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Textile cos hit by strong rupee

Apr 17, 2007 08:38 PM IST Business Business

Mumbai: First it was the IT industry which said that the rupee appreciation against the dollar would hurt margins and now its the textile industry which is crying foul.

Garment exporters say they are running into losses, as they are working on five to seven per cent margins compared to the domestic currency which has strengthened nearly nine per cent against the dollar.

Exporters say they expect that even the bottom line will not be spared and they are likely to see an erosion of 10-15 per cent.

Says Chairman (WR), Federation Of Indian Export Organisation, SK Saraf, "Once the buyer goes, it would mean a double loss for us."

Textile exporters say that they have already seen a drop of more than nine per cent in exports to the US and the EU in the financial year that just ended.

Besides, getting orders for the winter season from the US and the European Union will only get tougher as buyers are not ready to pay a higher price for Indian garments.

Buyers from the West are likely to shift to low cost textile hubs like Vietnam, Thailand, Malaysia, even Bangladesh and Pakistan.To tackle the competition exporters say would be to import cheaper raw material from these countries.

Says President, Importers' & Exporters' Association, Mohan Nihalani, "This trend is accelerating. We have seen exporters import fabrics from Southeast Asia where it is cheaper, but still most people are not accustomed to do it."

Some exporters say they might start moving production to lower cost producing countries. However they do hope that the RBI and the Government will step in to control the rupee appreciation to avoid any more financial loss.