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Apparel exports slide 1st time in post-quota era

business Updated: Jun 06, 2010 21:43 IST
Sumant Banerji
Sumant Banerji
Hindustan Times
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The country’s apparel exports suffered an embarrassing decline for the first time since 2004-05, when quotas were abolished worldwide.

During 2009-10, apparel exports witnessed a 2.6 per cent dip at $10.6 billion against $10.9 billion in 2008-09.

“Exporters are in deep trouble as the garment industry is reeling under unprecedented price hike of yarns and fabrics,” said Premal Udani, chairman, Apparel Export Promotion Council (AEPC). “The past four months have witnessed a mind boggling 50 to 80 per cent increase in prices of basic raw materials. Just when there were signs of initial recovery the industry has been plunged into gloom because of high raw material prices and erratic supply.”

Till December last year, exports were down 8 per cent but have seen a revival particularly in the US, which is India’s single largest export destination. In the six years since the abolition of quotas, exports have grown at an average of around 10 per cent (see table). Even in 2008-09, when the global meltdown was at its worst, export was up 12.8 per cent, which was next only to 2005-06 — the first full year after quota abolition.

The industry hopes to be back on the growth trajectory this year largely on the back of the revival trends in US. But the sovereign debt crisis in Eurozone may upset the applecart. Europe accounts for more than half of India’s apparel exports. With Bangladesh already ahead of India, there are fears that Vietnam may also overtake it, this year.

“The situation in Europe is very uncertain and orders may shrink there,” said Rajendra Hinduja, managing director, Gokaldas Exports Ltd. “Prices have stumbled even as raw material costs and wage bill has gone up by at least 20 per cent. After June, there are hardly any orders from Europe and whatever orders there are, they are at very low margins. US is slightly better but prices are low.”