Exports sweeten India's textile scene

The Indian textiles industry is set for strong growth, buoyed by strong domestic consumption as well as export demand. Karthik Muthuveeran reports.

The Indian textile industry is currently on a roll. Not only the industry´s hopes are flying high following the formation of a new Modi-led government and its promises of new incentives to give a boost to the sagging fortunes of the textile industry, but also-according to data released by the Apparel Export Promotion Council (AEPC)the industry has overtaken Germany and Italy to be the world No. 2 in textile exports recently.

As a part of support to the textiles sector, the new government may enhance allocation for the Technology Upgradation Fund Scheme (TUFS) in the Budget. The government had approved the continuation of TUFS for the 12th Plan period (2012-17) with a budgetary allocation of Rs 11,900 crore. This decision-if carried out wisely by the government-may provide a fresh impetus to the Indian textile industry, which has been termed as the next sunrise industry.

According to some statistics revealed by AEPC, despite India being No. 2 in textile exports it clearly lags behind China, whose exports are whopping seven times higher. The Indian textile industry largely depends upon the textile manufacturing and exports. Exports definitely plays a prominent role in the economy of the country as India earns about 27 per cent of its total foreign exchange through textile exports. In India, exports of textiles have increased steadily over the last few years, particularly after 2004, when textiles exports quota stood discontinued.

Cotton fabric exports grew 19.90 per cent to $8.07 billion in the first 11 months of 2013-14, accelerating from 8.30 per cent growth in the same period of 2012-13. Cotton garment exports grew 8.14 per cent to $8.15 billion and synthetic fabrics and made-ups grew 12.95 per cent to $4.63 billion in the first 11 months of 2013-14 against contractions of 14.19 per cent and 12.47 per cent, respectively, in the comparable period of 2012-13.

Not only exports, India´s textile production grew 4.6 per cent in April-February 2013-14 even as the index of industrial production shrank by 0.1 per cent.

Recovery in merchandise exports overall was slow in 2013-14, despite the rupee´s depreciation. Exports rose just 4.43 per cent to $281.82 billion in April-February 2013-14 against a 2.62 per cent decline in the corresponding period of 2012-13.

A report by Karvy Institutional Research revealed the same. According to them, the industry is witnessing buoyant demand of cotton yarn from export markets and diversion of garmenting orders from Bangladesh due to labour unrest and safety issues. Moreover, weaker INR YoY helped Indian exporters further on global competitive scale. During Apr-Jan FY14 period, textile exports grew 14.6 per cent YoY to $28.5 billion (In INR terms, grew 27.2 per cent to Rs 1,723 billion). Vardhman Textiles (yarn & fabric), Arvind (fabric & garments) and Raymond (fabric & garments) are expected to fare well on exports front.

´We expect cotton based manufacturers to witness moderate margin pressure due to higher cotton prices, while synthetic fibre prices are stabilising. Worsted fabric is looking positive with approximately 10 per cent YoY decline in imported wool prices, coupled with strengthening of Rupee. Companies with exposure to exports are expected to gain on buoyant demand while domestic demand is subdued on seasonality. March and June quarters are usually leaner for domestic market,´ said the Karvy report.

Dun & Bradstreet´s India Outlook 2014-15 report revealed that textile industry has shown a strong growth, sustained by strong domestic consumption. Availability of raw materials such as cotton, wool, silk and jute in huge quantity and skilled workforce has made India an important player in the textile industry.

During FY14, exports are esti