Knitwear exporters of India suffering the brunt of US economy slowdown

India is getting globalized, but if you really want to know what this 10-letter word means, you must visit Tirupur. It’s locked, for better or worse, to the fate of America and Europe. It buoys or deflates with their joys and sorrows; it swings to their moods, meanness and madness.

Tirupur, a knitwear town in western Tamil Nadu, India supplies top of the line garments to American and European marquee retailers like Eddie Bauer, Gap, Talbots and Ann Taylor. Christmas is near and the town should have been brimming with optimism. Instead, there is gloom here.

The word has gone around-the US economy has contracted in the third quarter because consumer spend has come down dramatically. This obviously means the demand on Tirupur will be tepid this Christmas, if not lower than ever before. an An exporter got from a leading retailer orders scaled down by 30%.

Eddie Bauer has closed 27 shops in the first quarter and plans to close few more by the end of the year. The owner of retailers Lane Bryant, Fashion Bug, Catherine’s Plus Sizes will close about 150 under performing stores this year. The Talbots Inc has announced that it will exit its Talbots Kids and Talbots Men’s Concepts.

All this is grim news. Tirupur Exporters’ Association (TEA) expects a minimum 5% drop in exports this year. Orders are being scaled down in US and Europe. They will have a negative growth (in exports) from Tirupur this year.

It is not painting a scary scenario but it would be no exaggeration to assume that there would be big job losses in Tirupur any thing between 10,000 and 15,000 jobs in the coming months, although none of the big manufacturers has resorted to this extreme step yet. More than 3lakh people depend on garment exports in Tirupur.

American stores are shutting down by scores. In all, Talbots will close 78 men’s and children’s store. Walt Disney in a news release said it too had obtained the right to close about 98 Disney Stores in the US.

Gap, whose brands include Old navy and Banana Republic has announced plans to shut 85 stores as it continues to struggle to attract customers. And Ann Taylor will shut 117 stores between 2008 and 2010.

Retailers in the West have told that sales are down this year. They will take time to stabilize. This year will be really challenging. Sabare gets about 80% of its revenues from home textile exports to the United States.

The rupee’s downward movement hasn’t helped improve the situation for the exporters. Western retailers have got wise to this. They see the weak rupee as an opportunity to slash prices to cushion the impact of the slowdown in the west.

A cross-section of exporters said that with the sharp fall in the rupee, western retailers would definitely go for price cuts for the ensuing summer orders. A few retailers have even requested exporters to consider price revision for booked and shipped orders.

As walk-in purchases are coming down in the American super stores, retailers are offering discounts and concessions to improve sales. With recession setting in, they also want Tirupur garment exporters to help them out.

What it means for Tirupur is clear: lower orders and job losses. As the financial turmoil has spread to Europe, orders from several European countries are slowing down too. This comes at a time when Bangladesh has toppled India in garment exports to the US.

For the first eight months of the calendar year (year-to-date), apparel exports from the country to the US declined 4.8% to $2.20 billion. In the same period, Bangladesh’s exports were up 6.21% to $2.25billion. As a matter of fact, India went out of the top five exporters list to the US only recently. The US accounts for a little over 50% of the apparel exports from the country.