Wherever I go these days, I hear that exports are picking up, but for the right price and within this scenario the community is happily claiming that business is growing. Statistics also corroborate the fact that apparel export business grew 12.2% in dollar terms in the Financial Year 2014-15. Even the regular analysis done by my team for our data pages shows that despite market conditions, India made steady progress in both the US and European markets on both quantities and values in 2014.
In calendar year 2014, when the currency fluctuation with US Dollar was at an average 2-3%, Indian exports to the US registered 5.89% growth in value (in US Dollars), while the volumes were up 8.07%. The increase in volumes was accompanied by a dip in the average UVR for the year at US $ 3.55, marginally down from US $ 3.63 in 2013. Products which did well in the US include undergarments, babies wear, sweaters and nightwear. Was the industry able to offer lower price points with the help of the 6.15% increase in competitiveness because of the rupee depreciation as against the dollar… it would seem so, but even at almost the same level increase in volumes is a positive trend.
Even more significant is the 23.5% increase in quantities of exports to the EU, accompanied by an 11.69% rise in value of exports (in Euros) in 2014. Significantly the rupee appreciated around 11% over the year, yet there was a noticeable drop in average UVR from Euro 19.51 (per kg of fabric equivalent) in 2013 to Euro 17.63 (per kg of fabric equivalent) in 2014. This is significant because the European market has not only been slow, but also ridden with many internal problems.
I am happy to note that rising to the market demand for better prices and also trying to balance the weakening Euro, exporters working in the EU have worked on their product, productivity and costing to be more competitive, and this is clearly reflected in the 9.81% drop in the average UVR which has helped boost India’s exports growth to the region, which is mostly of value-added small quantity orders. Products that did well in the European market include T-shirts, ladies blouses, sweaters, ladies dresses and trousers.
No one seems to know if there was significant growth in the non-traditional markets and earlier in the year there was a major concern that the non-traditional markets, which constitute around 35% share in India’s garment exports, are poised to receive a setback due to withdrawal of the benefits under Chapter 3, which provided 3% incentive for Focus Market Areas and 4% in Special Focus Market Areas. It is sad that there is a lack of authentic and updated data to analyze impact of policies on exports.
It is difficult to predict how the Indian currency is going to move in relation to other major currencies and though hedging has been suggested as a safety net, not many exporters are comfortable with the option… and to be honest not everyone understands how it works. As usual when the rupee depreciated the exporters are happy as they can offer better prices in dollar terms and grab orders that may otherwise go to other destinations, but when the rupee appreciates, exporters are unhappy and turn to Government for incentives.
As of now we seem to be on a winning boat, but the river bank is still far away… the anticipated business from China is still to come in. I keep hearing that a few companies are getting orders previously intended for the Chinese, but they are not enough to say that we have seen meaningful gains. Bangladesh is holding on to its orders and if we are getting any advantage of the shift happening, it is mostly in knits. This is clearly reflected in the reported increase in business from the knit centres of Tirupur and Ludhiana.
After six months and running in the seventh, feedback from industry is positive. Product Development for S/S ’16 is over and industry is happy with many Indiafriendly trends… On top of this, the depreciated rupee is giving an edge. In our Top 100 analysis too, we saw 90% of the listed companies’ project growth, and that too at around 15%. Also interesting is the fact that even the middle-level exporters are positive and willing to make changes to be more competitive. It would seem that the industry is finally out of the woods and looking for a secure place over the next few years.
