Indian textiles exports may be negatively affected if the Chinese currency continues its downward swing. The Yuan has fallen 4.9 per cent against the rupee to date and may fall further if the Chinese slowdown deepens further. The rupee depreciated by 44 per cent against the Yuan from 2009-2013, but the trend seems to have reversed in the current year with the rupee gaining 5 per cent year to date. Though Yuan's depreciation till date is too marginal to make a lasting impact, if its depreciation continues then the things could reverse.

Since China is one of the largest commodity manufacturers, slow domestic growth and a weaker Yuan will help them increase exports, which would impact most of the Indian commodity companies. Textiles and engineering goods exports would be affected deeply. At present, 10 per cent of yarn produce of India goes to China. If the depreciation in the Chinese currency continues for six more months, India's cotton and yarn manufacturing companies would record a 3per cent-5per cent price decline.

Consistent demand for cotton and yarn from China had increased the revenue of most textile companies by 35 per cent- 40 per cent. Due to the expensive quota system in China and the Chinese government's cotton stock piling policy of supporting its farmers by buying cotton at high prices and selling them to farmers, most Chinese companies preferred buying cotton and yarn from India and Pakistan. But, the Yuan depreciation would now lead to Chinese companies buy raw materials from China itself, instead of souring from other countries.