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India’s apparel exports plunge 22.76 %: PS Analysis

India‘s apparel exports have shown a big decline of 22.76 % for the month of April 2018 as against the corresponding month of April 2017, as per the latest trade data. In April 2018 the Indian RMG exports were to the tune of USD 1.34 billion (approx.) as against the corresponding month of April 2017, when the exports was USD 1.74 billion (approx.). In rupee terms export for the Month of April 2018 was Rs. 8859.67 Cr as against Rs. 11272.24 Cr. in April 2017, showing a decline of 21.40%.

India‘s apparel production has also shown a decline of 18.6% in the month of March, 2018 and a decline of 11% for the period April-March, 2017- 18 as per the latest IIP figures. This is the 11th straight monthly decline in apparel production. Despite rupee depreciating against the greenback by almost 6% in recent months to trade around Rs 68 per US dollar, India‘s apparel exports have not benefited from the trend, resulting in a 22.76% fall. Last year (2017-18) the industry witnessed a strong growth but now the exports are in a negative territory since October due to a declining trend in the global apparel industry. The high base effect has been due to the release of RoSL amount during April 2017 but the continued backlog in GST and RoSL is affecting the sentiments of export industry.

While consumption in the international market is growing at around 1 to 2% competition is increasing too, as the business sees new entrants like Myanmar and Ethiopia. Competitors currencies are also depreciating, but they don‘t have problems that Indian exporters do. “We would like the government to address the issue at the earliest, so as to reverse the trend of stagnating exports,” said HKL Magu, chairman of AEPC.

Apart from the delay in refund of levies and reduction in drawback availability of manpower is also a big concern in all the existing textile centers and productivity is low. Because of GST the cost of raw material, jobwork, labour wages all are witnessing increased cost. All these put together makes Indian exports at least 10-12% costlier than competing countries. High cost is hurting both the topline and the bottomline. Led by AEPC, the apparel exporters have urged the Centre to look at schemes to boost exports, besides looking at labour laws, as their protection is directly linked with productivity, in which India is far behind peers like Vietnam and Bangladesh. The price difference between Indian and Bangladeshi products is around 20%. Vietnam has a cost advantage of around 10% while also having increased its production as more Chinese and Taiwanese players have set up their factories in the country.

India‘s Ready-Made Garment (RMG) Export Update for FY (April) 2018-19

RMG exports were to the tune of USD 1349.81 million in April 2018 with the decline of -22.76 per cent against the corresponding month of April 2017, which was USD 1747.44 million. In rupee term export for the Month of April 2018 was Rs. 8859.67 Cr. as against Rs. 11272.24 Cr. in April 2018 with the decline of -21.40 per cent. India’s RMG export to World in the April-March of 2017-18 was to the tune of USD 16716.5 mn. which has decreased by -3.83 per cent compared to the same period of previous financial year. During April-March 2016-17, India’s apparel exports were to the tune of USD 17382.8 mn.

TEAM PERFECT SOURCING spoke to some of the exporters and asked the following questions

As you know apparel exports have registered a decline of 22.76 % and manufacturing of Apparel has shown a decline of (-18.6% )in March, 2018 and (-11%) for the period April-March, 2017-18

Do you think these Turbulent Times would End Soon?
Has the Government been able to tackle the situation and what steps are required to control the situation?
GST refunds, Duty Drawback and FTA‘s all are pending for a long time now, do you think industry is going to survive the storm, if yes how?
What has been the impact of the situation on your company in terms of demand, growth, bottom lines and liquidity?

HKL MAGU, CHAIRMAN, APPAREL EXPORT PROMOTION COUNCIL (AEPC)

The export figures for apparels for the month of April 2018 has shown a decline of 22.76 % and the apparel manufacturing is also in the negative territory. The apparel production has registered a decline for the 11th straight month in March.

ASHOK G RAJANI, FORMER CHAIRMAN OF AEPC

It was disappointing that the Government was not looking at this sector seriously or helping, despite the fact that textile is one of the largest employment sectors in the country. Every $1 billion of additional business can create 700,000 jobs. But, after the implementation of GST, withdrawal of duty drawback, delay in refund and lack of incentives to the sector are resulting in units to shutting shop.

THIRUMENI, MANAGING PARTNER, ABIRAMI EXPORTS

I am not sure when these tough times times will end. However, all went wrong in a single time because of reduction in duty drawback, GST and many other factors things have gone wrong. We believe this is the industry which can sell the produced items in a promising manner and has a lot of potential. So we have to wait and watch as I strongly believe that this industry will definitely survive the storm.

NARINDER CHUGH, MD, MILLION EXPORTER

Exports are in a negative territory since October due to several reasons. Major reason was that our GST refunds were blocked for a long time and we did not have cash and other countries/exporters took advantage and fetched orders. Secondly, the duty drawback was decreased from 10 per cent to just about two and a half percent. Thirdly, we cannot not compete with Vietnam and Bangladesh as we are not given enough facilities and benefits.

RAVI KUMAR, CEO, INDIAN DESIGNS

If these turbulent times do not end quickly we fear that half of the industry will be wiped out within a year. The other half will follow suit shortly thereafter. The pressure on prices has already intensified by countries importing out of India. Domestic players are also sourcing from Bangladesh after the Government opened up duties for them. Domestic players compare local prices with Bangladesh where wages are still very low compared to India. Huge money is lying with the Government in lieu of GST refunds, Duty drawback rates which has created a huge vaccum in the terms of working capital.

Banks have frozen advances due to all their bad debts and inflation is also very high. Subsidies started by the Government to start the manufacturing in backward areas is also not a very attractive scheme as the infrastructure is not as per the requirement. Every buyer knows that we will get refunds on GST and they do not allow us to add that cost in the GST. Above all labour laws remain where they have been since 70 years. Bottom lines, liquidity and growth are dismal. With all odds stacked against the industry and the Government not helping the industry is heading towards very tough times.

There is too much confusion on GST refunds. For example, if any company files for a GST refund we are then asked for declaration that no drawback has been claimed earlier. As per our thinking the GST refund is exclusive of drawback which has already been reduced by 6%, but so far we have no clear picture on the same. ROSL has been pending for over a year. Secondly, Bangladesh has a 10% advantage over us because they enjoy duty free preference in many countries. How can garment exporters survive when all their profits and capital is stuck with the government? 2% of the profit is stuck because the incentives do not come on time. All garment exporters are stuck with these issues and do not want to proceed further. Even if there are orders everyone is skeptical to accept those with the current situation. I foresee a drop of 30% in my sales this year.

DHIRAJ MAHTANEY, APPARELIZE, MUMBAI

If the current situation does not improve in the next few months we might have to close down our factories as business is becoming tougher and difficult to sustain.

AMIT JAIN, ADIRAV APPARELS

Firstly, if our Hon. Prime Minister is promoting “Make in India”; then steps should be taken to boost demand for our products outside India. We can only create a demand for Indian garments in the EU and other countries only if we quote competitive prices. The Ministry of Textiles and the Government should take immediate steps for boosting textile exports. Duty drawback rates should be increased to at least 6%. GST refund process should be simplified and should be done on a fast track basis. There should be zero duty on import of textile goods from India in Europe. A lot can be done in regard to MSME for instance sanctioning of working capital from banks to MSME units should be hassle-free and faster since working capital and cash flow is a big hassle in India post GST.

VIKAAS GHONASGI, ANNU EXPORTS, TIRUPUR

It does not seem that these tough times will end soon as the steps taken by the Government are not enough for the industry and moreover they are more likely to benefit big exporters and small and medium sized exporters will continue to suffer. This is a very difficult time for industry as the GST refund process has increased corruption and still process it is very slow. People should move to IGST refund modules. Performance based help should be extended by banks. In terms of demand, growth, bottom lines and liquidity all are affected badly.

DHIRENDRA KUMAR JHA, A.S.FASHIONS PVT.LTD

I firmly believe that the reasons for downfall of the industry is GST which is now 12% on blended yarn like viscose, polyester, wool, nylon and other man made yarns. Besides, the GST on fabrics is now 5%. Now the crux is that yarn is the main component / raw material of fabric manufacturing which is approximately 90% of the fabric value. We are buying yarn at 12 % GST and selling fabric at 5 % GST, the cost of manufacturing has gone up by 7 % due to this and hence we are out of competition as compared to our neighbouring countries who, have big cost advantage. Another challenge is that the loans have very high rate of interest which any manufacturer needs for personal, business or for buying machinery. Today, people do not have capital and when they seek bank loan the high rate of interest becomes a major hurdle. I think the solution to this is reduced interest on collateral base loan to 0 %. This way everyone will start doing business in ethical manner and the government will earn from GST and income tax. In my opinion, the Government should start giving incentives on income rather than charging income tax. Everyone will start doing business through genuine mode and all transactions will be through either bank or digital payments. Govt will start earning through gst or other indirect taxes and this will increase GDP many times.

RAJAN MISHRA, ARDEE KOMFAB PVT. LTD, DELHI

Finance and Textile Ministry assures AEPC of an early resolution of the issues of the Apparel Industry

Responding to the Apparel Industry’s request for a meeting to address the serious down slide in textile and apparel exports since the last eight months, Finance Minister, Hon. Piyush Goyal and Minister of Textiles, Hon. Smt Smriti Irani, along with senior representatives of Ministry of Textiles and Finance met the senior officials of Apparel Export Promotion Council, along with stalwarts from apparel and textile industry, to understand the issues being faced by the entire value chain. In a two hour long meeting, the Finance Minister noted the concerns of the Industry with regard to the huge blockages in GST refunds since the roll out of GST and the slow disbursements in RoSl. Due to the blockages of working capital – arising because of the blocked GST refunds and slow disbursements in RoSl – the industry has not been able to book orders in the peak season, and hence losing out to its competitors, in a big way.

Commenting on the meeting, HKL Magu, Chairman Apparel Export Promotion Council said,” AEPC expresses gratitude for the speedy response from our Honourable Minister of Textiles in presenting critical industry issues along with senior representatives of industry to Honourable Finance Minister and his team on Sunday at North Block. For this important meeting, the Industry came together, from Apparel, Made ups and Textiles to present a unified perspective that looked at the range of issues – making India competitive in exports, expanding growth, and employment. Industry apprised Finance Minister about the crisis faced across industry — in embedded and inverted taxes not being considered for refund as well as the huge delays in receiving GST/ROSL claims. Since over 90% of apparel manufacturers are in the MSME sector with limited financial capability, this has created crippling pressure. Finance Minister has instructed his team to urgently identify central and state embedded taxes and work out a reimbursement mechanism. Also, Ministry will expedite GST and ROSL refunds in a time bound manner. FM assured all possible support from his Ministry to enable exports growth and creation of jobs by the employment intensive Apparel, Made ups and Textile industry. Industry has also assured that with our competitive position restored, we would be able to regain lost market share, further consolidate these gains and create gainful employment in shortest possible time. ”

The industry has witnessed a reduction in the drawback and RoSl benefits by over 5% of FoB since the pre GST period. This, coupled with the disadvantage of around 10% faced by the industry vis-a-vis its competitors in the major markets like EU, due to lack of preferential access, had led to India loosing out to Bangladesh and Vietnam in a big way. The apparel industry is today at USD 17bn, but the industry is optimistic of recording a 20% growth in exports by next year, if the level playing field is offered along with facilitation of faster GST and RoSL refunds. We are also confident of a pickup in investments and jobs, if the industry is offered some long term employment-linked incentives.

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