Indian apparel exporters are poised for a significant revenue boost in FY25, with projected growth of 9-11%, according to the Investment Information and Credit Rating Agency of India Limited (ICRA). This optimistic outlook stems from a gradual reduction in retail inventory in key end markets, as well as a notable shift in global sourcing patterns towards India, positioning the country as a preferred supplier for international buyers.

The anticipated growth in FY25 follows a lackluster performance in FY24, where apparel exports were impacted by several challenges, including high retail inventory levels, subdued demand, supply chain disruptions, and increased competition from neighboring countries. The apparel industry faced hurdles that restricted its potential, but the current scenario indicates a recovery phase.

One of the critical factors contributing to this positive forecast is the reduction in retail inventory among major retail players in markets like the United States and European Union. As these inventories decline, it opens up opportunities for Indian exporters to fulfill demand, thereby increasing revenue. Moreover, with the recovery in demand, ICRA expects a corresponding rise in capital expenditure spending in FY25 and FY26, potentially reaching 5-8% of turnover as companies invest in scaling operations and enhancing capabilities.

The long-term outlook for Indian apparel exports remains encouraging, bolstered by several key elements. Improved product acceptance in international markets, along with evolving consumer trends, particularly towards sustainable and ethically produced garments, play a vital role. Additionally, supportive government initiatives, such as the Production-Linked Incentive (PLI) scheme, export incentives, and proposed free trade agreements with the UK and European Union (EU), are expected to further enhance the industry's competitiveness.

However, challenges still loom over the sector. Demand uncertainty persists in several key markets, compounded by a sluggish macroeconomic environment and ongoing geopolitical tensions that can affect consumer spending patterns. Despite the projected revenue growth, operating margins for the industry are expected to contract by 30-50 basis points year-on-year in FY25. This contraction can be attributed to rising labour and freight costs and other operating expenses that continue to put pressure on profitability.

In light of these challenges, ICRA notes that Indian apparel exporters are adopting strategies to mitigate risks and replenish retail inventories. This is especially crucial in the US and EU markets, where Indian brands aim to strengthen their foothold. Recent geopolitical tensions in countries like Bangladesh may inadvertently benefit Indian exporters by prompting capacity expansions within India. Such shifts are anticipated to bolster India’s position in the global apparel sector, providing a competitive edge over other manufacturing countries.

Furthermore, the government's support through the Prime Minister's Mega Integrated Textile Region and Apparel (PM MITRA) scheme aims to further enhance the industry's growth prospects. This initiative is designed to create an integrated ecosystem for the textile and apparel industry, fostering collaboration among manufacturers, suppliers, and exporters.

In conclusion, while Indian apparel exporters face several challenges, the growth projections for FY25 reflect a positive trajectory for the industry. The combination of reduced retail inventory, shifting global sourcing trends, supportive government policies, and a gradual recovery in demand will be key drivers in reshaping the future of apparel exports in India. Stakeholders are optimistic that with continued efforts, the Indian apparel sector can emerge stronger, resilient, and more competitive on the global stage.

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