According to a survey by Care Edge Ratings, home textile exports from India are predicted to decline 16–18% year-over-year in FY23 due to a slowdown in demand, particularly from the US and Europe, as well as an increase in material and logistic costs.
After experiencing a boom in FY21 and FY22, the brokerage report states that India’s overall textile exports decreased by 13.4% year over year, totaling $23.1 billion, from April to November 2022.
However, FY22 saw exports of $44.4 billion, boosted by pandemic-related demand and the China+1 importation plan.
The home textile sector of the textile industry contributes the most to exports after ready-made clothing. The sub-segment recorded export increase of approximately 34% in FY21 and 12.6% in FY22.
“CareEdge anticipates a 16–18% decline in home textile export growth in FY23, which will be impacted by the European recessionary trend and cuts to non-essential spending in the US due to rising inflation. “Margins would shrink by 400-500 bps due to lower operating leverage given lower capacity utilisation, even while the declining rupee against the dollar and the global China+1 policy restrain turnover fall for Indian home textile businesses,” said Arti Roy, Associate Director.
As freight and cotton costs show some easing and retailer inventory runs out, demand momentum could gradually pick up from Q1FY24, she added.
After reaching their peak in Q2 FY22, exports began to plateau as a steep rise in commodity inflation and a trend towards global recession disrupted growth.
“The exports of Indian home textiles increased by 7.1% CAGR from $5.3 billion in CY17 to USD 8.0 billion in CY22. Home textile exports began to moderate Q-o-Q after reaching their peak growth in Q3FY22 because of the ongoing rise in cotton prices, the US’s ongoing inflation crisis, and the pressure from Europe’s recession, according to Care Edge.
Around 68–70% of imported home textiles go to the US and Europe, which together make up the largest markets.
The operational margins for the top four listed home textile businesses, which account for 30% to 35% of Indian home textile exports, have been declining quarterly and are predicted to decline by 400-500 basis points (bps) in fiscal year (FY) 23.
Despite the decline in cotton prices, weaker demand and increased operational costs as a result of lower capacity utilisation are hurting profitability.