The dreaded trending word that haunted the global economy in 2022, recession continues trending in 2023, claiming its latest victim, the world’s fourth largest economy, Germany. As the third largest economy, Japan’s recovery is painfully slow and the USA is continually teetering at the edge of a recession. In this scenario, the Indian textile and apparel sector has felt the heat from the export side of the business and 2022 was rife with textile plants and readymade garment manufacturing factories either running at lower capacity or completely shutting down, especially the ones who were exclusively export-orientated. As an example of the true grim situation that the Indian textile sector is going through could be summed up by the statement made by president of Andhra Pradesh Textile Mills Association, Lanka Raghurami Reddy – he stated that due to the sudden drop in demand, coupled with disruption of supply of raw material and higher energy prices that was being caused by the Ukraine-Russian war, many mills had to operate at 50 per cent capacity for most of 2022 and then finally stop production all together. This was not just the situation in Andhra Pradesh but also across other textile production and readymade garment manufacturing hubs across India.
German recession highlights India’s situation today
Germany has now joined the ranks of some fellow European Union nations in the pits of recession as its GDP continued falling quarter after quarter. As Europe’s growth engine, Germany’s recession has a far wider impact well beyond its borders, exposing the other strong economy, France, to greater risks. What does this mean for India? Experts say that the Indian footwear, readymade garments and leather sectors will feel the impact of Germany’s recession directly. In the last financial year India had exported to Germany apparel worth $ 990 million, footwear worth $ 332 million and leather goods worth $ 305 million. Adidas, Puma, Marc O’ Polo, Tom Tailor, S.Oliver, Escada, MCM, Hugo Boss are some of the leading brands from Germany and a few of them have good sourcing from India. The prediction by Indian experts is that exports to Germany might decline by 10 percent and Sharad Kumar Saraf, Chairman of Technocraft Industries, Mumbai says that this is going to affect Indian exports not only to Germany but also Europe as a whole since other countries are also already in recession. Of course, India is not the only one finding its exports declining – Bangladesh, Vietnam, Cambodia, Indonesia are among the many in the same boat. The other big drag on the global economy is that the US debt crisis, which was expected but not of this magnitude, is impacting export-based economies in a negative way as they seek alternatives in a world that is already financially weak.
Domestic market is India’s trump card
An economy growing in leaps and bounds and ranked fifth worldwide, across the board, India’s domestic market has grown by 15 per cent according to Arun Roongta, Managing Director HGH India. Roongta goes on to say that local exporters can expect the low demand stagnation to continue until the next half of 2023 but then he also cautions that hopes shouldn’t be too high for now at least. Political stability and a confident government that envisions global leadership in the next few years has been the driving factor for a thrumming with vibrancy economy. The domestic market has not only been a safety net but also a driver of innovation, growth and diversification.
Levi’s chairman lauds India’s stability
As global financial experts predict India playing the role model of growth as the world grapples with recession, Chip Bergh, the Global CEO at Levi Strauss & Co lauded the politically stable environment for ensuring a vibrant domestic economy fuelled by a confident consumer who is at ease knowing the country and economy are doing well, which is not like his home base, the US, where consumers are tightening purse strings in fear of entering a recession. Talking to a leading Indian trade site, Bergh said that he not only sees India’s stability attracting FDIs but also India playing a lead role in the global supply chain.