But, revival in Indian apparel industry being dented by fresh crisis
There is some reason for Indian apparel manufacturers to cheer up after a long time. The Indian apparel sector, which had been reeling under pressure since recent past primarily due to rising cotton yarn prices, has witnessed a positive beginning in December 2010.
Almost after seven months of continuous decline in apparel exports i.e. from May 2010 to November 2010, the apparel industry has seen a sign of revival in the month of December 2010. The same is being perceived by the industry as the result of the recent intervention by the Government, whereby it put a Rs 720-million-kg cap on exports of cotton yarn for the FY 2010-11 to facilitate the steady supply of cotton yarn to the troubled domestic apparel manufacturers who were suffering at the want of cotton yarn to meet their production commitments. The industry believes that the Government initiative has helped smoothen the upwardly moving cotton yarn prices to some extent.
Apparel Export Promotion Council (AEPC), the apex body of apparel exporters in India, has recently compiled a data that reflects an increase in exports for the month of December 2010 by 40 per cent from the previous month viz. November 2010. For the first time in December 2010, apparel exports touched USD 1 billion mark. The data shows that in the month of November 2010, apparel exports were clocked at USD 7.10 million. For the three months ended on December 31, 2010, the apparel industry posted exports of USD 2,438 million, as against exports of USD 2,398 million for the corresponding year of FY 2009-10.
An important reason for this increase has been the growth posted in AEPC’s largest exporting partner country, the US markets. Apparel exports from India to the US have registered a remarkable growth of 10 per cent during the period January 2010 to November 2010, against the corresponding period of January 2009 to November 2009. Apparel exports from India to US markets during January to November 2010 stood at USD 2903 million, as against exports of USD 2636.90 million during the same period of 2009.
Outlook for FY 2011:
AEPC is cautiously optimistic to reach an export figure of USD 11 billion for the current financial year. For the next fiscal, AEPC forecasts about 10 per cent growth; subject to raw material stability.
The CEPA Agreement with Japan to boost apparel and knitwear industry:
The signing of Comprehensive Economic Partnership Agreement (CEPA) with Japan is one of the largest agreements ever signed by India with US$ 5 trillion GDP of Japan.
As per the Agreement, about 94 per cent of the tariffs between Japan and India will be eliminated within 10 years (about 97 per cent by Japan and about 90 per cent by India on trade value basis). Said Mr Udani, “With this agreement, all garment items falling under Chapter 61 & 62 (knit and woven garments) have become duty free with immediate effect. The effective rate of duty, which is around 11 per cent, shall now not to be paid by the garment exporters of India. There would be a growth of nearly 50 per cent in India’s garment exports to Japan, as a result of this agreement.”
The current garment exports from India to Japan are in the order of US$ 125 million, which are almost equally divided between knitted and woven garments. India is amongst the top five suppliers of garments to Japan.
In anticipation of signing of CEPA Agreement, AEPC had organized Apparel Mega Show in International Fashion Fair; Tokyo during the year 2009 and 2010 to project India’s clothing potentials.
Added Mr Udani, “AEPC has already made arrangements to showcase Textile and Clothing show by participating in IFF, Tokyo between 20-22 July, 2011. AEPC, in anticipation of the Agreement, had extensive meetings with major buyers like FAST Retailing, who have over 700 stores and the Council is in continuous dialogue with data exchange. In the recently concluded Tex-Trends India – 2011, 98 Japanese buyers visited the show, which itself demonstrates growing capabilities of our country in performing quality garment exports to Japan.”
In spite of the revival, the sector faces new challenges:
Though there is some sign of revival in the sector, the same is being dented by fresh crisis. Around 20.1.2011, prices of cotton yarn have once again started rising abnormally, though it has been largely due to the steep increase in price of cotton. The prices have already increased about Rs. 30 a-kilo and another Rs. 20 per kilo is in the offing. AEPC feels that such steep price increases will once again prove detrimental to the reviving fortunes of the apparel export industry. For AEPC, one of the top challenges of the industry still remains is the raw material security.
To further augment this crisis, the industry recently witnessed a very sensitive issue in Tirupur, the apparel manufacturing hub of India, where the Court ordered the closure of dying units. Said Mr Udani, “The closure of all dying units in Tirupur has been a very big blow to the knitwear industry. We respect the Court’s decision, but this has resulted in loss of many jobs. Also, it has led to severe loss of reputation with foreign buyers as all pending contracts are severely delayed. There is a fear that the industry may shift out of Tirupur, if the impasse continues for long.”
The largest employment provider after agriculture and a home for about six million employees, Indian apparel industry has seen worst of its time when it started facing shortage of cotton yarn – the basic raw material for apparel manufacturing. The trend that started almost in the middle of 2009 lasted continuously till November 2010 and crippled the industry. “All these issues are not only distorting the industry’s targets, but also harming the industry’s socio-economic structure. Because of these varied problems, many of the industry players have been forced to shut down their operations rendering thousands of labour jobless. We had to go long way to restore the normalcy, but we still believe that a lot has to be done to completely stabilize the sector”, added Mr Udani.
Added Mr Udani, “The Council is extremely disappointed that in spite of the Hon’ble Commerce Minister’s assurance that special incentive package will be brought out for labour intensive industries like apparel; nothing seems to have been done in the recently announced package. The apparel industry is the largest employer in the country and facing the most severe crisis. We will meet the Honourable Ministry of Commerce to take up the issue further.”
Expectations from the Government:
AEPC has recommended certain further measures such as:
- Continuing the existing cap on cotton/cotton yarn till the next cotton season,
- Removal of import duty on cotton yarn,
- Realistic drawback rates for the garment sector,
- Special package of incentives from the Commerce Ministry
About AEPC:
Incorporated in 1978, Apparel Export Promotion Council (AEPC) is the official body of garment exporters that provides invaluable assistance to Indian exporters as well as importers/international buyers who choose India as their preferred sourcing destination for garments. With 40 offices and 8,000 small, medium and large garment exporters across India, AEPC today has grown to become the most powerful association for promotion and facilitation of garment manufacturing and exports. With an objective of building a strong ground for the Indian exporters, AEPC is committed to provide various platforms to Indian exporters which would help in achieving growth of garment exports.
