Mumbai: The textile sector, which has already been facing concerns over the global economic downturn, is expected to be impacted by the continuing appreciation of the rupee.
If the rupee continues to strengthen, the Rs 25,000-crore textile industry will see a sharp revenue decline of over 12% in its earnings from overseas business in the short to medium term. Textile analysts say future export orders would not be competitive if the currency is allowed on its upward spiral.
On one hand, competition from China, Pakistan and Bangladesh is eating into the profits of Indian textile exporters, on the other hand the upward movement of the currency is hurting profit margins of the already depressed sector.
Ajay Shah, chief financial officer and director, Arvind Ltd says, “The rupee is hurting the textile companies, but in the medium term, we had calculated a base price for the dollar and have a strategy in place to combat the situation. He, however, did not give any specifics on the strategy. Exporters are worried the rising rupee will adversely impact prospects in the US market by making their goods more expensive against those of neighbouring countries.
For textile, the picture is likely to stay grim in the short term. A Sakthivel, president, Federation of Indian Export Organisations (FIEO)says there are indications that the US government in order to resume growth will basically not raise interest rates for the coming 12 to 18 months, leading to massive dollar inflows in the emerging markets. He further said while the lower interest rates may help the US economy, in India and the emerging markets, the inflationary pressures are becoming more acute every day with foreign funds purchasing $15.77 billion in Indian stocks this year, resulting in the appreciation of the rupee by 4.8%.
Source : FinancialExpress