The rapid rise in rupee value caught the country’s textile exporters almost off-guard in the year gone by as they struggled to remain globally competitive.

Textile firms not only fought the hardening rupee, but also had to bear high interest, raw material costs and poor infrastructure in the year they would not forget in a hurry.

While 2007 began on a promising note with government extending the popular Technology Upgradation Fund Scheme (TUFS) for the 11th Plan, the jubilation did not last long.

The more than 12% rise in rupee against the US dollar began eating into profits of textile exporters, with many units forced to down shutters as they failed to cope with the rupee rise.
The sector, one of the biggest job generators, was among the worst-hit due to the decline in dollar value.

The government had set an export target of $25 billion (Rs98,500 crore) for 2007-08. But, in the first quarter, exports of textiles and clothing declined more than 14% to $4.01 billion due to an appreciating rupee. In April alone, exports fell 18.23%.

Textile exports in 2006-07 stood at $18.73 billion, falling short of the targeted $19.73 billion by about 5%.

Faced with declining profits and exports, textile exporters were forced to lay off workers on a large scale.

“The entire textile and clothing industry is going through a grave crisis,” said P.D. Patodia, chairman of the Confederation of Indian Textile Industry. “About 35,000 jobs have been lost and the number may run into several lakh by the year-end if corrective measures are not taken.” Exports would fall short of the target by $7 billion, he added.

Undeterred by these problems, textile companies expanded capacities across the value chain in design, yarn, fabric, garments and retail ventures.

Companies also did not lag behind in acquiring global brands.

Terry towel maker Welspun India Ltd acquired 76% stake in Portuguese bath rugs maker Sorema at an enterprise value of Rs60 crore.

Himatsingka Seide Ltd bought three firms abroad—Giuseppe Bellora SPA, Divatex Home Fashion Inc. and US-based DWI Holdings Inc.Spentex Industries Ltd continued with its inorganic growth strategy with the acquisition of Czech firm Schoeller Textil AG.

In addition to giving a package to exporters, the government also extended TUFS for five years and included more sectors such as garments, technical textiles and processing under its fold.

Moreover, a capital subsidy of 10%, in addition to 5% interest refund, would be given to exporters.

The Union textile ministry proposed an outlay of Rs10,000 crore for TUFS for modernization of the industry in the 11th Plan, by when it hoped to see investments of Rs1.5 trillion in the sector.

The domestic textiles and apparel market is estimated at $49 billion, of which 61% is accounted for by the domestic market and the remaining by exports.

According to industry estimates, the industry would be able to attract investments of $55 billion, create job opportunities for 65.4 million people and grow annually at 22% by 2010 if reforms proposed for the sector are initiated at a faster pace.

Here’s hoping the new year weaves a better fortune for India’s textile sector.

Mr. Rakesh Joshi

Joshi Enterprise

Manager, Joshi Enterprise
Dispur, India

Free Member, Joined :02/02/2007
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