GST, stronger rupee may result in flat Indian apparel exports growth: AEPC

Posted by Daily Shipping Times on 01-09-2017        Tweet

MUMBAI: Indian apparel exports growth may remain flat or at the most see a marginal rise this year, due to factors like the goods and services tax (GST) implementation, rupee appreciation against the dollar and sluggish global demand.

Industry representatives have hazarded single-digit growth in apparel exports due to disruption in the textile value chain along with rise in raw material costs.

According to Rahul Mehta, President of the Clothing Manufacturers' Association India (CMAI), the rise in minimum wages and rupee appreciation have resulted in estimates of sluggish growth in apparel exports. The rupee has risen to 64.2 against the dollar from 66.5 last August. This is in contrast to six consecutive years of depreciation. India had posted $17 billion worth of apparel exports in 2016-17.

According to an official at the Apparel Exports Promotion Council (AEPC), India reported a marginal 5 per cent growth in apparel exports worth $6.9 billion for the period April-July 2017.

"We had earlier anticipated 15 per cent growth in apparel exports. However, things appear sluggish now.  Apart from the GST implementation and rupee appreciation, what has also been affecting the industry is the rise in raw material prices and labour wages," said Mehta.

Further, the global apparel trade has also shown no signs of reviving, resulting in subdued demand in key importing countries. This may result in India’s apparel exports continuing to remain volatile, says a report by ICRA.

"Although we have witnessed brief phases of growth in the past 18 months, the trend has been unsustainable and has failed to instil confidence. In such a scenario, sustained growth in India’s apparel exports 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 global counterparts," said Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector ratings, ICRA.

"De-growth in fabric sales volumes in the first quarter was higher than the aggregate nation-wide production de-growth of 1 per cent due to the clearance of channel inventory by intermediaries prior to the GST implementation," Roy added.

As a result, ICRA noted that although the profitability of export-oriented players had been protected to an extent by prudent hedging practices, sustained strength of the rupee might exert pressure on their pricing ability and hence demand and profitability.