After witnessing a sharp decline since April, readymade garment exports have started picking up. In April, exports dropped by around 91.04 per cent in dollar terms, gradually, as exports started recovering the drop in August was 14 per cent.
In April 2020 exports dropped by 91.04 per cent to $126 million as compared to $1.409 billion in April 2019. In August, exports rose to $1.084 billion as compared to $1.260 billion, a drop of 14 per cent year on year.
Recovery was largely driven by the European Union (EU).
Garment exporters have started seeing the revival of demand, which in turn has increased capacity utilisation to around 60-80 per cent. Companies said that customers are placing new orders based upon the season and number of stores they have opened globally and e-commerce is also picking up pace. They expect growth to return by early next year.
The development comes months after shipments were kept on hold by international customers due to lockdown imposed in their respective countries. This led to revenue loss during the lockdown period. But now, they have started witnessing significant recovery in the order flow from the customers since May 2020.
Raja M Shanmugam, president of the Tiruppur Exporters Association said that inquiry levels are more than last year. Brands are now looking for alternative for China. But three major challenges Indian exporters need to address are quality consistency, quantity fulfillment and timely delivery commitment. "These factors have always been an obstacle for any buyer to look at procuring from India. Pricing challenge is part of any trade, if we can address these factors for sure we can get a good pie of the global trade," he said.
“If we address the above-mentioned lacunas we are going to get orders from brands since there is a silent anti-China feeling prevalent all across the globe,” he said.
On the impact of the withdrawal of Merchandise Exports from India Scheme (MEIS), he said, it will not have an impact on the Apparel exports since it has been withdrawn last year itself and it was replaced with The Rebate of State & Central Taxes and Levies (RoSCTL). Now the government is replacing ROSTL with Remission of Duties or Taxes on Export Products (RoDTEP). So we don't see any impact in the government's decided not to extend MEIS.
SP Apparels, one of the leading exporters in the country said that all the factories are operating at around 60 per cent capacity due to social distancing norms imposed by the authorities.
The company managed to address the labour shortage by supporting all the migrant workers' stay and food in the hostel premises. Those who have gone also have started returning, while the return of some others is restricted due to transportation issues.
On the Covid-19 impact, the company said, besides the order flow, the Indian Rupee depreciated significantly in the fourth quarter compared to last year. This impacted company's hedged positions and resulted in hedging losses and the loss of revenue due to the pandemic is expected to impact the hedges and may see an impact in the first and second quarters also.
Rahul Mehta, Chief Mentor at The Clothing Manufacturers Association of India had earlier said, "most of the previously cancelled orders are being reinstated to start with, and new inquiries are also being received. Most of the European as well as US buyers are talking to exporters about lockdown situation, factory operation, and Covid-19 status. Discussions have started about the ability to supply, deadlines, amid very positive signs."
He expected exports to pick up much faster and end up with a much lower deficit compared to the domestic market, where consumer sentiments, local lockdowns, and restrictions on mall activities are still preventing a rapid recovery of the Industry. He had cautioned that today's prices may in fact show a negative trend. Dollar weakening will impact profitability. "The 2020-21 fiscal year may end up with a deficit of 20-3o per cent. It will probably show good growth in 2021-22 due to the low base of 2020-21 and market sentiments getting stronger in 2021-22."
Published On : 16-09-2020
Source : Business Standard
