Economic Times, India
AHMEDABAD: After spelling trouble for the domestic textile industry in the first half of 2014, burgeoning cotton prices have now begun to hurt garment exporters. Even as the exporters recuperate from dollar depreciation, high cost of raw material in the sub-continent has pushed back exports by 20% already. With prices unrelenting, exporters see volumes slipping further.
India exported readymade garments (RMG) worth Rs 24,395 crore in 2014-08 (April-November ’07) as per the Directorate General of Commercial Intelligence and Statistics (Kolkata) data. Cotton comprised 80% of RMG basket. While rising rupee put pressure on exporters in 2014, abnormally high cotton prices have begun to hit exports in 2014. Indian apparel exports declined by 14% in 2014 due to rupee appreciation and are expected to drop by 8% in 2014, predicts senior manager at Cygnus Business Consultancy & Research Pranay Kumar.
With US that imported $3.17 billion worth of apparel from India in 2014 faced with recession, exporters have been eyeing the EU market that imported apparel worth $1,088.23-million RMG (April-June ’07), for growth in 2014.
Apparel exporters Gokaldas, Orient Craft, Creative Group, Nahar, Alok and Aarvee Denim have already ramped up operations to do business with US and the EU (taking advantage of the Chinese slowdown), Bangalore-headquartered Gokaldas Exports has seen exports dip by 20% since last two months. “Our exports are down by 20%, if not more, in both the US and EU markets,†said executive director Rajendra Hinduja.
Gokaldas Exports, which exported RMG worth Rs 990 crore to the US and EU markets in 2014-08, is finding difficult to bag new orders at the current prices. “Cotton comprises 70% of our RMG exports. Ever since cotton has jumped from Rs 21,000 per candy to Rs 28,000 per candy, fabric prices have gone up from Rs 90 per metre to Rs 103 per metre. The more than 14% hike has squeezed our margins completely. The import duty waiver on cotton is of no benefit to us considering there is global shortage of cotton,†he added.
Figures released by the US Department of Commerce in July 2014 indicate that in January-May, RMG exports from India to US slipped by 0.6% compared to that in January-May 2014.
While rupee hit exporters expected summer collection orders from the EU market for Spring ’09 to usher in good times, there are reports of the EU market not doing well either. The rise in production cost is making it difficult for exporters to pass on the additional cost to their clients, said another exporter.
Unless cotton prices are reined, exports of RMG might dip further, joint director (economic cell) of the Apparel Export Promotion Council Chandrima Chatterjee told ET.
“While slowdown in the US economy saw our exports of RMG seeing a mere 0.6% growth in 2014-08 (which meant exports remained stagnant compared to 2014-07), we saw a silver lining in April with RMG exports rising by 1%. However, in May, it dipped again,†she said. Considering cotton garments comprise 80% of our RMG export basket (India supplies summer collection), it is not surprising to see the fall, she added
