World apparel trade: India is in a sweet spot, says CARE

Though Indian apparel exports is expected to see some moderation, the country is in a favourable position to boost its share in world apparel trade due to weakening competitiveness of China, according to a report by CARE Ratings.

With increasing competition from Bangladesh and Vietnam along with the passage of TPP (Trans-Pacific Partnership), the export demand for Indian apparels may moderate.

Also, with the recent depreciation of pound vis-à-vis the various currencies, including US dollar and Indian rupee, the prices of apparel are expected to see a surge in the region which may lead to decline in exports of Indian apparel to UK, which is among the top exporting destinations.

However, with the government initiating efforts to support the industry, India is in a sweet spot to increase its market share in world apparel trade given the declining competitiveness of China, which is the largest apparel exporter in the world, said the report.

In recent years, China has seen a sustained rise in its wage costs, which may lead to potential increase in its apparel prices. As a result, China is shifting its production base to higher value-added industries like electronics and curtailing low value-added production like textile and apparel. This presents a huge opportunity for south Asian countries, including India, to increase their share of exports.

As per the recent study conducted by World Bank, a 10 per cent increase in Chinese export prices would result in the US increasing its imports from India by 14.62 per cent and from Bangladesh by 13.58 per cent. Countries such as Vietnam and Cambodia would benefit even more where exports would increase by 37.71 per cent and 51.25 per cent, respectively.

So, with the expected reduction in China’s cost competitiveness and reduced focus on textiles, India has the chance of increasing its share in global apparel exports.

Despite increase in the export of Indian apparels in value terms, the market share has remained stable due to higher growth rates of its competing nations like Bangladesh and Vietnam led by favourable government policies in terms of incentivising the sector through trade agreements with the world’s largest apparel importing nations like the US and EU.

Traditionally, India is a net exporter of cotton yarn accounting for 30-35 per cent of the production, which can be diverted for the production of cotton-based apparels leading to more value creation within the country.

With the Government’s continued thrust on export of value-added products like garments, it provides an opportunity for Indian textile industry to increase its share of garment exports. This would also provide higher foreign exchange earnings and create higher employment.

Though Indian government has initiated various support measures, the country needs to adopt more favourable policies to increase market access, ease import barriers, improve export logistics, labour reforms and facilitate foreign investment, cited the report.