Rupee appreciation forces textile industry to seek further drawback

With the rupee appreciation causing worry lines again, the textile industry is back to desiring higher drawback rates. According to the Confederation of Indian Textile Industry (CITI), if the drawback rates are not raised on time, the industry may face a negative growth of five per cent in overall exports.

“Recently, our competitor, China increased its draw back rates on exports from 9 and 11 per cent to 16 per cent on all products. On the contrary, India restored drawback rates in January 2009, after reducing it in September 2008 but hasn’t increased it further,” said DK Nair, secretary general, Confederation of Indian Textile Industry.

Nair said that apart from China, Pakistan also announced a five year textile policy with kinds of sops for the industry. According to Nair, not only a sudden further appreciation in rupee would strangle the industry’s exports but the stagnant drawback rates. “As per the current trends, a negative growth of five per cent is expected in textile industry’s overall exports. But if the rupee appreciates further or no additional draw back rates are offered, the figure may increase,” he added.

Currently, in the textile industry, the government offers a drawback rate of eight per cent to the garment vertical, four per cent to yarn and six per cent to fabrics vertical.

Recently, industry representatives also met union minister for textile, Dayanidhi Maran through CITI and requested that export incentives for raw cotton should not be reintroduced since the country will have very limited exportable surpluses in cotton year 2009-10.

“It was pointed out that there has been damage to cotton because of the recent floods which would bring down production, whereas industry is picking up and cotton consumption would go up. Since shortage of cotton is expected in the global markets, international prices are likely to go up and this will drive export growth from India in raw cotton,” said Nair.

While last year, the industry’s exports were of about $ 22 billion, this year it is expected to be $ 20-21 billion.