As world fears that US is heading towards a double dip recession,which is likely to infect the rest of the world gradually, what is the position of the Indian textile and apparel sector? How are the industry players bracing themselves, to ride the tide?


It could be a make or break situation in the global financial markets, as fears of skidding into a financial crisis is threatening the US market. Economists have mixed opinion, with some of them stating that US will fall into a recession,while a few others state that it would only be a slowdown. Stocks of the EU and the US market are slumping; not seen since after the 2009 recession.Concerns regarding the spreading debt crisis of US and EU have turned on an intense spotlight on the financial position of the countries. Economists predict these factors as telltale signs of the forth coming double diprecession. Though all businesses would be hit, if recession strikes again,textile and apparel sector would feel the heat more.



US outsources manufacturing and labor, and also import raw materials from other countries. With US under stress, and possibilities of a looming recession,consumers are beginning to cut back on their spending. Recent news about declining job growth and bankruptcies are fanning concerns among consumers.This is likely to have its effect on the fashion industry. In the upcoming months, shoppers might tend to give preference for necessary goods over the luxury ones. They will have a tendency to look for savings.

 

Financial Ice age: the Indian effects:


India's overall exports grew by 6.7% in 2008-09, and above 8% in 2010-11. Growth rate is expected to be around 8.5% for 2011-12. With imprecise opinions about the downturn hovering around, apparel exports are witnessing a mild slowdown. Indian apparel industry has worked for getting more orders for the spring, but current situation indicate major ramifications. US and EU are the major markets for Indian apparel exporters. One out of every three exported garments from India goes to the North American market.


Export market for EU and US is currently seeing a slow down due to the much feared recession. This has resulted in a decline in exports by 16.3% during 2010-11. Prospects for the next year are not promising as well. Industry sources state that out of 2000 apparel makers based in Ludhiana, only 20 of them are planning to export for the current year.


Southern India Mills Association reports Sakthivel, President of Tirupur Exporters Association saying, "Surely there will be some impact on textile exports to the US. Lesser value items, in the price range of $3-$7 per piece, will be less affected".


On the contrary domestic demand is seeing an optimistic increase. Market is promising; growing at a stable rate. Indian apparel manufacturers are now focusing on the demand from affluent customers in the domestic market to make the margins even. Economic Times reports Virendra Sharma, President of Ludhiana-based Oswal Wool Mills, which owns the Monte Carlo brand saying, "As much as 85% to 90% of our production is for domestic market as the demand has been terrific in the country these last two quarters. We are expecting to grow at 8-10% this fiscal year".


Responding to the increasing domestic demand, imports of raw wool has also increased by 30%. However, exports of wool and wool blended products have decreased from 2, 26,273 lakh in 2009-10 to 1, 79,360 lakh in 2010-11. This indicates woolen apparels for domestic consumption have increased.


If US fall into a recession, its substantial effects cannot be easily undone, and is going to hike prices in almost all the industries worldwide. US Government must come up with strong economic policy decisions to control its fiscal expenditures. Amidst all fears, Indian apparel exporters hold optimistic opinions. There may be job cuts, and fall in production and exports. Still they have a ray of hope that even if recession hits US, India might only witness a slowdown.


References:


1)     Financialexpress.com

2)     Fashionindustrytoday.com

3)     Imf.org

4)     Economictimes.indiatimes.com