It is distressing to note that the Indian textile industry hasn’t reaped the full benefits of the sustained fall in rupee against the dollar that gave India a distinct advantage over its Asian rivals in terms of export competitiveness. Termed the worst performing currency in Asia, the rupee declined by over 13 per cent against the US currency during July-December 2011. However, this has not manifested itself in higher sales. Not that Indiaís competitors in Asia fared better. Barring China, all others in the region are also passing through a critical phase, with their exports dwindling, but not definitely to the extent that India suffered. The general slump in exports is traceable to the US and Western retailers drastically reducing orders over fears of shrinkage in demand in the coming months. This is also due to the Western buyers preferring products from suppliers in close proximity to the EU and the US, which together account for more than 60 per cent of Indiaís textile exports.
It is in this backdrop, with individual economies across the world facing an unprecedented slowdown, that the Textile Ministry has so far not been able to formulate a special policy to meet the export challenges faced by Indian exporters. This, after the formation of six high-level committees with representatives from different ministries and departments to work out an appropriate strategy to tackle the crisis facing the largest exchange earner for the country. Obviously it is not possible to realise the textile export target of $33 billion fixed for 2012-13 against $28 billion for 2011-12, given the stiffer competition from China, Pakistan and Bangladesh.
Meanwhile, what has come as a big surprise to thousands of textile companies in the country is the outright rejection by the Government and RBI of the proposal for restructuring textile loans, thereby enhancing the refinancing risks involved. This would be a further blow to the mills with higher working capital debt and falling revenue. Higher inventories, coupled with liquidity pressures, have forced the mills to put off buying of cotton and other raw materials till the situation returns to normal. The only redeeming feature in an otherwise grave situation is a low-cost interest regime likely to be ushered in by the forthcoming Union Budget. Lower interest rates with infusion of higher liquidity into the system would benefit all industry sectors, including textiles.