Identifier
Created
Classification
Origin
07CHENNAI696
2007-11-30 06:23:00
UNCLASSIFIED
Consulate Chennai
Cable title:  

TIRUPUR GARMENT INDUSTRY: EXPORT SUCCESS STORY ANXIOUS

Tags:  ECON EIND EINV EFIN PGOV IN 
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RR RUEHBI RUEHCI
DE RUEHCG #0696 3340623
ZNR UUUUU ZZH
R 300623Z NOV 07
FM AMCONSUL CHENNAI
TO RUEHC/SECSTATE WASHDC 1364
INFO RUEHNE/AMEMBASSY NEW DELHI 2883
RUEHBI/AMCONSUL MUMBAI 5152
RUEHCI/AMCONSUL KOLKATA 0877
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
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

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