1: Global Economic Scenario:
On the global scenario, the fuel and the commodities prices havenow stabilized after having taken a serious hit due to drastic cut in consumerspending and demand contraction, esp. in the recession impacted USA and Europe. Due to a comeback in the global energy demand, the world oil prices may remainstable at $70-75 level during the Q4/2009.
The global economy, however, remains in the slow mode. Thegood sign, however, is the positive indications of increase in consumer confidenceand consumer demand in the developed economies, namely USA, the Europe and Japan. The quarterly growth in these erstwhile well to do economies is now beingprojected from 0.5% to 1%. The renewed consumer confidence is likely to be reflectedin pre-Xmas and post-Xmas sales and thus improve the sales of the leading retailchains in the USA and Europe.
2: Impact on India's Textile Sector:
The demand contraction and low consumer spending in the USA, the EC and Japan had decisively impacted the demand for imported textiles and clothing from, boththe USA and the Europe. Due to reduced export demand from the USA and the EC countries, the textile industry in both India and China has been in slow off-takephase. The exports of apparel and textiles have gone down already by 10-11%w.r.t last years.
The erstwhile Key drivers for growth of the Indian textileindustry have been the global/ export demand for its products and competitiveprice for domestic cottons. The New cotton supply season is just about to startand, a comfortable Cotton crop, at 29-30 million Bales for the new 2009-10season, may enable the input price for the textile industry to go down albeitfor the Oct to Dec 09 period; and which is likely to increase incase areasonable quantity, say 15-20% of output of Indian cotton is exported.
Due to above, and the ongoing 'slow pick up' in demand, andprices, the domestic textile sector is in 'static' mode, due mainly to slowlifting of fabrics and made ups owing to continuing slowdown in demand for clothingand apparels in both global and domestic markets. Also, the high cost of inputsin the Textile sector viz: borrowings [along with the corresponding low liquidityand credit crunch], high cost of power and serious non-availability andincreasing cost of work force is fuelling the negative sentiments in thetextile sector.
3: Domestic Textile Prospects:
As, of present the Textile and clothing sector has already touchedthe bottom of the 'U'; and the future direction for production and demand can bepositive only.
The decline on demand for retail garments and made ups, inexports and dom. Retail, had affected the Indian fabric manufacturers. Thecotton fabric output had shrunk to the lowest rate, since last 4 years; andis down to a combined 11.4% from a year ago. The Apparel exports down to 8.7, from$9.6 bln for last year.
Also, with the break on the growth in domestic Retail segmentand with corresponding downstream unlikely to see a sustainable 'rebound' soon;the Output of textile mills [esp. the fabric mills] is likely to be flat overnext 2 Quarters. It is time to pull the belt much-much tighter for next 2 Qrtrs.The pricing by the Retailers, and also reality sector, will remain underpressure.
4: Textile exports:
The Dollar to rupee rate is also not providing gain and fortextile exports. The export demand and orders, for apparel and textiles, forspring-summer 2010 are not as strong as was expected.
Overall, the short and medium term sentiment in textile sectorwill continue to remain weak over the last Quarter of 2009, and the realstepwise correction may not begin possibly by 2nd Qrtr. Of 2010 butdomestic demand will remain buoyant and reasonably strong to support thesector.
Notes:
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