Apparel, Fashion & Retail | News & Insights

Indian Apparel Sector Poised for Growth in FY25: ICRA

Published: November 1, 2024
Author: TANVI_MUNJAL

The Indian apparel export industry is set to rebound in the current fiscal year (FY25), with an anticipated revenue growth of 9-11%, according to a recent report by ICRA. This positive outlook comes after a challenging FY24, marked by high retail inventory levels, sluggish demand, and supply chain disruptions.

Key Drivers of Growth Several factors are driving this optimistic forecast:

  • Inventory Liquidation: The gradual liquidation of excess retail inventory in key markets like the US and EU is freeing up space for new orders.
  • Global Derisking: As part of broader global de-risking strategies, many companies are shifting their sourcing to India, recognizing its competitive advantages.
  • Government Support: Government initiatives such as the Production-Linked Incentive (PLI) scheme and export incentives are providing a significant boost to the sector.
  • Free Trade Agreements: The proposed FTAs with the UK and EU are expected to further enhance market access and competitiveness.

Positive Performance in H1 FY25 The first half of FY25 saw a promising 9% year-on-year increase in apparel exports, reaching $7.5 billion. This growth is attributed to inventory clearance and a higher number of orders for the spring/summer season.

Challenges and Cautions Despite the positive outlook, challenges persist:

  • Macroeconomic Uncertainty: A subdued global economic environment and geopolitical tensions could impact demand.
  • Rising Costs: Increasing labour and freight costs, along with other operational expenses, may erode profitability.

Capital Expenditure and Debt To capitalise on the growth opportunity, apparel exporters are expected to increase capital expenditure, with an estimated range of 5-8% of turnover in FY25 and FY26. However, this could lead to a slight increase in debt levels and a potential moderation in interest coverage ratios.

Long-Term Outlook The long-term prospects for the Indian apparel industry remain bright. Government initiatives like the PM-MITRA scheme are expected to strengthen India’s position in the global apparel market, particularly in the man-made fibre value chain.

With its competitive advantages, India is well-positioned to increase its market share and drive sustainable growth in the years to come.

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