According to rating agency ICRA on Monday, Indian clothing exporters are predicted to see a 9–11% increase in revenue in FY25, mostly due to a shift in global sourcing to India and a gradual liquidation of retail inventory in important end markets.

The production-linked incentive (PLI) scheme, export incentives, the proposed free trade agreement with the UK and the EU, and other government initiatives have all contributed to the improved product acceptance in end markets, changing consumer trends, and favourable long-term prospects for Indian apparel exports, according to a statement from ICRA.

The anticipated improvement in this fiscal year comes after a lacklustre performance in FY24, when excessive retail inventory, weak demand from important end markets, supply chain problems—including the Red Sea crisis—and increased rivalry from neighbouring nations all had an impact on exports, it continued.

ICRA stated that, given the rebound in demand, it anticipates that capex investment will rise in FY2025 and FY2026 and may remain between 5 and 8% of turnover.

Srikumar Krishnamurthy, Senior Vice President & Co-Group Head Corporate Ratings ICRA, said, “After a marginal decline (down 2 per cent) in FY24, Indian apparel exporters are estimated to report a 9-11 per cent revenue growth in FY25, benefitting from de-risking strategy adopted by various customers and replenishment of retail inventory in key end markets, especially the US and the EU regions.”

However, he noted that despite a muted macroeconomic climate and geopolitical concerns, obstacles related to demand uncertainty still exist in a few significant regions.

Krishnamurth, said, “Despite the revenue growth, associated operating leverage benefits and softer raw material prices, the industry’s operating margins are expected to contract by 30-50 bps on a YoY basis in FY25 with increasing labour costs, freight costs and rise in other operating expenses.”

According to ICRA, the ongoing geopolitical upheaval in Bangladesh can encourage capacity increases, especially in India.

However, it observed that Bangladesh is able to remain competitive over most other developing countries due to the availability of labour at low rates and advantageous duty access, given its categorization as a least developed nation for an additional two years on exports to the US and the EU.

“Apart from the benefits to be derived from the fresh capacity additions under the PLI scheme, PM Mega Integrated Textile Region and Apparel scheme is expected to strengthen India’s presence in the global apparel trade by providing scale benefits and strengthening the country’s presence in the man-made fibre value chain,” Srikumar said.

According to him, ICRA expects these programs to come to a close so that Indian clothing exporters may get a larger piece of the global apparel market.

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