Indian apparel exporters to achieve 9-11% revenue growth in FY25

Indian apparel exporters are expected to see a revenue growth of 9-11% in FY2025, according to a report by ICRA. This growth will mainly be driven by clearing out retail inventories in key markets and a shift in global sourcing towards India.

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Indian apparel exporters are poised for a revenue growth of 9-11% in FY2025, according to a recent report by ICRA. This growth will be primarily driven by the gradual liquidation of retail inventory in key end markets and a shift in global sourcing to India, as part of a de-risking strategy adopted by several international customers. These factors are expected to follow a lackluster performance in FY2024, during which the sector faced challenges such as high retail inventory, weak demand in primary export markets, supply chain disruptions (including the Red Sea crisis), and increased competition from neighboring countries.

Despite these short-term difficulties, the long-term prospects for Indian apparel exports remain optimistic. The ICRA report highlights that the sector will benefit from increasing product acceptance in key markets, evolving consumer trends, and government initiatives like the production-linked incentive (PLI) scheme and export incentives. The potential free trade agreements (FTAs) with the UK and the EU are expected to further bolster growth, opening up new opportunities for Indian exporters.

The report also notes that with a revival in demand, capital expenditure (capex) spending in the industry is expected to increase during FY2025 and FY2026, potentially reaching 5-8% of the turnover. This rise in investment will likely be directed towards expanding capacity and modernizing operations to meet growing demand.

The US and European Union (EU) remain the primary destinations for Indian apparel exports, accounting for over two-thirds of total exports, which stood at $9.3 billion in CY2023. The first half of FY2025 has already shown promising signs of recovery, with apparel exports growing by 9% year-on-year to $7.5 billion. This growth is attributed to the liquidation of inventory and a strategic shift in global sourcing towards India.

However, challenges remain. Geopolitical tensions and macroeconomic slowdowns in certain end markets continue to create uncertainty in demand. Despite anticipated revenue growth, operating margins for the industry are expected to contract by 30-50 basis points in FY2025 due to rising labor and freight costs, as well as other operational expenses.

Srikumar Krishnamurthy, Senior Vice President & Co-Group Head – Corporate Ratings at ICRA, emphasized that while revenue growth is projected, the sector will need to navigate these persistent challenges to maintain profitability and long-term success.