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The volatility and uncertainty on exports: Salem An Overview

The volatility and uncertainty on exports: Salem An Overview

By

B. Nirmala Devi, (Ph.D)

VMKV Professor of Engineering,

Faculty of Management Studies

Vinayagar University Mission

Salem

 

1. Introduction

The proposed industrial policy undertaken by the government since July 1991 have been designed to take advantage of past industrial achievements and intensify the process of making Indian industry internationally competitive. It also recognizes strength and maturity of the industry and attempts to provide the stimulus for further growth competitiveness. These initiatives have been the increase in internal and external competitions that promote the dynamic relationship with foreign investors and technology providers. There are some major industries that came into the competitive global market among which the textile is one of the main sectors. It plays a vital role in the economy, both in terms of employment generation and foreign exchange earnings. Recently, a rise in inflation well above the earth 13 years and the high rate expectation is driven by unrelenting pressures originated from the international commodity prices including the price of crude oil, edible oil and metals. It affects all sectors directly or indirectly, leaving one to breathe freely and textile industries are one of them. This study focuses on the environment of volatility and uncertainty in exports textile industry located in Salem, Tamil Nadu.

1. THE PROBLEM

The textile industries are one of the main sectors in India. Textile exports now account for more than 1/3rd of the country's export revenue total. It is one of the main sources of greatest contribution currency. The wonderful feature of the exports of textiles and clothing import intensity is low compared to other export products. Inflation is a necessary evil for economic growth represents a state where the value of money falls considerably with rising prices constant. Most of the industrial sector both private and public, households are affected due to inflation met by India, which was not at all gone through before. Fluctuations and uncertainty – in the market environment, decreased production, slowed growth – exporters and other problems (micro level) of lead instability among the exporters of textiles. This study highlights the current status of exporters of Salem. The study was a period of 30 days starting from September 13 to August 13, 2008 2008.

1. Objectives:
2. To study the effect of currency fluctuations faced by exporters of textiles in the city of Salem.
3. To study the market risks undertaken by exporters of textiles in the city of Salem.

3. To give suggestions for restructuring the existing market environment.

4. Measurement Tools:

Statistical tools such as correlation and chi-square tests were used with bar graph and line graph to reach a conclusion. The sources of data were collected from export clothing located in the city of Salem. The sample consists of 50 garments export in Salem. The nature of the work of these organizations varied in three aspects: (i) Production Process: weaving clothes, sewing process is carried out outside the industry (ii) Source of capital investment and (iii) the nature of exports (varies according to the harvesting capacity of export orders worldwide or foreign countries).

5. Literature review

In view of inflation many theoretical and empirical research have been presented to propose or explain inflation indifferent methods or strategies for managing their impact. In a further study of these perspectives, research few results were highlighted in the next section

Feldman and Gang (1990) study suggests that simple indicator was value / GDP, which measures the degree of monetization of the economy. Financial development is identified with the growth of financial sector size and relative to GDP that supports textiles.

Liu and Woo (1994) recommends an approach to the degree of financial sophistication was the relationship long term or short-term financial asset values. money supply (M1) is used as short-term value of financial assets. The ratio of broad money of narrow money (M2/M1) should be a positive relationship with a country's level of financial development.

King and Levine (1993) study M2/PIB found that the ratio measures the overall size of financial intermediation sector and correlated with the level and rate of change of real GDP per capita. Moreover, M1/GDP not strongly associated with the level of economic development.

Outreville JF (2005) study visits the development of human resources can be promoted at the expense of economic growth raises the trade was wrong. The measures of financial development are correlated positively to real GDP per capita and measures of human capital development, and negatively in most cases, but not significantly with measures of instability policy. Measures in relation to inflation, real interest rates and monopoly power in the financial sector are significant determinants of financial development.

6. For Indian Textile View:

jute industry group and other vegetable fiber textiles' recorded a decrease in production. Wool, silk, synthetic fiber fabrics, textiles, cotton fabrics registered a growth slowdown in 2008 prices world's cotton, represented by the "Index Cotlook A", dropped nearly 4% in March 2008. Cotton prices were higher on account of 27%, year after year, in June 2008. According to the International Cotton Advisory Committee (ICAC), world cotton production is expected to decline by 3% in 2008-2009 and, therefore, world cotton stocks are expected to continue declining by almost 9% to 11% million tonnes. According to the report of the Independent Commission prices should rise by 12% in 2008-20091. Sources taken from RBI Bulletin 2007.

Indian textile exports have soared from 14.03 million in 2004-2005 to $ 20.25 million in 2007-2008. The hype built shows the possible improvements in performance since 2004. Due to the adverse effect on the price and quality, the combination brings the competitiveness' of Indian textiles to China, Pakistan and Bangladesh. This brings us steady advances in the major market India in the U.S..

The rocker interest subsidy of 2% for pre-shipment and post-shipment credit for textiles readymade garments on the fiscal and the first additional grant of 2% from November 1, 2007 shows a steady appreciation of the rupee and the end of March 31-2008. But 4% interest subsidy announced by RBI tempted the textile industry to cope with a higher back tie-source rate2 Mr Rakesh Vaid, Apparel Export Council Advancement Chairman.

In order to promote exports of textiles, fashion designers to help them compete in the international market. In addition to the current National Institute of Fashion Technology (NIFT) Centre in New Delhi, NIFT main centers in Mumbai, Hyderabad, Calcutta, Chennai, also offer their effort Ghandhinagar significant increase exports in the international market effectively. Apart from these, Universities and University Colleges "also showed their ability innovation in their designs to create export. Promote research and other scientific works, Ahmedabad Textile Industry Research Association, Bombay, India Southern Research Association, Coimbatore and Northern India Textile Research Association, Ghaziabad are the four textile associations Research registered under Societies Registration Act 1860 and functioning under the administrative control of Ministry of Textiles. Total employment in the textile sector was estimated that about 64.20 million.

7. Reasons for the fluctuations of currencies:

The current situation shows that the depreciation of rupee vis-sa-vis the U.S. dollar had

fluctuations in the current fiscal year to lead a healthy trend in Indian exports. A slow market as defined in the U.S., where out of Rs 100 of exports reached Rs 20 U.S. and that this down to Rs 15. This has been met by the diversification destination of exports to Latin Ameirca, Southeast Asia and ASEAN region by Indian exporters in the recent period.

Hurricane Gustav could be the first major threat to U.S. Gulf of Mexico oil fields and ports since hurricanes Katrina and Rita in 2005. The hurricane, that developed after a storm has a trail of destruction in Jamaica, Haiti and the Dominican Republic headed for U.S. after sweeping through Cuba. The Gulf is the source of 25% of domestic oil and 15% of natural gas. Because of its threat, support the price of a barrel of crude oil worth $ 10 compared to its resistance up to $ 125-132 per barrel. This brings us a great deal of currency fluctuations on the world market. For the moment, the exchange rate of the rupee has exhibited appropriate flexibility in response to market conditions. In addition, the international currency markets also led to changes in cross-currency rates. Because of this, rates Domestic wholesale prices (WPI) for most commodities had increased by a much lesser extent worldwide.

8. Analysis:

Hypothesis: Ho: the investment of high-risk high influence on the sales market

among exporters

Table No: 1

Global Sales

Investment

U.S.

Europe

United Kingdom

Sale

East. East

Australia

Others

<5 crores

4

4

0

3

2

3

5Crores-10 Crores

5

3

4

3

2

2

10Crores-50 Crores

3

2

2

1

0

1

> 50 Crores

3

2

1

0

0

0

Total

15

11

7

7

4

6

Factor

Chi-square value

DOF

Values table

Comments

Global Sales

998

15

7.61

No Significant at 5%

 

The above table shows that the calculated value of chi-square is less than the value of the table and therefore the null hypothesis is accepted. It is inferred that "influence the high risk investments in the sales market for exporters. "   

Table 2

Investments and Industry

The investment made by the exporters from the city of Salem and the type of industry is given in the following table. The types of industry are classified four types of knowledge. Society, property, and other limited liability and their investments are classified in less than five million rupees crores 5-10, 10-50 million rupees and over 50 million rupees.

Industry

Investments

<5Crores

5-10Crores

10-50 Crores

> 50 Crores

Total

Association

9

8

0

0

17

Property

4

5

1

0

10

Limited Liability

5

6

2

0

13

Others

3

6

1

0

10

Total

21

25

4

0

50

The table above shows that the heavy investments made the industry was the association. Alongside this, the private sector had increased investment. On the other hand, had business and other similar investments.

 

1. Scope for development:

Going for accredition of ISO 17020 certification solves problems parameters such as length, width, etc. Under this certification, customers can evaluate the quality of the products in counting the warp and weft the size of the piece (length and width), weight / m² and the resistance to washing, rubbing and exposure to sunlight, etc. This certification will solve the problems of export quality.

Penetration in foreign countries is another aspect of development in the textile industries. If the India's commitment to the ASEAN market took place, then it is possible to tetile exports to Japan, China, Korea, New Zealand and Austral. What is remarkable is that the country has FTAs with ASEAN would pay zero tariffs. This is a golden opportunity for Indian textile global market broadly.

Recently, China faces difficult times with the rise of foreign exchange and the closure of many textile units to reduce pollution levels in Beijing. textile exports from China reached falling to 2.4% in September 2007 to May 2008, while during the same European Atomic Energy, Inda way around the 25 tumors. Because Indian exporters push markets in South Africa Kenya and other African countries and also South-East ASEAN countries like Thailand, Malaysia and Singapore.

Furthermore, the world cotton production is expected to decline by 5% to 24.9 million tons in 2008-2009 due to the decrease in both area and yield. U.S. output expected to fall more than one ton to 3.1 metric tons. Indian market is not going to stay away from foreign influences. In 2007-2208, domestic prices increased by 30-35%, with a shadow over the outlook for production in India, the world may be starved of much needed cotton and India are expected to be supplied in recent years.

• Arguments

1. Are all items in the list of WPI is affected by international market volatility?

Rates of domestic wholesale prices (WPI) for most commodities had increased at a much lesser extent worldwide. Deglobalization results in rising prices for rubber and cotton in the domestic prices with world prices. This benefit is performed by the Indian farmers at the expense of tire manufacturers and textile millers. Basic chemicals and chemical products and transport equipment and parties with respect to snuff industry, beverages and related products are shown double-digit growth. Mining picked up by 5.6% compared with 3.2% a year ago.

1. Who is the benefactor of the volatility of international market?

Textile millers mining, manufacturing of the beverage industry, farmers, rubber, cotton are the benefactors of market volatility.

1. Do Salem textile exporters get accounted due to international market volatility?

  Yes but all exporters are not. By taking the market risk, exporters are member of the Salem Exporters Association to start slow penetration to markets in South Africa, Kenya and other African countries. Moreover, some individual exporters trying to get orders from Thailand, Malaysia and Singapore.

Your biggest risk is the rupee depreciation vis-sa-vis U.S. dollar / Euro currency variations in the cost of supply, shipping and full payment.

9. Conclusion:

Reference:

1. India Economic View Overall, Finance India, March 2005.
2. RBI Bulletin 2008, www.statistics of India Finance.com
3. Feld Man and the Band of 1990, "Financial Development and utility prices," Economic Development and Cultural Change, vol.38, 2, pp341-352
4. King and Levin 1993, "Finance, entrepreneurship and growth: Theory and Evidence," Journal of Monetary Economics, vol.32, pp341-352
5. Liu and Woo 1994, "The Economics of behavior in imperfect financial markets and the Current Account Consequences", The Economic Journal, Vol.104, pp512-527
6. Outreville 2005, "Financing for Development, Human Capital and political instability," Mexico Finance, Vol XIX, 2, pp481-492

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix:

Table No: 1

Industry Types

TYPES OF INDUSTRY

S.no

Types of industry

Number of respondents

1

Association

16

2

Propritorship

10

3

Limited liability

13

4

Others

11

Total

50

Values

Standard Deviation

2.64

Average

20

Chisquare

0.641

Graph 1

Industry Types

 

 

 

 

 

 

 

Table No: 2

 

Turn over sales

 

Turn over sales

S.no

Sale

Number of respondents

1

Less than 5 million rupees

17

2

5 million rupees 10 crores

19

3

10 crores to 50 crores

8

4

Over 50 million rupees

6

Total

50

Values

Standard Deviation

1.767

Average

Chisquare

0.0185

Chart: 2

Turn over sales

 

 

 

 

Table 3:

Labor

Labor

S.no

Direct Employees

Number of respondents

1

Up to 10

5

2

11-50

15

3

51-100

16

4

more then 100

14

Total

50

Values

Standard Deviation

5.06

Average

12.5

Chisquare

0.10408

Chart: 3

Labor

 

 

 

 

 

 

 

Table No: 4

Mode of recruitment

Mode of recruitment

S.no

Recuritment Mode

Number of respondents

1

Advertisement

18

2

References

9

3

Unions

9

4

Oters

4

Total

50

Values

Standard Deviation

Average

Chisquare

Chart: 3

Mode of recruitment

Table No: 5

The training facilities

Trainig Facilities

S.no

Trainig limitations

Number of respondents

1

Court

14

2

Stitching

12

3

Inspection

9

4

Packaging

11

5

Others

4

Values

Standard Deviation

Average

Chisquare

0.128

Graph: 5

Training facilities

Table No: 6

Risk Company

Business Risk

S.no

Types of Risk

No. of respondents

1

Shipping

10

2

Product Quality

7

3

Variation clour

12

4

Processing Time

10

5

Others

11

Total

50

 

 

 

 

 

 

 

 

 

 

 

 

 

Graph No: 6

Business Risk

About the Author

Thai rubber farmers hit by slump in commodity prices