Indian textile exports will benefit from changes in China’s RMB exchange rate policy

On Tuesday, an Indian textile ministry official said that China’s decision to increase its flexibility in foreign exchange rates is a good news for Indian textile exporters. In 2010-11 (April-March), Indian textile exports were US$25 billion. The official said that this is a good signal for Indian textile exports.

China maintains low artificial manipulation of the renminbi. If China allows a flexible exchange rate system, the renminbi is expected to appreciate by 10% against the US dollar. DK Nair, secretary-general of the Indian Federation of Textile Industry, said that exports to Europe and the United States account for 60% of Indian textile exports, and exports are calculated in US dollars.

With the appreciation of the renminbi against the US dollar by 10%, Indian textile export prices will be much cheaper. At present, as China's renminbi artificially pegs the U.S. dollar, the cost of Indian clothing is 10-15% higher than the cost of Chinese clothing.

DK Nair said that China’s move will also help reduce domestic cotton prices, which China imports from India due to insufficient production. This led to a sharp increase in Indian cotton prices.

He said that for Chinese importers, the appreciation of the renminbi will make the price of Indian cotton higher.

This will benefit the Indian textile industry, which faces raw material shortages.

He said that the shortage of cotton nationwide has led to layoffs in the domestic textile industry. If the renminbi appreciates, it will benefit India in two ways.

However, it is difficult to quantify how much Indian textile exports can increase. India should only export surplus cotton annually so that it will not affect the domestic textile industry. India's textile industry is India's second largest employment industry, second only to agriculture. He said that the Indian Cotton Information Committee should determine the remaining amount of cotton once a month.