India’s apparel exports in the third quarter of fiscal 2019 remained lower than the average quarterly exports during the past five years.
India continues to experience headwinds in the form of intense competitive pressures from nations having a cost advantage. While China, the world’s largest apparel manufacturer and exporter, continues to shed market share in global trade, India has not been able to capitalise on the opportunity. Instead, a large chunk has been garnered by Bangladesh and Vietnam, the second and the third largest apparel exporting nations globally.
The EU-Vietnam FTA can weaken India’s competitive positioning in one of the key apparel markets, accounting for 37 per cent of India’s apparel exports in 2018. Bangladesh, which enjoys a duty-free access to the EU market since 2001 under the Generalised Scheme of Preferences, has been able to expand its market share in EU from less than seven per cent in 2001 to 20 per cent at present. But India has been barely able to maintain its share at six per cent or seven per cent.
Indian exports are set to recover with internal challenges and abrupt pressures subsiding, though the pace of recovery is likely to remain muted considering the challenging environment.