The virus in China and a withdrawal of EU concessions to Cambodia offer two major opportunities for Indian garment exporters - but none of them are in a position to gain
The troubled Indian garment industry is at the crossroads of a major opportunity owing to two crises in core producer markets of Asia. First, the Coronavirus outbreak in China has western markets eyeing alternative sources.
According to rating agency Crisil, this could lead to $2-3 billion worth of incremental orders for Indian exporters in FY2021. In another development in August last year, European Commission partially suspended the “Everything But Arms (EBA)” trade programme for Cambodia for human rights violations. The programme gave that country duty-free exports to the EU ...
Zippers, buttons and other accessories may run out in a month; industry not sure of replenishment of stocks
Garment makers in Tirupur, Tamil Nadu, are in a state of near panic, for the industry is largely dependent on China for sourcing accessories.
The coronavirus outbreak, they fear, could adversely impact the sector, as garment manufacturers in the city source accessories such as zippers, buttons, hangers, tags (labels) and even blended fabric from China.
These are imported from China at half the rate or less vis-à-vis local products, an industry insider told BusinessLine. “Local traders buy the products from China and wait for an opportune time to offload the same in the local market,” the source said.
Rise in input cost
The sector, already hit hard by a delay in GST refunds, has started to feel the heat as these accessories, if sourced from a trader in India or from overseas markets other than China, will hurt margins.
“Garment manufacturers already operate on wafer-thin margins. We can ill-afford any increase in input cost at this juncture,” the source said.
More than 50 per cent of India’s knitwear garments are manufactured in the ‘Dollar Town’, as Tirupur is popularly known as (for being a key export hub). “The sector’s requirement of accessories from China is estimated at around ₹500 crore,” said S Sakthivel, Executive Secretary, Tirupur Exporters’ Association.
In an indication of the gravity of the situation, a buyers’ meet, scheduled for later this month in Hong Kong, stands deferred for now.
“Stocks seem adequate for the present, say a month or so. But manufacturers have started to voice doubts about production continuity in the coming weeks. The real impact will be known only after a fortnight,” Sakthivel said
Meanwhile, industry sources say the lack of a level playing field has relegated India to the sixth place in the global ranking of readymade garment exports. “The coronavirus outbreak will further hamper the competitive edge we enjoyed on the pricing front (due to the imported accessories),” the source said.
While certainly a challenge, the present situation also presents an opportunity for the traders here, say industry insiders. The virus outbreak has closed the Chinese option for several garment importers, particularly from the West. Tirupur exporters can now target these international markets, said the source.