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India’s apparel export growth to remain flat, say experts

"As per textile trade analysts and industry stalwarts, India’s apparel exports growth will remain flat or may see marginal rise this year, due to factors like GST, rupee appreciation against the dollar and sluggish global demand. As Rahul Mehta, President, Clothing Manufacturers' Association India (CMAI) points out, the rise in minimum wages and rupee appreciation have resulted in estimates of sluggish growth in apparel exports. The rupee has risen to 64.2 against the dollar from 66.5 last August. This is in contrast to six consecutive years of depreciation. India had posted $17 billion worth apparel exports in 2016-17."

 

 

Indias apparel export growth to remain flat say experts

 

As per textile trade analysts and industry stalwarts, India’s apparel exports growth will remain flat or may see marginal rise this year, due to factors like GST, rupee appreciation against the dollar and sluggish global demand. As Rahul Mehta, President, Clothing Manufacturers' Association India (CMAI) points out, the rise in minimum wages and rupee appreciation have resulted in estimates of sluggish growth in apparel exports. The rupee has risen to 64.2 against the dollar from 66.5 last August. This is in contrast to six consecutive years of depreciation. India had posted $17 billion worth apparel exports in 2016-17.

Indias apparel export growth to remain flat

 

As per Apparel Exports Promotion Council (AEPC), India saw a marginal 5 per cent growth in apparel exports which was worth $6.9 billion for April-July 2017. In fact, the industry had expected 15 per cent growth, however, things are sluggish now. Apart from GST and rupee appreciation, what has also affected the industry is a rise in raw material prices and wages.

Apparel exports remain sluggish

There are no signs of revival for global apparel trade. This has resulted in sluggish demand in key importing countries. According to ICRA, this may result in India’s apparel exports continuing to remain volatile. According to Jayanta Roy, Senior VP and Group Head, corporate sector ratings, ICRA, although there have been brief phases of growth in the past 18 months, the trend has been unsustainable and failed to instill confidence. In such a scenario, sustained growth in India’s apparel exports remains challenging. The challenges have been further augmented by the appreciation of rupee in recent months, which has reduced competitiveness of Indian exporters vis-à-vis global counterparts.

According to the report, the apparel and fabric industry has been facing headwinds as a result of temporary disruptions caused by demonetisation and transition to the GST regime. The impact of these developments has been more direct on highly fragmented fabric segment, with fabric production declining 1 per cent in the first quarter of 2017-18 following flat production in 2015-16 and a 2 per cent decline in 2016-17.

Despite significantly higher raw material prices, revenues of fabric manufacturers that ICRA contacted grew a marginal 4 per cent in the first quarter of 2017-18 pointing towards a steeper de-growth in sales volumes vis-a-vis production volumes. De-growth in fabric sales volumes in the first quarter was higher than the aggregate nation-wide production de-growth of 1 per cent due to the clearance of channel inventory by intermediaries prior to GST implementation, Roy points out.

ICRA noted although profitability of export-oriented players have been protected to an extent by prudent hedging, sustained strength of the rupee might exert pressure on their pricing ability and hence demand and profitability. Notably, the likely pressures on profitability, debt levels are expected to decline with industry focussing on sweating the existing assets more and undertaking limited debt-funded capacity additions. In such a scenario, it is expected that the financial risk profiles of Indian exporters as well as domestic-focused apparel/fabric manufacturers will remain steady in the near term.

 
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