The rupee’s appreciation by over five per cent against the dollar in 2017 is hurting Indian textile and apparel exports. The rupee’s strength has shrunk exporters’ margins. The dearer rupee also makes yarn, fabric and garment imports cheaper, hurting local manufacturers.
Export margins in apparels tend to be two or four per cent in dollar terms and the rupee appreciation has almost washed these away. Almost 70 per cent of India’s textile exports is dollar denominated. Meanwhile, currency depreciation in some of India's competing nations like China, Vietnam and Bangladesh is making their exports more competitive.
Exporters in the knitwear hub of Tirupur in Tamil Nadu fear they may lose orders to neighboring countries since they are at a 10 to 12 per cent price disadvantage. With the rupee appreciating this gap has widened by another four or five per cent.
An exporter supplying to one of the top three retailers in the US says his buyer prefers cheaper Bangladeshi textiles. He has let go of his margins but he’s still unable to compete with Bangladesh’s manufacturers. Tirupur is a sourcing hub for Walmart, Ralph Lauren, Diesel, Tommy Hilfiger, H&M and Marks & Spencer. GST is expected to have a further impact on exports as duty drawbacks will be curtailed, adding more pressure on the textile industry.