Indian textile sector vulnerable to global slowdown in 2023: CRISIL

It is apparent that dependence on these regions is disproportionately large for many of the export items. For instance, the European Union (EU) accounts for 46.2 per cent and 42.7 per cent of India’s leather and footwear exports, respectively. Likewise, the US commands a large share in items made up of textiles and rags.

There are several common export items to the two regions and their combined share is significantly large for items such as textiles, both raw materials and ready-made garments (RMGs). Such high concentration of exports (especially on discretionary items such as textiles and leather products) to these two regions make domestic exporters vulnerable to a slowdown in their economies, as per CRISIL’s report.

India’s growth cycles have become highly synchronised with those of advanced economies over the years. The most important and direct impact of this will be reduced demand for Indian goods abroad. The US and EU are two of the largest destinations, accounting for 18 per cent and 15.4 per cent, respectively, of India’s merchandise exports in fiscal 2022. Indeed, exports to these two regions have been on a declining trend since July 2022, barring a slight uptick in November and December, which could be a reflection of festive demand towards the year end.

Global economic activity is projected to slow down in 2023 as the peak impact of synchronised monetary policy tightening across major economies manifests. Advanced economies are expected to bear the brunt as they aggressively pursued monetary tightening in 2022.

S&P Global, in its November 2022 outlook, predicted global growth to slow down to 2.2 per cent this year from an estimate of 3.4 per cent in 2022 with the US economy contracting 0.1 per cent and eurozone remaining flat in the base case.

ALCHEMPro News Desk (DP)