Already plagued by the impact of a stronger rupee, India's textile and garment industry has been dealt another blow by weaker US demand. Some 55m jobs in India depend on the industry, the second-largest employer after agriculture.

As the cost of making textile and garments in India rises, customers are shifting their orders to countries with weaker currencies such as Sri Lanka, Vietnam and Bangladesh. By some estimates, 500,000 jobs in the industry have been cut in India since the rupee rose 13-15 per cent over the course of last year.

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Far from achieving the 18 per cent growth that had been projected, textile exports have dropped about 8 per cent so far this fiscal year, says Ajay Sahai, director-general of the Federation of Indian Export Organisations.

The textile industry is clamouring for government relief. A proposal to give tax refunds to exporters and reduce interest rates on loans is in the works.

Given the situation with demand from the US, India's textile industry is looking to develop other export markets.

It has targeted Asia, Latin America and Africa. Some Indian manufacturers are even setting up factories in China.

Mumbai-based Welspun, the world's fourth-largest maker of towels, says signs of a mild slowdown emerged last year. This was reflected in Christmas sales and a weaker first quarter so far.

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"Some of our US customers have deferred some orders because they are not too sure how the market will pick up," says Akhil Jindal, a director at Welspun.

In response, Welspun, which exports premium home textiles to its own and other retail stores in the US, is buying counterparts in Europe and rapidly expanding its retail chain within India. The company plans to reduce the US share of its sales to 50 per cent from 65 per cent. "We are becoming a large player in Australia and New Zealand and also are diversifying into the Middle East. So that way we can decouple ourselves from the US market," adds Jindal.

Two years ago 86 per cent of textile exports to Europe were denominated in dollars, according to FIEO. That has fallen to 65 per cent this year as the industry weans itself off the US currency.

Large players might be able to weather the storm by diversifying and seeking other markets. But thousands of India's small textile businesses "are definitely in trouble", says Mr Sahai.

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