Bangalore, Aug 25 Garment exports may be turning the corner, according to premier vendors. They ruled out a shift to the domestic sector to offset uncertainties on the global front, citing slack demand and low margins as reasons. Bangalore accounts for 30 per cent of India’s annual apparel exports of about $9 billion.
Premier exporters, or ‘A’ grade vendors, who claim to account for about two-fifth of total garment exports, are of the view that the worst is behind them. However, they faced pricing pressure rather than a significant dent in orders.
According to a well-known garment exporter in the city, the indications were that the order situation would really improve by next March. As for the potential of the domestic market, consumption is believed to be down 20-30 per cent in higher price segments.
In mass segments, demand has remained steady, but not many people want to enter that area as profit margins are low, he said.
Pick-up in demand
Mr Rajendra Hinduja, Executive Director (Finance), Gokaldas Exports Ltd, said: “The scenario is certainly better than what it was six months ago, thanks to a pick-up in European and US demand.
It is likely to improve in the next six months, as orders for Christmas and the next summer start coming in. As for the shift to the domestic market, there are payment difficulties even here.”
Mr Jayaram K.R., Vice-President, Garment and Textiles Workers Union, said: “The April-June period is always lean. The situation improved after June.
Work availability is more than normal. Volume has increased but value is down.
The recession is being used as a pretext not to implement the March 26 minimum wage order, which raised the wage from Rs 101 to Rs 127 a day.
Urban demand
He continued: “There has been no shift in making garments for the domestic market, because there is demand only in the urban areas.
For the urban areas, it is the small-scale units rather than big players who are catering to the low-cost domestic market, as the margins are low. Few SSIs survive in Bangalore purely by doing job work for exporters, because of unreliable payments.
In view of this situation, SSIs keep the domestic option open.”
The index of industrial production for textile products entered the positive territory after April 2009, registering a year-on-year growth of 2.5 per cent.
This increased to 9.8 per cent in May and 11.7 per cent in June.
A similar trend was in evidence in the corresponding period last year, when the sector was arguably worse hit by currency fluctuation.
Q1 performance
First-quarter results of major exporters point to a mixed trend. Gokaldas exports’ net sales, at Rs 238 crore, wereabout Rs 50 crore less than sales for the first quarter of 2008-09, and its profit down from Rs 37 crore to Rs 15 crore. Other major exporters from the city such as Arvind Mills and Bombay Rayon Fashions Ltd (BRFL) reported increases both in Q1 net sales and profits. BRFL executives said they were unaffected by the recession, as their situation actually improved after September 2008.
Source : Business Line