Indian apparel exports are likely to see only a marginal single digit growth this year, due to Goods & Services Tax (GST) implementation, rupee appreciation against the US dollar, rise in raw material prices, increase in labour wages as well as poor global demand, according apparel exporters.
A rise in minimum wages and rupee appreciation are reasons to estimate sluggish growth in apparel exports, according to the Clothing Manufacturers' Association India (CMAI). The Apparel Exports Promotion Council (AEPC) too has stated that India reported only a marginal 5% growth in apparel exports worth US$ 6.9 billion for the period of April-July 2017, while the country had posted US$ 17 billion worth of apparel exports in 2016-17.
Incidentally, the Indian rupee rose to 64.2 against the US dollar from 66.5 last August, which is in contrast to six consecutive years of depreciation.
The global apparel trade has also shown no signs of revival, due to poor demand in key importing countries, which could affect India’s apparel exports, according to an ICRA report.
According to the report, the apparel and fabric industry has been facing headwinds as a result of temporary disruptions caused by demonetisation and the transition to the GST regime. The impact of these developments has been more pronounced on the highly fragmented fabric segment, with fabric production declining by 1 per cent in the first quarter of 2017-18 following flat production in 2015-16 and a 2% decline in 2016-17.
Despite significantly higher raw material prices, revenues of fabric manufacturers who participated in ICRA’s sample survey grew by a modest 4% in the first quarter of 2017-18 pointing towards a steeper de-growth in sales volumes vis-a-vis production volumes.
De-growth in fabric sales volumes in the first quarter was higher than the aggregate nation-wide production de-growth of 1% due to the clearance of channel inventory by intermediaries prior to the GST implementation, the ICRA report stated.