Faced with changes in fashion trends and demand patterns, the knitwear sector in Tirupur is looking for fresh cuts in short-term bank rates in the coming monetary policy review.
“We feel that repo rate needs to be cut further by at least 50 basis points as the present rate of 7.25 per cent, after the three cuts in this calendar year, is still high,” says an exporter.
“Unless the interest rates on loans are low, the entrepreneurs cannot go for capacity expansion to cope with the production demands arising following the changes happening in the trends and fashion in the apparel consumption market both within the country and abroad,” Raja Shanmugam, apparel exporter and state council member of Confederation of Indian Industry, told The Hindu .
The industrialists and technocrats point out that the repo rate was just 4.75 per cent in April 2009.
Major worry
A major worry that bothers the business men in the capital-intensive knitwear sector is that many banks show hesitancy to reduce the interest rates on loans every time RBI makes a cut in repo rates whereas the same banks show urgency to increase the interest on loans soon after a hike in repo rate.
“Unless there is an enforcing mechanism by which RBI can ensure that the benefits it announced are passed on to the consumers, what is the point in making announcements in monetary policy review,” quipped T. R. Ramanathan, a senior member of Institute of Chartered Accountants of India.
Development plans
Presently, the Tirupur knitwear cluster occupies a share of 44.4 per cent of the total knitwear exported from the country as per the statistics available from the Ministry of Commerce web site for 2014-15 fiscal. With the global apparel market showing greater inclination for products made of man-made fibres, the knitwear industry here has to invest on machinery to produce such apparels.
“Apparels made of man-made fibres now occupy more than 60 per cent market share globally. But the Tirupur cluster still produces over 85 per cent of the products from cotton. So, loans at lower interests are required to help the knitwear entrepreneurs to procure high-end machinery for product diversification,” pointed out Mr. Shanmugam.
The industry also feels that signing of Free Trade Agreement with European Union should be expedited if the apparel exports have to be increased by nullifying the duty free access enjoyed by Bangladesh, one of the main competitiors of Indian products.
