Garment exports begin to see revival, September fall lowest in 5 months

Garment exporters have started seeing the revival of demand, which in turn has increased capacity utilisation to around 60-80 per cent

After witnessing a sharp decline since April, ready-made garment exports are on a road to revival. In April, exports dropped by around 91.04 per cent in dollar terms, and in August, the fall was 14 per cent. In April, exports fell to $126 million, compared to $1.409 billion in April 2019.
 

In August, exports stood at $1.084 billion, compared to $1.260 billion in the corresponding month of the previous year. Recovery was largely driven by the European Union (EU) markets. With garments seeing demand revival, capacity utilisation has increased to 60-80 per cent.
 

Companies said customers are placing new orders based on the season and the number of stores that opened have globally. E-commerce is also picking up. They expect growth to return by early next year.
 

The development comes months after shipments were kept on hold by international customers due to lockdown imposed in their respective countries. This led to revenue loss during the lockdown period. But now, they have started witnessing significant recovery in the order flow, compared to May.
 

Raja N Shanmugam, president of the Tiruppur Exporters’ Association, said enquiry levels are more than last year’s.
 

Brands are now looking for alternatives from China. But some major challenges Indian exporters need to address are quality, consistency, quantity, and timely delivery. “These factors have always been obstacles for any buyer to look at procuring from India. Pricing challenge is part of any trade. If we can address these factors, we can get a good pie of the global trade,” he said. “If we address these lacunae, we are going to get orders from brands since there is a silent anti-China feeling prevalent all over.”

 

On the impact of the Merchandise Exports from India Scheme (MEIS), he said, it will not hit apparel exports since it has been withdrawn last year itself. It was replaced with the Rebate of State & Central Taxes and Levies (RoSCTL).
 

Now, the government is replacing RoSCTL with Remission of Duties or Taxes on Export Products (RoDTEP). So, we don’t see any impact in the government’s decision of not to extend MEIS.
 

SP Apparels, one of the leading exporters in the country, said all the factories are operating around 60 per cent capacity due to social distancing norms imposed by the authorities.
 

The company managed to address labour shortage by providing migrant workers with accommodation and food in the hostel premises. Those who had gone have also started returning while the return of some others has been hampered due to transportation issues.
 

On the Covid-19 impact, the company said, besides the order flow, the rupee depreciated significantly in the fourth quarter, compared to last year’s. This impacted the company’s hedged positions and resulted in hedging losses. Loss of revenue due to the pandemic is expected to impact hedges and may see an impact in the first and second quarters also.
 

Rahul Mehta, chief mentor at The Clothing Manufacturers Association of India, had said, “Most of the cancelled orders are being reinstated to start with, and new enquiries are also being received. Most of the European as well as US buyers are talking to exporters. Discussions have started about the ability to supply.”