1: Global Economic Scenario:
On the global scenario, the fuel and the commodities prices have
now stabilized after having taken a serious hit due to drastic cut in consumer
spending and demand contraction, esp. in the recession impacted USA and Europe. Due to a comeback in the global energy demand, the world oil prices may remain
stable at $70-75 level during the Q4/2009.
The global economy, however, remains in the slow mode. The
good sign, however, is the positive indications of increase in consumer confidence
and consumer demand in the developed economies, namely USA, the Europe and Japan. The quarterly growth in these erstwhile well to do economies is now being
projected from 0.5% to 1%. The renewed consumer confidence is likely to be reflected
in pre-Xmas and post-Xmas sales and thus improve the sales of the leading retail
chains in the USA and Europe.
2: Impact on India's Textile Sector:
The demand contraction and low consumer spending in the USA, the EC and Japan had decisively impacted the demand for imported textiles and clothing from, both
the USA and the Europe. Due to reduced export demand from the USA and the EC countries, the textile industry in both India and China has been in slow off-take
phase. The exports of apparel and textiles have gone down already by 10-11%
w.r.t last years.
The erstwhile Key drivers for growth of the Indian textile
industry have been the global/ export demand for its products and competitive
price for domestic cottons. The New cotton supply season is just about to start
and, a comfortable Cotton crop, at 29-30 million Bales for the new 2009-10
season, may enable the input price for the textile industry to go down albeit
for the Oct to Dec 09 period; and which is likely to increase incase a
reasonable quantity, say 15-20% of output of Indian cotton is exported.
Due to above, and the ongoing 'slow pick up' in demand, and
prices, the domestic textile sector is in 'static' mode, due mainly to slow
lifting of fabrics and made ups owing to continuing slowdown in demand for clothing
and apparels in both global and domestic markets. Also, the high cost of inputs
in the Textile sector viz: borrowings [along with the corresponding low liquidity
and credit crunch], high cost of power and serious non-availability and
increasing cost of work force is fuelling the negative sentiments in the
textile sector.
3: Domestic Textile Prospects:
As, of present the Textile and clothing sector has already touched
the bottom of the 'U'; and the future direction for production and demand can be
positive only.
The decline on demand for retail garments and made ups, in
exports and dom. Retail, had affected the Indian fabric manufacturers. The
cotton fabric output had shrunk to the lowest rate, since last 4 years; and
is down to a combined 11.4% from a year ago. The Apparel exports down to 8.7, from
$9.6 bln for last year.
Also, with the break on the growth in domestic Retail segment
and with corresponding downstream unlikely to see a sustainable 'rebound' soon;
the Output of textile mills [esp. the fabric mills] is likely to be flat over
next 2 Quarters. It is time to pull the belt much-much tighter for next 2 Qrtrs.
The pricing by the Retailers, and also reality sector, will remain under
pressure.
4: Textile exports:
The Dollar to rupee rate is also not providing gain and for
textile exports. The export demand and orders, for apparel and textiles, for
spring-summer 2010 are not as strong as was expected.
Overall, the short and medium term sentiment in textile sector
will continue to remain weak over the last Quarter of 2009, and the real
stepwise correction may not begin possibly by 2nd Qrtr. Of 2010 but
domestic demand will remain buoyant and reasonably strong to support the
sector.
Notes: The above Outlook and forecast for
Textile sector is based on bi-monthly feedback provided to selective textile corporate,
by Senior Textile and Clothing Industry consultant, Mr. Munish Tyagi.
