The worst performance of the Indian rupee in Asia Pacific this year at 16% depreciation to the US dollar is probably doing more good in boosting exports than the numerous policies from the government.
Exports of textiles, auto component and numerous other manufactured products are beginning to look up as for many countries such as Sri Lanka, the US and Germany it is profitable to import from India than China where the yuan has appreciated.
Inflows of billions of dollars in the past few years that kept the Indian rupee elevated and high inflation led to Indian goods becoming expensive globally, benefitting rivals such as Bangladesh, Sri Lanka, Pakistan and China. Now that the US dollars are flowing out and the rupee falling, the natural advantage is beginning to show. Indian products sold outside have become cheaper with power as well as labour costs along with rupee interest cost in dollar terms falling about 25% since April when China, which thrives on exports, is facing escalating raw material prices and labour costs.
What is more assuring for the textile industry is that apparel exports from India have started looking up after a gloomy 2012-13. According to figures published by Apparel Exports Promotion Council, India’s readymade garment exports have shot up by 14.85% in April-May this year to Rs.19,918 crore vis-à-vis same period last year.
For the tea industry rupee depreciation can generate a windfall profit in the short term. The country produces textile worth $80 billion and exports 35-40% of it.
India’s labour cost is one of the cheapest ($1.17 per hour) while labour costs $52/hr in Belgium, $40/hr in France and $36/hr in the US, according to the US Bureau of Labour Statistics. Similarly, the cost of power is also low in India at $0.08/kwh, compared to South Korea’s $0.54/kwh and France’s 0.17/kwh.
The lower cost is especially helping traditional labour-intensive sectors like textile, leather,handicrafts or tea which are riding on the rupee fall and witnessing a sudden rise in order-book size.
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