Textile Industry Set for Rebound : CRISIL SME Tracker Analysis
The CRISIL SME Tracker reports that the textile industry is poised for a rebound in revenue after experiencing two years of contraction.
The previous financial years were challenging due to volatile cotton prices and subdued export demand. However, the industry is expected to close this financial year with lower revenue due to a correction in cotton prices and subdued exports of readymade garments.
Export markets, which typically contribute a significant portion to the textile industry, have been affected by slowdowns in key markets. Nevertheless, domestic demand has remained steady, which is a positive sign for the industry, particularly for small and medium enterprises (SMEs) constituting about 75% of the textile value chain.
In the upcoming financial year, growth is expected to revive driven by sustained domestic demand, stable cotton prices, and an anticipated recovery in exports. Stable cotton prices are forecasted due to lower consumption compared to production, which maintains the cost competitiveness of the cotton textile value chain. Volume growth for cotton spinners is expected to normalize after a significant surge this year.
For readymade garment (RMG) players, volumes are projected to increase gradually in line with improvements in major export destinations such as the US, EU, and UK. However, key export-oriented RMG clusters like Tirupur, Bengaluru, and Mumbai may experience slower revenue growth compared to clusters with higher reliance on the domestic market like Kolkata, Kanchipuram, and Ludhiana.
Despite the current contraction, profitability is anticipated to improve in the coming period due to stable cotton prices and reduced inventory losses. Medium-term prospects are bolstered by free trade agreements with the UK and the establishment of textile parks under the PM MITRA scheme, aiming to enhance India's competitiveness in the RMG sector. Additionally, the Production Linked Incentive scheme is expected to provide a further boost to domestic manufacturing.
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