Garment, Handicraft Exports May Gain From Rupee Depreciation

Experts suggest that India's labor-intensive export industries may benefit from the recent rupee depreciation. According to them, there can be a 2-10 per cent boost in outbound exports of ready-made clothing, carpets, and handicrafts, while the benefit can reach 100 per cent in the case of handicrafts with little import component, according to a report by Economic Times.

"One can also get the benefit while negotiating contracts. If an exporter hasn't hedged, then they would get windfall gains during the period of depreciation, but most of the time, inflation nullifies the benefit given by deprecation," Ajay Sahai, director general, Federation of Indian Export Organisations told Economic Times.

Industry analysts stated that if the rupee depreciates by around 10 per cent and the exported product has a 20 per cent import content, the exporters will gain 8 per cent net.

The global slowdown has severely hurt labor-intensive industries, as seen by lower production than the previous year. The first half of 2023–24 had a 21.9 per cent decline in clothing manufacturing year over year, while the leather industry saw flat growth.

According to an ET investigation, leather exports were 22 per cent below pre-pandemic levels, while output of clothing was 34 per cent lower than it was during the pre-Covid-19 2019–20 time frame.

From April to October, exports of ready-made clothing decreased 14.58 per cent on a yearly basis to $7.82 billion. Exports of handicrafts decreased by 11.37 per cent, while exports of leather products decreased by 11.74 per cent.

The net gain is approximately 1 per cent in the gem and jewellery industry, where import content is nearly 90 per cent; nevertheless, the advantage differs for each company. One of the businesses where exports have decreased the most is the gem and jewellery sector.

If raw material prices don't rise further, exporters of engineering items anticipate that a 4-5 per cent depreciation of the rupee will result in a 10 per cent increase in exports.

Currently, 1 US Dollar equals 83.24 Indian Rupees.