India’s apparel exports are expected to remain subdued in the near term, even as the worst appears to be over. With the base effect setting in, it is expected that India’s apparel exports to grow at a modest pace of 1-2% year-on-year for the rest of FY19 vis-a-vis a sharp degrowth of 14% y-o-y in 4M FY19, said an Icra analysis.
As this would still mean a 4% y-o-y decline in the country’s apparel exports in FY19, it is expected to be the fourth consecutive weak year for India’s apparel exports, following the 4% degrowth in FY18 and modest growth rates of 1% and 3% in FY16 and FY17, respectively.
India’s apparel exports have exhibited an unencouraging trend, with a marginal de-growth of 1% in FY18 as well as 4M FY19, even after adjusting for apparel exports to the UAE, which have declined inexplicably and sharply over the past one year, said the report on Tuesday.
The apparel sector’s performance is worrying as it is contrary to the global trends. The global apparel trade is back on the growth trajectory with an estimated growth of 4-5% y-o-y in H1CY2018 (refers to calendar year) and 2% in CY2017 in US dollar terms. The positive trend in the global apparel market is being led by the strong recovery in apparel imports by the European Union, which accounts for two-fifth of the global apparel trade (including the trade within EU).
With faster GST refunds, improved clarity on the rate of export incentives, and the sharp rupee depreciation witnessed over the past few months, most of the industry’s concerns stand addressed to a large extent. The industry is now facing mounting concerns on the continuance of export subsidy schemes in India, after being challenged by the US at the World Trade Organisation, which seems to be constraining the growth momentum of India’s apparel export sector, the Icra analysis added.
Jayanta Roy, senior vice-president and group head, Icra, said: “With several internal as well as external headwinds, the past year turned out to be rather challenging for India’s apparel exporters. Transition to the new taxation regime, besides posing liquidity challenges for the industry, added to uncertainties because of alternating stances on export incentives during the year. Further, a stronger rupee heightened the challenges in the international market by affecting competitiveness of players in an intensely competitive international apparel market.”
“Going forward, steps taken by the Union government to address these concerns will remain crucial for apparel exporters to capitalise on the revived global apparel trade as well as the continuing loss of marketshare by China, which opens up a lucrative opportunity for key players such as India, Vietnam and Bangladesh,” Roy said.