India Will See More Or Less Gains From The Depreciation Of The Rupee In The Short Term

Since May this year, the depreciation rate of the Indian rupee has exceeded 23%. At the end of August, it hit a new low of 68.83 rupees per dollar. At present, it still hovers at the level of 63.35 rupees per dollar. According to the recent analysis report of India's Crisil Research, the rupee will continue to decline, and is expected to fall by 5%~8% year-on-year from 2013 to 2014.

Talking about the impact of the devaluation of the rupee on the country clothing On the one hand, as Indian clothing becomes more competitive in the global market, the export growth trend of India will become more obvious. According to the data released recently, India's clothing exports showed a rapid upward trend in July and the first four months of this fiscal year. On the other hand, the devaluation of the rupee has also pushed up the price of imported raw materials, increasing the manufacturing costs of enterprises. Especially for clothing products that need a large number of imported fabrics and accessories (the average import volume in this field is about 25%~35%), the problem is particularly serious, and the profit space of enterprises is further squeezed. Dr. A Sakthivel, Chairman of the Indian Garment Export Promotion Council (AEPC), said: "Only by keeping the exchange rate stable can it help the long-term development of garment trade."

In theory, the devaluation of the rupee will help reverse the decline in exports last year. Now there are also signs that the country's exports are recovering. India's clothing export last fiscal year was about US $12.9 billion, down 5.8% from the previous year, largely due to the reduction of orders in Europe and the United States. In the first four months of this fiscal year, India's clothing exports increased by 13.1%, during which the total exports reached 4.84 billion US dollars. In July, the year-on-year growth rate was as high as 19%. The export of this month reached 1.28 billion US dollars. In terms of rupees, the export growth was as high as 28%.

However, the performance of Indian clothing in its two major export markets shows that the depreciation of the rupee has not brought obvious export competitive advantages to India. In the first seven months of 2013, US clothing imports increased by 3.6% to US $44.7 billion, while imports from India increased by only 3.1% to US $2 billion. In the first five months of this year, EU clothing imports decreased by 0.6% to US $32.8 billion, while EU imports from India decreased by 1.1%, lower than the average import level. In addition, India's market share in Europe and the United States is gradually being squeezed by its main competitors Bangladesh and Vietnam (the United States and Europe account for about 60% of India's total clothing exports), and Indian exporters are facing a more complex international environment.

According to Crisil Research, India has clothes RMG exporters can regain a part of market share after the collapse of Rana Square in Bangladesh, because foreign buyers began to look for diversified procurement bases, but there is no such sign yet. In the first seven months of this year, Bangladesh's clothing exports to the United States increased by 9.2% to US $2.997 billion.

"From 2013 to 2014, other competitive countries, such as Bangladesh, Vietnam and China, maintained stable exchange rates, which is particularly important for the long-term development of the country's clothing industry." A Sakthivel said. Bangladesh, India's second largest trading partner, is also closely watching the impact of weak currencies on India. But at the same time, Bangladesh's clothing imports from India account for about 1/3, including cotton, cotton yarn and fabric and cheap clothing.

In general, India's export-oriented industries, such as the garment industry, will see more or less benefits from the depreciation of the rupee in the short term. But for the overall growth and profitability of the clothing industry, the growing market demand and product competitiveness are more important than exchange rate fluctuations.