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Indian garment exporters are worried due to Brexit

"But the textile industry hopes Brexit could mean India emerging as a stronger political and trade partner for the UK, thereby expediting work on FTA. Garment exporters in Tirupur are worried as UK decided to exit from EU. For India’s readymade garments (RMG) exports, EU is a major destination. In 2015-16, total RMG exports from India was Rs 1,11,236 crore, of which EU's share was 36.97 per cent."

 

Brexit

But the textile industry hopes Brexit could mean India emerging as a stronger political and trade partner for the UK, thereby expediting work on FTA. Garment exporters in Tirupur are worried as UK decided to exit from EU. For India’s readymade garments (RMG) exports, EU is a major destination. In 2015-16, total RMG exports from India was Rs 1,11,236 crore, of which EU's share was 36.97 per cent.

Estee Exports’ managing director, T. Thirukumaran was sounding worried after he heard the news that UK has decided to exit from the European Union which in turn impacted the currency. He is one of the exporters from the tiny town of Tirupur, and 50 per cent of the business comes from Euro and he has already lost 5 per cent of the value. Five per cent may sound small, but for an exporter like us, it’s big especially given the current circumstances, according to Thirukumaran.

Indian garment exporters are worried due to Brexit11

While similar view is echoed by many of the exporters from this tiny town, which exports around Rs 26,000 crore worth of knitwear, A. Sakthivel, president, Tirupur Exporters Association, tries to cheer them up by giving the positive side of the story.

Sakthivel said that it will have an impact but it will be temporary but in the long run this will help them since UK will support more which it could not when it was part of the EU.

Positive side

The apparel and made-ups industries are hoping the Indian textile industry will only stand to benefit from Brexit given the rupee devaluation against pound and euro.

According to Rahul Mehta, president of Clothing Manufacturers' Association of India (CMAI), in the immediate, Indian apparel exporters should only benefit from this and exports to UK and Europe will be more remunerative for us due to rupee devaluation. Of the roughly $16-17 billion of Indian apparel exports, Europe forms 45 per cent, within which UK forms roughly 40 per cent. However, for made-ups, share of Europe in exports come to roughly around 20-25 per cent, of which UK forms around 15-20 per cent.

A senior official at Welspun Group on condition of anonymity said that, though a small share, UK's exit from EU should benefit the Indian made-ups industry due to rupee devaluation. Welspun is a leading home textiles or made-ups exporter from India. Similarly, the textile industry also hopes Brexit could mean India emerging as a stronger political and trade partner for the UK, thereby expediting work on free trade agreement (FTA).

Mehta added that even EU could now look at India favourably with regard to FTAs and review the same soon. This should also benefit the Indian textiles industry.

Indian garment exporters are worried due to Brexit

Out of the total, knitwear exports is around Rs 50,150 crore of which Tiurupur’s share is around Rs 23,050 crore or 45.96 per cent. Total knitwear export to the UK is around Rs 5,519 crore and from Tirupur it is around 30 per cent.

Worried about EU’s future

Indian exporters are also worried about the existence of EU itself. An exporter said that now that UK has exited many may follow. In such a scenario, it will take a long time for India to enter into FTA with each country and negotiation is going to be a major challenge.

On this note, Somi Hazari, MD, Shosova Properties, said that the situation is positive for India since FTA with UK can happen fast and doesn’t have to depend on the EU.

Moreover, UK’s exit can open doors for some more business on the long run, feels many exporters. For example, UK has been buying high-end products from Italy. Before EU, it used to be from countries like India, which has been enjoying EU member status in tax concessions and others. Now that UK has exited, it would attract customs duty and other things, which will make Italian products costlier and that would open doors for countries like India.

There is a mix reaction or one can call it confusion among garment exporters from India on what the future is going to be.

 
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