Facing tough competition from emerging markets like Vietnam, the garment industry is set to witness a decline in its exports growth this year. According to the Clothing Manufacturers Association of India (CMAI) as against earlier estimates of $ 11 million (Rs 54 crore approx.) exports, the industry will only be able to achieve exports worth $ 9.5 million (Rs 46.5 crore approx.) by the end of financial year 2009.
"As against our earlier expectations of exports worth $ 11 million, due to recessionary trends and competition from emerging markets like Vietnam, it may only be around $ 9.5 million. This is because there has been a decline in bulk orders by 20-30 per cent ever since the recessionary trends began. Moreover, the US and Europe formed 80-85 per cent of our exports. But they now form 70-75 per cent only. This has been the situation since almost a year now. Garment exporters have now begun exploring new markets like Asia, Africa, Australia and New Zealand," said M K Panthaki, director of CMAI.
Unlike an export growth of 10-12 per cent last year, CMAI expects the growth to be around 5-7 per cent only.
With the inflationary trends prevailing across the globe, especially in the western markets, the Indian garment industry has been bearing the brunt lately. The loss of consumer confidence in purchase of garments in markets like the US and Europe, orders have been dwindling for these exporters. "Consumers have been spending their money on basic necessities like food and have reduced expenditure on garments. This has been reflecting in bulk orders which have dropped lately. If the trend continues, we might also see the medium and small orders declining as well," added Panthaki. CMAI defines bulk orders as anywhere between 50,000 to 100,000 pieces per order.
While Bangalore-based garment exporter Gokaldas Exports Ltd. has experienced such a high decline in bulk orders, the company admits the situation has become prominent lately. "Although we have experience a marginal decline of 1-2 per cent in bulk orders, the industry overall is facing with a reduction of 20-30 per cent. However, the competition from emerging markets like Vietnam is not to be worried about much since it is a global phenomenon," said S N Rangaiah, general manager (finance) at Gokaldas Exports.
To facilitate its member garment exporters, CMAI has begun representations with the central government for availing certain benefits. "We have asking the government to offer certain tax benefits to garment exporters so as to reduce the impact of low bulk orders. Due to an overall tax value of eight per cent on exports, we are at times outpriced in the international market by markets like Vietnam. If these taxes are removed, the situation might get better for us," said Panthaki.