The recent depreciation of the Rupee is expected to be a mixed bag for the India's textile exports, said professional investment information and credit rating agency, ICRA. "As India is the world's second largest cotton exporter after USA, the Rupee depreciation improves the export competitiveness of Indian cotton."
"The export competiveness of the Indian cotton yarn depends on the relative currency movement of Indian Rupee with Pakistan's currency since Pakistan is the major competitor in export of cotton yarn to China. As Pakistan's currency had remained relatively stable, the depreciation of the Rupee improves the competiveness of Indian cotton yarn as well,'' said ICRA. ''Nevertheless, as China is the largest market for both cotton and cotton yarn exports from India, the higher devaluation of China’s Yuan will require Indian exporters to offer lower USD prices for these products to maintain competitive prices in Yuan terms."
"In apparels, the export competiveness depends on the relative currency movement of the major apparel exporters such as China, Bangladesh and Vietnam. As China's Yuan has depreciated more than the Rupee and given that China enjoys dominant position in international export markets, India will see increased pricing competition which will affect the profitability of Indian exporters," ICRA added.
However given that Rupee has depreciated more than that of other competing countries, and India's share in overall trade is relatively small, ICRA expects the export volumes may not be impacted severely. Fabric exports, on the other hand are geographically well diversified as against other segments in textile exports.
ICRA expects fabrics export volumes also should not be significantly impacted, however given the fragmented nature of India’s fabric industry, the Indian exporters will require to pass on the benefits of depreciated Rupee by way of lower USD price.