Apparel exports remain in red despite overall export recovery (29-Aug-2010)
Apparel exports from India continue to face difficulties as the global economic recovery remain inconsistent and demand from the developed region continues to be weak. According to the Apparel Export Promotion Council (AEPC), shipments from India declined at a substantial pace of 22.5% on annual basis in July 2010 to touch $816 million. This was the third consecutive month of decline in apparel exports.
The AEPC is saying that despite the ongoing recovery in the western world, demand continues to remain low and competition in the sector has increased enormously that is having a huge impact on India’s overall apparel exports.
Analysts opine that while the bigger export oriented textile companies have been able to return to high growth rates of around 15-20% in the June quarter, it is their smaller counterparts which are facing much greater trouble. Smaller players by nature lack volumes and hence economies of scale and thereby fail to compete with their Chinese rivals who manage to sell at much lower rates owing to large volumes.
Textile has been one of the worst effected segments from the global downturn and resulting pressure in exports. While there has been some improvement in demand from the developed countries, the textile space has become increasingly competitive since the crisis began and industry insiders are contending that India was failing to compete with rival exporters like Bangladesh and China on pricing as these countries were giving greater support to their exporters. On the other hand, textile companies in India are facing increasing cost side pressures.
Cotton and yarn prices too have increased considerably this year and despite a partial ban on exports, prices continue to remain significantly high on a year-on-year basis. This has not only put a lot of pressure on textile companies’ margins, but has also curtailed their ability to compete on pricing front, particularly for smaller companies. Another reason for decline in exports by small players is that domestic demand has remained robust and attractive, and these players therefore are preferring to cater to local buyers.
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