Part 1- De Dollarization - New opportunities and the Challenges

A Review of near future global event Indian Industry will be facing Esp.Textile Industry

By Mr. Jaideep Jamkhedkar

Introduction:

Many of you will be surprised by reading heading of the article. People must be wondering what has happened now that is compelling me discuss this subject.

I have more than 3 decades of experience in Textile field in manufacturing, planning, marketing and as marketing / product strategist.

Due to various Geo Political and Geo – Economic conditions which are rapidly changing since last 4 years esp. post Covid, world is moving towards multipolar arrangement from unipolar one. We are continuously getting signal of the same. Also reverse Globalization is happening and next 2 to 3 year will be of great uncertainties. Importance of US a unipolar leader and USD as reserve and trading currency is getting challenged. This is exactly the situation created after WWII. Exhausted Great Briton lost its Pole position and British Pound lost its sheen. Through “Bretton Woods” agreement, it was agreed that USD is pegged to the gold, rest of the currencies to be pegged to the USD. Total 44 countries agreed in 1944, This also gave birth to IMF and World Bank & made provision to supply uninterrupted supply of USD. Thus, USD became world currency for trade and reserve Currency. Since then, US has been managing importance of USD as global reserve and trading currency by various means of creating demand for USD world-wide. USD is controlling @ 70% world trade in USD. (Reduced by almost 10 % since 2000). Oil is major commodity traded by OPEC.  In year 1973 agreement US and Saudi Oil for Security made it mandatory to OPEC that oil trade will happen only in USD. Weapons / Pharma deals were made mostly in USD, thus demand for USD kept on increasing. This is how Dollarization of the world happened.   This was era of dollarization of the world. There are many other Geo Political reasons and subject itself is vast, we will not go in those details, as the purpose of this narration is how to handle the situation post “Financial Reset” expected @ 2025. The reasons for impending for De Dollarization are narrated further. The signs of the same are visible and needs to be understood in right perspective. Next 2 years are of extremely important in this perspective of “Financial Re-Set” 

Subtle signs of the same are already visible. These signs are briefly discussed later.

Unfortunately, vast majority experts in the industry seems to be either unaware of the same or not understood the serious implications of the same. Textile Industry is still labour intensive and to incorporate, products / cultural changes take long time to implement. The future changes we will be talking about – will be from product innovations, development, work practices / improvisation to various marketing aspects. Advertising / product promotional Industry will get very big boost. We will talk further on this in next narration.

Dr Ankit Shah an expert in the field has been consistently presenting his views along with other experts. Dr. Ankit Shah CS,FCA, Phd (IIMA) has written elaborately on this subject in his book “ Geo Politics – Decoding intents, narratives, lies and Future. This is bench mark book in this field. I have used many of his observations, conclusions to explain the subject.

Before arriving at the subject in esp. in the context of textiles industry, I wish to explain the background by analysing, narrating various current Geopolitical events happening around us. Unless we understand these events, we will not be able to comprehend the real financial implications of the same. Diagnosis of these events in right perspective is very essential. Once we diagnose the problems, then the solutions to handle the same can be derived out of it.

The lectures of Dr Shah and his book has helped me to understand the subject more clearly. His analysis and conclusions are the bed rock for my further interpretations in context of Textile Industry. 

Current Global Geo-Political and Geo-Economical situation

• World is passing through turbulent situation. Russia – Ukraine war is on, Israel – Hamas conflict is on, China – Taiwan tension is building, Quatar is adding its own col. And now Iran – Pakistan conflict started,
• New blocks are getting formed Like BRICS (further 4 more added from Jan 2024), QUAD, Shanghai Cooperation Organization (SCO) while NAM, Commonwealth, SARC are becoming history, with this situation new challenges are coming up in near future. After fall of USSR world has seen unipolar world. Now world is moving towards multipolar world.

De Dollarization in brief –  Triggers, signs and Effects :

Please note the below list of events:

• US puts sanctions on Iran – Nov.2018.
• Many Central Banks start buying massive gold quantities
• March 2019 – Gold Becomes Tire I asset under BASEL III norm. (This is as per agreed norm by BASEL Committee norms -in 1974)
• Aug.2021 – Saudi Signs Military Co-operation Agreement – Reversal of Oil for Security Agreement.
• Dec. 2021 - UAE cancels F35 deal with US followed by US gets UAE listed in FATF grey list in March 2022.
• Feb.2022 – Russia invades Ukraine attracts further sanctions.

These are some of triggering events indicates the weaponization of Doller by US. And how respective countries are preparing themselves for countering the same. This narration is only to show how situation is building up.

US it is self is staring at slow down. Job cuts are increasing, though Fed has declared rate cut, further rate cuts in interest looks difficult, will put inflationary pressure on US economy.

Signs:

• US / China relations are strained, Economically China is not as strong as perceived to be. Lots of big players are shifting their manufacturing base out of China. Sanctions on Russia and Strained relations with US, bringing them together to work on multipolar world. 
• There is general feeling world over US is using sanctions / aids (dollar or weapons) blatantly to achieve its political goals.
• India has consolidated its position post Covid as world leader. Before Covid the “Balakot Strike by Bharat is one of corner stone of historical turn” in reference of de-radicalization / de-dollarization.
• FTA with various countries is on cards. Emphasis will be more on Bilateral trade agreements rather than multilateral ones.
• Bilateral trades are now happening in local currencies (African countries, UAE, Russia) While China – Russia trade is happening in Rubal / Yuan. So, the demand of USD is reducing slowly and importance of USD as reserve currency is under question.
• UPI system is accepted by 19 countries and many more are in line.
• Gulf / Saudi are looking for alternatives for investments, Oil stock is expected to last for next 15 /20 yr., so they are looking for alternative avenues for income through diversified investments. When bilateral trade is happening in local currencies, where to invest existing USD stock? 
• On 29^th Jan 24, UAE and China done first digital transaction (Dirham/Yuan) through “mBridge-multi CBDC(Central Bank Digital Currency). CBDC has potential to be game changer particularly in facilitating cross border settlement that currently requires Swift platform for routing funds through banks. US has total control over Swift and uses it as weapon for economic sanctions.  This is heralding impending change.
• US senet discussion, talks about all these events mentioned above but I have not come across any argument which says, de-dollarization is not coming. The only difference of in opinion is at what speed will it happen. 

I have used lots of space for explanation of geo-political and geo economical events, this is to explain the specific events happening around us and where they leading us to. We need to understand near future and long-term implications of the same.

We are now moving towards some of the outcomes of these events which will finally lead to reshape business strategies. Still there is time and one can relook the situation in context of above.

The expected outcome of this situation is as below

1. US / Bharat ties are getting stronger, Bharat is becoming strategic partner of US, and manufacturing base is getting wider. Bharat is expected to become manufacturing hub for Defence, Auto, Pharma, space, AI.  This will have effects on flourishing other industries like IT, Agro. based, infrastructure, Textiles, Real estate and final but not the least advertising and promotional (event mgt. etc)

2. USD will lose its status as only global reserve / Trading currency. It will remain part of multi-currency basket for trade and reserve currency. 

3. Value of currency against each other will be decided by new system, probably backed by Gold, key natural resources that country holds, which may be decided in due course.

4. De – Radicalization, De-colonization and De – Dollarization will go hand in hand. As UAE is trying to become global financial hub, more and more companies will open their offices in this region. Saudi has announced30 yr. tax relief package for multinational companies’ regional headquarters in Saudi, this will start from the day on they obtain license of regional headquarter. To make this reality, they will have to make their laws more liberal.

5. Weaponization of key natural resources, food will be used more decisively.

6. Rupee is set to get appreciated against USD and other major currencies.

7. This all-financial reset is expected to happen @ 2025.

8. Next 2 /3 years are the years of uncertainties, as a result more and more countries will look inwards. As a result, these countries will apply more protectionist measures.

9. US / China are also openly looking for internal consumption rather than import based. Esp. China has declared its look inward policy and encouraging more Local products.

10. Expected appreciation of Rs Vs USD is 65INR. This is posing serious threats to Indian Exports. To handle this issue, government is spending fast on developing infrastructures and alternative, innovative fuel to bring down cost of logistics. Nitin Gadkari has openly stated to bring down cost of logistics by 50 %.

Recent Interim budget presented in parliament stated “A corpus of Rs.1lac Cr will be created to with 50 yrs low or zero % interest free loans for financing / refinancing the innovations, technology investments, technology research, product innovations etc. This will boost employment. Government is working on logistic and interest cost reduction, which will make business more competitive.

Respective business will have to work on rest of cost reduction to boost their profitability.

11. Russia, Gulf countries esp. UAE, Saudi, Japan will be future emerging markets. As these economies are expected to grow fast.

12. Bharat is expected to get @ 100BUSD FDI each year. With So much FDI inflow, spending capacity of average Indians is going to increase, this will create a new segment of “Aspirational Customers” This assures increased markets for high end products across the board. Taking advantage of this situation will solely depends upon how you create your image, or how customer perceives you.   

13. This will open new opportunities for product promotional,   advertising and digital marketing companies. These companies need to prepare themselves for this global competition.

14. Fashion Industry

Indian fashion Industry till 2000 was largely limited to ultra-rich / film Industry. I believe post 2000 when European high end fabric manufacturers started making techno / commercial collaborations to set up manufacturing facilities in India. The main reason was cost of manufacturing was prohibitive in Europe and they wanted some low-cost units, who will manufacture the fabric as per their specifications, which in turn they sell in Europe / US. All these collaborations didn’t last more than a decade or little over decade. But this has given an eye-opening 1^st hand experience to Indian Business managers / Technicians and designers.

All these business managers / designers were sitting in prestigious “Premier Vision Paris”, “Milano Unica” “Texworld” etc as exhibitors. Paris, Milan, New York, are the main fashion hubs of the world.

“Premier Vision” and “Milano Unica” management control was strictly with European Manufacturers, so Indian manufacturers (with one /two exceptions) were not allowed to participate as exhibitors. These restrictions were lessened little bit later in PV (Premier Vision) but Milano Uniqua remained firm.

“Premier Vision” exhibitions happens in three places – Paris, New York and Shenzhen in China.

With the Change of role Post Financial Reset, a big opportunity opens up not only for Indian manufacturers but (all these exhibitors will line up these exhibitions in India too) various exhibition organizers, advertising companies, garment manufacturers.

Because not only manufacturing but consumption of final product is also going to happen in India. All the prestigious brands Which remained aspirational for upwardly moving young Indian will now be available in in India.

Since Post financial reset Middle East, Russia, Japan will be growing markets, Bharat is situated right in the middle of all.

All these high fashion Gurus will have to set up their shop in Bharat along with their ideas, designing concepts, product innovations. 

Along with new things learning,  we also will have inculcate their discipline, secrecy and ethical values of innovations.

Challenges for Textile Industry:

Let’s talk more specific in context of our Industry Textile

Below discussion is more specific in context of men and women wear products. I am not discussing specifically for homecare, non-wearable, Industrial textiles or Technical Textiles. One can draw their strategy in context of above narrated Geo -Political and Geo-Economical situations.

The appreciation of Rupee will pose different set of challenges. Export will be challenging while imports will be cheaper. The Indian Industry needs to redraw the Manufacturing, Products and marketing strategies.

Due to appreciation of rupee, lower end products will not be economical to manufacture esp. for mass exports;(as Bharat is not replacing China, but set to become producer of high-end products). This is exactly role reversal with Europe and US.

About The Author:

Mr. Jaideep Jamkhedkar, with a BE in Mechanical Engineering and an MBA, brings over three decades of extensive experience in the textile industry. His expertise spans across manufacturing, planning, marketing, business development, and product development. Throughout his career, Mr. Jamkhedkar has held various key positions, including Manager of Production, Deputy General Manager of Marketing, General Manager of New Business Development, and Head of Marketing. 

He has made significant contributions to esteemed organizations such as Mafatlal Industries, where he worked in both manufacturing and marketing roles, Oswal F.M Haemmerle Textiles Ltd as the Head of Domestic Marketing, JCT Mill as the General Manager of New Business Development, and F.M Haemmerle Textiles Ltd as the Head of Marketing. His extensive experience and diverse skill set have made him a valuable asset in driving growth and innovation in the textile industry.