Financial Daily from THE HINDU group of publications
Monday, Aug 15, 2005
Industry & Economy - Exports & Imports
Textile exports dip despite end of quotas
New Delhi , Aug. 14
THE end of the quota regime in the global trade of textiles and clothing was supposed to herald a hectic activity in India's traditional textile and clothing exports. But the promised boom remains a pipedream with the first five months of trade figures not being bright enough to entertain any turnaround.
The latest trade figures compiled by the Directorate General of Commercial Intelligence & Statistics (DGCI&S), Kolkata, show that overall, the textile exports of the country, including handicrafts, coir and coir manufactures and jute, showed a decline of 13.5 per cent during the first five months of the calendar year 2005 (January to May) at Rs 24,518.3 crore compared with Rs 28,333.4 crore in the corresponding months of 2004.
The only redeeming feature in this overall decline of textile and clothing exports is the relatively robust performance of wool and woollen textile exports, which revealed a growth of 18.3 per cent at Rs 663.4 crore against Rs 560.6 crore in the corresponding months of 2004.
The worst performer turned out to be cotton textiles, covering cotton raw (including waste and cotton yarn), fabrics and made-ups, which saw exports dip by 25.8 per cent to Rs 5,816.1 crore during January-May 2005 (Rs 7,835.1 crore). Readymade garments, which account for a substantial portion of overall exports, also put up a tepid show, registering a 10.4 per cent decline at Rs 11,279.9 crore during January-May 2005 (Rs 12,583.6 crore). However, when contacted, the Apparel Export Promotion Council (AEPC) Chairman, Mr A. Sakthivel, told Business Line here that things have improved vastly after May 2005, particularly in the markets of the US and Europe, which have shown pickup orders from the Indian textile industry.
He said that over and above the $5.7-billion export receipts the country obtained through apparel exports last fiscal, a growth rate of 20 per cent in dollar terms has been fixed for the current fiscal and the trends since June have been encouraging, particularly from the Western markets.
He is also optimistic that the action initiated by the US and the European Union (EU) on the astronomical import surge from China to these countries in the first few months of 2005 would also improve India's export prospects.
Official sources recall that as per the agreement hammered out between EU and China on June 10, 2005, the EU has limited the growth of Chinese textile exports to Europe to 10 product categories under caps ranging from 8 per cent to 12.5 per cent a year. The actual growth rates of these product categories during January-March 2005 over the corresponding months of 2004 range from 51 per cent to 534 per cent.
As India is a major exporter in most of the product categories affected by the EU-China Agreement, Indian exporters could cash in on the restraint being imposed on China. Alongside, the sources said, the US has also set off proceedings under `China Textile Safeguards' provisions on certain categories originating from China. Incidentally, they said, the EU and the US account for more than 60 per cent of India's textile exports.
Analysing the reasons for the real decline in India's exports to the developed countries after the dismantling of quota regime, the sources said that there has been a downward pressure on prices since the beginning of the year. China has been able to withstand the downward pressure on prices, as it has large production capacities with economies of scale.
The reduction in duty entitlement pass book (DEPB) rates in September 2004 and the further rationalisation of the scheme announced in January and June 2005 had adverse effects of squeezing margins for Indian exporters.
The industry is of the firm conviction that unless the only incentive, such as DEPB rates for the exporters, is realistic and other disabilities like high transaction costs are reduced, the hope for a turnaround in textile and clothing exports is unlikely to translate into a reality.
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