Pressure on Indian Textiles Exporters to Ease by Q3

Pressures on the profit and debt levels of textiles exporters is likely to decline from the third quarter of this fiscal with cotton prices easing from mid-September and the industry focusing on sweating the existing assets and undertaking limited debt-funded capacity additions, according to ICRA. The exporters are facing tough times for the past few months.

Subdued demand trends in the key importing countries, including the United States and those in the European Union; competitive pressures from Bangladesh and Vietnam; unfavourable currency movements and high raw material prices in the last few months; and revision in duty drawback rates have added to the woes of Indian textile reports, credit rating agency ICRA said in a report.

Despite a large domestic market, this is a matter of concern as exports comprise more than one-third of the Indian textile market, it said.

Cotton-yarn exports have been under pressure as well due to decline in demand from China, which accounted for more than 40 per cent of total cotton yarn exports from India till last year.

Pressures on textile exporters have become more severe with strengthening of Indian rupee against currencies of key competing nations during the current calendar year, which reduced competitiveness of Indian exporters from their counterparts.

"Notwithstanding the 2 percent depreciation in the Indian rupee against the US dollar in September, the rupee sustained its strong performance against currencies of most of the countries competing in the global textile space during much of the current calendar year," ICRA senior vice president Jayanta Roy said.