Neighbour’s envy India’s gain
With about 25 per cent contribution to the Indian textile & apparels (T&As) industry, exports play a crucial to its growth. While domestic demand for T&As has remained steady over the past two years, exports faced setbacks in 2023 due to high inflation and rising interest rates in key markets, resulting in a 10 per cent decline to $ 32.8 billion. However, the sector rebounded by 6 per cent in the first 10 months of calendar year 2024 (CY24), reaching $29.26 billion, aided by order shifts from Bangladesh and government support for the polyester yarn industry.
On the cotton yarn front, trend was reverse with exports declining by 5 per cent in the first 11 months of CY24 over a relatively high base of 11MCY23, according to CareEdge Ratings report. Cotton yarn exports are influenced by the parity between domestic and international raw cotton prices. Since April 2024, domestic cotton prices have been consistently higher than global prices, negatively affecting India’s cotton yarn exports. Furthermore, a slowdown in China’s textile industry, reduced global demand for textile products, and the adoption of the China Plus One strategy by global suppliers and brands have also contributed to the decline in India’s cotton yarn exports to China.
Readymade garments (RMG) and home textiles have experienced significant recovery. RMG exports increased by 7 per cent year-on-year in the first 11 months of CY24, reaching $13.2 billion. This growth was primarily driven by higher exports to major markets such as the US and UK, which together accounted for approximately 43-45 per cent of India’s total RMG exports.
The ongoing crisis in Bangladesh has further boosted India’s RMG exports. While Bangladesh holds the second-largest share in the global RMG market at 8-9 per cent, India ranked seventh in 2023 with a modest 3 per cent market share. However, socio-political unrest in Bangladesh during 2024 caused a shift in orders to India. Since the crisis began, India’s RMG exports have consistently outperformed Bangladesh’s. In Q3 CY24, India’s RMG exports grew by around 13 per cent year-on-year, while Bangladesh saw a 1 per cent decline. This trend of India outpacing Bangladesh’s growth continued through October 2024.
India is poised to benefit from global brands diversifying their supply chains due to geopolitical and socio-economic factors. The on-going Bangladesh crisis could redirect 6-8 per cent of Bangladesh’s monthly export orders to India, translating into incremental monthly exports of $200-250 million, says the CareEdge report. Indian companies, particularly those with capacities in knitted garments, are well-positioned to capitalise on this shift.
In the short term, India can meet the immediate demand, but sustaining medium- to long-term growth will require expanding capacities, enhancing supply chain efficiency, and improving cost competitiveness. This message was clearly outlined during the recently held webinar – titled “Outlook 2024 for Indian T&As industry” – by ITJ.
Changes in US trade tariffs under the incoming Donald Trump administration could temporarily impact exports. However, reduced reliance on China (by the US) is likely to benefit India in the medium term. According to CareEdge, the Indian textile industry is projected to grow by 8-9 per cent in 2025, provided cotton and polyester yarn prices remain stable and forex rates are favourable. This could improve operating profitability by 40-80 basis points.
