ICRA anticipates that the revenue of the Indian garment sector will rise by 12-14 percent in the fiscal year 2024-25 (FY25) and by 9-11 percent in FY26, driven by higher volumes and realizations, excluding the effects of inorganic acquisitions by some companies. The growth will be supported by the advantages of the China Plus One vendor strategy, along with improvements stemming from inventory liquidation at the importers’ end. However, ICRA noted that due to rising labor costs and inflation affecting other operating expenses, operating margins are expected to decrease by 50-75 basis points.
Following a year-on-year (YoY) decline of 10 percent in Indian apparel exports, which fell to $14.5 billion in FY24, there was an 11.6 percent YoY increase in apparel exports during the first ten months of FY25, aided by inventory liquidation at the retail level and the benefits of the China Plus One approach, according to ICRA. This underscores the trend that ICRA forecasts growth in Indian garment industry revenues, as the market adapts to these changing dynamics.
Exports of apparel from India to the United States saw a YoY increase of 13.8 percent, while exports to the European Union (EU) and the United Kingdom grew by 11 percent YoY in the first nine months of FY25. Furthermore, the depreciation of the Indian rupee against the U.S. dollar led to an additional increase of 160 basis points (bps) in export values when measured in INR during those nine months, as reported by ICRA in a release.
Additionally, inorganic growth and new greenfield ventures by certain players in ICRA’s sample group have resulted in increased capital expenditure (capex) in FY24. Capital spending is projected to remain high in FY25 before moderating in FY26. As the industry continues to evolve, ICRA forecasts growth in Indian garment industry revenues, highlighting the sector’s potential and resilience in the face of challenges.
