After sharply increasing in the first four months of the year, India's apparel exports are now expected surging in the months ahead as apparel trade with the United States and the European Union was diverted from SARS-hit countries. Indian exporters may be rapidly confronted with saturation in US an EU quotas, however, as shown by our report.

India's apparel exports to so-called quota countries were up 19% in volume terms (number of pieces) in April, even rising more than 24% in value terms at US$376 million.

Shipments to the European Union were higher than experienced in the first quarter with a 26% increase in volume terms and a growth of 40% in value terms at US$190 million.

Exports to the United States slowed down, nevertheless, "only" rising 10.64% and 10.46% in volume and value terms, respectively.

In the first four months of the year, exports to the US were up 23% in volume terms while shipments to the EU increased by 17%.

Exports to Canada were up a mere 4.17% in volume terms in April with a 5.74% growth in the January-April period.

India is expected becoming the most important challenger of China in the post-quota era, starting on 1 January 2005.

In addition to the surge in shipments observed in the first four months of the year, Indian exporters could benefit from the negative impact of SARS outbreak on US and EU imports from China and Hong Kong.

Sharp rise in orders

US and EU orders for the next season would dramatically increase, domestic authorities forecast.

The surge of the first part of the year is already resulting in a new saturation of US and EU quotas, however (see our table below).

Exports licences issued for deliveries to the European Union already account for 93.61% in category 4C (T-shirts) while the same quota fill rate even reaches 96.39% in category 7 (women blouses and shirts).

Category 4 (knitted shirts) is 83% filled. More than a month before the end of the first half, rates exceed 50% in a large series of EU's apparel categories.

Although Brussels may grant additional quotas under flexibilities offered by EU-India bilateral agreement, limits will be rapidly reached.

Focusing on a few US categories

On US apparel market, quota fill rates are much lower, leaving additional room for a surge in exports in the second part of the year.

As usual, US orders focused a few sensitive categories, however, such as 338/339 (knit shirts, including sweatshirts and T-shirts) with a fill rate of 63.30% in this category as a result .

Saturation may also be rapidly reached in categories 336/636 (dresses), 341 (W/G woven shirts) and 351/651 (nightwear).

Sharp increases are also reported in other US categories.

In addition to the surge in volume terms, Indian exporters benefit from a rise of prices. If average unit value of exports to the US only rose 3.55% in the January-April period, it increased by 18% for shipments to the European Union.

It is not yet clear if such a surge will be confirmed in the coming years or if India only takes advantage of a short-lived SARS outbreak and from the very low level of quotas imposed on China's exports to the US and the EU. These quotas will be phased-out in less than twenty months.

Related Reports :

India's apparel exports surged in January-February (7 Mar 03)

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