| During the first week of the New Year 2010, the | | | | competing on price. Of course, technically any |
| Indian Rupee touched a new high against the US | | | | exporter will get affected by rising of domestic |
| Dollar to reach 46.22 per Dollar. Although this was a | | | | currency value but for this variation to become a life |
| good New Year greeting from the Rupee to | | | | threatening issue, is a matter of high concern. |
| importers in India, it may not have pleased the | | | | The roots of this issue lie in the formulation of |
| exporter so much. Since then the Rupee has been | | | | corporate strategy and business strategy and have |
| hovering consistently around 46.2 Rs. values and in | | | | to do with value proposition of the company. |
| the recent weeks, it has appreciated overall. You | | | | Companies which failed to either innovate or move |
| may check the latest conversion rate here. | | | | up the value chain in the long run, so that they can |
| In this article, we will concentrate on the Indian | | | | command a premium on their product rather than |
| textile exporters. Hardly anyone understands the | | | | playing a volume and price game, often find |
| variation in foreign exchange rates better than the | | | | themselves in this situation. |
| Indian textile exporting community as their bottom | | | | Traditionally, China has been known to compete |
| lines routinely depend on this factor. With globalization | | | | heavily on price and it successfully dragged |
| and opening of global textile markets under the | | | | manufacturers from other countries such as India, |
| World Trade Organization, this variation has been | | | | Bangladesh etc in the price competition. It would be |
| affecting their businesses more frequently than ever | | | | unfair to blame everything on the Chinese because |
| before. In the recent time also, the appreciation of | | | | fact of the matter is that we had to give in, for the |
| the rupee against the USD, a currency widely used in | | | | lack of a stronger value proposition. |
| trade from this part of the world, has hurt the textile | | | | Supply and demand factors which determine the |
| exporters. According to Apparel Export Promotion | | | | price of raw cotton which fall under the broadly |
| Council, the adverse effect on margin has been in the | | | | traded commodities are beyond the control of an |
| range of 8 to 10%. | | | | average exporter. Although India has strong |
| The variation in exchange rate that adversely affects | | | | credentials as far as installed manufacturing capacity |
| the textile manufacturers' profits may be due to | | | | and past performance of textile exports in |
| seeming unrelated factors such as increase or | | | | concerned, a lot more remains to be done in terms |
| decrease in capital inflows in the form or Foreign | | | | of having control over the market, which is an |
| Direct Investment or Foreign Portfolio Investments | | | | agreeably challenging task. |
| or RBI intervention as the case may be. The woes | | | | Macroeconomic factors or indicators such as inflation |
| of the exporters aren't limited to the rise of Rupee | | | | and agricultural yield as a percentage of GDP may |
| against the USD. Domestic inflation and rising raw | | | | not be influenced directly by individual textile |
| material prices exert further strain on already | | | | exporters but business can surely do well to |
| dwindling profits. For instance, there is a rise in cotton | | | | reorganize their value proposition. In the long run, two |
| prices globally which makes the procurement of good | | | | solution that will help businesses sustain themselves |
| quality raw material, expensive. | | | | are innovation and moving up the value chain. As to |
| Simple calculation of currency realization per meter of | | | | how exactly that should be done, we will present our |
| exported fabric will reveal the loss or gain of profits | | | | suggestions in the next article. |
| with unit variation of the foreign exchange rate. But | | | | As for short term remedies to counter strengthening |
| the real question to ask is why the Indian textile | | | | rupee and rising domestic inflation, keep watching this |
| exporters are so dependent on these factors for his | | | | space. |
| survival? A simplistic explanation is that they are | | | | |