India’s apparel exports do not reflect a very optimistic picture. Sustained growth remains challenging. The challenges have been further augmented by the appreciation of the rupee in recent months which has reduced competitiveness of Indian exporters vis-a-vis their global counterparts.

Fabric production declined by one per cent in the first quarter of fiscal 2018 following a flat production in 2016 and two per cent de-growth in 2017. The apparel and fabric industry has been facing headwinds as a result of temporary disruptions caused by demonetisation and transition to the GST regime.

Besides demand pressures, high raw material prices and currency movements also continue to weigh on the industry’s performance, which has been visible in the profitability of apparel and fabric manufacturers over the past three quarters. Although the profitability of export-oriented players has been protected to an extent by prudent hedging practices, the sustained strength of the rupee against the dollar may exert pressure on their pricing ability and hence demand and profitability.

Notwithstanding likely pressures on profitability, debt levels are expected to decline with the industry focusing on sweating existing assets more and undertaking limited debt funded capacity additions. As a result, the financial risk profiles of Indian exporters as well as domestic-focused apparel/ fabric manufacturers are likely to remain steady in the near term.