Indian Denim Sector And Global Demand: Immediate Prospects And Challenges

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The Indian denim sector has always shown better growth prospects in spite of many market side up and down. In fact, it is projected to grow at a faster rate in spite of India’s apparel exports as well as the domestic market are expected to see subdued growth.

The Indian denim sector is growing at a compounded annual growth rate (CAGR) of 13% to ­15% in a year, according to industry experts. This growth in the Indian denim sector is happening at a time when the overall apparel growth rate is being pegged at a lackadaisical 3.­5% this fiscal, which is down from the 12% to ­15% growth seen during the past couple of years.

Denim makes up for a sizable share of India’s total textile exports and it is expected that production may increase to 1.5 billion metres by 2020.Indian denim industry is primarily aiming to increase its share in exports, which currently pegged at 35% of production compared to domestic consumption of remaining 65% of the produce.

"Denim is witnessing one of the fastest growth rates as an apparel fabric segment, up by 500 million metres from 700 million metres in 2010 to 1.2 billion in 2015. Yet, there is a gap of another 300 million metres in India if the denim industry needs to tap its full export potential," says P R Roy, chairman of Diagonal Consulting (India).

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"While the total denim fabric capacity in the country is about 1.2 billion metres per annum, the utilisation is at around 900 million metres per annum, of which 250 million metres are exported. However, denim apparel exports would roughly form around 50 to ­60 million metres," says Prashant Agarwal, joint managing director of Wazir Advisors, a retail and management consulting firm.

Global denim market is estimated to grow atabout 8%annually from U$55 billion in 2015 to US$59 billion in 2021. While the projected growth rate in Asia including India is around 12%, that for Latin America, North America and Europe is expected to be around 15%, 10% and 4%, respectively in the next six years, according to industry experts.

Besides, Indian denim exporters may not have to fear about competition from China either for a very good reason – China’s denim manufacturing capital called Xintang is down in the dumps, and hence China may find it difficult to meet the global denim demand.

China’s falling denim export

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In fact, statistics put out by the National Bureau of Statistics of China indicate that the country’s denim export is dwindling.

Xintang used to be the most vibrant denim manufacturing centre of the worldwhich is facing several issues today. With initial investment from Hong Kong, cheap migrant labour from China’s inland provinces and a relatively accommodating local government policy framework, the town was an ideal manufacturing zone for international brands like Zara, Gap and H&M, until quite recently.

This small town in Guangzhou province was home to more than 3,000 companies in the jeans and denim business, whose 200,000 workers cut and stitched 800,000 pairs of jeans a day. (Read Textile Excellence Issue 16-29, February 2016).

That’s how things were before China’s labour cost for making a pair of jeans increased by at least five fold during the past decade, even as newer competitors came up in India, Bangladesh and Vietnam where labour costs are lower. After that, it has been downhill for China’s denim sector.

However, that by itself may not be enough reason to make the Indian denim manufacturers and exporters smile, especially when some other hard facts are also taken into account. To continue the growth story, consumption of denim apparel has to grow as well. US -a major consumer of denim apparels, has witnessed sizable decline in imports.

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Denim apparel imports into US peaked in 2013 at about 522 million pieces but slowly declined ever since and fell to 475 million pieces in 2015. In 2016 also, the fall in denim apparel import continued and over all us import of textile and apparel fell 6.44% to US$ 104.72 billion .

It remains to be seen how thisimportant market will perform though the current year. The Indian denim fabric sector must focus on meeting the demand from non-US markets like Latin America and Europe, besides Asian majors like Bangladesh and Vietnam. 

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