the last fiscal. Growth in the textile and clothing segment ispredicted to be sluggish during 2009-10. The estimated average annual growthwill be around 7%. Exports are likely to fall to 11.1% in 2009 to $26.15 billionUSD.

Is Rupee Appreciation a Mixed Blessing?

Adding a cruel twist in the tale, the country is witnessinga period of sharp rupee appreciation causing a further decline in the textileand apparel exports. Since 2007, a gradual appreciation in the rupee value hashit the profit margins of the textile manufacturers. High interest rates, andincrease in the cost of inputs have infected the bottom lines of the industry. Economicanalysts predict that Indian rupee is likely to appreciate further against the USdollar in the coming months.

On the contrary, arguments also exist that rupeeappreciation is a welcoming situation for companies with overseas borrowings.They benefit due to reduced interest payout occasioned by the appreciation inIndian currency. Stock indices are able to sale new peaks due to the mounting currencyvalue. It is also believed to soften the force of inflation.

Fibre2Fashion had an exclusive interview with Mr. Gautam Hari Singhania,Chairman and Managing Director, Raymond Ltd.

• Being a part of the diligence, what is your perception about the textile industry?

"The Indian economy has been growing by about 8 to 9percent and if this momentum continues then we will see a very bright futurefor India. The Textile Industry has been a major contributor to India's growth and it is one of the largest employers in India."

• Has the industry been hit by rupee appreciation?

"The appreciating rupee is already impacting theindustry. The Government should consider the case of the textile sector withtopmost priority and should encapsulate incentives for the industry in theforthcoming budget to provide a fillip to dwindling exports."

"The rising value of the rupee against the majorcurrencies is the biggest challenge for the sector as the exports have almostlost the comparative advantage on the pricing front. The situation has furtherworsened because while the Indian rupee has appreciated by 12-15 percent, thecurrency of Pakistan, Bangladesh and China has appreciated marginally thereby making their industries significantly more competitive than ours at least onthe commodity side."