Indian exporters see their export order books shrink

Exporters order books begin to shrink
Exporters order books begin to shrink

Indian Market
by 5paisa Research Team Last Updated: 2022-07-07T17:45:31+05:30

It may not be a broad trend in most industries. However, several consumer oriented sectors like textiles and leather are reporting a slowing of export orders as inventories pile up at export destinations. Supply chain bottlenecks and weak demand amidst a recession are some of the reasons for the shrinking of export orders. Exporters are now reporting that the order books have begun shrinking as inventories pile up in key export destinations in the midst of weak demand. Order books are down 20% for leather products and 70% for yarn.

Too much inflation and a fear of inflation is never a good combination. In the last few months, soaring inflation in the US and EU has resulted in tepid offtake for cotton yarn, ready-made garments, leather goods and handicrafts. This has had a rather deep and unsettling impact on the momentum of India's exports. That is evident in the month of June, where the trade deficit has also widened to the highest ever. The rising trade gap is not just about a spike in imports but also about weak growth in exports on a sequential basis.

Normally, the combination of high inflation and recession worries is said to make clients go slow on their budget spends. Also, inflation and interest rates hit household budgets and hit everything from credit card dues to loans to mortgages. The orders have suddenly slowed after spiking in the last 2 years. For example, a leading shoe manufacturer, which is an outsourcing vendor for marquee names like Adidas, Clarks, Marks & Spencer and Bally Shoes; has also reported a visible and perceptible slowdown in export orders.

The hit is most visible in discretionary consumption. We already spoke about leather, footwear and other such products above. In addition, the exports of yarn, fabric, made-ups and handloom products have also shrunk by a rather steep 22.54% in the month of June 2022. Indian cotton prices are normally higher than global prices and in these trying economic times, people are naturally becoming a lot more discerning about their spending patterns. For example, the order book for yarn is down 80% and fabric  is down 40%.

Global retailers are cautious about bulk offtake from countries like India when there are fears of a slowdown in the US and EU, two of the most lucrative and high value markets. Hence, retail houses in the US and the EU have delayed the orders for readymade garments while the yarn exports have come to a standstill. Many of the large retail chains are delaying their purchases leading to April orders getting postponed to October. This is hitting a lot of Indian MSMEs, which actually undertake most of the outsourcing work in these areas.

Industry bodies assure there is not much to worry as the comparison is with the previous year when there was a lot of pent-up demand. However, they also admit that the pressure on order books due to lower demand would eventually translate into lower prices in the future. Already, the major buy orders that are to come in September look to be just about half of what was originally envisaged. There is already a lot of overbuying that has happened in the US and the EU because of clubbing of containers earlier this year.

For now, the exporters are hoping that the demand from Eastern Europe, Latin America and Middle East should pick up. They are also betting that the free trade agreements (FTAs) with the UAE and Australia should translate into larger export orders. However, if you delve into June data, the problems are not just in textiles and leather but also in industrial exports. The Russia Ukraine war has resulted in the export of engineering goods also falling by 1.57% year-on-year in June to $9.14 billion. Clearly the slowdown is pinching; and pinching hard.

Start Investing in 5 mins*

Get Benefits worth 2100* | Rs. 20 Flat Per Order | 0% Brokerage

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.


Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.

Open Free Demat Account

& get benefits worth 2100*

Resend OTP
Please Enter OTP
  • Have Promo code?
  • Use code ACT2100
Enter Promo code
Account belongs to

By proceeding, you agree to the T&C.

Start Investing Now!

Open Free Demat Account in 5 mins

Enter Valid Mobile Number