Global apparel buyers are negotiating hard with Indian exporters to get products at lower prices. Recently in India, cotton prices have fallen 15% and rupee has depreciated against the dollar which made a chance for buyers to ask products at at the pre-covid level prices.
According to a report published in The Economic Times, the impending recessionary pressure in the US and Europe are forcing global brands to negotiate hard with Indian exporters, who have now started looking at other countries like Japan, Australia and Latin America for developing new markets for Indian apparels.
“Cotton prices have dropped by 15% from the high of Rs 1 lakh per candy (356 kg). It will fall further in the coming weeks,” said Narendra Goenka, Chairman, Apparel Export Promotion Council (AEPC).
But the drop in cotton prices have prompted global brands to initiate hard negotiation in the price front. Raja M Shanmugham, President, Tirupur Exporters Association (TEA) said, “Global buyers now want garments at the pre-covid prices. For instance, the price of a product which we have sold at $7 this year due to high cotton prices, they are now asking to offer it at $5 – the price at which we had sold in pre-covid times.”
Since rupee has depreciated against dollar, foreign buyers are driving hard bargains to lower the prices of garments. On account of rising dollar index and economic worries, rupee weakened to a fresh record low of 79.41 against the US dollar on Monday as investors continue to favor greenback as safe haven bet. In early morning deals, at the interbank foreign exchange, Indian rupee opened lower at 79.30 and went on to slide further, breaching its previous record low of 79.37 levels.
“Despite rupee weakening, we cannot give such a huge discount because cotton prices have not come down to the 2019 level. At best, we can offer a price which is 15% lesser than what we are offering now,” said the TEA president.
The AEPC chairman said the recessionary trend in the US and Europe will impact the orders for Spring 2023 that are manufactured and shipped between October to March.
Indian apparel exporters are expecting a decline of export orders up to 10 per cent for the Spring 2023, which will impact their second half of current financial year.
This means that the projected garment exports for FY23 of $19 billon will be missed. In FY22, India had exported garments worth $16 billion.
Indian exporters are now looking at newer markets like Japan, Latin America and Australia to make up the expected losses.