Textile exports hit in a free world

Exports fell by 7.6% to $1.07 billion in January 2005.

Belying expectations of a surge, India's textile and clothing exports fell 7.6 per cent to $1.07 billion in January 2005, the first month after the termination of export quotas.

Textile and clothing exports were estimated at $1.16 billion in January 2004, according to provisional data compiled by the Directorate-General of Commercial Intelligence and Statistics.

The export of readymade garments, the largest segment in the textiles basket, dipped 8 per cent to $542 million during January 2005 against $589.1 million in the corresponding period last year.

The decrease in the export of cotton textiles was more pronounced and was estimated at $279 million this January against $333.4 million, representing a 16.3 per cent drop.

India's textile exports have dropped at a time when China has increased its garment exports by 14 per cent to $3.73 billion in January 2005. According to data released by the General Administration of Customs, China's total exports rose 42 per cent to $50.8 billion in January.

Industry sources said a reason for the dip in Indian textile exports was the reluctance by exporters to take up orders fearing lower margins.

"The margin in the US market has, for instance, lowered by 8-10 per cent. At the same time, the surge in Chinese exports is mainly because of a lower base," said an official of the Cotton Textiles Export Promotion Council (Texprocil). He added that China's quotas were lower compared to the capacity.

According to information available with the commerce ministry, prices of Chinese textile products exported to the US dropped by around 22 per cent in January, compared with the prevailing prices a year ago.

Officials at the Apparel Export Promotion Council said exporters had adopted a cautious approach while taking orders for shipment in January.

"We expect exports to pick up from February. Initial data show a 40 per cent rise in knits and over 7 per cent growth in woven products. Orders are fully booked up to May. However, exports after May may dip as exporters are wary of the new duty neutralisation schemes and rates," an official said.

Commerce ministry officials said exporters were reluctant to book orders after October 2004 as the duty entitlement passbook scheme and drawback rates were reduced.

"Lack of flexibility in labour laws, particularly hiring of temporary labour, is also hindering exporters in accepting large orders," an official told Business Standard.

Officials also pointed out that in the last week of December, shipments to the US and the EU were held back because of ambiguity over whether they would be considered part of the quota regime or not.