India’s garment exporters believe, the recent depreciation of the Indian rupee will help boost shipments of garments and handicrafts from India by around 5-10 per cent. However, a sharper fall in currencies like the Chinese yuan, Japanese yen, and Mexican peso may lead international buyers to demand price cuts, eroding long-term competitive advantages from the rupee's decline.
After crossing the Rs 85 mark for the first time recently, the Indian rupee reached an all-time low of 85.10 per dollar. With nearly 60 per cent of India's trade benefit, dollar-based, the depreciation is expected to benefit traditional export sectors like textiles and leather.
Sanjay Jain, Managing Director, TT, notes, the rupee depreciation will help the entire textile chain, with exporters retaining about 50 per cent of the benefit while passing the rest to buyers.
The handicraft sector also expects a 2-3 per cent rise in exports due to the rupee depreciation, says Rakesh Kumar, Chief Mentor, Export Promotion Council for Handicraft
Exporters without hedged positions could gain the most in the short term, though these benefits may not be sustainable, opines Ajay Sahai, Director General, Federation of Indian Export Organisations. Only 15 per cent of exporters operate without hedging mechanisms, according to estimates by industry experts.
Since the start of the year, the rupee has depreciated 2.2 per cent against the dollar, but other currencies have weakened more significantly—such as the Brazilian real (26.8 per cent), Mexican peso (19.6 per cent), Japanese yen (11.8 per cent), South Korean won (11.7 per cent), and Chinese yuan (2.6 per cent). The rupee has faced relatively less depreciation, except in the last two months, notes Madan Sabnavis, Chief Economist, Bank of Baroda. While a weaker rupee aids exports, the sharper depreciation of the yuan could give Chinese exporters a competitive edge, the bank highlights in a recent report
The rupee depreciation has been more pronounced since Donald Trump’s election as US president, reflecting global economic pressures. Despite short-term gains, exporters remain cautious about the long-term implications of the rupee’s fall, adds Sabnavis.
