The European Union has always been a potential destination for the Indian apparel export industry and rightly so as the Union collectively stands at over US $ 350 billion worth of apparel market. But, India’s apparel export to EU is not at all encouraging as compared to the neighbouring countries such as Bangladesh, and COVID-19 has further made a huge dent on export values.
According to Ministry of Commerce and Industry, India’s export to EU valued US $ 4.52 billion down 24.46 per cent from 2019 when export of apparels had clocked US $ 6 billion – thanks to COVID-19. This is approximately 37 per cent of India’s total apparel export value in 2020. Whereas, Bangladesh’s share of clothing exports to EU was 61.96 per cent, as per data available on Export Promotion Bureau (EPB, Bangladesh) in 2020, and it was around three-and-a-half times more than what India accounted for! If UK is excluded from the list of EU destinations, as it has already parted its way from the Union, the export value of India shrinks to just US $ 3.40 billion.
Here is how India stands in front of other countries that ship apparels to EU…
The latest data of EUROSTAT shows that the imports of clothing to the EU Member States decreased by 14 per cent in value in 2020 compared to 2019 and valued US $ 82.26 billion. To prevent the spread of the COVID-19 pandemic in 2020, countries around the world took a variety of restrictive measures, which negatively affected international trade in goods – trade in apparels not being an exception.
China remained the main origin of imported clothes by the EU countries with around US $ 25 billion revenues and constituted around 30 per cent of total import values of EU. Bangladesh’s share was 18 per cent with US $ 14.30 billion worth of shipment; Turkey’s contribution was 12 per cent with US $ 9.54 billion; followed by the United Kingdom (US $ 4.77 billion, that is 6 per cent), India and Vietnam (each US $ 3.40 billion that is 4 per cent) and Cambodia (at US $ 2.39 billion that is 4 per cent). So, with just 4 per cent of market share, India stands at 5th spot in the tally.
As far as the top apparel markets of EU is concerned, Germany, Spain, and France among others tumbled due to shut markets and low consumer spending once the markets were opened after lockdowns. As a result, India also got affected and its exports to these markets fell flat, as shown by the data. (See Table 1)
During 2020, Germany was the largest importer of clothes in the EU and almost US $ 20.27 billion worth of clothes were imported by German buyers from non-EU Member States that accounts around 25 per cent of total EU clothing imports from non-EU member states – making Germany the largest EU importer of clothing, ahead of Spain (US $ 11.93 billion that is 15 per cent) and France (almost US $ 11.70 billion that is 14 per cent).
|India’s Apparel Export to European Union Countries (2020 vs 2019)|
|S. No.||Country Name||Knitted||Woven||Total (2019)||Total (2020)||% Change|
|CY 19||CY 20||% Change||CY 19||CY 20||% Change|
Table 1 (All figures are in US $ million)
Data Source: Department of Commerce, India
Compiled by: Apparel Resources
* UK is no longer a member of EU but it was a member back in 2019, hence the table includes UK just to compare figures of 2019 to that of 2020.
India must target Hungary and Denmark to boost export along with the revival in traditional EU countries…
Top 5 EU destinations – Germany, France, Spain, Netherlands and Italy, all fell down in their respective RMG imports from India during 2020. It’s worth mentioning here that these 5 markets accommodated 73.48 per cent of India’s total export to EU – with UK excluded. While the EU-India FTA talks will aim at increasing India’s apparel exports to these 5 traditional and top markets, the other two emerging destinations – Denmark and Hungary – can’t be overlooked.
Denmark was the 6th top apparel export destination in EU for India during 2020 with an export value hovering around US $ 231.95 million, that’s 3.29 per cent yearly growth. Though the increase in shipment to Denmark looks miniscule, the fact can’t be denied that growth was noted in COVID-19 hit period. On the other hand, Bangladesh declined by 0.51 per cent in its apparel export to Denmark in 2020. The growth of India in the Denmark market seems to be not just one-off instance as the future projections for this emerging retail market are all positive.
The revenues in the Denmark apparel market are projected to be US $ 4.58 billion in 2021 and the same is expected to grow annually by 4.02 per cent (CAGR 2021-2026). Hence, tapping this growing market in the early stage will set the future platform for the Indian factories.
Another rising market is Hungary that imported US $ 21.16 million worth of apparels from India in 2020, as compared to just US $ 2.79 million in 2019, marking 658.42 per cent yearly growth in a pandemic-ravaged year. Notably, Hungary imported US $ 1.56 billion worth of garments from worldwide in 2020, as says ITC data, and India’s share to this value remained just 1.35 per cent and that’s where the key lies. Since India’s garment export to this small yet potential European destination seems to be weaving up strongly, the country has a great chance in 2021 and onwards to increase its market share in Hungary. As per Statista, the total revenue in apparel segment in Hungary was US $ 2.07 billion in 2020 and the same is expected to grow annually by 16.2 per cent from 2021 till 2025.
The chances of India’s growth in Denmark and Hungary are high because of the fact that both these countries are known to source high fashion garments in small quantities, something which India already has an upper hand in, as compared to its Asian counterparts.
Road ahead for India…?
Till now, India hasn’t been able to substantially increase its market share in the EU clothing market over the years, mainly because of ‘zero’ tariff benefit granted by EU not only to Bangladesh but other competing countries like Pakistan, Sri Lanka and Vietnam. On the other hands, the average tariff applied on import from India into EU is approximately 9.60 per cent for textile and clothing products. This big duty gap compels the importers in Europe to buy more quantity from India’s competitors. If EU-India FTA talks finalise, the expansion of apparel export of Indian factories to the Union’s countries is very likely.
Besides what better country it would be for EU buyers than India in terms of wide logistics network. India does have 13 major ports which add to the advantages EU buyers will have if they increase sourcing post FTA talks, if it finalises. Because of such great logistic network, India is able to ship products to EU faster than Bangladesh, Sri Lanka and even Pakistan.