Stronger Indian rupee hurts textile exports

Indian textile exporters are sustaining huge losses because of the strengthening rupee; cotton exporters are reaping a rich harvest as demand for the commodity is soaring.

Cotton exports this year (2007-08) are expected to exceed 6.5 million bales (one bale: 170 kg) perhaps even touch the 7.0 million-mark, riding on the back of a surge in demand especially from China, Pakistan and Taiwan. Happily for the exporters – and for the growers - prices are also on an upswing. Exports rose by 27% in cotton year 2006-07 to 6.0 million bales.

A fall in global cotton production, including a sharp fall in America with farmers shifting to other crops, has helped boost exports from India. Demand for Indian cotton is rising rapidly and cotton exports are expected to leap by over 20% this year.

With growing demand for Indian cotton, producers have also been expanding the area under cultivation. Growing domestic demand from textile mills for cotton since 2005 – when exports of Indian textiles took-off – saw many farmers shift to cotton.

The strengthening of the Indian rupee – it has gained by nearly 14% against the dollar this year – has hurt the prospects for India’s textile exports, but continuing demand from China, Taiwan, Indonesia and other countries for raw cotton has seen a buoyant cotton market in India.

Last year, nearly 20%of India’s cotton production was exported; this year, about a quarter of the production is likely to be exported. India also emerged as the second largest producer and exporter of cotton. Interestingly, just four years ago, India’s cotton exports amounted to a meagre 100,000 bales, whereas it imported about 2.5 million bales of cotton. Today, imports are down to just half a million bales, mostly the extra-long staple variety, which is not available in the country.