India’s textile and apparel industry exports are forecast to decline again in 2008 due to lower global demand and higher input costs, offsetting the depreciation of the rupee against the US dollar. The textile and apparel industry contributes 13% to India’s exports and 4% to GDP.
Despite a number of positive factors for India, including rising input costs from China, a shift in business away from neighboring countries such as Pakistan, and declining market share in the U.S. from rival countries, the Indian textile and apparel industry remains weighed down by sluggish demand and high input costs. .
Exports have dropped by 30% since April 2008, and production has shrunk by 20-30%. This resulted in closure of several units in major centers of Tiruppur, Bengaluru, Delhi, leaving thousands of workers jobless.
Falling demand for textiles and clothing in the United States and European countries has triggered panic among manufacturers, who have cut production in stages. 1/2 of India’s textile and clothing production is exported to the United States and Europe.
In 2007, India’s textile industry exports reached US$22 billion, lower than the target of US$25.06 billion.
If the order situation does not change, India’s exports will decline again in 2008. In the third quarter of the current fiscal year, the number of orders for major export units shrank by 15-20% year-on-year, and domestic sales fell by 10-15% year-on-year.
The Federation of Indian Chambers of Commerce and Industry and the Confederation of Indian Industry predict that the output of the entire manufacturing sector will decline by about 10-40%, and more workers may be unemployed in the near future due to administrative costs. The government announced a stimulus policy of 14 billion rupees for the Textile Industry Technical Transformation Fund and promised to provide more promotion policies.
But industry figures say adjusting cotton prices could be of greater help. The Indian Garment Manufacturers Association believes that the tariff rebate rate should be increased by at least 3-4% so that the industry can be more competitive.
Even if global cotton prices fall by 25-30%, India’s domestic minimum support price is still 40% higher than the previous year, which affects industrial competitiveness. Cotton prices rose by 40% in September to Rs 2,850/quintal, which is 20% higher than international prices.
Industrial analysts say India’s input costs, especially cotton prices, have begun to fall from their peak, but are still higher than the same period in 2007. India’s direct competitor China faces pressure from high input costs, labor, electricity, currency, and low export subsidies, leading to growth in India’s competitiveness.
