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.