Indian apparel exporters are facing stiff competition from global players. Will they be able to achieve $18 billion export target?

The Indian Government has revised the garment export target to USD 18 billion for FY 2012-13. The earlier target of USD 17 billion was revised to USD 18 billion following announcements in its annual supplement of the Foreign Trade Policy (FTP). Industry players believe that apparel exports are currently witnessing a declining trend. There is cut-throat competition in the global market that is suffocating the Indian apparel exporters. They are getting hit in a hard way regarding their margins. Exporters believe that the Government's recent decision to allow 51% FDI in multi brand retail would further have a negative impact on the Indian apparel sector.

C:\Documents and Settings\megha\Desktop\Copy of test1.jpgIndian textile sector is facing a difficult situation due to the slowdown in the major markets, which is affecting demand for clothing. Rising costs of production, crippling power shortage, uncertain prices of raw materials, and dearth of skilled labor are also infecting the performance of the sector. All these factors affect the export performance of the country.

During the first five months of the FY, apparel exports declined by 12% to USD 5.26 billion. In July 2012 apparel exports dropped to be $1 billion, 16.7% decline compared with the corresponding period of the previous year. Exports to US were $35.9 billion, declining 0.5% from the period January-June compared with the same period of the previous year. AEPC Chairman A Sakthivel stated that for October 2012, the exports were to a tune of 907 million dollars, a decline of 0.75% compared with the corresponding period of the previous FY export figures.

Market linked product scheme was extended till the current FY for exports to EU and US. The sops included interest subvention on pre-shipment credit. EU and US comprise around 65% of total apparel exports of India. During 2011-12, apparel exports grew by 18% on a y-o-y basis to USD 13.6 billion. Currently, there is a declining trend in apparel exports to EU, which is also believed to have a significant impact in the Indian apparel export figures. Fall in exports to EU by 10% is likely to affect Indian exports.

Currently India is facing severe competition from its counterparts such as Bangladesh, Cambodia, and Vietnam. These countries export huge volumes of apparel at inexpensive prices. The AEPC Chairman believes that it would a tough time for apparel exporters to achieve the $18 billion export target. The council is however optimistic that around USD 16.17 billion could be achieved. It also stresses the need for Indian exporters to explore other markets apart from the US and EU.

The Government's approval for allowing 51% FDI in multi brand retail is feared to have some effect on the apparel exports. Clothing would be the core component for most of the multi-brand outlets owing to its high margin and possibility to attract more consumers through private label apparels.

The industry is positively expected to gain positive momentum in the next 3 to 4 months. Experts comment that apparel manufacturers should focus more on global trends, and manufacture apparels matching with the demands from the global market, rather than focusing on manufacturing apparels in huge volumes with inexpensive prices.



2.      Apparel Views, November 2012