Apparel exports to stay weak in current fiscal.

MUMBAI: Even as the demand for key textile inputs such as yarn and fabric are expected to revive, apparel exports would lose momentum in the current financial year as demand from the US and Europe, the biggest markets, is likely to remain weak.

Though the rupee is expected to depreciate by 10.5% in 2012-13, exporters are unlikely to reap the full benefits as buyers have started demanding discounts. "In spite of fall in prices, we expect (apparel) export volumes to grow by only 3.5% as demand from Europe and the US is expected to remain weak," according to the Centre for Monitoring Indian Economy (CMIE).

And there is no cheer on the value front either. Apparel exports, which are estimated to have grown 24.8% in 2011-12 in value terms largely on account of better realizations, are likely to decline 0.3% in 2012-13 due to the drop in input costs. Export realizations rose last fiscal despite a sluggish growth in volumes due to spike in prices of inputs such as yarn and fabric and a weak rupee.

Demand for yarn and fabric, which fell due to poor demand from apparel makers last fiscal, would revive in the current fiscal on the back of softening cotton prices, CMIE said. With cotton prices likely to ease, prices of readymade apparels too are likely to fall leading to a revival in fabric demand.

"We expect fabric production to grow by a healthy 6.5% (in 2012-13) aided by a pick-up in demand," CMIE said. Demand for apparel fell as they turned expensive due to increase in prices of cloth and yarn. The levy of 10% excise duty pushed apparel prices even higher.

While synthetic fabric production dropped 8.7% last fiscal, hosiery fabric output too fell at the same rate. Yarn output dropped 5.3% with production of cotton yarn, which constitutes 54.2% of total yarn production, declining 8% in 2011-12 due to weak demand from fabric manufacturers.

Production of synthetic and cotton fabric is expected to grow by 6.3% and 4.5% respectively in 2012-13, CMIE said in its monthly review of the Indian economy. With fabric demand expected to improve, production of cotton yarn and synthetic yarn would increase by 10% and 3.5% respectively, CMIE said.

Source : timesofindia.indiatimes.com