Survival of the Fittest-Indian Apparel Industry in a State of Turmoil

Source: Apparel India

The beginning of the year 2011 brought in a ray of light for the dented apparel industry after almost seven months of continuous decline in apparel exports. For the first time in December 2010, apparel exports touched the USD one billion mark. In the month of November 2010, apparel exports were clocked at USD 7.10 million. For the three months which 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.

Apparel exports showed positive growth even in January and February 2011, but this revival was not for long as the garment industry suffered a bolt from the blue after the budget 2011 was released last month. The garment exporters especially were not prepared for this and are till date in despair.

Budget falls short of expectations

The garment industry received a rude shock after the announcement of the budget 2011-12 which left the garment export industry under distress, with the mandatory excise duty of 10 per cent across the branded garments. Although the export units would continue to be zero-rated, the requirement for registration with the excise department is being viewed as a major procedural hazard.

The instant response to this news jolted the entire nation with an indefinite strike by thousands of manufacturers. Around 2-3 lakhs of manufacturing units, workers, and retail majors like Shoppers Stop, Pantaloon, Westside, Globus, Lifestyle, etc. went on an indefinite strike to protest against the mandatory excise duty levied by the government. Survival of the fittest is what the duty would lead to as it will push the smaller brands to the non-branded segments. The consequences would be further faced by the consumers at the end, as this hike would result in a 10-15 per cent increase in prices of garments and made-ups.

A stitch in time saves nine, thus, AEPC feels that certain recommendations if implemented can stitch the hole of the apparel industry. Mr. Premal Udani, Chairman, Apparel Export Promotion Council said, "We have requested the government for deferring the same imposition till GST rolls out next year as it would help in simplifying things for the exporters. In case, this is not implemented, we have suggested shifting the onus of payments of excise from factories to the domestic brands."

He further said that, "We have suggested that the exporters with a turnover of 95 per cent exports and 5 per cent domestic be spared from registration. We hope the government soon implements these recommendations by AEPC for the benefit of the industry."

Rising Raw Material Prices & Labour Cost

The increasing price of raw material is a major concern for the industry. Global cotton prices have been on the upswing for the last several months. Between October and February, cotton prices surged by about 60 per cent in world markets, spurred by unabated demand from China, which accounts for a little less than half the world's consumption of cotton. This, coupled with a growing shortage in Chinese production of fibre and a ban on exports from India, has kept global prices high.