India’s future Ajay Srinivasan Director Research …€¦ · · 2016-08-11Ajay Srinivasan Director Research ... •Indian exports grew at 10% CAGR in dollar terms from 2010-15

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India’s future prospects in apparel exports

Ajay Srinivasan

Director

Research

August 2016


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RMG comprises ~6% of total merchandise exports

Readymade garment export facts

• Exports comprised ~40% of overall RMG market in India in 2015

• Exports dominated by US and EU which account for ~60% of India’s export basket

• Indian exports grew at 10% CAGR in dollar terms from 2010-15 but still make only

about 4% of world RMG exports

• Market share in woven category (4.2%) slightly better than knit category (3.5%) in

world exports

2

51% 42% 7% 22% 37% 41%

Indian readymade garments

industry Rs 2,850 billion

Domestic

Rs 1,750 billion Exports

Rs 1,100 billion

Men's apparel

Rs 890 billion

Women's

apparel

Rs 732 billion

Kids'

apparel

Rs 126 billion

US

Rs 241

billion

EU

Rs 401 billion

Others

Rs 455 billion

Source : Crisil Research,Textile Commisioners Office

EU 37%

USA 22%

Other Countries

41%

US and EU still dominate India’s exports

Source : Crisil Research,Textile Commisioners Office


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India’s share in RMG exports has improved

3

Source: Intracen,Crisil Research

World RMG Exports remained stable over past 5 years World RMG trade growth remained relatively

stable in 2010-2015, vis-à-vis 2005-2010

- Exports declined in 2015, mostly due to Euro

depreciation and consequent drop of European sales

in dollar terms.

India gained significant market share in 2005-

2009 on quota removal

- However, growth slower than key competitors

Vietnam and Bangladesh

India’s share has slightly improved in 2015, as it

continued to gain market share in non traditional

markets

Markets share of various countries in world RMG trade

% 2005 2009 2014 2015

China 24.5 31.8 36.8 36.1

Italy 6.6 5.9 4.9 4.3

Bangladesh 2.5 3.9 6.1 6.7

Germany 4.3 5.2 4.1 3.7

Vietnam 1.7 2.6 4.2 5.3

Turkey 4.2 3.6 3.5 3.3

India 3.0 3.6 3.5 3.8 Source : Intracen

269

361 316

347

407 406 445

471 450

0

50

100

150

200

250

300

350

400

450

500

2005 2008 2009 2010 2011 2012 2013 2014 2015

USD bn


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India's knit exports accounted 3.5% of world exports in 2015

4

Indian knit exports dominated by T-shirts, Women suits and men shirts

Indian knit exports cater less to the Jerseys &Pullovers and Women Innerwear which account

for 29% of world knit export

India’s market share in Jerseys and Pullovers, which is the largest knit category, is ~0.5%

Source: Intracen ,CRISIL Research

Product

Share in World

Exports

Share in India's

exports

Tshirts 19% 37%

Women Suits 17% 9%

Jerseys and Pullovers 23% 4%

Women Innerwear 6% 1%

Men's Suits and Jackets 6% 5%

Women Bathrobes and Pyjamas 6% 7%

Mens Shirt 4% 10%

Babies Garment 3% 9%

Mens underpant 3% 6%

Garments 3% 8%

Total value (USD billion) in 2015 224 7.7

(Market Share in world)

2010 2015

5% 8%

2.2% 2.6%

0.5% 0.5%

3% 5%

4% 4%

6% 3%

7% 9%

6% 9%

5% 8%

3% 10%


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United Arab Emirates

United Kingdom

France

Saudi Arabia

Canada

Poland

Afghanistan

Nigeria

-30

-20

-10

0

10

20

30

-15 -5 5 15 25 35

An

nu

al g

row

th o

f p

art

ne

r co

un

trie

s im

po

rts fro

m th

e

wo

rld

be

twe

en

20

11

-20

15

,%

Annual growth of India's exports to the partner countries between 2011-2015, %

Declining Markets

Growth Markets

Growth of world market for the selected product : 3%

India’s export

growth to

partner >

Partner

Import

growth from

the world

India’s export

growth to

partner <

Partner

Import

growth from

the world

Bubble size is

proportional to

share in the

world imports

of partner

countries

Description Criteria Countries

Slow markets where India performing well Growth in India exports > Partners Imports Germany, Spain , South Africa, France, Ireland

and United Kingdom

Growth markets where India performing

well

Growth in India exports > Partners Imports for the

category

UAE, Poland, Afghanistan, Mexico, Australia,

US

Growth markets where India not

performing well (share in the world imports

> 2%)

Growth in India exports < Partners Imports for the

category

Canada

Growth markets where India not

performing well(share in the world imports

< 2%)

Growth in India exports < Partners Imports for the

category

Saudi Arabia and Nigeria


Opportunities for market diversification in knit segment


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6

Indian woven exports dominated by women and men suits/jackets and women

blouses, which account for 57% of world exports

Indian has negligible presence in Women overcoats/capes, mens overcoat and

Garments made of fabric, which account for 20% of world trade


In 2015, India's woven exports accounted 4.2% of world exports

Category

Share in world

Exports

Share in India's

exports

Women suits and jackets 29% 29%

Mens suits and jackets 22% 13%

Mens shirt 7% 12%

Women overcoats and capes 8% 0%

Mens overcoat 6% 0%

Garments made of fabric 5% 0%

Women's blouses & shirts 6% 17%

Track suits and sky suits 5% 12%

Brassieres 5% 1%

Total value (USD billion) in 2015 224 9.3

(India’s Market Share in world)

2010 2015

4% 5% 2% 3%

6% 8% 0.12% 0.09%

0.11% 0.16%

0.07% 0.11% 12% 11%

2% 10%

0.5% 1.0%


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India’s export

growth to partner

> Partner Import

growth from the

world

India’s export

growth to partner

< Partner Import

growth from the

world

Bubble size is

proportional to

share in the world

imports of partner

countries

Description Criteria Countries

Slow markets where India performing well Growth in India exports > Partners Imports

for the category United Kingdom, South Africa

Growth markets where India performing well

Growth in India exports > Partners Imports

for the category

UAE, Malaysia, Sudan, Afghanistan,Brazil,

Australia,US

Growth markets where India not performing well (share in

the world imports > 2%)

Growth in India exports < Partners Imports

for the category Spain, Canada

Growth markets where India not performing well(share in

the world imports < 2%)

Growth in India exports < Partners Imports

for the category Saudi Arabia

United States of America

United Arab Emirates

United Kingdom

Spain Saudi Arabia

Canada

Brazil

Malaysia

Afghanistan

Australia

Sudan (North + South)

South Africa

-10

-5

0

5

10

15

20

25

-20 -10 0 10 20 30 40 50

An

nu

al

gro

wth

of

pa

rtn

er

co

un

trie

s im

po

rts

fro

m t

he

w

orl

d b

etw

ee

n 2

01

1-2

01

5,%

Annual growth of India's exports to the partner countries between 2011-2015, %

Opportunities for market diversification in woven segment Growth Markets

Declining Markets

Growth of world market for the selected product : 2%



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Textile package marginally positive for apparel exports

• Duty drawback on MMF fabric inputs to make India more cost competitive and boost MMF exports

• Flexible labour laws a significant structural change, which should help the industry scale up production based on market needs

Source : Ministry of Textiles, CRISIL Research

Textile package not a game changer but would support export growth

Special package for Textile exports

Increase in overtime caps on working hours (from 3

to 8 hrs a week)

EPF Scheme (Govt. to bear 12% of employers’ contribution for 3 yrs for employees earning

less than Rs 15,000 pm)

Additional incentives under ATUFS (Outcome based

incentives; increase in subsidy to 25% )

Enhanced duty drawback coverage (duty drawback

to enhance MMF capabilities)

Enhancing scope of 80 JJAA of Income Tax Act (provision

of 240 days relaxed to 150 days)

Introduction of fixed term employment


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India less competitive than Bangladesh and Vietnam

India scores high on raw material availability, but loses out on machinery, market diversification

and mix by fabric. Absence of FTAs and low scale of operations also hamper India’s prospects

9

India’s moderate competitiveness in export market

Note: L: Low; M: Moderate; H: High

Source: CRISIL Research

• Bangladesh enjoys zero duty in EU; China has FTAs with many of its

markets; Vietnam has signed trade agreements with the EU and US

• China gets maximum support from its government

• India exports 59% to US & EU; China ships only 44%

• But shipments to non-US/non-EU markets growing at an impressive

pace

• Majority of RMG exports from India are cotton-based

• Smaller scale of operation and lower labour and machine productivity

hamper India’s efficiency.

• However, surplus cotton availability is a positive.

• China has the best infrastructure in among major textile exporters

Factors Ranking

Policy parameters

FTAs and access policies L

Government policies M

Market parameters

Diversification M

Growth in key markets M

Product diversification

(mix by fabric and range of offering) M

Efficiency parameters

Scale of operations L

Labour cost M

Exports infrastructure M

Raw material availability H

Final ranking M


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10.7

13.8 12.9

14.4

16.7 17.2

23.0

-

5

10

15

20

25

2010 2011 2012 2013 2014 2015 2016P 2020P

Long term RMG export growth to be moderate

Exports growth in 2015 moderated to 3% as compared to 15% growth in 2014 due to

- Decline in demand from Europe due to sharp (~16%) Euro depreciation

- Deceleration of growth in Non US-EU markets (from 26% export growth in 2014 to 9% in 2015)

Lower export competitiveness to slowdown export growth to 5-7 % CAGR in the next

5 years

15

Growth in exports to moderate India’s market share relatively stable

P: Projected

Source: OTEXA; Eurostat; Ministry of Commerce; CRISIL Research Note: Data for US (in USD), data for EU (in Euro)

Source: OTEXA; Eurostat; CRISIL Research

% India's market shares

US EU Other mkts

2004 3.4 5.5 2.2

2010 4.4 6.8 2.6

2011 4.3 6.8 3.0

2013 4.1 6.2 3.9

2014 4.2 6.3 4.2

2015 4.3 6.3 4.6

2020P 4.2 6.0 6.0

Growth

driven by

prices

Growth Slowdown in 2015

(2013-12%, 2014-15%, 2015-3%)


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16

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Thank you

Ajay Srinivasan

Director

[email protected]

India’s future Ajay Srinivasan Director Research …€¦ · · 2016-08-11Ajay Srinivasan Director Research ... •Indian exports grew at 10% CAGR in dollar terms from 2010-15

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