The currency-driven troubles come at an already-challenging time. Retailersare using a smaller number of vendors, bypassing traditional buying housesto source directly from a few chosen manufacturers.Committing large sums for expansion requires nerves of steel."Unfortunately, interest rates overall in India, too, have moved up, from7.5%-8% to 12%-13% per annum," said Rakesh Valecha, director of corporate ratings at Fitch Ratings India. So after a federal governmentinterest subsidy for upgrading certain machinery, "the effective cost forexporters has gone up from 2%-3% per annum to 7%-8% per annum." Indiais not well-suited for high-volume, low-margin production, Zodiac Clothing'sNoorani said. "We have not built the kind of scale that Vietnam or China has.Nor do we have the productivity to compete with the best. I therefore feelthat India has missed the bus with respect to this part of the textileoutsourcing business. You can see that vendors of Wal-Mart and the like arenow in distress and we have a crisis."As recently as 2006, India, among the top five apparel exporters, seemed tobe making rapid strides. The new outlook is a sea change from industryprojections of exports doubling every year. "Today we are nowhere on thattrajectory and are in fact selling at prices which are lower than what we soldat even five years ago," Udani said. Many small firms operate at net profitmargins between 3% and 8%. "Thanks to low gross margins, any productionloss quickly turns into a net loss as well," the Textile Industry Confederation'sPatodia said. The industry's woes have led some prominent participants to leave or scaleback. In August, the Hinduja family, who controlled 70.1% of GokaldasExports, sold a 50.1% stake to the Blackstone Group, the private equity firm.Captain C.P. Krishnan Nair, chairman of the Bombay Stock Exchange-listedHotel Leela Venture, sold his family firm Leela Scottish Lace. The textile firmhad helped keep him afloat when the hotel industry and Hotel Leela'sfortunes in particular were in the dumps several years ago. The companythat made 12 million pieces annually with revenue of 4 billion rupees wassold to Bombay Rayon Fashions for 1.55 billion rupees in July.
Seeking Political Patronage
The apparel and textile sector is India's largest employer after agriculture,with an estimated workforce of more than six million. So job losses are apolitical hot potato. The industry is looking for government help while itadjusts to the rupee's appreciation."We need a global level playing field with comparable infrastructure, interestrates, power costs and labor laws," Udani said. It costs more to ship acontainer from Tirupur to the western port city of Mumbai than it does toship one from Chennai, in southern India, to Hong Kong, he said. Respondingto industry demands, Shankersinh Vaghela, the minister of textiles,