Is depreciating Indian Rupee benefiting Indian apparel export? Industry stalwarts stand divided

by Dheeraj Tagra

26-September-2018  |  9 mins read

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The Indian rupee has hit an all-time low against the US dollar after having fallen more than 12 per cent this year. Normally, a weakening rupee is in the favour of Indian exporters, but stalwarts of Indian apparel industry are divided on whether it will benefit their trade or not. Apparel Resources talked to many top-level Indian apparel exporters, trade body heads to know their opinion and experience on the same. Some of them are quite positive and are getting more orders while few loudly say that it really doesn’t matter much.

India’s number one apparel exporters and MD of Shahi Exports, Faridabad, Harish Ahuja accepts that the depreciation of rupee is benefiting the country in the sense that apparel industry is getting more orders compared to what it was getting earlier. “Most of the exporters are able to book more orders due to recent sliding of the rupee. For once, we have become comparatively little more competitive as in this way the weaker rupee has proved good for the economy. Due to this currency development, Shahi Exports is also able to book more orders,” He told and further added that the depreciation of the rupee has been only against the dollar, and not against other currencies. So, export from the country in dollars is around 40 per cent and with this bracket, we can grow in a good way.

HKL Magu, Chairman, Apparel Export Promotion Council (AEPC), Gurgaon, is also positive and believes that the depreciating rupee will be beneficial to industry for further order bookings. He shared, “It is very much true that buyers do ask to adjust this benefit but not each and every buyer asks to do that. Big buyers or top stores having their offices in India, definitely ask for this adjustment. But they do understand that this currency up and down is in nobody’s hands and it will carry on. So, the overall falling rupee will benefit all of us.”

PMS Uppal, MD, Pee Empro Exports, Faridabad and President, Okhla Garment and Textile Cluster (OGTC), Delhi, strongly feels this situation will benefit more particularly the small and medium level exporters. “We as an organization have a target to grow at the rate of 20 per cent and to consistently achieve this target, weaken rupee is also a good thing for us,” he says.

On the other side having a different opinion, Raja Shanmugham, President, Tirupur Exporters’ Association (TEA), and MD of Warsaw International, Tirupur has a logic that currency depreciation is not only in India but in few other garment-producing countries too, and so Indian exporters can’t get too much benefit due to currency developments. “Buyer – the smartest stakeholder in the entire supply chain – does ask for bonus money in such a case; especially in repeat orders, one can’t expect a single penny more from the buyer,” claimed Raja

Lalit Thukral, President, Noida Apparel Export Cluster and MD of Maharana of India, Noida doesn’t believe that plummeting rupee will benefit the exporters. In his words, “Whenever rupee appreciates or depreciate, it has the reverse effect on the industry. Temporarily, we think that we save small amounts, but it doesn’t take place in reality. One gets little benefit in some payments; while in other payments, buyers raise the issue to adjust the same.”

Whatever product buyers were taking earlier in for US $ 3 to 4, they want to get the same now in US $ 3, just because of the weakening rupee. So, it is not a big difference for exporters like us. Yes, there is a little ease in market competition, that is the only benefit.

Anil Peshawari, MD, Meenu Creations, Noida sees it in a global perspective and insists that there is nothing much beneficial in this currency fluctuation. Anil Says, “The Chinese Yuan depreciated nearly 10 per cent and China has 34 per cent share in the global apparel trade and this country does every product. So, we don’t have any benefit against China which is our main competitor. Turkey’s Lira depreciated more than 50 per cent. Turkey, which earlier was doing mainly knitted garment, is now focusing on woven garments also. Due to these two latest developments and proximity advantages, Europe is importing more from Turkey.”

He further adds that Bangladeshi Taka depreciated just 2 per cent, little more in recent months, but Dhaka already has a lot of advantages over India. India’s exporters were already working on nominal margins. Now, to get orders, they are passing or have to pass the minor benefit of rupee depreciation to the buyers. Major depreciation in Indian rupee has happened in recent three months only.

“One should not forget that if the US imposes the tariff on Chinese apparel, China will move more aggressively to EU, and can also supply apparel at extremely low cost as they have to keep their capacities occupied,” he concludes.

And what about Hedging

Hedging, risk management strategy used in limiting or offsetting the probability of loss from fluctuations in the prices of currencies, is always critical for apparel exporters. So, in the strong dollar scenario, exporters are more involved in hedging. HKL Magu believes that most of the big exporters have already hedged their currency and they got 67 or 68 rupees against a dollar. Hedging for the long run will be a benefit as they will be hedging it for 75 rupees after one year or maybe 74 rupees after six months. But, we have to keep in mind that only 50 per cent exporters hedge as small exporters don’t bother about hedging and they even don’t know deeply about its various aspects.

“As far as my company Jyoti Apparels is concerned, till date, we have not made much profit because we have already hedged the currency. But going forward, I think that we will be benefiting to the extent of Rs. 30 to 40 lakh. We do hedge around 30 to 40 per cent,” he says.

Raja Shanmugham strongly insists that if any fellow apparel exporter is going to hedge, it should go for at least one-year period, then only hedging will benefit properly. “So far, my experience on hedging very strongly says that in such scenario, hedging for at least one year is a must. Every exporter has more or less idea about its dollar inflow, so such planning is not a big issue,” says Raja.

Some medium level exporters who normally don’t hedge also have an eye on the situation and most of them are of the view that if rupee goes above 75, then only they will hedge. Hedging is quite an individual thing and experts say that if someone is not aware of all the aspects of hedging, he should take the services of experts.

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