Huge potential for growth in apparel exports

Icra says structural change needed for long term growth; Texprocil urges support

India's apparel exports are set for a boost in the next two years despite a slowdown in demand from China and a preferential treatment given to competing countries in major consumer countries like the European Union and the United States.

Credit rating agency Icra forecasts India's apparel exports to rise by 20 per cent in the next two year to $20 billion by calendar year 2016 as against an estimated $18 billion in 2015 and $16.5 billion in 2014.

The domestic apparel market has grown at a CAGR of around 10 per cent over the last five years with growth in the economy and rising income levels, and is expected to maintain the growth rate over the medium term. While there could be short term blips on account of moderation in economic growth and increase in inflation or interest rates as witnessed in FY 2009 and FY 2012, the long term prospects for the industry is favorable.

Meanwhile, Icra stressed on the problems faced by domestic apparel industry which needs structural changes to sustain the long term growth.

Echoing similar response, R K Dalmia, Chairman, The Cotton Textile Export Promotion Council (Texprocil), said, "The export trends are not very encouraging. While a slowdown in exports widens the gap in trade deficit in our sector, surplus capacity finds an outlet only through the channel of exports. Thus, the textile industry needs interest rates subvention, re-calibrated product market matrix to include exports to emerging markets as exports are growing in developed markets from the countries with preferential access."

While speaking on the occasion of the Platinum Jubilee celebration of All India Exporters' Chamber here on Thursday, Dalmia said, textile, as it stands today, the export trends are not very encouraging. While a slowdown in exports widens the gap in trade deficit in this sector, surplus capacity finds an outlet only through the channel of exports. A large part of the reason for the sluggish growth lies in the overall slowing of demand in the overseas markets too.

Apart from a general decline in overseas demand, over-dependence on China especially for cotton and cotton yarn exports, is magnifying the overall decline in exports as China slows down.

Further, the high cost of export finance which is around 10 per cent in India as compared to 3-4 per cent in competing countries like Vietnam, Bangladesh and Pakistan is also having an impact on India's competitiveness.

The new Merchandise Export from India Scheme (MEIS scheme) introduced in the Foreign Trade Policy of 2015-20 has included exports of very few products to select markets. Many important markets like African countries, South Korea, China and Vietnam have been left out of the scheme. Non-coverage of exports of mainstream products to leading markets under the MEIS is having its own impact on India's textiles exports as the margins have shrunk due to price pressure from competing countries.

He further added that Indian cotton textile products also suffer the disadvantages of differential duties in major markets. Competing countries like Pakistan, Bangladesh and Vietnam get the benefit of zero duty or preferential duties in major markets like the EU. Available data clearly demonstrates that the only countries recording positive growth currently in the falling EU market are the countries with preferential access like Bangladesh, Vietnam and Pakistan.