Source: The Stitch Times

After a long winter of slowdown in Indian economy and exports, there are reports to suggest that Indian economy is looking up at least in some sectors, which would inform other sectors, too. To my mind, probably yes; or probably no.

True, some sectors are showing the first green shoots of recovery. The relatively good performance of equity markets is perhaps the main driver of this new optimism and there have been some other signs too like car and two-wheeler sales and home loan disbursements. A recent survey by the Confederation of Indian Industry (CII) has also indicated a slight revival in manufacturing during January-March quarter but the drop in Index of Industrial Production during March 2009 did pour some cold water on this optimism. What is even more distressing is the fact manufacturing sector, which comprises about 80 per cent of the index basket, declined by an even sharper 2.3 per cent. This is the largest decline in both indices since they turned negative a few months ago.

In so far as the garment export sector is concerned, there have been mixed signals: continuing world economic downturn; some late recovery, however temporary and for some people; recent Rupee appreciation and with a new Government, expected to be stable, assuming charge. I think now is the time when we can look for right kind of realistic expectations and projections of shape of things to come. What are the major issues? To my mind:

1. Assessment of the world apparel export scenario during 2009-10.
2. Prospects of Indian apparel exports to the US, the EU and Japan as also to other countries.
3. Assessment of the impact of the stimulus packages, offered by the Government of India last fiscal, on Indian garment exports, and
4. What more and specific is required or expected from the Government of India to enable Indian apparel exports to compete for adequate space in world apparel trade?

Let us take up each of these issues

Assessment of world apparel export scenario during 2009-10

The economic downturn or more appropriately recession, has taken every sector down and garment exports are no exception. There has been an overall shortfall in the import of garments both by the US and the EU, which are in the grip of recession. Similar is the case with Japan, where the garment imports have contracted. The heat of the contraction of garment imports by the developed countries like the US, the EU group of countries and Japan has been felt by almost all the developing countries, exporting to these countries, save a few exceptions.

Unfortunately, there are hardly any reliable signs of recovery. In US, the economists have downgraded their projections for a recovery from the deepest US recession in half a century, now seeing the jobless rate exceeding 8% through 2011. Unemployment will average 8.5% in 2011 and a 9.6% rate next year, which is higher than the previous forecast. Similarly the US economy will contract at a 1.9% pace this quarter, returning to a growth rate of 0.5% in July to September period and 1.8% in the final three months, according to the median forecast of 61 economists surveyed.