Depreciating Rupee Fails To Cheer Apparel Exporters

Economy

Depreciating Rupee Fails To Cheer Apparel Exporters

The apparel exporters have failed to cheer the depreciating rupee against the US dollar for a change. There are good reasons for it. Even though the rupee fell to INR 68 per dollar by a steep six percent quantum, apparel exports to US have not picked up or benefited from this trend. In fact the fall in apparel exports value for the seventh consecutive month in April stood at 22.76%.

A year earlier, in April 2017, the ready-made garment (RMG) sector had a total export value worth of USD 1.747 billion. In the current year, the number has declined to USD 1.349 billion. The trend continuing for seven months since October 2017 comes as an aftermath of the Goods and Services Tax (GST) implementation. In the post GST regime Indian exports have been rendered uncompetitive as the system is not conducive for exports.

The new regime has resulted in the rise of cost of working capital for the exporters. In addition, they face an acute cash crunch due to delays in the refund of taxes paid. However, the manufacturers are not all glum about the depreciating rupee. “If Rupee remains at 68/69 levels for the next few months, it can offset the loss of Duty Drawback to some extent and may see a growth of three-to-five per cent,” said Rahul Mehta, President, Clothing Manufacturers Association of India.

According to a spokesman from the exporters’ body, “While consumption in the international market is growing at around one to two per cent, competition is increasing too, as the business sees new entrants like Myanmar and Ethiopia. Competitors’ currencies are also depreciating, but they don’t have problems that Indian exporters do.”

The Apparel Export Promotion Council also sounded the cautionary note, stating, “Fall in apparel exports has led to a decline in production. According to the latest IIP figures, India's apparel production fell 18.6 per cent in the month of March and saw a decline of 11 per cent for the period 2017-18.”