Garment exporters from southern textile belt of Tirupur in Tamil Nadu are negotiating with their European buyers for dollar-denominated contracts.
Reason – the sudden 20 per cent slide in the euro down from 80 levels last December wiped profits in lakhs for Tirupur’s entrepreneurs, forcing them to transact in the more stable dollar.
As the euro fall takes effect on revenue, entrepreneurs are relying on the greenback, which has been fairly range-bound against the rupee around 63 levels with a prediction of marginal appreciation.
“Many small businesses are having trouble in signing deals. A 20 per cent slide in currency is too much to take for a capital-intensive sector like ours. But, the larger ones, which can take some impact, are pushing the buyers for dollar deals, because the currency is holding relatively steady against the rupee,” P Mohan, MD of a Rs 150-crore turnover company in Tirupur said. Nearly 90 per cent of his company’s exports are focussed on the euro region.
For Mohan, also the treasurer of the industry body Tirupur Exporters association, the larger worry is about small exporters whose revenues do not exceed Rs 10 crore, for whom banks are still hesitant to extend forward covers.
Tirupur exporters are aware of the structural problems of the euro zone, which has just flagged off a 1.1-trillion stimulus programme to bolster the sentiment and help struggling economies such as Greece.