Global slowdown may hit apparel exports in FY2017

Posted by Daily Shipping Times on 31-03-2017        Tweet

NEW DELHI: Growth in apparel exports may stay muted for a consecutive year in FY17, as demand from key importing countries remained subdued. On the back of the global apparel trade contracting by one per cent to $432 billion (Rs 28 lakh crore) in 2016, apparel exports, according to the Apparel Export Promotion Council’s (AEPC’s) estimates, were likely to close 2016-17 at $17.3 billion (Rs 1.12 lakh crore), up by roughly two per cent from $16.9 billion (Rs 1.10 lakh crore) in the previous financial year.

Credit rating agency ICRA also expects India to report tepid growth of one per cent in dollar terms.

This is also evident from the fact the industry clocked exports of $15.5 billion (Rs 1 lakh crore) during April 2016-February 2017, a growth rate of just 0.6 per cent over the last year, according to AEPC sources.

While sluggish demand from importing countries has been the primary reason for the muted guidance, what also works against India is its heavy reliance on cotton amid an increasing share of lower-priced man-made fibre-based apparels by other competing markets such as Vietnam and Bangladesh.

“The other competing nations import almost all the raw materials and hence have a better economies of scale than India, which is dependent heavily on the domestic industry, predominantly driven by cotton,” said an AEPC official.

“The exports in value terms have declined, following an increase in the share of man-made fibre-based apparels, which are lower in value vis-à-vis cotton-based apparels. This in turn has been caused by the improved competitiveness of polyester vis-à-vis cotton during the past few years,” ICRA said in its March update.