The rupee sank to a new low on December 3, breaching the psychologically significant 90 mark against the US dollar for the first time. While concerns have been mounting over a depreciating rupee and its implications for the economy at large, the mood is a tad brighter in the tariff-hit textile export sector, where most sales are billed in dollars and even a small currency swing can lift realisations.
Exporters anticipate that the boost from a weaker rupee will be short-lived but they see it as providing some respite from the American tariffs, which have hit them hard.
The US is India’s largest textile and apparel export market. In FY24, it imported textiles worth $10.05, accounting for 28 percent of India’s textile exports. Apparel constituted the largest share of the export pie, followed by home textiles and made-ups such as bed linen, carpets, towels, table mats, aprons, napkins, curtains, and upholstery.
“A softer rupee generally improves competitiveness of Indian apparel exporters. It expands operating margins for firms billing in dollars and makes Indian FOB prices more attractive compared with competing suppliers such as Bangladesh, Vietnam, and China. The benefit is most visible in segments with thin margins – knits, basic woven garments, and home textiles,” said Rahul Mehta, Chief Mentor, Clothing Manufacturers Association of India (CMAI).
“Most export contracts are not designed to profit from currency depreciation. Prices are typically negotiated in dollars, with delivery and payment cycles of up to 90 days. Exporters usually hedge a portion of their exposure to avoid volatility rather than speculate on depreciation. Only a few large players build currency clauses or flexible pricing windows; the wider industry largely focuses on stability over opportunistic gains,” Mehta added.
The bigger challenge is China’s improved tariff position with the US, giving American buyers greater comfort to source from them. So the industry’s real hope is for an early resolution of the trade issue — ideally, removal of the additional 25 percent tariff in December itself — to sustain our market share in the US.
Indian textile firms have responded by diversifying sales to the UK and Europe, while also serving the US customer base via offshore units in Africa, according to industry executives.
The rupee sank to a new low on December 3, breaching the psychologically significant 90 mark against the US dollar for the first time. While concerns have been mounting over a depreciating rupee and its implications for the economy at large, the mood is a tad brighter in the tariff-hit textile export sector, where most sales are billed in dollars and even a small currency swing can lift realisations.
