Mumbai: India’s apparel exports have fallen for two years in a row. Estimated at $16.2 billion in FY19, the country’s apparel exports fell by 1.2% from FY18, which in turn was 4% lower than the previous year.

This comes after annual average growth of 5.7% between FY10 and FY16. The reasons for the slowdown range from issues on the domestic front to slackening global demand.

According to Chandrima Chatterjee, adviser at Apparel Export Promotion Council (AEPC), the time taken by the industry to align to the new goods and services tax (GST) regime, downward revision of export incentives, and the credit squeeze particularly faced by small and medium enterprises adversely impacted exports.

That’s not all. Even the share of apparel exports in the country’s total textile exports has fallen sharply from 51% in FY17 to 45% in FY19. Industry experts attribute the growth between FY10-17 to shifting of manufacturing bases by developed countries to low-cost emerging nations such as China, India, Bangladesh and Vietnam.

However, the recent slowdown in global demand has increased competition in the markets, which also coincided with taxation changes in India. Analysts say that there was a 6-7% impact on costs, which hurt profitability of garment makers too.

There are other reasons for the decline. According to CARE Ratings Ltd, “India’s apparel exports comprise mainly of cotton garments (51%), with manmade fibre accounting for around 28%. India needs to diversify its fibre base, as global consumption is diversified and MMF (man-made fibre) holds a much larger share as compared to cotton."

That apart, competition on pricing has also increased in recent times. CARE Ratings adds that India is projected to lose market share to Bangladesh and Vietnam for ready-made garment exports to the European Union (EU), because of lower competitiveness, as Bangladesh has duty-free access to the EU.

However, apparel manufacturers are now focusing on diversifying exports into countries such as Japan, Israel, South Africa and Hong Kong.

How far these new markets help will determine export trends in the years ahead.

Published On : 23-04-2019

Source : Live Mint