How Favourable Is Rupee's Precipitous Fall For Indian Textile Sector

13 May 2022, Mumbai:

Industrialists and, professionals, notable exporters are concerned about currency appreciation-related losses. Exporters see a significant drop in exports, particularly in garment exports.

To make matters worse, the currencies of their closest competitors, such as China, Bangladesh, Indonesia, and Pakistan, have seen little or no appreciation.

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Compared to the Indian rupee, China's Yuan has gained just 4.72 percent in the last year. The graph below depicts fluctuations in several currencies against the US dollar. The state of the Indian textile engineering industry (TEI) is directly proportional to the state of the Indian textile industry.

The rupee's gain of 15% last year has proved devastating to the Indian textile sector.

In a recent press statement, the Confederation of Indian Textile Business (CITI) urged the government to help the industry by proposing relief measures that would balance at least a portion of the losses incurred due to rupee appreciation and interest rate hikes.

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Because of the losses sustained in both the local and international markets, units across the textile value chain are closing or scaling down operations. According to reputable sources, most equipment businesses are seeing negative growth this year.

For example, synthetic machinery is down 11%, weaving and associated machinery is down 34%, and processing machinery is down 37%.

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The spinning sector earns significant operational profitability as compared to other industries. As a result, the position of spinning machinery makers has improved.

Growth has slowed to 26 percent, down from 45 percent previously. Because of high costs and a lack of free trade agreements, India has lost market share to Vietnam and China in cotton yarn during the last decade.

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Even when global commerce in RMG decreased, India did well to preserve its market position.

The upside of the falling rupee

Where is taking us to; How a country is using the emerging opportunities in a weak currency regime, in terms of both import substitution and a surge in exports.

The precipitous fall of the rupee in the period between May and August created panic, as in a kneejerk reaction. 

There is a section the "Economists say the benefit of a strong rupee outweighs the advantages of a depreciated currency, regardless of the purpose, a depleted currency is beneficial to one set of players and quite certainly detrimental to another."

Historically Benefits of a Strong Currency:

Cheaper imports - and resultant higher real income;

Cheaper service for Foreign

In conventional wisdom, a depreciated country's currency makes imports pricier, whilst catalytic action is it stimulates exports by making them affordable for overseas buyers to buy.

Competitors such as Vietnam and Bangladesh, on the other hand, have done far better, capitalizing on China's declining market share over the last five fiscal years, whereas India has not.

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