Garment exporters worried over US firm's bankruptcy filing

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SME Times News Bureau | 05 Nov, 2009
Indian garment exporters, already reeling under a severe demand crunch in key markets, have expressed concern over the application for bankruptcy protection filed in the US by CIT group, among the largest lenders to small and medium sized businesses.

"Nearly 80 percent of Indian exporters service small US vendors. Given their high exposure to smaller vendors, the impact on Indian firms may be significant," said Apparel Export Promotion Council (AEPC) chairman Rakesh Vaid.

"Most importantly, credit terms may worsen and thereby impact Indian exporters," Vaid added.

Of the $10.17 billion worth of garments exported every year from India, nearly $3 billion are bound for the US.

As per a Standard and Poor's estimate, CIT lent about $4 billion to US apparel manufacturers and retailers last year and is among the largest funding firms to the apparel sector, responsible for an estimated 60 percent of funds to the American apparel and footwear industry.

Indian garment exporters could get severely impacted as thousands of small and medium-sized businesses in the US face financial difficulties and could go out of business after CIT filed for bankruptcy protection, an AEPC statement said.

CIT provides working capital to small establishments such as shops and restaurants and their suppliers -- many of whom are already struggling in the current economic recession.

AEPC also said Indian garment exporters were on the lookout for other markets to offset the slump in demand and offset risks arising from cancelled orders.