The domestic market is also gradually overcoming the dull demand sentiment which had arisen out of demonestisation of high-value currency notes in November 2016.
The share price of Trident jumped by 9.8 per cent to close on March 23 at Rs 87.90. Garden Silk and Banswara Syntex rose seven per cent and 5.6 per cent to Rs 33.65 and Rs 151.30, respectively. Garware Synthetics and Nahar Spinning rose by 4.9 and 2.6 per cent.
Trade sources believe India’s share in the global textile market would rise after China’s decision to reduce energy and personnel-intensive industries, including textiles and apparel. With around 39 per cent market share, China leads in global textile export. India’s share is five per cent.
“While the domestic market suffered a temporary setback, with the entire trade at a standstill following demonetisation of high-value currency notes, it is gradually coming back on track. Steady business growth was witnessed in January and February, after subdued sales in November and December. With the wedding season on, we expect sales to remain up this season,” said Rahul Mehta, president, Clothing Manufacturers’ Association of India.
Industry sources said even if one per cent of China’s market is captured by Indian exporters, there would be a big boost to our overall shipment in the sector.
A recent study by ratings agency ICRA said the global apparel trade remains under pressure, having contracted for a second year in 2016, owing to subdued demand in key importing countries. While the volume growth was marginally positive, primarily aided by a recovery in demand from Europe, realisations fell. Further, the latest trends point to a modest recovery so far in 2017.
“Amidst the weak and volatile phase in global apparel trade, India’s exports remain flat and unencouraging, growing by a tepid one per cent (in dollar terms) for a consecutive year in FY17. This, however, needs to be looked into in conjunction with the decline in global apparel trade in value terms during the period,” said Jayanta Roy, senior vice-president at ICRA.
The pace of growth for other Asian apparel exporters Bangladesh, Cambodia, and Vietnam had also moderated in the past two years, though they continue to grow at a relatively better pace than India’s. Even so, the scrapping of the proposed Trans-Pacific Partnership has weakened prospects for Vietnam, which augurs well for India, as the risk of increased competition from Vietnam has abated to an extent, for now.
Given the global trend, domestic market-focused apparel manufacturers are expected to do relatively better than exporters in FY17, too, though less so because of the demonetisation effect in demand.
China was earlier known for low production costs and a stable currency. It experienced a record rise in production costs (21 per cent over 2013-15) and is trying to mitigate the volatility of its currency, the yuan.
“China’s competitiveness in cotton textiles is dropping rapidly, while India’s competitiveness is steadily improving. This has offered an opportunity for Indian textiles on the market share of China in the developed world, especially the European Union and the United States, which cumulatively comprise around 60 per cent of the global export market,” said Akhand Pratap Singh, an analyst with Axis Securities.
Source: Business Standard