The pace of growth in India’s apparel exports is likely to remain contingent upon the industry’s ability to overcome the internal as well as external headwinds that it is currently facing, feels Icra.
According to a Icra report released on Monday, while transition to the new taxation and export incentive regime has posed liquidity challenges for the industry, intense competitive pressures in the global market, particularly in light of impending trade agreements and foreign currency movements pose additional challenges. In addition, uncertainty on the apparel exports to the UAE looms, in light of inexplicable trends witnessed in the recent months according to economictimes.indiatimes.com.
Jayanta Roy, senior vice-president and group head at Icra, says: “The accommodative stance taken by the government by way of upward revision in export incentives in November 2017, has addressed one of the issues that the segment is facing. However, sustainability of growth remains contingent on how the scenario how the scenario on the other fronts pans out.”
According to Icra, following an upward revision in export incentives, India has reported a 6-20% year-on-year (Y-o-Y) growth in apparel exports to key nations such as the US, UK, Germany, France and Spain during the November-December period in 2017. However, despite this, the overall apparel exports are down by 1% Y-o-Y in 10M in FY18.
Further quoted that economictimes.indiatimes.com the decline has been primarily driven by the sharp decline in exports to the UAE market. UAE had emerged as one of the prominent apparel export destinations for India, with its share increasing to 23% in FY17 from 12% in FY14. Particularly for the ten-month period ending June 2017, India’s apparel exports to UAE had grown at a sharp pace (56% Y-o-Y). Thereafter, apparel exports to the UAE have fallen at an equally fast pace, by as much as 45% since June 2017. Excluding the trade with the UAE, India’s apparel exports are estimated to have stood 3-4% higher in 10M FY18.
As for the global scenario, apparel trade has remained subdued for the third consecutive year, expanding by just 1% in the calendar year (CY) 2017 on a low base, following a 2% and 5% decline witnessed in CY2016 and CY2015 respectively. In addition, the world’s largest apparel manufacturer and exporter – China, has been able to arrest the sharp declining trend in its apparel exports to a mere 1% in CY2017 as compared to de-growth of 10% and 6% in CY2016 and CY2015 respectively. Accordingly, China is estimated to have vacated just US$ 1 Billion worth of space in global apparel trade compared to US$ 10-15 Billion vacated in each of the previous two years. China’s declining market share was earlier expected to offer opportunities to the other major apparel exporting nations, to garner a larger pie of the global apparel trade.
