Revival in Indian apparel industry being dented by fresh crisis

25 Feb '11

6 min read

There is some reason for Indian apparel manufacturers to cheer up after a long time. The Indian apparel sector, which had been reeling under pressure since recent past primarily due to rising cotton yarn prices, has witnessed a positive beginning in December 2010.

Almost after seven months of continuous decline in apparel exports i.e. from May 2010 to November 2010, the apparel industry has seen a sign of revival in the month of December 2010. The same is being perceived by the industry as the result of the recent intervention by the Government, whereby it put a 720-million-kg cap on exports of cotton yarn for the FY 2010-11 to facilitate the steady supply of cotton yarn to the troubled domestic apparel manufacturers who were suffering at the want of cotton yarn to meet their production commitments. The industry believes that the Government initiative has helped smoothen the upwardly moving cotton yarn prices to some extent.

Apparel Export Promotion Council (AEPC), the apex body of apparel exporters in India, has recently compiled a data that reflects an increase in exports for the month of December 2010 by 40 per cent from the previous month viz. November 2010. For the first time in December 2010, apparel exports touched USD 1 billion mark. The data shows that in the month of November 2010, apparel exports were clocked at USD 7.10 million. For the three months ended on December 31, 2010, the apparel industry posted exports of USD 2,438 million, as against exports of USD 2,398 million for the corresponding year of FY 2009-10.

An important reason for this increase has been the growth posted in AEPC's largest exporting partner country, the US markets. Apparel exports from India to the US have registered a remarkable growth of 10 per cent during the period January 2010 to November 2010, against the corresponding period of January 2009 to November 2009. Apparel exports from India to US markets during January to November 2010 stood at USD 2903 million, as against exports of USD 2636.90 million during the same period of 2009.

Outlook for FY 2011:
AEPC is cautiously optimistic to reach an export figure of USD 11 billion for the current financial year. For the next fiscal, AEPC forecasts about 10 per cent growth; subject to raw material stability.

The CEPA Agreement with Japan to boost apparel and knitwear industry:

The signing of Comprehensive Economic Partnership Agreement (CEPA) with Japan is one of the largest agreements ever signed by India with US$ 5 trillion GDP of Japan.

As per the Agreement, about 94 per cent of the tariffs between Japan and India will be eliminated within 10 years (about 97 per cent by Japan and about 90 per cent by India on trade value basis). Said Mr Udani, “With this agreement, all garment items falling under Chapter 61 & 62 (knit and woven garments) have become duty free with immediate effect. The effective rate of duty, which is around 11 per cent, shall now not to be paid by the garment exporters of India. There would be a growth of nearly 50 per cent in India's garment exports to Japan, as a result of this agreement.”

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