Recession in US and EU: Home Demand Bails Out Apparel Companies From Global Slump.

NEW DELHI: Indian woolen apparel manufacturers are focusing on growing demand from affluent customers in the domestic market for high-end products as uncertainty in the global market, especially in the EU and US, continues to slow down exports.

"As much as 85% to 90% of our production is for domestic market as the demand has been terrific in the country these last two quarters. We are expecting to grow at 8-10% this fiscal year," Virendra Sharma, president of Ludhiana-based Oswal Wool Mills, which owns the Monte Carlo brand, told ET.

Lower demand from the EU and the US, major markets for Indian woollen products, led to decline in exports by about 16.3% in 2010-11 over last year. The on-going crisis in some European countries and the debt trouble in the US have put a shadow on export prospects for the current year as well.

Erratic demand from China is also adding to the unpredictability. "If China decides to buy in bulk, prices shoot up. So obviously exporters have started looking inwards," S K Chaudhuri, managing partner of Fiber Services International told ET.

Domestic demand, on the other hand, is on the rise. "Domestic market is growing at a stable rate, quite contrary to what is happening internationally," Chaudhuri said.

According to industry estimates only 20 out of 2,000 manufacturers in Ludhiana, the knitwear hub of India, are looking to export.

The rise in demand at home is getting reflected in rising imports of raw wool, despite a fall in exports. Total import of raw wool rose significantly by 30% from 1,00,077 lakh in 2009-10 to 1,29,305 lakh in 2010-11 (up to Feb 2011).

Interestingly, imports are rising, despite a sharp increase in prices of Australian raw wool that Indian worsted industry imports in huge quantities for producing woolen yarn and blend products, particularly for men's trousers.

Imports from Australia have gone up from 52,851.73 lakh in 2009-10 to 61,982.06 lakh in 2010-11 (till Feb '11) in value terms. Even quantity wise, imports saw a significant increase of about 9% in 2010-11 y-o- y.

"Earlier 7% of the total wool production of Australia was imported by India. But since 2009, it has increased to 10%. This is at a time when production in Australia too has risen sharply," said SK Singhal, CEO of OCM suitings.

Retailers say this is happening because of changing buying patterns and evolving tastes of consumers in the country. With fatter wallets and higher purchasing power comes greater demand for better quality product.

Customers would earlier buy polyester-viscose fabric made clothes but now superior quality wool-polyester blend clothes are in demand, Singhal said. "We are expecting a 10% growth for OCM this fiscal keeping in line with the overall robust performance of the industry," he said.

The exports of wool and wool-blended products have decreased from 2,26,273 lakh in 2009-10 to 1,79,360 lakh in 2010-11. Woollen garment manufacturers are, however, not looking at expanding capacities at the moment.

"Our capacities were majorly underutilized. So, despite huge demand, we are not looking to expand as our existing capacities will be able to cater for at least the next three years, Singhal added. Till 2008-09, the worsted industry grew at 2-3% per year but in the last two years it has registered a remarkable growth of 8-10% per year.

Source : economictimes.indiatimes.com