According to a press release issued by the Apparel Export Promotion Council (AEPC) of India, Indian businesses has been severely dented by a 40 percent hike in the price of cotton yarn, tumbling values of the dollar and euro against the Indian rupee and a sharp increase in minimum wages for workers in the national capital.
Textile mills have been frequently revising yarn prices upwards in the past four months, citing a rise in prices of cotton, power and labor. “But the abnormal increase is without any co-relation to the rise in yarn input costs,” said AEPC’s chairman, Premal Udani.
The planned increases in customs and excise duties on petroleum products will seriously affect the textile and clothing industry as power shortages will further increase production costs, he said.
At the same time, the two major trade-related currencies — the dollar and the euro — have been on a steady downward spiral in the past three months resulting in poor realizations for Indian exporters.
With the rupee appreciating 4.13 percent against the dollar and 10.15 percent against the euro since January 1, the profitability of small and medium-sized export companies who work on seven to eight percent operating margins has taken a huge hit, said Mr. Udani.
“Many exporters are not able to confirm new orders and bookings have come down sharply as retailers in the West who are just emerging out of the worst recession in decades are in no mood to give better rates,” said Mr Udani.
On top of that, the Delhi state government has increased minimum wages for workers by 33 to 49 percent from February 1. “We are still not out of recession. Such unprecedented increase will jeopardize our sustainability. Once we lose our competitiveness to countries like China and Bangladesh, it will not be easy to regain the lost ground,” said Mr. Udani.
In the current fiscal year, India exported garments worth $7.92 billion between April and January — down 10.16 per cent from $8.81 billion in the same period of previous year.
Source: Apparel Export Promotion Council