An excessive dependence on China is hurting India’s textile exports, while the garment industry is doing better due to wider geographical spread of its export markets...
An excessive dependence on China is hurting India’s textile exports, while the garment industry is doing better due to wider geographical spread of its export markets, reports Banikinkar Pattanayak in New Delhi. While China is the biggest market for textiles, accounting for over 70% of India’s cotton and 40% of yarn supplies, the US and EU are the largest markets for Indian apparel, making up for roughly 65% of the country’s garment exports.
Given that China is predicted to slow further in 2015 as well as 2016 while the US economy seems to have turned the corner and Europe is on its way towards a fragile recovery — if the IMF forecasts on global growth are any indication — India’s exports of garments may continue to perform better than those of textiles for some more time. Textile exports include a range of products such as raw cotton, yarn, fabrics, made-ups, carpets, jutes, etc.
Even the depreciation of the rupee against the dollar isn’t going to help Indian textile exporters much, as the recent yuan devaluation by China has made its imports more expensive, according to senior textile industry executives.
However, the fact that the rupee has depreciated more than currencies of other garment-exporting countries such as Bangladesh and Vietnam this year, outbound shipments of apparel may not be affected much. Then again, biggest rival China would be more competitive in the garment export market following the yuan devaluation. The withdrawal of certain shipment incentives under the foreign trade policy for 2015-20 just made the matter worse for Indian textile exporters.
Already, while exports of raw cotton and waste crashed by 58% during the April-July period from a year before, those of man-made yarn dropped nearly 6% during this period. However, some of the other textile segments, such as jute and carpets, have performed well during the April-July period (exports of jute grew 13.2% and those of carpets rose 12.3%), helping the overall textile exports achieve an under 1% rise up to July this fiscal.
Not just exports, even the production of textiles dropped in July from a year before, while that of garments gained 21.7% during the month, according to the industrial output data. This suggests while export demand remains weak, even domestic consumption isn’t picking up in textiles.
Not surprisingly, spinning mills in India have now started cutting down on production for the first time in five years to prop up prices. The fact that the government is yet to clear subsidy claims of around Rs 4,500 crore for investments made under the flagship Technology Upgradation Fund Scheme has added to the liquidity woes of textile units, especially the spinning mills.