Combined with a shift in consumer spending towards travel, electronics, and other services, the ready-made garments sector (RMG) in India is likely to be impacted by a sluggish domestic demand this year, as per a report by CRISIL Ratings.

Based on an analysis of over 140 RMG manufacturers with combined revenues of around Rs 43,000 crore, the reportprojects, this fiscal year, RMG exports will grow by 5 per cent -7 per cent. The report attributes this growth to the replenishing of inventories by US and EU retailers, although profit margins might remain flat due to anticipated lower cotton prices. Notably, exports contribute roughly 25 per cent of the industry's revenue.

Last fiscal year, domestic revenue rose by 10 per cent, while export revenuesdeclined by 7 per cent. This fiscal year, the trend is expected to reverse with exports rebounding exports and domestic apparel demand growth slowing down.

Gautam Shahi, Director, CRISIL Ratings, notes, RMG manufacturers faced revenue challenges in the first half of the fiscal year due to retailers' overstocking from the previous year. However, the sector is poised for a boost in the second half, driven by the festive season and an increased number of weddings.

Additionally, recent political unrest in Bangladesh may offer a short-term benefit to Indian RMG exporters. However, the advantage is likely to be limited due to the importance of RMG exports to Bangladesh's economy, differences in product offerings between the two countries, and favorable import duties that benefit Bangladesh’s RMG exports to the European Union.