India is the world's second largest cotton exporter after the US so the rupee depreciation improves the export competitiveness of the domestic cotton.
Depreciation of the rupee is expected to have a mixed impact on India's textile exports as competition will increase from China following devaluation of its currency, ICRA on Monday said.
As India is the world's second largest cotton exporter after the US, the rupee depreciation improves the export competitiveness of the domestic cotton, it said in a statement.
In apparels, it said, the export competitiveness depends on the relative currency movement of the major exporters such as China, Bangladesh and Vietnam.
"As China s Yuan has depreciated more than the rupee and given that China enjoys dominant position in international export markets, India will see increased pricing competition which will affect the profitability of Indian exporters," ICRA said.
However, it added, given that the rupee has depreciated more than that of other competing countries, and India's share in overall trade is relatively small, the export volumes may not be impacted severely.
Besides, it said, in view of the fragmented nature of India's fabric industry, exporters will require to pass on the benefits of depreciated rupee.
Further it said the export competitiveness of the Indian cotton yarn depends on the relative currency movement of the rupee with Pakistan s currency since Pakistan is the major competitor in export of cotton yarn to China.
As Pakistan's currency had remained relatively stable, the depreciation of the rupee improves the competitiveness of Indian cotton yarn as well, it added.
The Indian currency has depreciated about 7% since April.
India's overall textiles export grew by 12.2% to $16.8 billion in 2014-15.
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