Rising Cotton Prices Can Hit Export Revenue: Fitch.

New Delhi,  (PTI) Fitch Ratings today said the outlook for Indian garment exporters is ''negative to stable'' in 2011 as rising cotton prices and appreciating rupee could dampen profitability and lead to lower export revenue growth.

"Despite improving export demand in key markets -- the US and Europe -- rupee appreciation has impaired the competitive advantage previously enjoyed by the Indian garment exporters against their Asian peers," the agency said in a report.

India''s garments exports declined by about 3 per cent to USD 716 million in November 2010 year-on-year, mainly due to less demand from the West and rising input costs.

The rupee has increased by around five per cent against the greenback in the last one year. The rupee today closed at Rs 45.58 against the dollar.

"Furthermore, rising input costs have pressured exporters'' margins," it added.

The agency said it expects cotton prices to remain high this season due to global demand-supply imbalances and untimely rains in major cotton producing Indian states.

Fitch said, quantitative restrictions on natural fibre exports have also impacted the prices in the current cotton season (October to September).

In wake of high cotton prices, the government has imposed a cap of 5.5 million bales (of 170 kg each) on exports of the fibre.

Prices of cotton have increased by over 80 per cent in the last 10 months. Currently, natural fibre prices are about Rs 40,000 per candy (356 kg each) compared to the same period last season.

The report, further said, yarn and synthetic fibre prices are also on an uptrend because of their increased usage as substitutes for cotton this year.

Besides, the government has restricted cotton yarn exports to 720 million bales in the current fiscal.

Source : news.in.msn.com