Revenue growth of India's ready-made garments industry is expected to moderate slightly to 4-6 per cent this financial year from 6 per cent in the last fiscal due to sluggish domestic demand, a report by CRISIL Ratings said.
A shift in consumer spending towards alternative avenues such as travel, electronic gadgets and other services are likely to impact demand for ready-made garments (RMG), it explained.
An analysis of more than 140 RMG makers rated by CRISIL Ratings, with aggregate revenue of approximately Rs 43,000 crore, also indicated that exports' revenue is expected to rise 5-7 per cent this fiscal as retailers in the US and the EU replenish inventories, although realisations may remain flat amid expectations of lower cotton prices.
Exports account for a fourth of the RMG industry's revenue.
Last fiscal, overall revenue growth was driven by a 10 per cent increase in domestic revenue even as export revenue declined 7 per cent.
That is expected to reverse this fiscal, with exports rebounding and domestic apparel demand growth moderating, CRISIL shared.
Gautam Shahi, Director, CRISIL Ratings said, "The contagion effect of retailers' overstocking last fiscal impacted RMG manufacturers' revenue growth in the first half of this fiscal. The second half, however, is expected to receive a fillip from the festive season and a higher number of weddings".
Notably, the recent political turmoil in Bangladesh could have a transitory positive impact on Indian RMG exporters.
However, the upside is likely to be limited due to the criticality of RMG exports to Bangladesh's economy, differences between the product portfolios of RMG exporters in Bangladesh and India, and favourable import duty applicable for Bangladesh's RMG exports to the European Union, the report stated.
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