Kochi: Knitwear exporters from the textile town of Tirupur in Tamil Nadu saw their exports fall by about 10% in fiscal 2008 mainly because of a weak US dollar, making it the sharpest decline in more than two decades.
They are now bracing against threats from increasing cotton prices and inflation as well.
With the rupee appreciating significantly against the greenback, exporters were forced to cut down their overseas orders, said A. Sakthivel, president of industry body Tirupur Exporters Association.
Exports became unviable and most units were forced to lay off workers, cut working days, and reduce the number of work shifts, he said.
“The textile industry has been the worst victim of the rupee appreciation,” said Raja Shanmugham, managing director of knitwear unit Warsaw International in Tirupur.
Although only 30% of the town’s exports end up in the US, almost 70% are billed in dollars, making the textile units vulnerable to any appreciation in the local currency.
The rupee strengthened 12.3% against the US dollar in calendar year 2007, the biggest rally in more than three decades. The total worth of knitwear exports from the town dropped to Rs9,950 crore during the year from Rs11,000 crore earlier.
Some exporters are getting fresh enquiries as buyers try to take advantage of a fall in the rupee’s value against the dollar after the Chinese currency, the renminbi, appreciated sharply. The renminbi is up more than 4% against the dollar since January, when the rupee has depreciated 1.32%.
Still respite is unlikely for Tirupur’s exporters as, currency traders say, the rupee is expected to continue its rise against the dollar in the second half of 2008.
The town, with more than 6,000 textile units and over 350,000 workers, is one of the largest textile clusters in the country. This includes 2,500 knitting, 1,500 garment-manufacturing, 700 dyeing and 400 embroidery units.
The turnover for the industry has grown 11 times since 1991. The textile industry sawa 15% growth after 2005 when the quota system, which set limits on garment exports for each country, was dismantled. “This has been the first time after the dismantling of the quota system that the industry has taken a negative turn. The 10% decline has happened for the first time since 1985,” Sakthivel said.
Shanmugham of Warsaw International said the Rs9,950 crore worth of exports were based mainly on hefty orders booked in the fiscal year ended March 2007, before the rupee appreciated.
Most exporters stopped booking orders after the currency appreciation and this will be reflected in the industry’s performance in the current fiscal year, he said.
While inflation touched a three-year high of 7% for the week ended 22 March, pushing up labour costs, the increase in cotton prices to Rs23,000 per kandy (356kg) from Rs20,000 some months earlier added to the textile industry’s woes, said Shanmugham.
This will have an additional adverse impact on the country’s knitwear exports, which now has just a 2% share in the global export market, compared with neighbouring Bangladesh’s 4% share and China’s 28%.
Shanmugham said the industry is hoping that the Union government would consider the textile sector’s , when it announces its foreign trade policy on Friday.