1: Macro Economy:
On the global scenario, the fuel and the commodities prices have been cooling off. The global crude oil price has come down from the peak level of $ 146/barrel to the present level of $ 90/barell over last 6-months.
The global economy, however, remains in the slow and sluggish mode due mainly to failure of some top financial institutions in the USA and the continuing recessionary conditions there. This has eroded consumer confidence and impacted the demand for textiles and clothing in both the USA and the Europe. The textile industry in both India and China has been in slow growth phase despite good performance over Jan 2005 to mid -July 07. Both, Indian and Chinese textile exports have come down in last 9 months.
The Key drivers for growth of the Indian textile industry have been the global/ export demand for its products and competitive price for domestic cottons. However, since mid 2007 the domestic Cotton prices had increased by 35-40% while textile demands has been slow due to recessionary conditions. Presently, textile sector is in static mode due mainly to slow lifting of fabrics and made ups owing to slowdown in demand for clothing and apparels from USA. The share market has just seen its lowest level since last 2years and led to the negative sentiments in all markets.
2: Domestic Scenario:
Owing to the already increased burden of fuel and interest costs, there is slow down of consumption in the domestic economy. Te inflation is still hovering at the 12% level and has negatively impacted the consumer purchasing power.
This has negatively impacted the growth in domestic Retail segment and the only hope is from traditional increased consumer buying for textile and FMCF goods over the festival month of October.
The Q4/2008 performance of Indian textile sector will be certainly influenced by the prices of the new cotton crop available from mid-Oct 2008, and its favourable influence on yarn prices, leading to increased fabric making activity. It is forecast that the new cotton will be offered for Nov. delivery at about Rs23500-24000/candy vis-à-vis the present offering at Rs27000/candy for S6 cotton type. Should this happen, the consumption of cotton is likely to increase and will also help control the price of polyester and other manmade fibers.
3: Textile exports
Textile exports are likely to improve over Q4/2008 due to the enhanced buying interest from overseas buyers for XMAS season and also the buying interest for spring/summer season. The present rate of Dollar to rupee [1$=Rs.47.4] is favourable for the exporters but it is important to note that the Rupee has depreciated 12% against the dollar in short period of last 2-months.This will lead to Higher oil-import bill for India and the erosion of purchasing power for domestic consumers. However, it is expected that the Rupee will maintain the Rs.47 level for the next quarter.
Thus, greater export efforts by textile units are recommended for the ongoing Q4/2008. Overall the market sentiments, in the short and medium term, for the Textile sector remain weak for Q4/2008.
Note: The above Outlook and forecast for Textile sector is based on bi-monthly Feedback provided to textile corporate, by Senior Textile Industries Consultant, Munish Tyagi
