Britain’s decision to leave European Union following a referendum, is leaving the garment exporters from Tirupur knitwear cluster with the possibilities of facing losses due to the consequent emergence of currency volatility.
The currency volatility comes mainly as knee-jerk reactions to the decision of UK to quit.
On Friday, the British pound plummeted by more than 10 per cent within six hours on the concerns that severing ties with the EU would have a cascading effect on the UK economy.
“Presently, around Rs. 2,000 crore worth of garments are exported per annum from Tirupur to Britain. Losses will be suffered on the orders that are now in the process of execution/delivery since many of the garment exporters have not opted for forward contracts”, pointed out T.R. Vijayakumar, who exports garments to UK, and also the current vice-chairman of Confederation of Indian Industry (Tirupur district council)..
With the global markets becoming more price sensitive, the knitwear exporters will not be able to quote higher prices and rather have to absorb the losses or sustain in the business on wafer-thin margins.
S. Dhananjayan, a senior member of Institute of Chartered Accountants of India, feels that all that the garment exporters could do in this delicate situation was to observe the currency markets much more closely and take correct hedging positions at the time of execution of orders.
“They have not been hedging much till now when comes to the trade in British Pound as it was steadier.
Apart from the initiatives by exporters, the government machinery too need to take proactive stance of intervening in the currency market if a situation becomes necessary to protect the interests of the exporters”, he said.
Even though Free Trade Agreements cannot happen over a short period, the exporters are of the opinion that the government could think of the possibility to sign FTA with Britain.
