Indian textile industry is currently going haywires. Sharpappreciation of rupee against US dollar and euro has hit the textile industryseverely. Adding to this woe, increasing prices of raw materials are alsoaffecting the industrys performance.
Increasing Rupee Value:
The soaring rupee value is hitting the exporters hard, withthe textile exports taking a plunge. Rupee value soared to 44.97 against thedollar, and 61.67 against euro which was the highest in the past 18 months.Domestic currency has increased nearly 14.5% against the euro, and 5% againstthe dollar in the past five months.
Indian textile industry which holds a competitive positionregarding textile and apparel exports to the US has been adversely affected bythe appreciation of rupee value. More than 50% of the textile and apparelexports from India are to the US and EU. Increasing rupee value against thecurrencies of these countries has affected the exporters profit margins to aconsiderable extent. The industry which was already facing sluggish sales dueto the pangs of recession in the US is infected more due to the strengtheningposition of the rupee against the dollar. More impact is on the labor force of India. Increasing rupee value might result in the loss of export orders. There is apossibility of many workers losing their jobs due to the loss of export orders.
Soaring Prices of Raw Materials:
Adding to the appreciating rupee value woes, textileindustry is troubled by the increase in prices of cotton and cotton yarn rates.Prices of cotton and yarn are skyrocketing, thereby affecting the overallprofits. Yarn prices increased during March. During the past 6 months cottonprices have increased by 20-25%, while cotton yarn prices have been soaring upto 25%. Due to increase in prices of cotton, yarn prices have simultaneouslyincreased by 15%. The industry is jacking up the cotton yarn price recurrently.
During 2009, the global turmoil left many people jobless,and led to the closure of many companies. Textile exports declined to 21.75billion USD during 2009-2010, over 22.13 billion USD in the correspondingmonths of the previous year. After the tide of recession went down, companieswere positively hoping to increase their business. But the appreciating rupeevalue, and soaring cotton yarn prices, has left the industry, hanging by a thinthread. Exporters are not able to adjust the increase in prices to the buyers.One of the earliest industries of the country, textile sector accounts for 14%of total industrial production, and 30% of the total exports. If the presentsituation continues, it will erode the competitiveness of the textile andapparel sector against its business counterparts.
Potential Remedies:
The Government should aid the exporters by rationalizing the duty of various raw materials and intermediates. Targeting the mushrooming domestic market should be the long term strategy of the Indian textile industry. Some big companies attempt to reduce the risk of losses by hedging; under which prices are fixed at a certain level to ensure the certainty in cost of production or revenue of sale. Now with the grappling issues, medium and small companies can also look upon this issue.
One of the earliest industries of the country, textile sector accounts for 14% of total industrial production, and 30% of the total exports. Textile and apparel sector is the largest foreign exchange revenue generator of the country. With focus on the current issues, and settling them in the right way, the country can continue with the growth momentum and increase its economy.
References:
1. &sec=article&uinfo=<%=server.URLEncode(2524)%>">http://www.naukrihub.com
2. &sec=article&uinfo=<%=server.URLEncode(2524)%>">http://economictimes.indiatimes.com
3. &sec=article&uinfo=<%=server.URLEncode(2524)%>">http://www.india-exports.com
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