India’s apparel exports are rising by snatching orders that would otherwise have gone to China and Bangladesh, said a Business Standard report.
The report said exports were already up driven by demand coming in from major textile importing countries like the US and the eurozone. For overseas buyers, India has now become a favoured destination over the two mentioned countries.
China is currently facing high labour costs that also had an impact on its pricing, which is working in India’s favour.
While Bangladesh had lost its competitive edge to India as labourers staged a protest in September demanding reasonably high wages and the collapse of Rana Plaza that raised concerns regarding safety and working conditions among overseas buyers, resulting in their demand shifting to India.
Benefits of falling rupee this year is already having a positive impact on textile companies in this fiscal.
India’s garment exports to EU increased by 5.9 per cent year-on-year in January-May 2013, whereas those of China and Bangladesh declined by 9.7 per cent and 1.8 per cent year-on-year, respec tively, in the same period, according to Apparel Export Promotion Council.
Apparel exports for the month of September 2013 grew by 14.95 per cent registering to the $1.11 billion for September 2013. This is the sixth consecutive month where garment exports grew at an average of 13 per cent, according to data compiled by AEPC. In the first half of the current fiscal, India exported apparel worth $7.9 billion, a growth of 13 per cent over last year, according to data collected by AEPC.
This fiscal, KS Rao, union textile minister, has pegged apparel export target at $20 billion while last year India exported apparel and garments worth $14 billion. Christmas-related demand will provide further impetus to the exports.
The fall in the rupee has increased Indian apparel exporters’ competitiveness. The Chinese yuan has also increased against the dollar, causing them to lose its competitive edge.
‘Our garment orders in the last few months have gone up due to issues in Bangladesh. Importers now prefer to import from India than Bangladesh due to safety compliance issue,’ said M Shivkumar, CFO, Raymonds.
Orders from the eurozone have gone up by 15 per cent compared to last year as there is a good revival in demand. Even the US has increased their orders compared to last year this festive season (Christmas). Exporters are also seeing good demand coming in from the Middle East as well as Japan. India has also started exporting to Latin America, Russia and Australia.
Stocks of textile companies have also shot up in the last two months on the back of good export demand flowing in coupled with the fall in the rupee.
Textile stocks in the last two months have outperformed the S&P BSE Sensex. The Sensex has moved up by 10.25 per cent in the last two months, while Raymond stock has moved up by 40 per cent, Arvind by 33 per cent and Alok Industries 18 per cent.
India Ratings & Research, a Fitch Group research agency, expects this trend to stay in the short to medium term.
Export sales have also improved as garment manufacturers have tapped newer geographies such as Middle East, Latin America, Japan, Russia and Australia. Most exporters are running on full capacity and also outsourcing manufacturing on a job work basis as order books are growing ahead of the peak festive season (December).
‘This year the growth in the number of orders is very strong and also the current rupee level is working in our favour. India has now become a preferred nation for apparel exports which is also working well for the Indian apparel industry,’ said Premal Udani, ex-chairman of AEPC.
‘Strong revenue growth and earnings in FY14 are likely to improve the credit metrics of garment exporters. However, exporters may find it challenging to manage liquidity amid increasing volumes coupled with a long working capital cycle and the consequent higher use of working capital limits – a characteristic of the textile export business,’ India Ratings & Research said in a report.
-With New Age input
