India’s apparel exports continue to remain volatile and unencouraging with the global apparel trade not showing any signs of uptick amid subdued demand trends in the key importing countries. The latest trends point towards a third consecutive year of decline in global apparel trade, says an ICRA report.
Says Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA, “Although we have witnessed brief phases of growth in the past 18 months, the trend has been unsustainable and has failed to instil confidence. In such a scenario, sustained growth in India’s apparel exports remains challenging. The challenges have been further augmented by the appreciation of Indian Rupee in recent months which has reduced competitiveness of Indian exporters vis-a-vis global counterparts.”
The apparel and fabric industry has been facing further headwinds as a result of temporary disruptions caused by demonetisation drive and transition to GST regime. The impact of these developments has been more pronounced for the highly fragmented fabric segment, with Indian fabric production declining by 1 per cent in Q1 FY2018 following a flat production in FY2016 and 2 per cent de-growth in FY2017.
Despite the significantly higher raw material prices, the revenues of fabric manufacturers in ICRA’s sample grew by a modest 4 per cent in Q1 FY2018 pointing towards a steeper de-growth in sales volumes vis-a-vis production volumes.
“De-growth in fabric sales volumes in Q1 FY2018 was higher than the aggregate nation-wide production de-growth (1 per cent), due to the clearance of channel inventory by intermediaries prior to GST implementation,” Roy added.