The Impact of Global Recession on the Foreign Exchange Exposure of Indian Readymade apparel Manufacturing Companies

Abstract

The global economic recession has taken its toll on the Indian economy, with huge losses in business and export orders to the tune of millions of dollars, and tens of thousands of job losses, especially in key sectors like the information technology, automobiles, textile and export-oriented firms. The present study has addressed the impact of the global recession in terms of the foreign exchange exposure, i.e. exposure to foreign exchange rate movements. The results of the study show that there has been a significant trend decrease in foreign exchange revenues as a percentage of total revenue, and a slight trend increase in foreign exchange expenses as a percentage of total expenses. These trends are a direct reflection of the effects of the recession on textile and apparels exports. Also, in terms of foreign exchange exposure, it was found that though most companies have significantly lower foreign exchange exposure post-recession, but there are several companies with a consistently high level of foreign exchange exposure, even during the recession.