SPECIAL REPORT8SUNDAY TIMES OF INDIA, NEW DELHI

OCTOBER 28, 2007

Avijit Ghosh & Prabhakar Sinha | TNN

There are no signboards outside Rashid Ex-ports. The daunting black iron gate is thesignature of the factory located on Samb-hal Road, off Pandit Nagla bypass. Once in-side, you need to cross a narrow bridge cre-ated over an artificial waterbody and sur-

rounded by palm trees. Then you reach a capacious hallwhose double winding staircases remind you of an AVMProduction film set of the 1960s. There’s an air of opu-lence about the complex.

But first impressions can be red herrings. As co-own-er Mohammed Mansoor takes us on a guided tour ofthe factory, one realises that truth can be far more com-plicated than what appears at first sight. “There was atime,” says Mansoor pointing to the polishing unit,“when we had so many workers here that there washardly any place to stand. Now it is a different story.”

Now, the polishing unit has been slashed to 25 from400 workers. The finishing unit is down from 250 to 15and the casting unit cut down from 80 to 20. The annu-al turnover, too, has gone south — from Rs 28-35 crorein the late Nineties to Rs 12 crore in 2006-07. This yearso far, it is further down to Rs 4 crore. “If the businessgets any worse,” says Mansoor, “I might have to lay offmore.” There are no signs of improvement. Businesswas almost zero in the Handicraft Export Fair (Oct 16-19) in Greater Noida. “In comparison, we had on-the-spot orders worth Rs 3.5 crore last year,” he says.

Mansoor’s shrinking business is emblematic of thecrisis in the export-based handicraft industries ofMoradabad, also known as peetal nagri, the brasswarecity. The western UP town’s products — candleholders,flower vases, bowls and decorative figurines — foundlucrative markets abroad after the export boom kick-started in 1980s. A few ups and downs apart, it remainedlike that for the next two decades. An estimated 600 ex-porters aided by 5,000 auxiliary units and thousands ofcontract labour churned out metal giftware in brass,aluminium, iron, glass and wood. Official business fig-ures are unavailable but according to ballpark figuresthe town’s turnover had crossed Rs 2,000 crore by theturn of the century.

Then the downturn began. In the early years of thenew millennium, main competitor China developed anew, cheap material called polyresin, a kind of plasticmixed with mud that could act as a substitute for brassfor 1/10th its price. Concurrently, metal prices be-gan rising exorbitantly. Since January 2005, theprice of brass has gone up by 120%, from Rs115 per kg to Rs 255 per kg at present. To sur-vive, the city shifted to other metals suchas aluminium. Now, industry sourcessay, aluminium, steel and glass togethermake for around 80% of the exports.Brass constitutes only 5% of total ex-ports.

But the rise of the rupee proved tobe the last straw. Since March 2007, In-dian currency has appreciated by over11%: from around Rs 44.50 to Rs 39.50

per dollar, causing a sharp dip in exporters’ profit mar-gins. Exporters say the profit margin was around 20%.But with about 15% lost to the dollar slump since Octo-ber 2006 and another 5% to cost escalation, business hasceased to be profitable. “With the dollar slide continu-ing against the rupee, we are unable to quote a price foradvance orders,” says top exporter Ajay Gupta.

Gupta further explains that the value of the rupeechanges substantially between the time of sending thequotation to a potential customer and till the final or-der is secured. Therefore, he says, even if one is readyto incur the cost to cover the depreciation in the dollarin the future, it is not possible to hedge the losses com-

pletely because of the rise in the rupee value in the in-tervening period.

The overall effect is dramatic: a sharp drop in ex-ports, squeezing out of small players and huge loss ofjobs for contract labour. Iqbal Shamsi, president, Ex-porters’ Association of Moradabad, says the town’s ex-port has declined to almost half in the current businesscycle. The losses cut across the hierarchy of exporters.But those with US-based trade have suffered more.

Small exporter Asad Jamal is a victim of the down-turn. Back in 1997, he was a high flyer (“I have been toUSA 45 times,” he says) with a flourishing businessworth Rs 3.25 crore. “Now I have Rs 60 lakh worth ofcredit. And from Asad Jamal, I have become a sad Ja-mal,” he jokes. Nowadays he works as a daily trader inthe stockmarket. His three cars, including a HyundaiAccent, have been sold off. He rides a motorbike.

Falling fortunes aside, exporters have also had to ad-just to a different kind of treatment from their clients.In the 1990s, exporters like Shamsi were received at theairport, taken out to dinner at swank restaurants andgiven bulk on-the-spot orders.

“Now they ask us to submit samples and photographs.We wait for their replies on e-mail,” he says. Gupta adds,“Earlier every quotation we sent was accepted. Thesedays the conversion is not even 50%.”

Even labour contractors are feeling the heat. FahimJaved got work worth Rs 2 crore last year. “Work is downby 75% this year,” he says. One of Mansoor’s contrac-tors has had to sell off his home.

But the worst-hit are artisans and workers. Whenbusiness was good, they earned anything between Rs80-150 a day. Now many are without jobs. In most firms,at least 80% of workers are daily wagers. Both Guptaand Shamsi have cut down on their contract labour by30-40%. But with many exporters shutting shop, theoverall job loss is likely to be over 50%.

Several villages and semi-urban clusters such asRampur Doraya (see box), Kundarki, Kundawali and Mi-lak functioned as auxillary units. Now they are out ofwork. Labour inspector Lalta Prasad says most labour-ers work on daily wages and cannot be protected by law.

Unlike the workers and small contractors, the bigexporters have diversified to other businesses. Nowa-days Rashid Exports also imports Chinese glass items.They have opened a resort in Nainital. “We are also con-sidering setting up a public school,” says Mansoor. IqbalShamsi has opened an eye hospital. Wasim Khan is atop paper merchant. Many of them, including Mansoor,have invested in real estate in NCR and areas aroundMoradabad. One exporter has bought a car agency whileanother has got into retailing.

Local labour officials point out that a majority ofsuccessful exporters never invested in modernisingtheir factories or in research and development. “Whichis why they are unable to handle competition,” says alabour official. Exporters though maintain it isn’t easyto be competitive in a scenario where much of the workis carried out through expensive diesel generators andwhere costs of transportation, warehousing and inlandhaulage are high.

If the present situation continues, says a top ex-porter, the industry will shrink further in the com-ing months. In other words, more small exporters willshut shop, contractors will have less work and morecontract labour will fall on hard times. The shine hadlong worn off the Moradabad industry. Now the sur-vival of thousands who lived off it is at stake.

avijit.ghosh@timesgroup.com

prabhakar.sinha@timesgroup.com

Poised languidly alongside a grimypond strangled by water hy-acinths and rife with fetid smells

of rotting garbage, Rampur Dorayaneither has the dignity of a village northe claustrophobia of an urban slum.It is just a faceless, down-and-out set-tlement of 100-odd homes, about eightkm from Moradabad town.

But identity was never a problemfor Rampur Doraya. Exporters in theseparts of western Uttar Pradesh knewthat the semi-urban dwelling spe-cialised in casting, a process throughwhich molten metals are moulded intopreferred shapes, and was among the5,000 auxillary industrial units thatserved Moradabad’s export-based met-al craft industry. In fire pits, often lo-cated inside homes, metals wouldevolve into graceful liquid and soonbe transformed into the shape of a can-dle stand’s midriff or a flower vase’sbottom. Anonymous men, among thelowest in the export industry’s foodchain, delivered orders on time; andwho, if need be, doubled up as contractdaily-wage labour.

That was then. Now for over a yearthe orders have dried up. Rampur Do-raya once had 60 casting pits; only acouple of them have work now. Con-tract labour jobs, too, have dipped dra-matically. Many are either jobless orunderemployed. Most of the workerscannot read or write. Unaware of thedepreciating dollar and the vagariesof the larger global economic forcesthat have conspired to take their liveli-hoods away, they are like flash floodvictims who cannot find a way out. Forthey have neither any alternate skillsnor a piece of land to fall back on. “Iwill get my six feet of land only afterI die,” says Rahmat Ali. Like his life,the humour is black.

Small-time contractor MohammedKamal, also from Rampur Doraya, saysthat 15 men from the cluster workedfor him. “Money was never plentifulbut it enough to keep the kitchen firesburning. But for the past few months,there is no work at all. Many had nomoney to celebrate Eid,” he says. Tiredof unemployment, another small con-tractor Rafiq Ahmed has quit the pro-fession. He now works as a carpenterin Bangalore.

A majority of the casting pits havesince been covered. At the cluster’s en-try point, remnants of one such shedwith 10 pits are visible. “For us, thisplace was like a mini-factory,” saysNazim Ali pointing to the spot. “Nowyou can see dogs are lying there. Whatdo we do?”

With more and more workers get-ting laid off due to falling exports andplummeting profits, the contract work-ers are looking for odd jobs as rick-shawpullers or hawkers. Out of workfor the past six months and having notpaid his rent since then, MohammedAshraf pulled a rickshaw on Tuesdayafter hiring it for Rs 30. His earnings:Rs 40. “How can I survive on Rs 10?”he asks.

Nazim Ali wants to become a hawk-er. But setting up a cart with fruitscosts at least Rs 5,000. “Where can I getthe amount?” he asks. That’s the stateof affairs: plenty of uncomfortablequestions but no easy answers.

In a small workshop inside hishome, Mohammed Akhlaq, 27, is cast-ing a few aluminium slabs. “I got threedays of work after five months of wait-ing,” says the father of five, who alsopulls rickshaw in his spare time. “Doyou think there will again be a demandfor our kind of work?”

AVIJIT GHOSH & PRABHAKAR SINHA

Left to rust, men ofmetal turn hawkers

Boomtown in gloom: Knitwear hub out in the cold Rajesh Chandramouli | TNN

Kruthivasan, Murugan and Balu do not knoweach other. But ask any of them what’s ontheir mind and what you get is a gloomy re-

frain: ‘‘It’s going to be a dark Diwali this year.’’Blame their plight on the rising rupee which is

affecting thousands of livelihoods in and aroundthis knitwear hub near Coimbatore. For folks ac-customed to dollar surges, these are unprecedent-ed times. The initial sense of disbelief has givenway to uncertainty. Says R Balu, who runs a smallgarment export unit: ‘‘Initially we kept doing busi-ness, running losses on practically every order.Now we have started rejecting fresh orders. I re-jected orders from Orchestra of France, a marqueeclient for which I spent many weeks preparing.They wanted the contract to be pegged against thedollar. I have no idea where the rupee-dollar fightis headed and so decided to play it safe.”

Typically, exporters operate on a net margin of5-7%. With the rupee appreciating over the dollarby more than 14% in the past 12 months, exportersare in deep crisis. Many have politely turned downorders which are dollar-pegged. “It is better to trade

in the euro now. But it is also difficult as we are ac-customed to dollar billing,’’ adds Balu.

Tirupur exported knitwear worth Rs 11,000crore last fiscal and it expects a 10% fall this year.With orders thinning down, workers like Muru-gan and Kruthivasan are feeling the heat. Mu-rugan, 40, is a tailor who migrated from Ra-manathapuram some years ago. “In 2002, I earnedRs 90-100 per shift and used to work 15 shifts aweek. Now I earn Rs 150 per shift, but am given

work for only seven to eight shifts a week. In themeantime, my family has grown and costs havegone up,’’ he says.

Now his employer has said that if rupee ap-preciation continues, he will close down opera-tions. ‘‘I don’t understand a word of what thesepeople are talking about. What is my fault if therupee rises or falls? Why should I pay the price forit?’’ Murugan asks bitterly. ‘‘The government makesannouncements that it has signed MoUs with bigplayers to provide jobs to thousands. Here in

Tirupur, thousands of us are going to be thrownout in the next few months. And I may have to headback to Ramanathapuram after Diwali.”

Kruthivasan, 40, is already out of work. Hewas working in the HR department of TrikaalGarments, a garment sub-contractor in Chennaiuntil they closed shop. “We used to do job workfor Celebrity, Ambattur Clothing and Ratha Over-seas, all big garment exporters. They have stoppedplacing orders with us, so my owner decided toclose down the unit from September 30. I have tolook for another job.”

That’s the story in Tirupur these days. Of thetown’s four lakh workers, 7,000 to 8,000 have beenrendered jobless in the past three months, ac-cording to A Sakthivel, president, Tirupur Ex-porters Association. ‘‘The big players have start-ed slowing down production, the medium oneshave started lay-offs while smaller exporters haveannounced closure of operations,’’ he says. TEAexpects the job loss in the region to run into tensof thousands. For Tirupur, once famous for hav-ing a job for anyone who walked into the town,times have indeed changed.

rajesh.c@timesgroup.com

GAINING

CURRENCY

*Rupee exchange

rate against US $

3/10/06 45.84

1/11/06 44.93

1/12/06 44.56

2/1/07 44.20

2/2/07 44.11

1/3/07 44.27

3/4/07 43.13

3/5/07 41.18

1/6/07 40.54

2/7/07 40.66

1/8/07 40.55

3/9/07 40.88

1/10/07 39.73

26/10/07 39.51

TAILORMADE FOR EXPORT: But this year orders are thinning down and job cuts are spiralling

MORADABAD

TIRUPUR

GATHERING DUST: Export items (above) have few takers and contract workers (below) have no jobs

HIT BY THE RISING RUPEEA rampaging rupee may be great news for somefolks, but exporters are feeling the squeeze. Sunday Times tracks the crisis on the ground

Small-time

exporter Asad

Jamal has shut

shop. Once he

owned three cars,

now he drives a

motorbike

Re surge: FAQ of the matterWHAT’S FUELLING THE

RUPEE SURGE AGAINST

THE US DOLLAR?

It’s the rise of India as an attractiveinvestment destination. In 2007 so far,FII fund flow into the stockmarketstands at $18.80 billion, more thandouble of $8.85 billion in the same pe-riod last year. Another $34.67 billionhave come in as remittances under‘invisibles’, which includes fundtransfer by NRIs and incomes fromsoftware exports. In other words, weare flush with dollars and the rupee,which was hovering around Rs 49 perdollar in June 2002, is now up by 19%— at Rs 39.50 per dollar. Most of theappreciation (11%) has happenedsince March 2007.

Why has the trend picked up thisyear? Foreign funds are flowing insince liberalisation in 1991, but mostof the dollars were bought up by RBIwhich didn’t allow the rupee to ap-preciate. When RBI buys dollars, ru-pee supply goes up in the market,leading to inflationary trends. Withinflation around 6.5% in January-March 2007, RBI decided not to buydollars. Now, only those who need toimport buy dollars and RBI inter-

venes only selectively. So the demandfor greenbacks has dipped consider-ably while supply has increased. Re-sult: The dollar’s cheaper.

WHO GAINS BY THE RISE?

Importers and foreign travellers.When the exchange rate was at Rs 45a dollar, one had to pay Rs 450 to buya $10 item in the international mar-ket. With the going rate at Rs 39.50per dollar, Indians now have to payonly Rs 395 to buy the same item.That’s why prices of petroleum prod-ucts have not gone up in the Indianmarket although the crude price isup in global markets.

WHO IS BADLY HIT?

Exporters are facing the brunt. Whenthe exchange rate was Rs 45 per dol-lar, they used to sell a Rs 450 item for$10 in the international market. Nowthey have to sell the same item for$11.40 to keep profit margins intact.

IS INDIA LOSING ITS

COMPETITIVE EDGE IN

THE GLOBAL MARKET?

Undoubtedly. The international mar-ket is highly competitive, leaving ex-

porters with two choices: either theyslash their price or let the export or-der go. In some sectors, where theyhave good profit margins as in thesoftware sector, they cut prices tostay in the market. But in other sec-tors like garments, where marginsare lower, they cannot afford pricecuts. So they are losing market share.

In fact, in some sectors, Chineseimports have become cheaper thanindigeneous products. For instance,made-in-China Holi pichkaris, Di-wali Lakshmis and Ganeshas andchildren’s toys have flooded the In-dian markets. As a result, thousandsof artisans have lost their livelihood.

CAN THE GOVERNMENT BAIL

OUT EXPORTERS?

China has shown the way by pro-tecting the yuan. The Chinese cur-rency’s exchange rate has remainedat around 8 yuan per dollar for thelast 10 years despite the fact thatChina has compiled a reserve ofover $1.43 trillion. Experts say theIndian government should havethought of a similar mechanism toprevent such a sharp appreciationof the rupee.

HARD TIMES: Of the 60 casting pits in Rampur Doraya, only a couple are still in business

Photos: Avijit Ghosh