Apparel exports expected to improve mildly in FY24 following recovery in international demand: ICRA

The Indian apparel export industry is expected to see a year-on-year increase in revenue of around 2% to 3% in the 2024 financial year despite a challenging climate, according to credit ratings agency ICRA. The mild growth is expected to be brought about by demand recovery and government schemes.

“Despite a rationalisation in raw material costs in H1 FY2024, the benefit is expected to be passed on to the orders executed, considering a weak operating environment at present,” said ICRA’s vice president and co-group head of corporate sector ratings Kaushik Das, ET Retail reported. “The long-term growth prospects however look encouraging, with the Government of India’s various promotional steps, including the PLI (production linked incentive) schemes, the PM Mitra parks, the proposed FTAs with the UK and the EU, and the long-term benefit of China Plus One shift in apparel sourcing.” 
 
Operating margins could moderate from 10.9% in the 2023 financial year to 9% to 9.5% in the 2024 financial year, according to ICRA. This is due to factors including high raw materials prices, high cotton prices, and high employee expenses. Business could see debt increase but are predicted to remain stable, ET Bureau reported. 

Free trade agreements have given a boost to Indian trade, including the recent agreement signed with Australia, and India is in ongoing talks to sign a trade agreement with the UK. “Successful conclusion of the ongoing FTA discussions with the UK and the EU, along with the FTA agreement signed with Australia, which came into force by end-December 2022, is likely to provide a growth impetus to Indian apparel exports, going forward,” said Das.