No respite to apparel exporters despite rupee fall

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SME Times News Bureau | 02 Jan, 2012
The depreciation of Rupee against the US dollar has failed to fetch big orders for the country’s apparel exporters, mainly due to fears of a recession in Western countries next year, reports media.

The US and Europe account for over 80 percent of India's USD 11 billion garment exports and shoppers in these countries are currently decreasing their spending on clothes, owing to the financial crisis in those countries.

Normally, a decline in currency helps exporters as it decreases the price of goods in terms of their dollar value. But, this time round Indian exporters have not gained as western buyers have decreased their procurement, which is estimated to have come down by 15 percent in the last two months.

"Definitely, the market in Europe being very weak is one big reason for Indian apparel exporters failing to gain in spite of the depreciating rupee," said Premal Udani, Chairman of Apparel Export Promotion Council (APEC), the official body of apparel exporters.

"Another reason is that there is no meaningful reform taking place in India to enable apparel exporters to compete," he quips.

“Rupee depreciation is surely an advantage, but the buyer himself is getting aware that the dollar is getting stronger, so the buyer also expects us to sell a product worth US$ 5.00 at around US$ 4.80 or so. It, however, provides a cushion to negotiate which we lacked earlier,” says Praveen Nayyar, Managing Director of Dimple Creations, a New Delhi based manufacturer and exporter of woven and knitted garments.

Looking for opportunities, he adds, "While the business from Western countries is down, we stand a much better chance of exporting to the reverse countries like Australia, South Africa and countries of South America, where the delivery timings and seasons are reversed. Since these countries also deal in dollars, there are chances of giving them better prices and getting business."

Commenting on the expected decline in apparel exports, Nayyar says, "The peak shipping season is up to February 15th because the spring would go till end of January and then summer starts. The months from June to September were very bad for exporters. So, even if the exports are good now, the average would be quite less. Annually, we may have a deficit of about 10-15 percent."

The AEPC Chairman predicts that the coming quarter will be more or less the same for apparel exporters, but adds, "There are many steps that can be taken to help exporters. Interest subvention has to be across the board and drawback needs to be liberalized. Moreover, removing excise duty on garments would enable them to cater more to domestic market and make good for decrease in exports." (Source - fibre2fashion)