New Delhi, Nov. 4: India can compete against China when the world textile quota regime ends in 2005, but Chinese exporters will still hold the edge as long as long as Beijing continues to hang on to a fixed dollar-yuan exchange rate regime.
China has been under pressure from trading partners, including the US — with which it has a trade surplus of $100 million — to allow the yuan to float against the world’s currencies.
The dollar has been weakening against the euro and other western currencies but hardening against Asian currencies, forcing US politicians to demand a market-determined exchange rate for the dollar in Asia where central banks have been known to currency interventions every time the exchange rate goes out of whack.
While emphasising India’s ability to compete against China, textiles secretary S. B. Mohapatra expressed concern over the hardening of the rupee against the dollar which was undermining its export competitiveness.
Mohapatra, who was joining a global chorus of complaint against the China exchange rate policy, said as long as China artificially pegged the yuan exchange rate, its exporters would enjoy an unfair advantage in the world market. Such a policy would make it difficult for India to compete against the dragon nation.
The real challenge facing the Indian textile industry is producing quality cotton at a cheaper rate. In order to be globally competitive, he said the government would provide help to farmers to boost cotton production. It has set a cotton production target of 200 lakh bales in the years to come.
The government will also soon launch an IT initiative to improve cotton yields and revolutionise the extension system. In its commitment to yank the textile industry out of the morass, the Centre had earlier announced a 20 per cent subsidy for the modernisation of the weaving industry.
Speaking at the valedictory session of the Indian textile summit organised by CII, he said almost 70 per cent of global trade was from free trade zones or from bilateral trades. Therefore, India should make arrangements for bilateral trade and create a conducive market for the Indian textile industry.
He was of the view that India’s spinning, yarn and knit sector had the capability to become globally competitive.