The devaluation of the yuan has caused jitters among garment exporters in India. Garment exports from China will get an impetus as more and more buyers will source products from there since they could become cheaper. Already, China is the leading exporter of textiles and clothing in the world.
In contrast garment exporters in India like the knitwear cluster face rising production costs and shrinking profit margins. Tirupur knitwear cluster imports large chunks of machinery, raw materials like knitwear printing inks and accessories that provide embellishments to the garments.
Rupee volatility has been a problem for the last few months. If the rupee continues to slide, it can upset the costing of end products as garment orders usually take a few months to execute. Since currency markets cannot be controlled, Indian exporters want incentives that will arrest any further widening of the trade deficit and help them remain competitive. They feel rates of duty drawback and interest subvention can be increased and more sops be given to increase exports to focus markets so as to enable exporters to increase their market share. China further devalued the yuan against the dollar a few days back, setting the daily reference rate to the lowest since 2011.