Effect of Strengthening Rupee and Inflation on Textiles

During the very first week of the New Year 2010, the Indian Rupee touched a brand new high contrary to the US Dollar to reach 46.22 per Dollar.

Although this was a good New Year greeting from the Rupee to importers in India, it may not have pleased the exporter so much. Since then your Rupee has been hovering consistently around 46.2 Rs. values and in the recent weeks, it’s appreciated overall. You may check the most recent conversion rate here.

In this article, we will concentrate on the Indian textile exporters. Hardly anyone understands the variation in foreign exchange rates better compared to Indian textile exporting community as their bottom lines routinely depend with this factor. With globalization and Jute mat Manufacturer opening of global textile markets under the World Trade Organization, this variation has been affecting their businesses more often than ever before.

In the recent time also, the appreciation of the rupee contrary to the USD, a currency widely found in trade out of this area of the world, has hurt the textile exporters. In accordance with Apparel Export Promotion Council, the adverse effect on margin has been in the range of 8 to 10%.

The variation in trade rate that adversely affects the textile manufacturers’ profits might be due to seeming unrelated factors such as for example increase or decrease in capital inflows in the form or Foreign Direct Investment or Foreign Portfolio Investments or RBI intervention while the case may be.

The woes of the exporters aren’t limited by the rise of Rupee contrary to the USD. Domestic inflation and rising raw material prices exert further strain on already dwindling profits. As an example, there is a rise in cotton prices globally making the procurement of top quality raw material, expensive.