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With the rupee appreciation adversely affecting apparel export, the second largest employment generator, the textile sector, which employs 25 million workers, has started cutting back on jobs and laying off workers to contain costs.
"The total job loss for the textile industry for this year touched five lakh and about 35,000 jobs have been lost in April alone due to an 18.25 per cent decline in exports because of sharp appreciation in rupee," says P D Patodia, chairman, Confederation of Indian Textile Industry.
According to industry estimates, textiles exports have declined by 6.8 per cent during the April-May period of 2007-08, while cotton yarn has seen a negative growth of 9.9 per cent. India's textile exports amounted to $19 billion last year and the target for this fiscal was set at $25 billion.
"We have demanded an increase in duty drawback rates, reduction in interest rates for pre and post shipment credit as well as exemption from service tax. The export target of $25 billion set for the current fiscal is unlikely to be achieved with this growth," Patodia adds.
Vivek Kumar, senior merchandiser, Maya Exports, which does business in US dollars, says that his company suffered heavy losses in export orders of 10-20 per cent this year. "Most of the big export companies have done retrenchment upto 40 per cent to contain costs," he says.
He adds, 80-90 per cent of India's textile exports are dollar denominated and with declining exports, the companies have released employees in a bid to contain costs and the worst hit by this slump is textile mill workers.
The rupee appreciation has adversely impacted apparel exports and many units have either shut down their business or sent their employees on an extended leave, says Vivek.
Apparel Export Promotion Council (AEPC), an organisation which represents over 8,000 exporters in the country, has asked for a refund of all state-level taxes through the drawback route which total up to 6 per cent, refund of service tax and a dual currency rate.
AEPC's chairman, Vijay Aggarawal, says that there is a decline of 14 per cent in export from April to October and around 1,00,000 more jobs will be lost in the next six months.
"Textile is a very low capital investment sector and the social need will be affected if government does not look into the matter seriously. We have demanded that the government should make packing credit cheaper by reducing the rate of interest on it. We want it to be brought down from the present level of 9 per cent to 6 per cent," he adds.
Another exporter, BL International managed to maintain its costs as it deals in euros. "Our company did not slash jobs and the rupee appreciation against dollar affected us marginally," says Nahid, divisional merchandiser.
Suniti Mittal of MM Export, a small exporter with turnover of Rs 40 crore (Rs 400 million) and strength of 700 employees, says that his company is hard hit by current recession in US market. "Our company has seen a sharp decline of 40 per cent in orders from abroad," she says.
According to the Federation of Indian Export Organisations (FIEO), 4 million Indians have lost their jobs this year, and the number is estimated to rise to 8 million by March. The worst-affected exporters are those producing garments, leather goods and handicrafts for US customers. Adds Patodia, "Our neighbouring countries taking advantage of our loss as most of the orders going to Bangladesh, Pakistan, China Sri Lanka etc".