Due to Demonetization, the fall of rupee against the dollar is seen beneficial for the short-term export-oriented garment and leather industries. For example, a 5 per cent depreciation in the rupee against the dollar would help garment exporters improve profit margins by about 3 per cent.
However, experts and top industry officials say that these industries could only reap full benefits if the trend sustains for longer period. Raja M Shanmugham, President, Tirupur Exporters’ Association (TEA) said, “The depreciation (of the rupee) should sustain. Only then we would be able to get full benefits.”
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Moreover, exporters haven’t taken forward covers at higher levels. “It is not clear as to where the rupee would settle. So, we are in a wait and watch mode,” added P Nataraj, Managing Director, KPR Mill. Most garment exporters take forward cover as a hedge against currency volatility. For instance, if the exporter believes that the rupee would fall, he/she would take a forward cover at a higher level as a hedge against potential losses.
The rupee’s depreciation would enable leather and garment exporters to win more orders by quoting lower prices. “We now have the ability to quote competitive prices and gain an advantage over competitors such as China and Bangladesh,” said Naresh Bhasin, Chairman, Ram Fashions, Mumbai.
