Weak rupee breeds inflation
Fibre2Fashion spoke to few apparel manufacturers/retailers about the likely impact
of the depreciating rupee
The recent rupee depreciation will help exporters as Indian cotton, of which this country is the second largest exporter after the US, will become cheaper in global markets and boost international sales. Demand from the US and the EU is still to pick up and China has devalued its currency to a level lower than India’s. This will put pressure on our export competitiveness.
On the other hand, import of raw materials for the domestic sector has become costlier because of rupee depreciation and will affect the market if there are sudden fluctuations in supply of inputs. Due to the recent increase in MSP of cotton, the raw material cost would go up.
The fall of the Indian rupee definitely has an impact and raises concerns over widening trade deficit and higher capital outflows. For the apparel industry, the fall in the value of rupee in the short run could help exporters. For importers and brands like ours to some extent it impacts negatively as we have considerable portion of imports and a fall in the value of the rupee pushes up the cost of goods, but then most importers also partially hedge forex exposure.
The Indian currency is weakening steadily, and the outlook isn’t rosy. Weak rupee breeds inflation and a depreciating rupee makes imports of commodities more expensive. Though seemingly good for exporters, the weak rupee would push up input cost further for Indian companies.
If rupee continues to slide, it would pose a challenge at many levels, not the least on inflation. Global apparel trade has also shown no signs of reviving, resulting in subdued demand in key importing countries. Indian luxury retail growth may remain flat due to factors like the goods and services tax (GST) implementation, demonetisation and sluggish global demand.
Operation costs will increase as fuels price will have a great impact on every aspect of business across the industry.
In such a scenario, sustained growth in India’s apparel exports remains challenging.
Published on: 07/27/2018
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.
