The ongoing uncertainty in the global economy has hurt India’s denim exports, with exporters experiencing a decline in orders even in the current peak season.
“Around 10 per cent of the total denim capacity is lying idle currently due to lower overseas demand. Manufacturers, therefore, are feeling the pressure on manufacturing cost,” said Sharad Jaipuria, president, Denim Manufacturers Association.
According to Jaipuria, the reduction in orders was noticed widely in small and medium size players, who constitute around 55 per cent of the market. Their inability to divert their output to the domestic market also creates a tough competition from large players on both, quality and price fronts.
Large players, however, faced no slowdown because of their long-term contracts with overseas buyers. Large players like Arvind Mills, Aarvee Denims and K G Denims constituting around 24 per cent, 12 per cent and and five per cent of the market, have largely been unaffected so far.
“We have not witnessed a slowdown in our orders which is in line with industry growth,” said Aamir Akhtar, chief executive officer-denim fabrics at Arvind, the largest player in the denim fabric space.
India’s annual denim production stands at 700 million metres, of which around 32 per cent is exported.
According to an industry estimate, India’s total denim exports were recorded at around 180 million metres last year, which may go marginally up to 200 million metres this year.
The denim sector saw a major expansion in the last few years with many greenfield units installed and brownfield projects expanded. Growing orders from both, domestic and overseas markets, also lured entrepreneurs to test the waters in this business. Denim managed to escape from a slowdown in global demand in the past. Now, the weakening sentiment has also taken the denim sector in its grip.
“Many denim fabric manufacturers earlier expanded their capacity in anticipation of higher demand. But now, due to the lull in the market, the capacities are not used,” an analyst said.
Demand for denim has also been impacted as woolen fabrics are currently more in demand in major importing countries.
Although, the current situation is bad, revival cannot be ruled out in the coming months. That is because China, a major textile exporter, is cutting down on producing fabrics out of cotton, thus causing India’s export share to move up.
