Call@   + 91-11-47048012

Email@   info@exportgenius.in

 ^

Rising output costs hits textile export

Textile export contracted in calendar year 2016 for a consecutive year, due to weak global demand and India's losing competitiveness.

Data from the ministry of textiles shows a five per cent fall to $34.9 billion (Rs 2.3 lakh crore) for calendar 2016, from $36.7 bn in 2015.


In September 2016, the central government announced a Rs 6,000-crore package to boost textile export. This was on recommendations from the industry, and a commitment from it to raise annual export to $50 bn and create 100,000 new jobs.

"Textile demand remained sluggish, following uncertainty in globally economy. And, India has been losing its competitiveness to China, due to almost flat (rise in) cost of production there and depreciation in their currency. In contrast, the cost of production had increased sharply in India over the past year. Additionally, the rupee has appreciated around five per cent. So, India's receivable export proceeds have declined proportionately," said Rahul Mehta, president, Clothing Manufacturers' Association of India.

According to trade sources, the past year has seen a 25-30 per cent jump in apparel production's labour cost. Since labour is a major component of the overall cost, this rose proportionately. And, while the Chinese yuan weakened by nine per cent over the year, the rupee rose against the dollar by five per cent.

"Overall, therefore, India's textiles and apparel export are estimate to remain flat in calendar 2017, as the benefits offered by the government are negated by a sharp increase in the cost of production and appreciation in the rupee," said Mehta.

Rating agency ICRA says the global apparel trade remains under pressure, having contracted in 2016 for another year, with subdued demand in key importing countries. While volume growth was marginally positive, primarily aided by a recovery in demand from Europe, realisations fell. The latest trends point to a modest recovery in calendar year 2017.

"India's apparel export grew a tepid one per cent (in dollar terms) for a second year in FY17. This trend, however, needs to be looked into in conjunction with the decline in global apparel trade in value terms," said Jayanta Roy, senior vice-president at ICRA.

The pace of growth for other Asian apparel exporters Bangladesh, Cambodia, and Vietnam has also moderated during these two years, though their growth was better. Scrapping of the proposed Trans Pacific Partnership (TPP) has weakened the prospects for Vietnam, which augurs well for India.

Given the weak trend in global trade, home market-focused apparel makers are expected to do relatively better than exporters in FY17. However, given the temporary pressures observed in domestic consumption, owing to demonetisation, the gap in growth rates is likely to be narrower.

Subdued offtake by apparel makers, in addition to meagre fabric export, continue to weigh on fabric demand. The country's fabric production was tepid in April-September 2016, first half of this financial year, with modest growth of two per cent, after a flat trend in FY15. Demonetisation added to the challenges faced by this fragmented and unorganised segment, seen in a six per cent fall in fabric production during the December quarter. This is expected to hit total output in FY17, which might see a one per cent fall.

Source: Business Standard
Added On: 2017-03-18