India’s textile and apparel industry anticipates further dip in exports this year due to falling global demand and higher input costs, which offset the gains of a depreciating rupee against the dollar. The industry contributes 13% to India’s exports and 4% to the GDP.
Despite a host of positive factors for India, including rising input costs in rival China, business shift from neighbouring countries like Pakistan and falling market participation of its peers in the US and the UK, the industry is still grappling with the sluggish demand coupled with high input costs, president of the Clothing Manufacturer Association of India (CMAI), Premal Udani, told ET.
“Plummeting demand and rising input costs had hammered us badly during the year. Since April this year, exports fell by about 30% and production shrank 20-30%. And this led to closure of units in major hubs at Tirupur, Bangalore and Delhi which left thousands jobless,” Mr Udani said.
The falling demand for garments and textile products in the US and European countries has made the manufacturers panicky, who have started cutting down production in a phased manner. India exports half of its production to the US and Europe.
The textile industry exports stood at $22 billion last year, lower than the targeted $25.06 billion.
If the order book position is anything to go by, this year may see further dip in exports. Order book of leading exporters has shrunk 15-20% on an average for the third quarter of the current fiscal, while the domestic sales have dropped 10-15% on a year-on-year (y-o-y) basis.
The country’s top industry bodies — FICCI and CII — have predicted a production drop of around 10-40% across the manufacturing sector and expects more lay-offs to manage the costs in the near future. However, the government had announced a Rs 1,400-crore stimulus package for the textile industry for technological upgradation and giving continuous assurance of more booster packages.
But industry players said revising the cotton prices would have been a greater help. The CMAI feels that the rate of duty drawback should also be increased by at least 3-4% so that the industry could become more competitive.
Even though the global cotton prices have come down by 25-30%, the domestic minimum support price (MSP) is still higher by 40 % over the previous year, which is hurting the competitiveness of the industry, said Naishdh Parikh, director of Arvind. He added: “The cotton prices were raised 40% to Rs 2,850 a quintal in September, which was 20% higher than international prices.”
According to industry analysts, the cost of inputs in India, especially cotton, has come down from its peak, but still remains significantly high on a y-o-y basis. The immediate competitor, China, is facing pressure of high input costs — labour, power, currency, lower export subsidies — which had surged nearly 20% y-o-y in the recent past, resulting in increasing competitiveness for India.
