Indian Hosiery Industry: Away From the Impact of Exchange Rate Change

Amanpreet Singh

School of Management Studies, Punjabi University, Patiala 147002, Punjab, India



Till May 2002, non-exporting garmenting sector was reserved for SSI, while for garment exporting units there was no such restriction. India and China came out of quota on Jan 1st 2005. After quota elimination, there was huge opportunity for Indian garmenting sector to explore the world markets (Jatinder Bedi, 2009). But the performance of Chinese apparel industry was far better than Indian apparel industry.  In few of the hosiery products, the volume increased by 2000% and more and more orders were flowing to China. U.S and EU textile industry started facing crisis. After a series of negotiations; quota was re-imposed on China for another four years till 31st December 2008 (Dong Shen, 2008).  China has pegged exchange rate system while India has managed float rate system. Exchange rate plays an important role export performance of a country. India has experienced significant fluctuation in last few years. Indian hosiery sector has grown over the period but the growth is not consistent as it was expected. There could be various reasons associated to this. Indian infrastructure, technology level and capacities are primary reasons. Exchange rate risk is another major risk which is not controllable and exporters are not taking any risk coverage to protect their receipts.  In this paper, an attempt has been made to achieve the following objectives:  (i) To analyze the growth and performance of Indian hosiery sector (ii) To analyze the effect of exchange rate on export performance of hosiery industry. (iii) To predict the growth of hosiery sector in next four years.

Research methodology used is the data collection from various authenticated sources and analyzing it with the help of appropriate statistical tools. Time period of study is April 2001 to March 2009.

Keywords: Hosiery, Quota, Exchange Rate, Export Performance, Pegged Exchange Rate, Managed Float Rate