India in the WTO

The Economic Times reports that the Indian textiles ministry has advised exporters to shift to billing in currencies like the euro and the pound, and move away from the declining US dollar which is affecting export profits.

The textile ministry said the rupee has depreciated 0.50% against the euro between October 2006 and October 2007 and, therefore, a switchover to the euro would be beneficial to exporters. The rupee’s appreciation against the pound is lower than the dollar and this is another option for exporters, officials at the ministry feel.

But the switch will not be easy.

…textile exporters say that it is almost impossible to switch their invoicing to the euro due to two major reasons. For one, “about 75% of our textile exports are traditionally invoiced in the US dollar and with the value of the US currency showing a depreciating trend, no one is ready to change the terms of invoicing,” said the secretary general of the Confederation of Textile Industry, DK Nair. Second, many customers, who are not billed in the dollar, now want to switch over to the US currency.

Here’s more on how the declining dollar is affecting prospects for the textile industry.

India’s share in the global textiles and clothing trading was a meagre 3.68% of the total $530 billion in 2006, according data available with the World Trade Organisation (WTO). “According to data available with the government, India’s textile exports have declined over 14% in dollar terms in the first quarter of the current year over the corresponding period of 2006-07, and it would be impossible for the country to achieve any of the trade targets in such a scenario,” said an industry observer.

The Indian govt. is under strong pressure to intervene and a support package is likely to be announced soon.

The Times of India reports today that Indian garment exporters are finding it difficult to compete with Chinese and Thai garment manufacturers in the global market, post the abolishment of textile trade quotas. See http://timesofindia.indiatimes.com/Business/India_Business/Tough_measures_to_cure_garment_sectors_Re_woes/articleshow/2536770.cms

The report suggests that many units are shutting down.  Even though an appreciating rupee is adding to their difficulties, the real reason seems to be inefficient, uncompetitive family-run firms which are finding it difficult to thrive without their quota-rents. The report also notes that beneficial credit terms are still being made available to this sector by the Indian government.