Following the devaluation of Yuan, Indian currency has faced a depreciation noted be down by 7% overall since April. The Rupee recorded its sharpest depreciation among its competitors, falling by almost 4.63% to 66.83 against dollar as to 10th August. Responding to it, the ICRA suggest the depreciation of rupee has improved the domestic export for India – cotton from the world’s second largest cotton.
“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,”.
Mr. Rahul Mehta, the president of Clothing Manufacturers’ Association of India (CMAI) has said about the positive situation “Indian apparel will be more competitive. The quantum of competitiveness, however, would depend upon relative currency movement of the major apparel exporters such as China, Bangladesh and Vietnam”.
As the Vietnamese dong slumped by 8.9%, and the Bangladeshi currency slumped by mere 0.06%, India shall receive the benefits of overseas buyer re-negotiating terms of their contract. According to industry sources, drafts of new contracts also mention renegotiation clause if the rupee depreciates beyond 2-3%.
However, The ICRA added that since the rupee has depreciated more than that of other competing countries, and India’s share in overall trade is relatively small, the export volumes may not be impacted severely.
Besides, it said, in view of the fragmented nature of India’s fabric industry, exporters will require to pass on the benefits of depreciated rupee. Further it said the export competitiveness of the Indian cotton yarn depends on the relative currency movement of the rupee with Pakistan’s currency since Pakistan is the major competitor in export of cotton yarn to China.
