TIRUPUR GARMENT INDUSTRY: EXPORT SUCCESS STORY ANXIOUS

UNCLAS CHENNAI 000696 SIPDIS SIPDIS E.O. 12958: N/A TAGS: ECON EIND EINV EFIN PGOV IN SUBJECT: TIRUPUR GARMENT INDUSTRY: EXPORT SUCCESS STORY ANXIOUS ABOUT DOLLAR DEPRECIATION ¶1. SUMMARY: Tirupur, a small city near Coimbatore, Tamil Nadu's second largest city, is a remarkable economic success story. Over just a few decades, Tirupur's garment industry has grown to account for more than half of India's knitwear exports. The town's knitwear industry provides more than 300,000 jobs and exported more than $2.5 billion of knitwear in 2006. But the appreciation of the dollar is causing major anxiety in the industry, with fears of job losses on the horizon. END SUMMARY. BOOMTOWN ATMOSPHERE -------------- ¶2. Tirupur's garment industry is a powerhouse in the international knitwear market, exporting high-end products for famous brands including Gap, Banana Republic, Victoria's Secret, and Calvin Klein. Visiting Coimbatore and Tirupur there is a palpable buzz of economic opportunity. Recently, Coimbatore's main business hotel was filled with businesspeople from the United States, Germany, France, and Korea. Although many of the foreigners were buyers from international retailers, visiting political/economic officer met three analysts from an American private equity fund who were considering investments in several Indian companies and a group of U.S. equipment makers looking to sell to Tirupur manufacturers. ¶3. The numbers bear out the sense of opportunity: Tirupur accounts for more than half of India's knitwear exports, bringing in $2.5 billion dollars in 2006. Recent growth has been particularly dramatic, with exports from Tirupur increasing by more than 30% in 2005 and 25% in 2006. Tirupur, with an estimated population of 800,000, has approximately 350,000 regularly working in the garment industry. The figure reaches a staggering 500,000 (or almost 63% of the population) during high seasons. BUT SINKING DOLLAR CAUSING ANXIETY -------------- ¶4. But the depreciation of the dollar versus the rupee is casting a serious pall over the garment industry. With its huge export volumes, Tirupur is known as "dollar town" throughout Tamil Nadu. According to media reports, the industry is taking a big hit as seventy to eighty percent of its exports are dollar denominated. Businessmen kept mentioning to us, like some sort of depressing mantra, the depreciation of the dollar to the exact decimal: 12.5 percent. One knitwear manufacturer said the "dollar is killing us." He told us he does not have any immediate plans to cut staff, but added that "massive job cuts" throughout the industry are on the horizon if the dollar does not stabilize. ¶5. COMMENT: After a speech to a local Chamber of Commerce, the crowd literally booed when the first question asked to a visiting political/economic officer was about the U.S.-India Civil Nuclear Cooperation Initiative. The moderator interjected, saying "nobody cares about this nuclear cooperation business" and proceeded to ask a question about the dollar. It turned out to be the only issue posed to the visiting officer. The worry was not limited to the owners of garment factories: taxi drivers and college students we spoke with all asked about the dollar's prospects. In Tamil Nadu's "dollar town," civil nuclear cooperation is an abstraction; the decline of the dollar is hitting everyone where it hurts. END COMMENT. HOPPER