Post pandemic, the US is sitting pretty, watching the US dollar rise in value and other currencies decline. The latest on the Euro is that hit a 20-year low and the Pound Sterling just experienced a crash that it hadn’t seen in the last 40 years. In this currency related chaos, exporters from countries with weakening currencies are hoping to cash in on lower prices but there is a flip side to it – importing the raw material is becoming dearer, therefore shooting up production costs locally.

Indian exporters can leverage on weakening Rupee

As of today, the USD is at INR 82+ and experts predict a further depreciation of the INR. This rise in USD is good news for Indian exporters as they would get more INR per USD and increase their margins. Ajay Sahai, DG & CEO of the Federation of Indian Export Organisations (FIEO) said, “A surging dollar is good news for exporters because if the dollar was not rising and other currencies were facing sharper depreciation, we would have been outpriced. However, one needs to look at the phenomena of the surging US dollar from a larger standpoint. If competing currencies like those of the Philippines, China, Japan and South Korea are depreciating at a faster rate, India would lose out to these countries in its relative competitiveness. When we talk about depreciation, we just cannot look at the surface. One also has to see what the trend is for competing currencies. If they are depreciating at a faster pace, we would have to take it with a pinch of salt.” The US is the largest importer of textiles manufactured in India and that is definitely good news. However, as per Statista’s report dated September 2022, India also imported textiles worth INR 154 billion, an increase from the previous fiscal year, which incidentally is such due to the weakening INR.

A word of caution for Indian exporters

Vikas Singh Chauhan, Director, Home Textile Exporters Welfare Association (HEWA) said, “ We need to be cautious that the fuel bill will see a drastic spike due to the weakening INR, imported cotton yarn’s prices will go up, and accessories like buttons and outer elastics will also be dearer. The USD/INR exchange rate has touched new heights, which is good news in the short term as buyers are enquiring about Christmas orders. Overall, in the short term, exporters are able to quote orders aggressively. But in the long term, the surge will hurt us because of inflation. We have already witnessed a tremendous rise in raw material costs until the last quarter,”

Bangladesh’s raw material import poses challenges

Bangladesh’s textile mills are experiencing the worst crisis as the nation’s US dollar reserves are depleting fast and the government having to seek IMF’s intervention to bail it out. The Bangladesh Textile Mills Association (BTMA) released a statement in September expressing concern that most commercial Bangladeshi banks are not willing to opening letter of credit under the Export Development Fund, once paid at sight and deferred-payment systems due to an acute US dollar shortage. It said that this would make importing raw material for the textile mills a very difficult mission and it estimated that domestic spinners could only continue production activities until the end of the year when stocks run out.

The current global currency fluctuations affect countries that export finished garments but rely on imported raw material. If the crisis is not solved quickly, chances are the worldwide readymade garment sector could get hit badly and pose enormous problems for the retail sector.

By Fashionating World
https://www.fashionatingworld.com/new1-2/strengthening-dollar-creates-win-lose-scenarios-for-t-a-industry