Signs of revival in overseas demand.
The domestic textile exports is likely to see a recovery during the present financial year, 2009-10, thanks to the western economies’ positive reactions to the stimulus packages given by their governments. The last three quarters saw the textile industry struggle due to the slump in demand from abroad, especially in the US and Europe.
The global slowdown raised concerns textiles export would slip into negative territory in FY10, leading to shutting down of export-oriented units which resulted in job losses. Since August last year, domestic exports have dipped. However, the outlook no more seems bleak and is turning positive as orders have started pouring in, mainly from Europe.
“The worst may be over for the domestic textiles sector and fears of further units closing down are not there any more. We expect apparel exports to grow 3-3.5 per cent this fiscal,” said Rahul Mehta, president of the Clothing Manufacturers’ Association of India.
Since August last year, Indian textiles and clothing exports have been on a downward curve. The decline was substantial in November when exports dipped over 13 per cent. December was an exception with exports growing 18 per cent, only to fall in January and February by over 9 per cent and 10 per cent, respectively. The country’s textile exports were up around 4 per cent during the April-February period.
Anil B Joshi, textile commissioner, told Business Standard, “Global turmoil had raised concerns on the recovery of Indian textiles sector. However, there are strong signs of a recovery. We may recover soon in European market whereas the US may take a little longer. I believe, the present year will end on an optimistic note, better than FY09.”
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The textiles exports have grown over 55 per cent since 2004-05. It stood at $14 billion in FY’05 and reached close to $22 billion in FY09. This year’s exports may recover, but compared to projections made for the Five Year Plan, the country’s actual exports are nowhere near the target.
D K Nair, secretary general of the Confederation of Indian Textile Industry (CITI), said, “The current months are showing a declining trend of 10 per cent in exports, and till September we see the negative growth persisting. However, from October onwards we expect to have positive growth on the back of new orders coming from the European markets. This will help the industry do marginally better than FY09.”
Stimulus packages in western economies are helping in restoring demand, orders which are coming will take another three months to execute and that is where the positive signs will be reflected, added Nair. At the same time, the industry is hopeful of getting favourable measures from the government in the upcoming budget.
CITI is also betting big on the US market. “We expect that though demand recovery in the US would take 3-4 months, the recovery will be strong and faster,” said Nair. US is the largest importer of Indian textiles.
However, there are signs of continuing sickness. According to Mehta, country’s exports are continuously losing ground to our neighbours competitive exporters.
“The realisation per unit has declined and margins too are squeezed. Though, compared to the same period last year, we are competitive but not profitable. We are losing market overseas as apart from China, Bangladesh and Vietnam are giving tough competition to us,” said Mehta.
The currency movements and the higher price of cotton in the domestic market due to over 40 per cent rise in minimum support price of cotton is taking toll on the domestic industry as high input prices are hindering the players to stay competitive compared to their global peers.
The Indian textile and clothing industry had embarked on a vision of capturing market worth $110 billion by FY12. The government had announced that the entire investment to reach this target will be $ 43 billion.