• New markets, product innovation, and more -- the way forward for India’s apparel exports

    State of Apparel Report

    Today, India is the world’s second-largest exporter of textiles and apparel (behind China), with a huge raw material and manufacturing base. India’s textile industry contributes to 7% of India’s industrial output, 2% of the GDP, and 15% of total export earnings. The sector is also one of India’s largest employers, with about 45 million jobs.

    According to Ministry of Commerce data, in FY 2018-19, India has already exported over $15 billion worth of apparel goods (as of December 2019), with the highest value of goods being shipped in May. Following a general trend in seasonality of Indian apparel exports, shipment value then dipped for the rest of the year, before recovering slightly in December 2018 (more on seasonality later).

    As part of its series of reports on Commodity Insights, Drip Capital recently released a ‘Commodity Insights -- Apparel’ report that looked at the state of India’s apparel exports. Analyzing proprietary as well as publicly available export data, as well as gathering on-the-ground information by talking to apparel exporters across India, Drip’s report takes a close look at the various issues faced by the sector and suggests some possible steps for the future.

    Below are the key insights of the report:

    Top exporting states

    Tamil Nadu, Maharashtra, Delhi, Karnataka, Punjab -- these five states account for over 92% of India’s apparel exports

    Top import markets

    The US, the EU (mostly Germany, France, Belgium, Spain, and the Netherlands), the UK, and the UAE -- these four markets import roughly 75% of India’s apparel

    Seasonality

    India’s apparel exports tend to have the highest export volumes at the start of a given calendar year. After this high, apparel exports trend downwards for most of the remaining calendar year, with demand picking up again in late October and early November in time for a fresh cycle.

    A slow decline

    Data gathered by Drip Capital as well as that available in the public domain from the Ministry of Commerce backs up recent claims of a y-o-y decline in apparel exports, with 2018 clocking lower figures than 2017. Notably, demand from key import markets has been on a steady significant decline in recent months, particularly in the Middle East. The exporters Drip spoke to state that many local manufacturing units have sprung up in the Middle East, especially the UAE, that prefer to source raw material from India and elsewhere, then process it into readymade garments for resale in consumer markets.

    Rising competition

    Neighboring nations like Cambodia and Bangladesh are increasingly becoming large competitive threats to Indian apparel exports. Drip’s analysis reveals that lower labor costs in these markets enable them to price their exports more competitively. Given the infeasibility of reducing labor costs in India, exporters recommend a focus on technology upgrades as a means of countering this fresh competition.

    Recommendations

    Incentivize a focus on technology

    As India can’t compete with its neighbors on lowering labor costs, the focus should be on expanding these schemes and introducing more such policies that incentivize apparel exporters to upgrade their technology, including procuring better machinery, improving assembly-line efficiency, etc. Through this, exporters will not only be able to make their production processes more efficient, but they’ll also be able to improve the quality of goods, driving higher earnings.

    Expansion into new markets

    Drip Capital’s research reveals four new markets that have seen an extraordinary y-o-y increase in demand for Indian apparel exports in the last two years -- the United Kingdom (a resurgent traditional importer), Chile, Israel, and Japan. Exporters should look to tap into these new markets to fuel their growth and boost sales.

    Alternative Apparel Markets Collage

    At the same time, four countries, in particular, have seen massive drops in imports in the last two years -- France, Sudan, Sri Lanka, and the UAE -- and exporters might be well-served to keep orders from these nations to a minimum in their order book.

    Product innovation

    According to reports released by the AEPC, product categories witnessing a significant rise in demand in global markets include t-shirts, babies’ garments made of cotton, and dresses. By identifying products with high growth potential, and leveraging individual strengths like tech innovation, exporters can start to push their profits and efficiency margins.

    For the full report, contact Drip Capital at resources@dripcapital.com.

    Raghav Khajuria
    Raghav Khajuria
    Leads Marketing activities for Drip Capital.
    4 min read