Falling rupee brings cheer to textile exporters

Retail Majors Like JC Penny, Wal-Mart, GAP And Target Place Orders Worth Rs 700 Cr With Local Garment Exporters

EVERY dark cloud has a silver lining. This is what the labourintensive, export-oriented textile sector in India is discovering even as a pall of financial gloom settles on the western markets.
    With the rupee plunging to uncharted lows against the greenback, textile exporters hope to gain as their goods become cheaper in the hands of retailers such as Walmart, JC Penny, Li & Fung, GAP and Target, who, according to industry officials, have already placed orders worth Rs 700 crore with them in the new year to date.
    The rupee has fallen almost over 33% against the dollar, breaking down to below 52 against the dollar early this month, from a peak of 39 in January last year. The industry reckons that rising demand from these retail giants in the light of depreciating rupee could reduce its February-March business contraction to 6-7%, against an earlier estimate of 12-15%.
    "A significant fall in the local currency has created a silver line for the industry which was grappling with a host of negative sentiments over the past several months," the Clothing Manufacturing Association of India president Rahul Mehta said. "Though the buyers are not placing high-value orders due to uncertain market conditions, the number of orders are gradually increasing."
    Order placements, which had fallen 30-40% by January end, have shown a sign of recovery in the subsequent months. Another textile company, Alok Industries, expects its order book size to go up to Rs 1,100 crore by the end of the current fiscal as against Rs 1,028 crore in FY08.
    "The company has recorded steady growth despite the textile sector slowdown," Alok Industries MD Dilip Jiwrajka said. "Overall, big players from overseas markets are still doing well and demand for quality products such as home and speciality textiles persists despite the slowdown, India being one of the best quality producers. We are receiving bulk of orders in this segment."
    In a similar vein, an Arvind Mills' official said a gradual increase in demand coupled with a weaker rupee boded well for exporters.
    While some industry officials said that a fall in the rupee had led to international buyers demanding a discount from exporters, according to Mr Mehta, securing good orders by offering a minimal discount was a sane move at a time when order size was not too big.
    The sentiment was echoed by one of the leading exporters of Indian apparel. "International retailers, who follow a large volume lowcost business model are placing orders, albeit after tough negotiation," Bangalore-headquartered Gokaldas Exports MD Rajendra Hinduja said, adding "However, with the rupee at 52, it's a good sign for the next quarter (April-June)."
    Internationally, strong January and February results from several US retailers could be a positive development for the Indian exporters. Walmart has posted an increase of over 5% rise in February. Apart from Walmart, a report on retail chain stores indicated major improvements in the same month. Many US retailers have also recorded lower rates of sales contraction.

Retail trade sees a silver lining despite recession, courtesy a weak rupee