In Jan-Nov 2017, Vietnam’s apparel exports to the US grew by 7.42% and India’s by 2.19%; the other three in the top five saw their numbers declining
While US President Donald Trump’s ‘America First’ approach to curb imports of several products might have been a cause for concern to India, the apparel sector seems to be an exception. During the January-November period of 2017, India emerged as the only large apparel-sourcing destination other than Vietnam to post a jump in exports to the US.According to the US government trade data, among the top five apparel exporters to the country, Vietnam posted a 7.42 per cent growth in exports, while India saw its exports rising 2.19 per cent during the period on a year-on-year basis, show data from the Office of Textiles and Apparel (Otexa), under the US Department of Commerce. For India, the growth came despite its overall month-wise apparel export growth declining October and November 2017.Also attributed for India’s healthy numbers for exports to the US are a decline in China’s focus on apparel exports, and a weakening competitiveness of rival nations like Bangladesh and Indonesia. Rivals China, Bangladesh and Indonesia, meanwhile, saw their apparel exports to the US during the period falling by 3.09 per cent, 4.3 per cent and -2.86 per cent, respectively.Indian apparel exporters are banking on a continued decline in export focus by China, which is looking to move more towards technology and capital-intensive industries than labour-intensive ones. Bangladesh, on the other hand, is hit by rising labour costs and compliance issues making it tough to please the US with quality exports.“Apparel has not come under the Trump administration’s review for import curbs. Also, imports from China are coming down and buyers are looking at other sourcing destinations,” said Rahul Mehta, president of Clothing Manufacturers’ Association of India (CMAI).As alternatives, prime destinations for the US to source apparel tend to be Bangladesh, Vietnam and India.“Bangladesh’s business is getting hit by continual compliance issues, along with rising cost of production. China is shifting from labour-intensive to technology-intensive industries.
That only leaves Vietnam for India to compete with,” said Mehta.In dollar terms, while the US’ apparel imports from China fell by $803 million from $26.021 billion during the January-November 2016 period to $25.218 billion a year later, the decline for Bangladesh over the same period was by $212 million. Against $4.939 billion worth of apparel that it exported in Jan-Nov 2016, Bangladesh shipped $4.727 billion worth of apparel in Jan-Nov 2017. Meanwhile, Indonesia’s exports dropped by $126 million from $4.393 billion to $4.267 billion over the same period.By comparison, Vietnam, the second-largest apparel exporter to the US saw its export numbers growing by $742 million – from $10.005 billion to $10.747 billion. Among the top five destinations, India happens to be the fifth in value terms, with its apparel exports to the US in Jan-Nov 2017 growing by $74 million to $3.471 billion, against $3.397 billion in the same period a year earlier.According to Mehta, while Bangladesh scores over India in pricing, Vietnam does so in volumes. “Bangladesh is cheaper than India. Vietnam does not have lower wage costs but it plays the volume game with its productivity and manufacturing standards and ends up being cheaper than India,” said Mehta.While the Indian apparel industry is pinning its hopes on competing nations like Bangladesh and China to continue lowering exports to the US, it has also sought certain measures from the government to ensure a resurgence in overall exports.The Indian apparel industry saw consecutively declining numbers for overall exports in October, November and December 2017 – a fall of 39 per cent, 11 per cent and 8 per cent year-on-year, respectively – thanks to the impact of the Goods and Services Tax (GST), rolled out in July, and the discontinuance of certain export incentives.As a result, from seeking restoration of export incentives at the pre-GST rates (7.5 per cent duty drawback on cotton apparel and 3.5 per cent ROSL) to exemption of the 18 per cent taxes levied towards air freight charges under GST, Industry body Apparel Export Promotion Council (AEPC) has made around 8-10 demands ahead of Budget 2018.”We have been asking the government to support the apparel exporters to survive. There have been blockages of funds as very few people got GST refunds between July and December. The dollar, which was worth Rs 65, came down to Rs 63, hurting exporters further. We have become uncompetitive and Bangladesh has started cashing in on this by offering its products 10-15 per cent cheaper in the global market,” said H K L Magu, chairman of AEPC.From earlier rates of 7.5 per cent duty drawback and 3.5 per cent ROSL on cotton apparel, and 9.8 per cent and 3.5 per cent on man-made apparel, the apparel-exporting industry has seen these falling to 2 per cent duty drawback and 1.5 per cent ROSL on cotton apparel, and 2.5 per cent and 1.5 per cent on man-made apparel since the rollout of GST.