MUMBAI: Every dark cloud of recession has a silver lining. This is what the labour-intensive and export-oriented textile sector in India is
discovering even as a pall of financial gloom settles on the western markets.
With the rupee plunging to uncharted lows against the greenback, textile exporters hope to gain as their goods become cheaper for retailers such as Wal-Mart, JC Penny, Li & Fung, GAP and Target, who, according to industry officials, have already placed orders worth Rs 700 crore with them in the new year to date.
The rupee has fallen almost 33% against the dollar, breaking down to below 52 early this month from a peak of 39 in January last year. The industry reckons that rising demand from these retail giants in the light of a depreciating rupee could reduce its February-March business contraction to 6-7% against an earlier estimate of 12-15%.
“A significant fall in the local currency has created a silverline for the industry which was grappling with a host of negative sentiments over the past several months,” said Rahul Mehta, president of Clothing and Manufacturing Association of India. “Though the buyers are not placing high-value orders due to uncertain market conditions, the number of orders are gradually increasing.”
Order placements, which had fallen 30-40% by the end of January, have shown a sign of recovery in the subsequent months. Another textile company, Alok Industries, expects its order book size to go up to Rs 1,100 crore by the end of the current fiscal against Rs 1,028 crore in FY08.
“The company has recorded steady growth despite the slowdown in the textile sector,” Alok Industries managing director Dilip Jiwrajka said. “Overall, big players from the overseas markets are still doing well and demand for quality products such as home and speciality textiles persists despite the slowdown, India being one of the best quality producers. We are receiving bulk of orders in this segment.”
In a similar vein textile major Arvind feels that a gradual increase in demand coupled with a weaker rupee boded well for exporters. While some industry officials said that a fall in the rupee had led to international buyers demanding a discount from exporters, according to Mr Mehta securing good orders by offering a minimal discount was a sane move at a time when order size was not too big.
His sentiment was echoed by one of the leading exporters of Indian apparel. “International retailers, who follow a large volume low-cost business model are placing orders, albeit after tough negotiation,” said Rajendra Hinduja of Bangalore-headquartered Gokaldas Exports. “However, with the rupee at 52, it’s a good sign for the next quarter (April-June).”
Internationally, strong January and February results from several US retailers could be a positive development for the Indian exporters. Walmart has posted over 5% rise in sales for the month of February. Apart from Walmart, a report on retail chain stores indicated major improvements in the same month. Rates of sales contraction slowed significantly for many of the US retailers.
Source : The Economic Times