The recent depreciation of the Indian rupee against the US dollar, reaching a record low of 85.2, presents a complex scenario for India’s textile sector. While a weaker rupee typically boosts exports, the textile industry’s reliance on imported raw materials and competitive pressures from other exporting nations create a nuanced picture.
While theoretically a boon for labour-intensive exports like textiles, the reality is tempered by significant import content. K Venkatachalam of the Tamil Nadu Spinning Mills Association highlights that while India exports yarn and garments, it also imports substantial amounts of cotton and other raw materials in dollars. This import dependency, estimated at 30-40% for cotton yarn destined for export, effectively neutralizes the potential export gains from the rupee’s decline. High-quality cotton, crucial for export-oriented yarn, is primarily sourced from the US, Brazil, and West Africa.
Furthermore, the rupee’s depreciation is less pronounced compared to the currencies of key competitors like China, Indonesia, the Philippines, and Korea. This diminished advantage limits India’s ability to capitalize on exchange rate fluctuations. Ajay Sahai of the Federation of Indian Export Organisations (FIEO) confirms that exporters are not seeing substantial gains.
However, some industry figures offer a more optimistic perspective. Prabhu Damodaran of the Indian Texpreneurs Federation (ITF) suggests the depreciation may provide a modest advantage, though not a primary growth driver. He emphasizes the growing interest from European and American buyers in establishing long-term partnerships with India. However, India’s production scale pales in comparison to China, hindering its ability to fully capitalize on this demand. India’s monthly readymade garment exports ($1.1 billion) are dwarfed by China’s ($13 billion) and even lag behind Bangladesh’s ($3.3 billion in October 2024 alone).
Despite these challenges, opportunities exist. Bangladesh’s internal issues are prompting some buyers to diversify sourcing, presenting an opening for India. Damodaran urges Indian companies to leverage initiatives like the PM Mitra Parks and focus on greenfield investments to expand capacity and meet global demand.
Current export figures show modest growth. In April-November of the current fiscal year, textile exports reached $23.33 billion, a 6% increase compared to the same period last year. Readymade garments constitute 42% of these exports, followed by cotton yarn and fabric (34%) and manmade yarn (14%).
For textile companies in Gujarat, the fluctuating rupee presents both opportunities and risks. Ashish P Gujarati of the Southern Gujarat Chamber of Commerce and Industry (SGCCI) notes that a weaker rupee increases import prices for raw materials like man-made fibres (MMFs) and polyester, potentially leading to a 2-5% increase in input costs. Existing high import duties exacerbate these challenges.
While Bangladesh remains a significant importer of Indian cotton yarn (40 million kg monthly), no substantial increase is expected due to the rupee’s depreciation. Chandrima Chatterjee of the Confederation of Indian Textile Industry emphasizes the importance of competitiveness and product diversification for long-term export growth.
Conversely, Bharat Patel of Ultra Denims sees the current situation as a “perfect opportunity” to boost exports, potentially by as much as 10%. He believes geopolitical factors, including unrest in Bangladesh, could drive a 20% growth for ready-to-wear garment producers in Surat.
The outlook for other labour-intensive export sectors is similarly mixed. While booked orders may benefit from the weaker rupee in the short term, buyers are expected to adjust prices for new orders. The leather sector’s competitiveness is heavily influenced by exchange rates and pricing from competitors. Israr Ahmed of Farida Group notes that competing nations are likely to offer similar pricing adjustments. The leather garment segment, with lower import dependency, stands to benefit the most, while the leather goods segment, reliant on imported components, will likely gain the least. Shifts in global trade dynamics, including potential US tariffs on China, could offer further opportunities for the Indian leather industry.
