Source: The Stitch Times: February 2009

THERE IS NO STIMULUS IN REPACKAGING

The International Monetary Fund (IMF) has recently issued a world forecast of a declined growth of 2.2% for 2009, which has climbed down from 3.7% in 2008 and 5% in 2007. The current projection has every chance of being further revised downward as the year marches forward. All the major world markets are in the loop of negative growth. The US growth has been projected at -0.3% in 2009 against 1.4% in 2008. Europe will grow by -0.7% in 2009 as against 1.4% growth in 2008. Japan is expected to register a growth of -0.2% in 2009 as against 0.5% in 2008. All these projections are likely to be revised downwards, if the recent experience is any guide.

The Indian Scenario

Recent data released by Apparel Export Promotion Council (AEPC) shows that apparel exports plunged 11.29% in November, 2008 to $621 million dollars, compared to $700 million during the same period in 2007. This would aggravate during current fiscal, when the apparel exports are likely to fall 24% short of $11.62 billion target and may end up at $8.78 billion. This needs to be compared with garment export worth $9.69 billion during 07-08. Rakesh Vaid, Chairman, AEPC said, "India is clearly losing its edge in global markets. The Government and the industry must gear up to retain existing buying nations and explore fresh markets." Recent surveys conducted by AEPC in export hubs of Gurgaon and Okhla towards December-end showed 84% manufacturing units registered fall in export orders and employment in the range of 20 to 80%" Says A. Sakthivel, President, FIEO, "Exporters are now facing challenges due to present financial crisis. Fresh orders are drying up due to lower demands and buyers are canceling the earlier orders or re-scheduling the shipments. Buyers are asking to reduce prices even for already executed contracts and are asking exporters to match "China Prices". Buyers are also demanding longer period of credit to tide over the present financial crunch. The financial credibility of the buyers as well as of their banks is under question."

India's Declining Share in World Apparel Exports

At the first look, the decline in Indian exports seems understandable with the general contraction of demand the world over. But only if one were to compare the performance of our competitors, we realize that they are still expanding their exports to the world markets. While India's exports to the US declined 11% in Rupee terms during October to December last year, but the exports by Vietnam to the US soared 35% in dollar terms while those from Indonesia were up by 8.44%. Even Bangladesh registered increase in its exports to the US by 6.6%. Similarly, India's exports to the EU during January to August stagnated while those of China increased by 8.19%, Vietnam by 9.85% and Bangladesh by 3.1%.

Is the Government really concerned over this?

To my mind, a big NO. It is evident from the Government reflexes that it has no concern at all about this sector, which has a significant contribution to the GDP, employment and export earnings and what is even more important is that this sector can make more significant contribution in all these respects, only if it is provided with a level playing field vis--vis its competitors. Not only the Government has failed to consider the consistent demands by all stakeholders for providing them with the opportunity for a fair competition with their competitors, but the Government, in fact, has gone to the extent of DISHONOURING their own declared policies. For example, Commerce Minister Kamal Nath is on record of having repeated at least 20 times that the Government is committed to "non-export of taxes", but yet the Government continues consistently to deny exemption of taxes, both at Central and State levels, which the exporters are being subjected to.