Tirupur braces for life after Brexit

In medium term, the textile sector hopes both the EU and the UK will be more open to quicker signing of FTAs with India

Thirukumaran, managing director, Estee Exports, sounded worried on hearing about Britain having decided to exit from the European Union, impacting currency values.

He is one of the exporters from the tiny town of Tirupur, half of whose business comes from the euro. He has lost five per cent of the value. “It might sound small but for an exporter like us, it’s big, especially at the current circumstance,” he said.

However, not many are that bearish in this town, which export Rs 26,000 crore of knitwear annually. A Sakthivel, president, Tirupur Exporters Association, says soothingly: “Yes, it will have an impact but it will be temporary. In the long run, this will help us, since the UK will support more, which it could not when it was part of the EU.”

The EU is a major destination for readymade garment exports from India. In 2015-16, the latter were Rs 111,236 crore, of which the EU’s share was 37 per cent.

“In the immediate term, Indian apparel exporters should only benefit from this. Exports to the UK and Europe will be more remunerative for us, due to the rupee’s fall,” said Rahul Mehta, president of the Clothing Manufacturers’ Association of India.

Of the $16-17 billion of Indian apparel export, Europe forms 45 per cent, within which the UK is 40 per cent. For made-ups, the share of Europe is 20-25 per cent, of which the UK forms 15-20 per cent.

“Though a small share, the UK exit should benefit the Indian made-ups industry due to rupee devaluation,” said a senior official at Welspun Group, on condition of anonymity. Welspun is a leading home textile or made-ups exporter.

The textile industry also hopes a Brexit could mean India emerging as a stronger political and trade partner for Britian, thereby expediting work on a free trade agreement (FTA).  

“Moreover, even the EU could now look at India favourably with regards to an FTA. This should also benefit the Indian textileindustry,” Mehta added.

Of the total, knitwear export last year was Rs 50,150 crore, of which the Tirupur share was Rs 23,050 crore or 46 per cent. Total knitwear export to the UK was Rs 5,519 crore and from Tirupur, around 30 per cent was going to the UK.

Some exporters are worried about the existence of the EU itself. Now that Britain has left, said one, many might follow. In which case, India would need to separately neotiate an FTA with each, a long process.

Exit of the UK will also open the door for some more business on the long run, feels the Association., For example, the UK has been buying high-end products from Italy’ beforre it joined the EU, it bought these from countries like India. With the UK exiting, there would be customs duty and other levies, making Italian products costlier.

To conclude, a mixed reaction or even confusion among garment exporters on what the future is going to be.