NEW DELHI: India’s textile and apparel exports are forecast to grow by 6% in the next fiscal year, driven by additional incentives to improve competitiveness, expected growth in the garment sector, and higher fibre prices, new data shows.
In fiscal 2016, which ran from 1 April 2015 to 31 March this year, India’s textile and apparel exports stood at US$37.9bn, representing 14.5% of the country’s total exports, growing at a CAGR of 5.2% since fiscal 2011 when they stood at around $29.4bn. This is expected to reach $40bn by fiscal 2017, according to ICRA Research India, with apparel expected to represent around half of that.
In dollar terms, the growth in textile and apparel exports stands at around 29% over the last five years, while in rupee terms, is much steeper at 85% thanks to the currency’s depreciation. This sharp decline has helped improve the competitiveness of the sector’s exports, supporting strong growth across key textile and apparel export items. “The growth in exports was also supported by higher fibre prices and an increase in imports of intermediaries by China during these years,” explains Anil Gupta, VP, corporate sector ratings for ICRA Ltd.
“Subsequent to the strong growth during the period FY2011-2014, textile exports have stagnated in the last two years. Besides the impact of a weak trend in global textile trade amidst a sluggish global economy and softened fibre prices, the loss of growth momentum has also been driven by moderation in exports of textile intermediaries (primarily cotton fibre and cotton yarn) to China due to factors specific to changes in China’s textile policy.”
Despite this, India continues to slightly outpace the global trend in trade of the largest traded textile product category: apparel. Indeed, while the share of apparel in India’s textile export basket is lower at 47% compared with a global average of 56%, India is slowly gaining traction in apparel, as reflected in an increase in the share of apparel in the textile export basket from about 40% to 47% during the past five years. In fiscal 2016, India was able to grow apparel exports by 1% despite an estimated decline of 3%-4% in global apparel trade driven by lower imports by Europe and Japan.
India, along with other Asian countries like China, Bangladesh and Vietnam, has been gaining share in textile and apparel trade at the expense of other countries. But while India’s exports have outpaced trend in global textile and apparel trade, it continues to remain a marginal player in terms of the absolute volumes.
In 2015, India is estimated to have accounted for 5% of global textile and apparel trade, increasing from 4% in 2011. However, during this period, exports from Bangladesh and Vietnam have grown at a faster pace, increasing their market shares from 3% and 2%, respectively, to 4% thanks to favourable trade agreements.
Given the cautious global macroeconomic outlook, as reflected by the World Bank’s projected growth rates for 2016 (1.9% for the US, 0.5% for Japan and 1.7% for the Euro area) and concerns related to China’s demand growth, the global textile and apparel trade is expected to remain under pressure in fiscal 2017.
Gupta adds: “Given the stiff competition from other Asian exporters like Bangladesh and Vietnam, and expectations of modest growth in fibre prices in the international markets, the growth target of around 20% for India’s textile exports in 2017, as outlined by Ministry of Textiles, seems ambitious. “Nonetheless, additional incentives like refund of state levies offered under special package for exports in the textile and apparel sector will improve competitiveness of India’s textile exports.”