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India's Textile Industry Nervously Watches Euro Debt Crisis
By Manik Mehta
Like their counterparts in other Asian countries, India's textile and garment exporters are nervously watching the Euro debt crisis. The economic problems in Europe, India's second largest market after the United States, have added to the woes of Indian textile and apparel exporters who also faced difficulties selling their products to the United States. Indeed, Frankfurt's Heimtextil show in January, which attracted more than 350 Indian exhibitors, became a platform for some Indian exhibitors to vent their worries over the situation in Europe.
"Yes, Indian suppliers are deeply concerned with the situation both in the U.S. and Europe. Some Indian companies, in fact, sell more to Europe than to the United States. The Euro uncertainties are weighing heavily on Indian textile and garment exporters," Deepak Shah, a Mumbai-based textile consultant, told Apparel Magazine.
The Euro crisis has led many big exporters to make a downward revision of their export forecast. However, India's statistics compiling agencies made some glaring errors in compiling data which ignored the drop in India's textile and apparel exports. The Directorate General of Commercial Intelligence and Statistics (DGCIS), for example, recently released figures for apparel exports that were obviously inflated. The DGCIS figures suggested that apparel exports from India during the April-September 2011 period had posted a 30 percent growth to $ 6.7 billion, a figure challenged by exporters who said that they faced declining orders. The export figures for both the U.S. and Europe were exaggerated, Indian exporters said.
Premal Udani, the chairman of India's Apparel Export Promotion Council (AEPC), asked the government to check the figures because the "outlook is not as bright as the figures suggest." For the entire fiscal year 2011-12, exports were expected to rise by 10 to 20 percent, he said.
Similar sentiments were also echoed by A. Sakhtivel, the president of the Tirupur Exporters' Association, who said that in the knitwear category, there had been no growth in the last few months. Tirupur, a knitwear producing venue, has been hit by the Euro Zone crisis.
Textile exports rose 11 percent in the last fiscal year despite turbulent times in major economies. While demand from the Euro Zone continued to be low, demand still poured in from the U.S. and other non-traditional markets, which saved the day for exporters.
Apparel exports for 2011/12 fiscal year are expected to be $13 billion, compared to $11.4 billion in 2010/11, a 14 percent increase, according to the AEPC. Overall textile exports (including apparel) in the past fiscal year amounted to roughly $30 billion, compared to $27 billion in the previous year, accounting for 11 percent growth, according to the Confederation of Indian Textile Industry (CITI).
"The U.S. and the Euro Zone still remain the major export markets. Although economic uncertainties plague the euro zone, it still imports textiles from India," maintained D.K. Nair, secretary general of CITI.
India's cotton exports to top 10 million bales this year
In contrast to being a former net importer, India has now become the world's second largest cotton exporter. 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. India's cotton cultivation land area is said to be between 10 and 11 million hectares. ndia was a net cotton importer until 2003/04, after which it started to export the commodity, thanks to improved cultivation methods, new production-enhancing technology (BT, or genetically modified, cotton), and export liberalization.
Meanwhile, the Indian government contemplates imposing an export duty on traders, many of whom are doing significant business with China. Although many traders believe that the duty will not significantly impact exports, given the steeply discounted sale of Indian cotton to China, Bhadresh Mehta, the managing director of Bhadresh Trading Company, has said that such a duty would anger farmers who have difficulty disposing off their crops.
China is India's main cotton market, and together, the countries are the two world's largest producers and consumers of cotton. China is expected to import 16 million bales in 2012/13, according to the U.S. Department of Agriculture.
U.S. cracks down on child labor in India's garment sector
India petitioned the U.S. Department of Labor to remove non-tariff barriers imposed on Indian apparel exports because of alleged child labor employed in some Indian garment-producing factories.
An Indian team, including representatives of Northern India Textile Research Association and the Tirupur Exporters' Association, met with representatives of the U.S. Labor Department and urged them to remove the restrictions. Amarendra Sahoo, the secretary general of the AEPC, has said that the industry has managed, by and large, to eradicate child labor.
The (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.
Sahai maintained that although children are no longer employed at factories that are often audited by international buyers, the practice may exist in the cotton fields, which many exporters are not aware of. DISHA, Sahai said, will help exporters to plan their supply chain and take corrective action, if necessary.
For India's cotton textile sector, 2011 was "good in parts"
Siddhartha Rajagopal, executive director of the Mumbai-based Cotton Textile Export Promotion Council of India (Texprocil), said in an interview with Apparel Magazine at the Heimtextil 2012 show in Frankfurt that 2011 had been "good in parts." "The first and second quarters were slow but the last half of the year was better," Rajagopal explained, adding that India's cotton textile exports during the fiscal 2010-11 (April-March) amounted to $7.2 billion, a 25 percent increase over the previous year.
While discerning good demand for cotton textile products, Rajagopal said that there were challenges such as rising raw-material prices, instability in many overseas markets, fluctuating demand, and financial crises both in the U.S and now also in Europe. "The Euro crisis has indeed affected India's exports. The EU absorbs some 30 percent of India's export of yarn, etc," he said.
Rajagopal added, "People in the traditional markets of Europe and the USA are keeping their purchases to the minimum. However, India, with an annual 7 percent GDP growth rate, has a large domestic market which helps offset the loss in the export markets. The products that are selling well include cotton yarn, denim, gray fabrics, curtains, towels, bed linens and others."
He expects the first three months of 2012 to yield some improvement in India's exports, also buoyed by the Indian rupee's depreciation. Last year's momentum came in the January-March period.
Challenges for India's textile industry
India's textile industry faced challenges last year starting with the decline of yarn production from May 2011. Indeed, from April to September, production declined by 7 percent to 2,164.7 million kg, down from 2,327 million kg in the same period the year prior. Fabric production contracted by 5.2 percent in the April-September 2011 period. Cotton output was down to 14,854 million sq. meters from 15,761 million sq. meters in the year-earlier period. Spinning capacity operated at 60 to 70 percent, falling short of breaking even.
According to CITI, textile and clothing production declined by 3.3 percent during the first half of India's fiscal year April 2011/March 2012. Production costs were pushed up by rising crude oil and power costs. CITI claimed that about 83 percent of the 220 listed textile and clothing companies experienced declining profits during the first half of this financial year compared to the year-earlier period.
German company smartfiber eyes India
Rudolfstadt-based smartfiber AG, which made a strong pitch for its nature-based lyocell-specialty fibrers smartcel and SeaCell, at the Heimtextil show, was optimistic about the Indian market. Company representatives plan to travel to India to scout for suitable business partners.
smartFiber's major markets are North America and Europe. However, Asia is a very promising market region, particularly India, China and Japan, which will become a major focus for the firm. The company plans to intensify its contacts with Indian enterprises. "We have contacts with business associates there, and our company representatives will travel to that country frequently," said Natalia Kohne, the company's marketing director.
smartfiber, which faced production limitations as a result of space limitations and other constraints at its Rudolfstadt facility, has joined forces with Austria-based Lenzing, a market leader in the man-made cellulose fibers segment. Lenzing has been subcontracted to exclusively produce smartcel and SeaCell fibres developed by smartfiber at the Lenzing production site in Upper Austria.
Michael Kohne, smartfiber's chief executive, explained that the relocation of smartfiber's pilot plant from Rudolfstadt to Lenzing aims to facilitate the quick production to sustain the commercial exploitation of smartcel and SeaCell fibres despite rising energy and raw-material prices.
"We handed over the production to Lenzing because it was getting too expensive at Rudofstadt where energy prices and other costs have sharply risen and also because we could produce only a maximum of up to 500 tons. Lenzing, on the other hand, can produce unlimited quantities of smartcel and SeaCell fibres," Kohne said.
Messe Frankfurt's Textile Expert "Cautiously Optimistic" and Expects Asia to Provide Strong Impulses to Future Global Textile Trade
Notwithstanding the global economic uncertainties, Messe Frankfurt's expert on the global textile trade says that he is "cautiously optimistic" about the global textile trade which will get strong impulses from Asia.
"I am cautiously optimistic that things will improve this year though the global textile trade will get strong impulses from Asia in the future," Olaf Schmidt, the vice president (textiles and textile technologies) of Messe Frankfurt GmbH, which organizes premium textile trade fairs such as Heimtextil, Techtextil, etc. said in an interview with the Apparel Magazine at the recent Heimtextil 2012 show.
"Another development that vindicates my optimism is the revival of investments in the building and construction sector which will mean that there will be more buying of home textile and decoration materials. Textile associations are optimistic too, though they say that growth will be down to one to two percent this year," Schmidt added.
European textile suppliers were increasingly looking to Asian markets, particularly China, for increasing their exports. A "very encouraging sign" was that an Italian brand received an "impressive order" from a Chinese buyer as early as 10:00 a.m. on the first day of the show.
Beyond China, Schmidt had "great hopes" for India's textile sector, which has benefited from the propensity of the country's growing middle class for buying higher-end products. "This provides hope for Western textile and clothing suppliers. As you know, many Western company representatives are increasingly spotted at trade shows in India. There may be some bureaucratic hurdles still to be surmounted, but I am bullish about India," he said.
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