7 September 2011
India's apparel exports were very strong in the first part of the year but could now suffer from the global economic slowdown, as US orders would have already weakened. Compared with China, raw material costs were however maintained to relatively lower levels while wages are not so rapidly rising.
India's apparel exports sharply rose in US$ terms in the first half this year, but could slow down in the coming period.
In the first quarter fiscal (April-June 2011), exports gained 34.47% at US$3.58 billion.
A target of US$14 billion has been set by the government for full 2011-12 (April-March), up 26.13% from the level of US$11.1 billion reached in 2010-11.
The rise of exports is partly due to the jump in prices over the last 12 months.
On the US apparel import market, average unit price of Indian shipments gained 11.5% in the first half, from the same months in 2010.
Indian prices even surged 14.6% in category 341 (woven shirts for women and girls), and were up 17.6% in 352 (cotton underwear).
This is higher than average price increase of overall US apparel imports.
Finally, Indian prices were 13% above average level in the first half this year, against only 11% in the same period of 2010.
India's share of the US import market slightly declined over the period, as a result, in both volume and value terms.
The US market looks increasingly depressed, and US orders would have been disappointing for the next spring, in addition.
European data are slower in being released and were still indicating a strong growth of Indian shipments over the first quarter, in euro terms.
This was entirely due to a surge of 28% in prices, however, compared with an overall increase of 16.9% in EU's clothing import prices.
In volume terms, shipments from India declined over the first quarter, from a year earlier.
Indian exporters however feel that they will more easily compete with China in the future, thanks to a the surge in Chinese prices over the last period.
India would benefit from a lower growth in wages, especially if the domestic industry is relocated from large urban areas to smaller towns where a cheaper workforce is widely available.
The Indian apparel industry is also putting pressure on New Delhi to maintain raw material costs at relatively lower levels than in China.
In the last winter, it successfully obtained quantitative limits on exports of cotton yarns, therefore limiting the surge in yarn prices in the country.
India's yarn production began however rapidly declining, even with cotton exports being also restricted.
As a result, quotas on fiber and yarn exports have now been removed and prices are bottoming out on the yarn market.
Incentives were also restored for yarn exports, with the apparel industry requesting a similar help from the government, consecutively.
Compared with China, India's apparel industry is actually weakened by a low level of labor productivity, partly due to a lack of appropriate training.
If able to invest in higher productivity, and thanks to its vertical integration, Indian apparel exports could however rapidly expand in the coming years.
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