The Sri Lankan rupee has depreciated by more than 10% against the US dollar, raising concerns among Indian textile and fabric exporters that payments could be delayed. This comes after a slowdown in exports to Sri Lanka.
“Cotton fabric exports to Sri Lanka have trended upward due to pent-up demand. But it started to slow from August, then came the economic emergency that disrupted trade, ”Siddhartha Rajagopal, executive director of the Cotton Textiles Export Promotion Council (Texprocil), told ET.
According to Rajagopal, Sri Lanka is the second largest export market for Indian cotton textiles after Bangladesh.
Export of cotton fabrics from India In the first seven months of 2021, India exported cotton fabrics worth $ 179.29 million, up 38.47% from the previous year. the previous year, mainly due to pent-up demand.
“The impact of the economic crisis in Sri Lanka is expected to be felt more strongly in the coming months,” Rajagopal said.
Other products exported to Sri Lanka are auto parts, footwear, computer peripherals, and iron and steel.
Sri Lanka’s economic woes are partly due to the Covid-19 epidemic, which has affected tourism, one of the main sources of foreign currency income. Its growing external debt crisis is also seen as one of the main underlying reasons for the current situation.
The ban on the use of fertilizers by Rajapaksa, who wants agriculture to become completely organic, may have made matters worse.
Praveen Khandelwal, secretary general of the Confederation of Indian Traders (CAIT), said traders were facing payment problems due to the crisis in Sri Lanka.
“About Rs 8,000 crore is stranded in Sri Lanka and it is not known when the payments will become smooth,” Khandelwal said. “We also import pharmaceutical raw materials, cardboard, pepper and poultry feed from Sri Lanka. It also stopped.
However, Raja Shanmugam, president of the Tirupur Exporters Association, pointed out that the current crisis in Sri Lanka could work in favor of Indian clothing exports. “On the world market, Sri Lanka is a competitor to India in the clothing sector. Now that the country is going through an economic crisis, global garment buyers can view India as a sourcing country and place more orders, ”he said.
Ajay Sahai, Managing Director of the Federation of Indian Export Organizations, said: “Over the past year, we have seen Sri Lanka reduce imports of non-essential items such as vehicles and the like. But exports of essential items continued. Now that the payment has become irregular, we have asked the government to extend a line of credit in Sri Lanka. ”