Indian textile industry facing dual challenge over currency move

Indian textile industry together with including cotton yarn is facing dual challenge with the Indian rupee appreciating while there is depreciation in the Chinese currency against the dollar. In this situation, textile exports in the international market are jeopardize as buyers are preferring Chinese products due to price advantage, on the other hand orders which have been coming in are at lower prices, while cotton prices are on the higher side.

Current year’s textile exports were on rise as India had gained out of China’s rising cost of production resulting in to orders shifting to India. Chinese textile products were priced higher than Indian.

Now, buyers international have started negotiating over price, at present, 30’s combed of cotton yarn is priced at $3.60 per kilogram, but buyers are now asking cotton yarn at $ 3.50 per kilogram. While, China has gone ahead to cut down their prices to $ 3.50 per kg for 30’s count.

China, being a heavy importer of Indian cotton yarn has also reduced its imports of cotton yarn from India in the last three months. Moreover the direct export of cotton and cotton yarn to China is getting impacted due to change in Chinese policy of selling cotton from reserves at reduced price.

China has an added advantage in terms of pricing as their currency has been depreciating for the last three months. While, India had a cost advantage compared to China where labour cost is high but now it is getting equalized due to the depreciation in the Chinese currency.

If this trend of the rupee appreciating and the yuan depreciating continues, it will have a adverse impact on cotton yarn exports. Indian exporters are already feeling pinch from China it may start to feel the heat going ahead.

The price of benchmark variety of cotton Shankar 6 has increased by 4% since the start of the year to Rs 11754 per quintal.
Indian cotton yarn exports which is showing a rising trend so far till January according to DGFT with 143.81 million kgs compared to 117.14 million kgs in January last year may it affected.

With the substantial cost difference, cotton’s share of the market is likely to continue its downward trend this season.