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Tuesday, July 31, 2001

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Industry


`Textile industry should adopt risk management tools'

Our Bureau

COIMBATORE, July 30

GLOBALISATION has rendered businesses risk-ridden and the domestic cotton and textile industry has suffered setback because the latter could not cope with the changes in the market place, according to the President of the East India Cotton Association (E ICA), Mr Suresh A. Kotak.

Speaking at a road-show on `cotton futures' jointly held by the Confederation of Indian Industry (CII) and EICA here, Mr Kotak said the Indian textile sector would find trade becoming fierce in the face of abolition of quotas by 2005.

The market risks may become composite in nature in a globalised trade environment with issues such as non-tariff barriers adding new dimensions.

It was imperative for the textile industry to apply the system of confining risks by turning to risk management mechanisms such as cotton futures that hedges against price volatility and uncertainty in market.

The Indian textile sector enjoyed competitive advantages to step up its share in global trade in the free market environment and the factors favouring it were the present low market share of three per cent, its status as the second largest cotton consume r in the world, its emergence as a major importer of cotton, said Mr G. Ramachandran, a World Bank consultant who addressed the seminar.

These factors had also made the cotton textile industry a right candidate to adopt cotton futures trading. Cotton constituted 60 per cent of the production cost for cotton textile industry.

Managing price risk at the start of the value-chain would become essential for the country's export to be competitive and retrieve its pre-eminent position in cotton textiles it once enjoyed, he added.

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