Move by Chinese govt allowing yuan to decline to affect Indian textile exports

The Indian textile industry is already coping up with lower demands in the global markets. But the move by Chinese government allowing its official currency, Yuan, to decline by about 4% against the US dollar is expected to adverse impact on textile exports from India.

The impact of this move by China on textile sector will be that textile imports from China will become cheaper. Hence the buyer of Indian textiles will now start looking at cheaper products coming from China. Now, Indian textile manufacturers might have to renegotiate on the prices to catch up with the Chinese market, to protect their sales. If they don’t, there are chances that Chinese manufacturers will take away some business from their Indian counterparts.

China has been much quicker than India when it comes to protecting its export market. The Chinese government has acted swiftly once again to make its export attractive and cheaper, when there was a decline in global demand. Chinese economy is export driven and hence it cannot allow global forces to hurt its economy in case of demand slowdown.

In wake of demand reduction, boosting steps from the government will help the low-operating-margin textile sector to survive tough recessionary times and competition from Chinese goods.

But Industry representatives feel that Indian government has failed to protect the export markets in wake of slowing demand from other nations. The government has not yet announced the interest rate subvention of 3% for textile sector, despite sanction of funds for the purpose by the Ministry of Finance. The Government is also required to clear the dues of the industry under the TUF scheme and release additional funds.