After being hit by volatile cotton prices and muted export demand in the previous two financial years, India’s textile industry is expected to witness a rebound in revenues in the next financial year. 

As per a report by CRISIL, the industry will close this financial year with lower revenues as nearly 25 per cent correction in the cotton prices and subdued RMG exports have toned down realisations. Accounting for one-fourth of the overall market, exports are currently impacted by a slowdown in key markets, although domestic demand continues to grow at a steady rate. Particularly impacted are small and medium enterprises (SMEs),that constitute upto 75 per cent of the textile value chain. Growth is expected to revive in the next financial years as domestic demand continues to rise, cotton prices stablise and exports recover. 

With consumption continuing to be lower than production, cotton prices are likely to remain stable, supporting the cost competitiveness of the cotton textile value chain. The volume growth for cotton spinners is likely to normalise after an 80-85 per cent growth this year on a low base. For RMG players, volumes are expected to inch up in line with a gradual improvement in major export destinations such as the US, EU, and UK. 

Revenue growth in key export-oriented RMG clusters such as Tirupur, Bengaluru and Mumbai is expected to slowdown to 6-7 per cent in the next financial year. Highly dependent clusters on the domestic market, such as Kolkata, Kanchipuram and Ludhiana are likely to outperform export-centric clusters. 

 Profitability of players is expected to improve as cotton prices stabilise and inventory losses minimise. Over the medium term, the free trade agreements with the UK and the setting up of textile parks under the PM MITRA scheme will help improve India’s competitiveness in the RMG domain. The scheme will be complemented by the Production Linked Incentive scheme that will also boost to domestic manufacturing.