Falling rupee fails to shore up apparel exports

Despite the rupee depreciating against the dollar by almost six per cent in recent months to trade ( a dollar is now ~68), the country’s apparel export has not benefitted.

April, for instance, saw a 22.8 per cent fall in shipment of readymade garments (RMG) to $1,350 million, from $1,747 mn worth in the same month of 2017. This is a fall for a seventh month in a row, since October 2017.

The new goods and services tax (GST) regime has added to exporters’ existing problems; they have seen the cost of working capital rising and a lack of funds due to delay in refund of taxes paid.

Rahul Mehta, president, Clothing Manufacturers Association of India, said: “If the rupee remains at 68/69 for the next few months, it can offset the loss of duty drawback (the preGST concession) to some extent and one might see three to five per cent growth.”

Exporters say while consumption in the international market is growing at only around one to two per cent annually, competition is increasing. Including that from new entrants such as Myanmar and Ethiopia. And, competitors’ currencies are also depreciating; besides, many do not have the problems that Indian exporters have.

The fall in apparel export has led to decline in its production. The latest Index of Industrial Production figures, quoted by the Apparel Export Promotion Council (AEPC), shows the country’s production here fell 11 per cent in 2017-18; barring Apri 2017, it fell for 11 months in a row.

“The continued backlog in GST (refunds) and RoSL (refund of state levies) is affecting sentiment. We would like the government to address the issue at the earliest, to reverse the trend of stagnating export,” said HKL Magu, chairman of AEPC.

Best Corporation, a Tirupurbased maker of knitted garments, supplies to many global brands. R Rajkumar, its managing director, says that apart from the delay in refund of levies and, reduction in duty drawback, “availability of manpower is also a big concern at all textile centres. There is low productivity due to huge labour turnover”.

High raw material and labour cost put added pressure, says R S Jalan, managing director of GHCL. “All these put together makes India at least 10-12 per cent costlier compared to competing countries. The usual margins have been in the range of five per cent only and, hence, high cost is hurting both top line (revenue) and bottom line (profit).” Led by AEPC, apparel exporters have urged the Centre to look at schemes to boost shipments. Beside a review of our labour laws — they contend excess protection here is directly linked with productivity, where India is far behind peers Vietnam and Bangladesh.

Ashok G Rajani, former chairman of AEPC, said it was disappointing that the government was not looking at this sector with the required seriousness.