India’s textile exports tumble as Bangladesh, Vietnam get preferred access in EU

Date: Wednesday, September 25, 2019
Source: Financial Express

India’s containerised exports to China declined by 20 per cent in the second quarter of the current fiscal year, led by a reduction in demand for India-made textiles & apparel.

India’s textile and apparel industry is facing strong headwinds as key competitors such as Bangladesh and Vietnam are given preferred access in India’s biggest textile market — the European Union. These could make it increasingly more difficult for India’s apparel exporters to maintain their competitiveness in the EU, which accounts for over one-third of India’s apparel exports. Even, India’s containerised exports to China declined by 20 per cent in the second quarter of the current fiscal year, led by a reduction in demand for India-made textiles & apparel. These were large export commodities in the corresponding period last year.

“Apart from challenges in the EU market, retail trends in the US also remain unencouraging, which could exert additional pressure on the order flow for India’s apparel exporters going forward,” said Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA. External environment for India’s apparel exporters remains challenging amid a pick-up in activity on several free trade agreements among the key trading nations, which has intensified competition from nations having a cost advantage over India, he added.

Trade tension between the US and China was expected to give thrust to Indian industries by giving them an opportunity to fill the gap. However, India’s close competitors are squeezing far more profits than India. Although large exporters from India are well-positioned to benefit from the market opportunity, it would require companies to scale up their operations, maintain strict delivery schedules and meet stringent compliance requirements of the buyers in a short span of time, ICRA said in a report.

Ironically, smaller companies in the textiles and apparel sector, with limited bargaining power and dependence on smaller US retailers are facing performance pressures and are more prone to the slowdown.

Meanwhile, India’s containerized trade growth in Q2 FY19 slowed to 1 per cent, compared to 9 per cent in the same period last year, due to a combined effect of international factors such as slowing trade growth, and growing trade tensions, coupled with domestic factors like rural consumer distress, tightening liquidity and a slow-down in key manufacturing sectors.

“Amidst increasing global volatility, a slower local economy and the USA’s withdrawal of preferential access for certain Indian products, India’s import-export trade is expected to continue to face headwinds in the coming months,” said Steve Felder, Managing Director, Maersk South Asia.

Integration and enhancement of logistics value chain, coupled with the adoption of new technologies such as Blockchain and Artificial Intelligence across the logistics network, and concerted efforts towards the improvement of infrastructure at ports and roadways will ensure last-mile connectivity for farmers, MSMEs, and small businesses, driving economic growth and trade competitiveness of India, Steve Felder added.

 

 

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