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India’s Apparel Exports to Come Down by About 4-5% In FY 2019, Suggests ICRA Report

India’s Apparel Exports to Come Down by About 4-5% In FY 2019, Suggests ICRA Report

India’s apparel exports are projected to show a negative growth of 4-5% in 2019, mainly due to the decline in exports to the UAE, one of the largest importers of apparels manufactured in India. This will be the second consecutive year witnessing a decline in growth, as the exports were down by 4% in FY 2018.

Growth rates remained modest even in 2016 and 2017 when the export market grew by 1% and 4% respectively. Senior Vice-President of ICRA, Jayanta Roy said that the decline in apparel exports in FY 2019 so far was due to the declining shipments to the UAE from July 2017. Roy expressed his concern that if the trade with UAE was to be excluded, the apparel exports from India will fall sharply by 7% in terms of overall shipments in the remaining 10 months of FY 19.

He further added that contrastingly, the global apparel trade is showing signs of positive momentum, and weakening of Indian exports at such positive times is a serious point of concern. The global apparel trade expanded for the second consecutive year in 2018, with a growth of 3%, following a 2% growth in 2017.

The positive shift globally experienced in the last two years is mostly attributed to the strong recovery in apparel imports by the European Union, which accounts for about 40% of the global apparel trade. The apparel trade in the EU grew by 5.8% in 2018. On the other hand, growth in imports by the US was low at 2%, which, in fact, is an improvement.

According to the ICRA report, the trend seems to have bottomed out, and recovery is expected to set in with internal challenges and abrupt pressures subsiding. However, the recovery is likely to take time, considering the challenging environment. The report further stated that the exports to UAE stabilising, though at a lower level, and reasonable growth can be expected in March, considering the lower base. Nevertheless, the negative growth in the previous few months is bound to pull down the year growth figures.

Commenting on the increasing competition from low-cost nations, Roy said that while China, the world’s largest apparel manufacturer and exporter, continues to shed market share in the global trade, India has failed to capitalise on the opportunity. On the flip side, Bangladesh and Vietnam have been able to capture a substantial portion of the global trade, and are the second and the third largest nations respectively in global apparel exports.

He added that while Bangladesh created a base for itself in the EU, Vietnam has maintained growth in its stronghold market of the United States. Uncertainty on continuity of export incentives, after US’s allegations against India’s export subsidy schemes at WTO, have raised fresh concerns for domestic apparel exporters. On the other hand, the report added, enforcement of the comprehensive and progressive trans-Pacific Partnership and EU-Vietnam FTA has been posing serious challenges for an elongated period.

India’s apparel exports in Q3 FY2019 remained lower than the average quarterly exports during the past five years. The reports say that measures taken by the government will be extremely crucial to tackle the challenges and market recovery.

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