Switch to billing in euro, govt tells textile exporters

NEW DELHI: The textiles ministry has urged exporters to shift to billing in currencies like the euro to offset the negative impact the decline of the dollar is having on their bottomlines. At the same time, the government is in the process of finalising a new package for the sector to enable it to meet the export target of $25.1 billion in 2007-08.

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.

However, 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.

Despite differences within the government, the incentive package for textile exporters is expected before the end of December. “The package is not a part of the Budget and would be announced very soon,” a source close to the development said. The finance ministry, in a background note on textile exports, has acknowledged that continuous appreciation of the rupee can be detrimental to export industries like textiles and leather which have comparatively lower import intensity.

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.

While textiles (excluding ready-mades) posted negative growth in three out of six months from December 2006 to May 2007, ready-made garments witnessed negative growth in four months.