Apparel Exporters Prefer Dollar Billing As Pound Slumps
NEW DELHI: Indian apparel exporters are gearing up to re-negotiate terms and prices of their products with buyers in the UK to neutralise a decline in their realisations due to the sharp fall in the pound against the rupee.
Trade sources said Indian exporters have now devised three strategies to deal with the situation. They have started bypassing vendors in the UK for supplies to countries in the European Union. This would allow them to deal with the importers there directly.
Indian exporters are also gearing up to raise prices of their apparel products in next year’s contracts to compensate for the fall in the pound. Thirdly, exporters are re-negotiating for receivables in dollars instead of pounds.
Indian apparel exporters are convinced that the re-negotiated terms would protect them from any further fall in the pound without affecting their trade with the UK, which contributes nearly 11 per cent of apparel exports.
As the pound (GBP) has fallen evenly against other major global currencies, exporters anticipate no problem in arriving at re-negotiated terms with importers in the UK.
“A sustained fall in the GBP would certainly affect our business with the UK and the rest of the Europe,” said Rahul Mehta, President, Clothing Manufacturers Association of India (CMAI). “Indian apparel exporters would start negotiating directly with importers in the EU other than the UK. Export contract terms would be re-negotiated. Also, Indian exporters would raise prices of their apparel.”
A number of apparel importers in the EU are getting consignments delivered to their headquarters in the UK for transportation to other countries in the region. While the actual volume of exports to the EU through UK was unavailable, trade sources estimated the volume could be in the region of 25-30 per cent. A CMIE study estimated a decline in UK’s share in India’s overall apparel exports from 11.04 per cent in 2015 to 10.62 per cent now. Importers in the UK buy apparel from India not only for internal consumption but also for exports.
The GBP had crashed after the United Kingdom voted in favour of an exit from the European Union in June.