New Delhi: India’s textile exports will continue to fall until September, as demand remains weak in major export markets, a top official of the Confederation of Indian Textile Industry (CITI) told Reuters in an interview.

Textile exports, excluding jute, silk and handicrafts, may have fallen to $16-$17 billion in 2008-09 from $22 billion in FY08, CITI’s secretary general DK Nair said on Thursday, adding that government sops may help them rise 5-10% this year.

“If there are some helpful government action midway, we can push up the recovery,” Nair said.

“Otherwise the decline for first six months and the recovery for the next six months will offset each other and we will end up flat.”

Exports, which make one-fifth of India’s economy, have been falling since October, hit by a contraction in global trade following the financial downturn, prompting exporters to demand relief measures from the government to arrest the slide.

The textile sector, which is highly labour-intensive, is estimated to have lost 1 million jobs in 2008-09, he said, adding the sector may continue to see 100,000 job losses every second month until recovery kicks in.

Government’s Role

Demand in the US and Europe, which account for about 60% of the country’s textile exports, is estimated to have shrunk about 12% in the last three months, Nair said.

While global demand was a problem for all textile-exporting nations, Indian companies also had to contend with problems on the supply side, he added.

The government hiked the minimum support price (MSP) for cotton - that mills must pay farmers - by up to 40% for medium staple cotton to boost raw cotton exports, but that raised costs for manufacturers, making textile exports unattractive.

India’s new government is targetting an annual growth of 8-10% for the sector by investing Rs300 billion every year to generate 10 million jobs in the next five years.

To counter the negative impact on exports due to the global financial crisis, the government in the interim budget presented in February extended the interest subsidy of 2% till 30 September 2009.

However, Nair said the interest subsidy should be increased and urged the government to make a budgetary allocation of Rs40 billion to help the textile units upgrade technology.