For the last five years, the Bhadohi carpet industry, spread across nine districts of eastern UP, has been hurtling from crisis to crisis. First, the industry was hit by the slowdown in 2008-09, followed by the US debt crisis in 2011 and then the credit downgrade of India by Standard and Poor’s. Now the falling rupee has added to their woes. Earlier only Iran and Pakistan were their main competitors, but now machine-made Chinese carpets are giving tough competition to Indian products in the international market. Bhadohi produces both machine and hand-made carpets.
Contrary to the popular belief that with the rapid fall in the value of the rupee, the industry would be reaping the windfall, the carpet industry in UP has suffered a big setback as most of its raw materials are imported. Moreover, with the rupee devaluation, foreign buyers of the carpet are exerting pressure on the exporters of Bhadohi to slash prices, which has further aggravated the situation for the industry.
“The business is very bad right now, daily fluctuations in the value of rupee has hurt our business most and no new transactions are possible in such an unstable financial environment. It is highly erroneous to believe that with the rapid fall of the rupee, the carpet industry is enjoying the best of both the worlds. The cost of the imported raw material has almost doubled and the situation is so volatile, no one knows where the value of rupee will settle in the next 48 hours. The instability in the financial market coupled with the hike in raw material cost has led to more than 50 percent decline in exports. This is the peak season for the sale of carpets, a luxury product. It begins in September and lasts till March. The demand slumps in summer months in the international market,’’ said Onkar Nath Mishra, President of the All India Carpet Manufacturers Association (ACMA) based in Bhadohi.
“We had pinned high hopes on the turnaround of the US economy, hoping to bag big orders. But the rapid fall in the value of the rupee – as much as 25 percent in a month – has crashed all our hopes. The carpet industry has lost a lot because of the devaluation of the Indian rupee as all the raw material for the industry like tools, dyes, chemicals and wool yarn are imported. To stay afloat in the business is now top on our agenda,’’ said Abdul Hadi, a carpet manufacturer and exporter.
“The ACMA people have deep pockets and the recession and boom is merely a trade cycle for them. They can survive under both situations. It’s the artisans, weavers and the carpet designers who are worst affected by the fall in the value of the rupee. The cost of the raw material, particularly the imported wool yarn, has more than doubled. The wool yarn, which used to cost Rs 200 per kg, is now over Rs 400 per kg. Earlier I used to get over 2,000 orders in a year for designing the carpet, both handmade and tufted; now it has reduced to 200-250. With the fall in the value of the rupee, foreign buyers are exerting pressure on exporters to slash the cost. On one hand, the cost of the imported raw material is galloping, while on the other, foreign buyers are asking us to cut the price. How can we survive?’’ said Onkar Nath Shukla, a carpet designer.
According to ACMA, the carpet industry of Bhadohi has been facing tough times since 2008-09. Entirely export oriented, the industry is highly labour intensive and spread in nine districts of UP: Bhadohi, Mirzapur, Sonbhadra, Varanasi, Chandauli, Allahabad, Kaushambi, Jaunpur and Ghazipur, employing over 2 million people. The share of UP in total carpet export was over Rs 2,000 crore in 2012-13.