Eurozone Crisis: India worried but exports remain positive

Wednesday, 16 May 2012
Eurozone Crisis: India worried but exports remain positiveAs the Eurozone wrestles with a debt crisis, confidence level remains desperately low. And it has had a negative impact on India’s economy as well. As finance minister Pranab Mukherjee rightly pointed in recent press conference at Manila after taking over as Chairman of the Board of Governors of the Asian Development Bank (ADB), the crisis in the Eurozone had negatively impacted the Indian economy. “The unfolding of the Eurozone crisis has impacted the Indian economy through lower growth, falling business sentiments, declining capital inflows and exchange rate and stock market volatility with attendant implication for investor confidence,” he said.

AndEurozone Crisis: India worried but exports remain positive the impact is being felt by the textile and apparel exports community, because, though both, the US and Europe are major importers of textile and apparel products from India. Europe accounts for nearly 50 per cent of India's total apparel exports and hence it is no surprise that its debt crisis has adversely hit apparel exports from India. Further, lethargic demand in domestic and export markets, besides heavy debt, weaved a scrambled web for India's textiles industry in 2011-12. While the US is showing a bit of a bounce back in terms of placing orders, orders from Europe are still showing no recovery.

However, the latest export figures are positive. Though India was looking to achieve an export target of $38 billion (about Rs 200,000 crores) this fiscal, 12 per cent higher than previous year, it has been able to close the fiscal at $13.5 billion (Rs 70,000 crores) compared to $11 billion (over Rs 55,000 crores) in 2010-11. Despite a slowdown in the western markets, exporters’ strategy of exploring newer destinations like South Africa and Latin America has worked well in their favour.

Commenting on the achievement, A Sakthivel, Chairman of Apparel Export Promotion Council (AEPC) said, “Rupee depreciation has bailed out Indian apparel exporters who were unsure of growth following weak consumer sentiment. The final figures are not yet in, but India expects to close the fiscal at $13.5 billion against $11 billion in 2010-11.”

Moreover, Indian exporters also entered new destinations such as Latin America, southern and western Africa, Japan, Russia, Israel and Australia during the year. Also, government’s support through focus market scheme and market linked focus product schemes and various FTAs have given apparel exporters market access especially in Japan. Newer markets brought in 10 per cent business for the industry. According to AEPC data, Japanese demand seemed to help Indian garment exporters. Exports to Japan rose to 4.4 per cent last year after a 2.1 per cent drop the previous year. The industry is also strongly working on moving from cotton to synthetic fibre, as it will help diversify into new products like sportswear, swim suits. This is expected to help double exports in the next five years.

The US and European markets account for over 50 per cent of the country’s exports. Textiles export was about $34 billion (about Rs 180000 crores) in 2011-12, as against $26.8 billion (Rs 140000 crores) in 2010-11. India’s textiles export performance has continued to lag its global competitors in the last few years. It has a meagre 4.3 per cent share of the world market, compared to China’s 28.3 per cent. "The US and the Euro Zone still remain the major export markets. Although economic uncertainties plague the euro zone, it still imports textiles from India," points out D K Nair, Secretary General of Confederation of Indian Textile Industry (CITI).

Meanwhile to improve India’s image after US Department of Labour imposed tariff barriers on Indian apparel exports because of alleged child labor employed in some Indian garment-producing factories, Apparel Export Promotion Council (AEPC) has started an initiative called DISHA — Driving Industry Towards Sustainable Human Capital Advancement — to make garment manufacturers comply with global social standards and norms, and educate apparel exporters on a code of ethics covering issues such as child labor, freedom of association wages, health and industrial safety, with the aim of compelling garment manufacturers and exporters to clean up their "sweatshop image." The DISHA initiative is headed by Anil Sahai, the CEO of T-Group Solutions which monitors labor standards and related issues.

Another factor, which could work towards India’s advantage is the transformation as the world's second largest cotton exporter from net importer. Its cotton exports will exceed 10 million bales this year, representing a third of the projected cotton crop of a record 34.50 million bales. India is also the world’s largest producer of organic cotton, with annual production exceeding 75,000 tons.

No wonder, with developing countries especially India showing positive prospects against global giant economies, players from the developed world are becoming more and more interested in India.

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