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| Indian apparel exporters are trying to sell more goods to Japan and ASEAN region (Photo source: India Fashion Week) |
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The Indian textile and apparel industry is currently one of the largest and most important industries in the Indian economy in terms of output, foreign exchange earnings and employment. The industry contributes 4% to the country’s GDP, 14% to the country’s industrial production and around 12% to the country’s foreign exchange earnings, according to a report commissioned by the Confederation of Indian Textile Industry (CITI) and the Cotton Textiles Export Promotion Council (Texprocil) issued this June.
Due to the current economic slowdown of major advanced regions, the Indian textile and apparel industry may not reach the 2009 targets previously set by the Ministry of Textiles, such as a 16% annual growth of the industry to reach US$115 billion by the end of 11th Five Year Plan (i.e. 2012).
Indian textile and apparel market reached estimated Rs 2.55 trillion in 2007-08 with exports accounting for 35% of the total market value. The industry showed significant dependence on exports with 27 state members of the EU (EU27) being the largest export market, representing 33% of the total exports by value in 2007-08, the report mentioned.
The 27 countries in the EU annually purchase about one third of the total Indian textile and apparel exports |
Among the EU members, the UK was the largest buyer for Indian textile and apparel, or 7.5% of India’s total textile and apparel exports by value in 2007-08.
The US was the second largest export market for Indian textile and apparel industry, purchasing 21% of India’s total textile and apparel exports by value in 2007-08. The US registered negative economic growth in the second half of last year and retail sales of apparel in US shrank significantly as a consequence.
As the EU, US and other major overseas buyers were substantially affected by the global financial crisis, overseas demand for exports plunged in the last quarter of 2008, followed by a textile and apparel production decline in India.
The Index of Industrial Production (IIP) for cotton textiles declined 3.7% (year-on-year) in December 2008, 6.2% (y-o-y) in January 2009 and 12.1% (y-o-y) in February 2009. Apparel production also dropped 2.3% this February compared to the same period of last year.
Profit margins of Indian textile and apparel firms also declined significantly from the fourth quarter (Q4) of 2007 to 2008 Q4, based on an analysis of a sample of 81 such firms in the CITI/Texprocil June 2009 report.
The situation gradually improved in the second and third quarter as some fabric and garment production units reported a pick-up in international demand. It was expected to translate into a higher demand for spun yarns. While spinners reported a slack demand for cotton and polyester cotton yarns, polyester viscose yarn manufacturers continued to receive export orders.
Expects textile industry to revive in next months
To gain more orders, Indian apparel exporters are exploring more markets to reduce trade dependence on EU27 and the US.
Japan as a large apparel exporter, as well as Russia, is a good prospect. Japan accounts for 1% of India’s total textile and apparel export value in 2007-08. China being the major exporter to Japan in this field, shares over 70% of Japan’s total textile and apparel imports, in accordance to the CITI/Texprocil June 2009 report.
To facilitate the trade, India’s Union Minister for Textiles Dayanidhi Maran led a delegation to Japan this July, with representatives of Apparel Export Promotion Council (AEPC), the Texprocil, the Synthetic and Rayon Textiles Promotion Council (SRTEPC), Knitwear Technology Mission, and leading textiles manufacturers and exporters from Tirupur and Coimbatore textiles clusters.
The Indian minister invited Japanese textiles industry, during the delegation, to collaborate with their Indian counterparts in manufacturing fabrics and setting up of greenfield units of textiles machinery in India. In the addition to the cost advantage in terms of cheap labour, he highlighted the multiple advantages India has in the form of highly skilled workforce, high capital-employment ratio and a diverse raw material base.
Additionally, effective from January 2010, the Free Trade Agreement (FTA) between India and the ASEAN paves the way for the creation of one of the world’s largest free trade areas, of almost 1.8 billion people with a combined GDP of US$2.75 trillion, the ASEAN Secretariat stated.
Under the agreement, tariffs on more than 80% of total imported goods will be reduced to zero by 2013, and another small proportion of goods will be given zero tariff by 2016, involving totally over 4,000 product items.
India and ASEAN targeted to achieve bilateral trade of US$50 billion by 2010 from US$40 billion in 2007-08, the Indian Department of Commerce said. It is expected to bring economic benefits to the Indian industries including textile and apparel.
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