The Indian denim industry is on a high, thanks to China. With China and the US significantly cutting their denim capacity over last year, Indian denim makers’ business has seen a surge lately. While the domestic market has been growing by 10 per cent, foreign order books have risen by 10-15 per cent, as per experts.
Meanwhile, India has added about 100 million metres of capacity over a year. This has led to its being able to absorb the increased orders from within and outside the country. China has cut down production owing to rising labour and energy costs.
This is an opportunity for India from the space vacated by China that exports $70 billion of apparel annually. Even if a small percentage of this opens up, it would be an opportunity to Indian denim players. India’s present denim capacity is around 800 million metres, with an annual production of 650 million metres. As China which produces close to 2.5 to 3 billion metres of denim annually slows production. Indeed, while Pakistan, Bangladesh and Indonesia would try to cash in on China’s loss, experts say if cotton prices remain realistic and the local business environment conducive, India will get some of this business. The denim market in India is expected to grow by 15-20 per cent in the current year too.
Meanwhile, demand in the domestic market has been growing. In fact, with good growth prospects manufacturers are passing on the increased input costs to consumers and expecting more than 10 per cent year-on-year growth this fiscal. Cotton prices, along with energy and labour costs, remain realistic in India too, so that they can get good export business. Export demand for Indian players largely remains US-driven as Europe is reeling under the debt and slowdown crisis.
Indian denim market big enough
The Indian market is currently fragmented. Consolidation is not the answer to its growth. This is because in the more developed markets such as Europe and the US, consolidation happens in case of market stagnation or negative growth. In contrast, the Indian market is witnessing a robust growth of 15 to 20 per cent in recent years, and there is ample space for all players to grow.
Though the Indian denim market is flourishing, the country still has a lower consumption of the fabric compared to production. This has led to a considerable surplus available for export.
With import duties coming down and competition from countries such as Bangladesh growing, innovation is indispensable to ensure further growth and profitability for Indian denim companies. The need of the hour is an effective collaboration between countries such as India and Bangladesh, where the respective strengths of the two countries related to raw material and cheap production facilities can be combined to ensure success.