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Interview with Dr. A Sakthivel

Dr. A Sakthivel
Dr. A Sakthivel
Chairman
Apparel Exporters’ Promotion Council
Apparel Exporters’ Promotion Council

We expect the increase in demand of cotton products from India will continue in 2022
Incorporated in 1978, the Apparel Export Promotion Council (AEPC) is the official body of apparel exporters in India that provides invaluable assistance to Indian exporters as well as importers/international buyers who choose India as their preferred sourcing destination for garments. In a discussion with Fibre2Fashion, AEPC Chairman Dr. A Sakthivel talks about the Indian apparel exports in 2022.

What are your key takeaways from the textile and apparel industry developments in 2021?

The year 2021 has been a learning year for the apparel and textile industry. Given the volatilities and changes in the global demand and supply patterns, 2021 was a year of revival and growth. The Indian apparel industry demonstrated its resilience by gradually inching back to the growth path.
     The month-on-month performance shows that the industry has gradually picked up from a double-digit decline in the first quarter (April-June 2021) to a 20.3 per cent and 13 per cent growth respectively in September and October months. 2021 has taught the industry to work under uncertainties and new challenges. As against the export target of $20 billion for fiscal 2021-22, $9.65 billion exports have been achieved during April-November 2021.
     During April-November 2021, apparel exports have recorded a growth of 37.8 per cent vis-à-vis the same period of 2020-21. But the exports are lower than the same period of 2019-20 by 3.9 per cent. This decline, as compared to 2019-20 is largely due to the decline during the April-June 2021 quarter. Exports have consistently picked-up from the 2nd quarter (July-September). In September, October, and November, exports grew by 20.3 per cent, 13.0 per cent and 1.3 per cent respectively, vis-a-vis Sept 2019.
     Keeping similar rate of growth in mind, exports for FY 2021-22 are expected to be $16-17.5 billion. Industry is striving hard towards achieving the balance by the end of this financial year.
 

On the demand side, do you expect a significant pick-up beyond pent-up consumption in 2022, without government support?

The UNCTAD forecast for 2022 remains very uncertain because of slowing down of economic recovery, disruptions in logistics networks and increase in shipping costs, etc. With regards to the global demand for apparel, the demand has picked up in 2021 and is expected to be on a growth curve in 2022 also. The global apparel market was worth $472.7 billion in 2019 and $419.6 billion in 2020, with 11.2 per cent decline.

Following the recent COP26 meeting and given the textile industry’s influential role in climate change, what major developments do you expect in 2022?

The apparel industry has conventionally contributed to environmental pollution and climate change through water pollution and release of harmful chemicals.
     However, the industry today is extremely conscious of the social and environmental impact and majority of the industry in the apparel hubs are recycling the water and ensuring all chemical compliances. The apparel industry today is not a major contributor to adverse environmental impact and the industry is continuously working towards more sustainable production processes, production technologies and circularity.

Does 2022 seem to be as uncertain as 2021? Which factors would you rank as of topmost concern?

We are living in uncertain times and 2022 does not seem to be the end of it with the early signs of Omicron indicating new challenges that may come up. As per reports, European nations including the UK, South Africa, Brazil, Botswana, China, Mauritius, New Zealand, Zimbabwe, Singapore, Hong Kong, and Israel have been listed as ‘at risk’ countries. With such important apparel destinations at risk, the trade may get impacted in the coming months.
     However, both the industry and AEPC are learning to live with these new challenges. With travel restrictions still around, the Council has been organising virtual B2B meetings to explore new markets and strengthen existing ties. We have already conducted virtual B2B meetings with prominent countries to address the challenge of shortfall of export targets. These countries include UAE, Dubai, Canada, Spain, Mexico, the US, Columbia, Poland, Israel, and Azerbaijan.
     The top concerns in 2022 would be the possible disruptions and its impact besides the cost concerns that are presently prevailing because of logistics and raw material issues since supply bottlenecks and rising COVID-19 cases in Europe casted a shadow on India’s outbound shipments. We are optimistic that the exports momentum will revive though the uncertainty raised by Omicron variant poses a concern regarding the immediate outlook.

By when do you expect the challenges of shipping industry to ease?

In 2021, we saw severe logistics challenges as the prevailing system of buyback by shipping companies traveling from Asia to Europe did not happen. With the majority of EU ports closed, the vessels had to return empty, after delivering goods at these ports, leading to escalation in freight cost. However, this challenge has been universal and just not limited to India. In fact, Chinese logistic costs are estimated to have increased three times during this period.
     It has been predicted by the logistics companies that the situation will stabilise by March 2022. The Department of Logistics, Government of India, along with the stakeholders has been holding regular meetings to resolve the issue. We are hopeful that the issue will be resolved by the first half of 2022.

Related to this, will we see brands increasingly start focusing on sourcing with sustainability/ethics as a factor?

All the major brands are already focusing on prioritising sustainability and social compliances as important considerations while concerning apparel. The Indian companies are also extremely aware of this and have been working towards more sustainable fabrics, production systems, technologies and even supply chain management. With regard to labour and ethics, the industry today is extremely aware and conscious of the compliances with regard to child labour, workplace health and safety, workplace grievances and redressal mechanisms. In this regard, AEPC has also been very active and has been issuing advisories from time to time. AEPC has issued advisory on prevention of child labour in the factories. It is going to an awareness session with Social Accountability International (SAI) shortly to create more awareness in the industry about the social compliance issues and ways to ensure better workplace ethics.

Will we see greater technology adoptions in 2022 to solve transparency and traceability issues in the supply chain?

There are several initiatives that have been taken by the textile industry players both in India as well as globally. Some of them are:
Use of Fibercoins which are “digital block chain-based tokens” that can be managed by different manufacturers at different level of production chain. With Fibercoins details of any asset like fibre, filament, fabric, yarn, or garment can be digitised. Data of any type of end usable garment made using this technology will be available in the fingertips of the customers.
     QR codes and RFID chips are being used as a traceability tool by several brands. Cryptotags have also been used by several companies. A cryptotag that is printed on the finished garment contains tiny particles arranged in random ways which is unique for every garment and the information in this tool can be decoded using image reading technique.
     However, one of the major issues in textile is that it is a highly dispersed sector, making it difficult to ensure transparency at every stage. Hence innovation towards a robust traceability system is the need of the hour in the coming years. Promotion of integrated textile producing houses (i.e., production from fibre to final garment) to a certain extent would enable to resolve these issues.

How pressing could be the labour issues for the textile and apparel industry in 2022?

The issues with regard to labour which had arisen due to the pandemic have now stabilised. The industry presently is not facing any labour issues. If there are no complete lockdowns like those witnessed in 2021, the industry will not have too much of a problem to meet the production schedules and will be able to service the orders in time.

Do you expect any significant movement in textile and apparel supply chains in 2022 due to the geo-political scenario, particularly the US-China tension?

Due to human right concerns, the US had banned import of cotton and cotton products from the Xinjiang region of China in early 2021. This has impacted the textile and supply chain significantly and we expect that the resultant increase in demand of cotton products from India will continue in 2022.
     To facilitate the industry to avail of this situation, the Council had identified 20 apparel products which have opportunity in the US. These were shared with all the Indian apparel exporters so that they could align their US exports accordingly.

Energy prices are currently a major concern across the world. How do you see them continuing and what business strategies can we expect to cope with them?

Petrol and coal prices had been a concern for Indian apparel manufacturers. With the government’s efforts to stabilise the prices, we expect the situation to be more stable in 2022. However, as a long-term measure, the industry should make strategies which optimises energy, both in the factory production process as also in transportation and supply chain.

Do you expect any changes in the textile and apparel business model in the New Year?

One change in business strategy and model would be to have a liner supply chain and improve logistics tariff through better production compliance.
     With the US-China geo-political scenario, another important change would be an alternative source for concerning apparel products. Here relative competitiveness will determine how much of export enhancement India can do, especially with regard to the US market.
     With continuing uncertainties and disruptions, trade changes in sourcing patterns can be expected with slowing down of fast fashion and greater preference for certain product ranges.
     On part of AEPC, we are strengthening our virtual platform and will work on virtual B2B meetings besides resuming our physical compliance. We are working towards a strong revival of apparel exports, and I am confident to contribute in a big way in India’s overall merchandise exports.

Published on: 17/01/2022

DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.

This interview was first published in the Jan 2022 edition of the print magazine