Major rating agency ICRA has said that apparel exporters in India could record a revenue growth of 9-11% in the current financial year, thanks to gradual global sourcing from India and sale-out of inventory in important retail markets, which will stand out against the marginal contraction in the last financial year. However, most of this could be traced to the Bangladesh political turmoil.
Apparel exports has always been counted as an area where India, a country of great weaving tradition and cheap labour, has had a competitive advantage. The Indian entrepreneurs in this sector are not only nimble footed but also assisted by the production-linked incentive (PLI) scheme and export incentives. ICRA has mentioned the FTA (free trade agreement) with Europe and the US are factors that could add to the tailwind to the sector.
Indian apparel exporters revenue fell in FY24
The looking up of the sector adds special significance this financial year especially because the past financial year (FY24) was a listless one of this sector. Tepid demand caused inventories to pile up at the retail end and pulled down the market. Moreover, supply chain headaches and the Red Sea crisis that rendered shipping freights more expensive than normal years, tilted the scales against Indian exporters. ICRA also mentioned competition from neighbouring countries – Bangladesh is a major garment exports in the EU and US.
“After a marginal decline (down 2 per cent) in FY24, Indian apparel exporters are estimated to report a 9-11 per cent revenue growth in FY25, benefitting from de-risking strategy adopted by various customers and replenishment of retail inventory in key end markets, especially the US and the EU regions,” ICRA senior vice president & co-group head corporate ratings Srikumar Krishnamurthy was quoted by PTI as saying.
India to benefit from Bangladesh turmoil
Reports state that as much as 10.35% of the GDP of Bangladesh came from garment exports – ready made garments in their lexicon – in 2023. The recent political upheaval in which Sheikh Hasina-led Awami League government had to cede power to a motley collection has prompted several importers to source from other countries and India has stood to benefit.
ICRA also sounds caution
However, that does not erase the huge competitive advantage of Bangladesh, ICRA mentioned. “Despite the revenue growth, associated operating leverage benefits and softer raw material prices, the industry’s operating margins are expected to contract by 30-50 bps on a YoY basis in FY25 with increasing labour costs, freight costs and rise in other operating expenses,” Krishnamurthy added.
One of the most labour-intensive sectors of the economy is the apparel export sector. Fortunes seem to be looking up for this segment in FY25 after a poor FY24. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
