India’s apparel exports estimated to show negative growth of 4-5 percent in 2018-19, due to decline in exports during the first half of this financial year, especially to the United Arab Emirates (UAE), according to a report.
“The decline in apparel exports in FY19 so far has been driven by decline witnessed in shipments to the UAE from July 2017 onwards. If the trade with UAE is excluded, India’s apparel exports stood flat at 7 percent decline in overall shipments in 10 month of FY19. As this weakness coincides with a time when the global apparel trade has shown signs of positive momentum, it remains a cause of concern,” Icra senior vice-president Jayanta Roy said.
Icra said it expects the trend to have bottomed out and recovery to set in with internal challenges and abrupt pressures subsiding, though the pace of recovery is likely to remain muted considering the challenging environment.
“With exports to UAE stabilising, albeit at a lower level, we expect growth to be reasonable in February-March considering the lower base. Nevertheless, the de-growth reported in the earlier months is expected to pull down the overall growth for the year,” the report added.
As per Icra report, India continue to experience headwinds in the form of intense competitive pressures from nations having a cost advantage over India, which seem to be constraining the overall momentum of the apparel export sector of India.
Competition from low-cost nations like Vietnam and Bangladesh is a major challenges the industry is facing, it said.
“While China, the world’s largest apparel manufacturer and exporter, continues to shed market share in the global trade, India has not been able to capitalise on the opportunity. Instead, a large chunk has been garnered by Bangladesh and Vietnam, the second and the third largest apparel exporting nations globally.
While Bangladesh has been the key beneficiary in the EU, Vietnam has maintained growth in its stronghold market of the US,” Roy added.
Besides, uncertainty on continuity of export incentives, with US’s allegations against India’s export subsidy schemes at WTO, enforcement of the comprehensive and progressive trans Pacific Partnership and EU-Vietnam free trade agreement (FTA) also plague the sector, it said.
Going forward, the report said, steps taken by the government to address the challenges will remain crucial for recovery across the sector.
This also remained critical for the domestic apparel exporters to capitalise on the revived global apparel trade as well as the continuing loss of market share by China, which opens up a lucrative opportunity for key players such as India, Vietnam and Bangladesh, it added.