Cheaper yuan has exporters running for cover
KOLKATA : India's apparel, gems and jewellery exporters have renewed their demand to restore a 3 per cent interest subsidy offered to them until March-end, saying the devaluation of the Chinese currency is affecting their competitiveness in the international market.
For exports of these products, China is India's main competitor as well as one of the largest customers. China on Tuesday decided to devalue the yuan in an effort to make its products cheaper in the global market and thereby boost exports and the economy. Since imports would become costlier for Chinese consumers because of the cheaper currency, their purchase of foreign goods could also take a hit. Both are detrimental to Indian exporters.
"The Chinese devaluation of yuan has come as a major shock for the apparel exporters at a time when the exports have slowed down," Virendar Uppal, chairman of the Apparel Export Promotion Council, told ET.
"Our competitiveness in the world market is under severe stress. Unless the government does something right away, it will be difficult for us to achieve the government's export target of $18.7 billion in the current fiscal (year), which is higher by 11 per cent compared to last year's exports."
The interest subvention scheme was an important tool for exporters to be competitive as they got loans at affordable rates under the scheme. The government didn't extend it after it ended on last March 31.
Uppal sought the government's support to the efforts of Indian exporters to increase their presence in non-traditional markets in order to reduce their dependence on traditional markets like the EU. He said the latest foreign trade policy didn't have any Merchandise Exports from India Scheme - an export promotion programme offering duty credits - for Latin American, West Asian, CIS and African markets where they are trying to get a foothold.
"We will again make a fresh appeal to the government to introduce interest subvention scheme and MEIS for non-traditional markets," he said.
Apparel exports grew 7 per cent in the April-June quarter, but are since facing a slowdown, said the exporters who now fear the Chinese currency devaluation will further dent their business. Spinning mills are already suffering from overcapacity. The Northern India Textile Mills' Association is considering cutting back production and shutting mills once a week. These mills now operate 24x7.
Vipul Shah, chairman of the Gem & Jewellery Export Promotion Council, said the sector contributed 14 per cent of the country's total exports, but the government had not announced any package to boost the exports. "The high interest cost is increasing our production cost.We are making a fresh appeal to the government to introduce the interest subvention scheme," he said.
Source : economictimes.indiatimes.com