The falling value of the Indian rupee is proving to be something of a mixed bag for the country's clothing industry.

On the one hand, growth in exports is starting to pick up as Indian garments become more competitive in global markets. On the other, not only is depreciation pushing up manufacturing costs, especially on imported raw materials, but buyers, never slow to miss an opportunity, are renegotiating contracts in search of discounts.

"A stable currency and exchange rate is always good in the long run. We want buyers to have long-term contracts," said Dr A Sakthivel, chairman of the Apparel Export Promotion Council (AEPC) last week as figures were released showing the value of India's garment exports rose in both July and the first four months of the current fiscal year. 

But he admitted that while the impact of rupee depreciation "is advantageous in the short run, it is [also] pushing up the manufacturing cost. Moreover, on account of deprecating rupees buyers start asking for discounts."

Problems are particularly acute for products that have a high percentage of imported content, since they face a surge in input costs because of the rupee's diminished purchasing power - which in turn puts pressure on margins. This is especially true in ready-made garments, with an average 25% to 35% import content.

The Indian rupee has depreciated by more than 23% since May, falling to an all time low of 68.83 against the US dollar at the end of August.

It is currently hovering at 63.35 per dollar, and forecasts from India's Crisil Research suggest that while the rupee will continue to strengthen from its current levels, the 2013-14 average will still be 5-8% weaker than that of 2012-13.

In theory, rupee depreciation should help to reverse last year's downturn in exports - and there are already some positive signs. 

Apparel exporters in Asia's third-largest economy earned around US$12.9bn in the last financial year - a total that slipped 5.8% from the year before, largely on account of lower sales to Europe and the US.

And cumulatively, apparel exports have also registered growth of 13.1% over the first four months of the current fiscal year, which began in April, to reach US$4.84bn. This accelerated to an even more impressive 19% year-on-year in the month of July to $1.28bn, and in rupee terms, exports surged 28%.

However, while US apparel imports from all countries rose 3.6% to $44.7bn during the first seven months of 2013, US imports from India rose by a slower 3.1% to $2.0bn.

Likewise, while the EU market's total apparel imports fell 0.6% to $32.8bn in January-May of this year, India's exports to the EU declined by a steeper 1.1% to $2.5bn.

Between them, the US and Europe together account for about 60% of India's total apparel shipments - but the country's exporters have continued to lose market share to competitors like Bangladesh and Vietnam.

"RMG exporters may be able to recapture some volumes, as buyers abroad look at diversifying their sourcing base after the recent collapse of [the Rana Plaza factory complex] in Bangladesh," Crisil Research said in its report earlier this year.

Although as yet there is little sign of this, with Bangladesh's apparel shipments to the US up 9.2% to $2.997bn in the first seven months of the year. Vietnam, too, saw its US apparel imports surge 12.5% to US$4.6bn in the same period.

"The currencies of other competing countries such as Bangladesh, Vietnam, and China have remained more or less stable against the dollar since the beginning of 2013-14," the research firm added.

Neighbours like Bangladesh are closely watching the impact of the weak currency in India, its second largest trading partner.

But here again the likely outcomes are mixed, ranging from lower raw material costs - around one-third of Bangladesh's imports from India consist of cotton, cotton yarn and fabrics for the export-oriented ready-made garment sector - to the possibility of stronger competition from cheaper Indian garments.

Overall, it seems, India's export-oriented sectors such as ready-made garments will only benefit marginally from the rupee's depreciation - with rising demand and competitiveness having a greater role to play in growth and profitability than currency movements.