Impact of european crisis on indian garment exporters economics essay

OnImpact of European Crisis on Indian Garment Exporters inDelhi/NCR during 2012-2013By

Aman Arora


MBA Class of 2013

Under the Supervision of

Ms. Bandana Chadha

Head of DepartmentInternational BusinessIn Partial Fulfilment of the Requirements for the Degree ofMaster of Business Administration – GeneralAt







Title of the Dissertation- ” Impact of European Crisis on Indian Garment Exporters in Delhi/NCR” I declare(a)That the work presented for assessment in this Dissertation is my own, that it has not previously been presented for another assessment and that my debts (for words, data, arguments and ideas) have been appropriately acknowledged(b)That the work conforms to the guidelines for presentation and style set out in the relevant documentation. Date: 12/03/2013Aman AroraA0101911276MBA (class of 2013)CERTIFICATEI Ms. Bandana Chadha hereby certify that Aman Arora student of Masters of Business Administration at Amity Business School, Amity University Uttar Pradesh has completed the Dissertation on ―” Impact of European Crisis on Indian Garment Exporters in Delhi/NCR” under my guidance. Ms. Bandana ChadhaHead of DepartmentDepartment of International BusinessAcknowledgementI am thankful to and owe a deep dept gratitude to all those who have helped me in preparing this report. Words seem to be inadequate to express my sincere thanks to Ms. Bandana Chadha, Head of Department, Department of International Business, Amity Business School for her valuable guidance, constructive criticism, untiring efforts and immense encouragement during the entire course of the study due to which my efforts have been rewarded.


Also, I thank my family & friends for their cooperative spirits & exchange of ideas during the DissertationAman AroraImpact of European Crisis on Indian Garment Exporters inDelhi/NCR during 2012-2013


India’s export of Textiles contributes to 11 percent of the total exports (2010-2012). The textile industry in India is the second largest employer after agriculture. These days as the currently going on European crisis the Indian Exporters are facing a lot of repercussions. Due to the crisis not only the European market but the whole world is affected and due to which the European buyers have reduced the orders which they were earlier giving to the Indian Exporters. Banks have become stringent in the policies for giving packing credit to the exporters. Not only the exporters are facing problems but also the financial institutions and government are facing problem due to the crisis. Not only Europe but also countries like America are in a position of a financial crisis and due to which they are restraining the orders which they used to give to the exporters earlier. Also due to high competition from countries like China, Bangladesh, Sri Lanka, Thailand etc India is facing a lot of problem in giving the prices because buyers have access to all the suppliers of different countries and they place the order to the supplier who quotes the best price as the world has become a global market place the margins for the exporters are decreasing. The exporters today have to give cost to cost pricing and sometimes they have to survive on the duty drawback they get from exporting the products. So many Exporters in India today are quoting the price which is comparatively lower than markets like China and Bangladesh but still getting an order is difficult because buyers prefer to import from countries like Bangladesh because the Importers in the European countries do not have to pay the basic duty of 12 percent levied on garments when the country of Origin is Bangladesh. So Bangladesh gets a 12 percent direct advantage vis-a-vis India. This Project will clearly tell that what is the current situation of the Indian Garment Exporters and how are they affected by the crisis.

Table Of Contents

s. noparticularspage no. 1Introduction1-91. 1 Purpose of the study102Review of Literature11-203Research Methods And procedures213. 1 Purpose of The Study213. 2 Research Design213. 3 Participants213. 4 Data Collection223. 5 Instruments Used224Data Analysis And Findings23-325Conclusion And Recommendation335. 1 Limitations35References36Appendix38Questionnaire38-39Spss Output40-43

List Of Figures

figure no. figure namepage no. 1. 1India’s Textile Export41. 2India’s Textile Export year wise54. 1Which are the Main areas where you export234. 2What are your payment terms244. 3By what percentage have your orders reduced254. 4Do you agree that the buyers have shifted264. 5Do you think banks are becoming rigid274. 6How have the buyers changed284. 7Do you think organizations294. 8Is the current economic turmoil304. 9Has the current economic scenario314. 10If yes, which are the markets being focused on32CHAPTER1: INTRODUCTIONTextiles contribute to 11 percent of the total Indian exports(2010-2011). So according to the data from 307 Billion us dollar (2011-2012) of exports Textiles are exported in a very large quantity that is 34 billion us dollar. India’s textile Industry contributes to second largest industry in Employment generation. India is very famous for its fine quality of textiles and textile articles. Indian exports are considered to be the most famous because India’s hold is in cotton production due to which it is renowned in the world. As compared to the United States, India Produces less cotton but United States of America does not add value to the cotton it produces. So being the largest producer of cotton United States of America is Exporting cotton and after value addition it is importing it back from countries like China, Bangladesh, Sri Lanka and India. China today is the largest exporter as well as importer of cotton. India also has hold on its cheap labour and Economies of Scale due to which it is able to manufacture products which are cheaper than the other countries. Countries like USA and Europe import textile and textile products from countries like India, China, Bangladesh, Thailand, and Sri Lanka etc. The impact of European crisis after 2009 has led to various repercussions. The European crisis will be explained later. The repercussions of the crisis include lesser orders from the impacted nations and due to which the garment industry which was considered to be the most promising and high revenue generating industry in India has been impacted to a great extent. This is because not only of the European crisis but also because of the more competitive nations like China, Bangladesh and Sri Lanka who are also enjoying the Economies of Scale and Cheap Labour for production. Bangladesh being a small and a Third World country enjoys a power more than India and China that is that when Europe imports products from Bangladesh the importer does not have to pay any specific import duty and due to which the Indian Exporters are at a loss. So after the impact of the crisis prevailing in Europe the costs need to be reduced and the Indian exporters become at a loss of 12 percent directly (import duty from India to Europe) whereas Bangladesh enjoys 12 percent more of cost reduction than India. So European buyers tend to buy more from Bangladesh than country like India. China has its hold on manmade filaments and manmade staple fibres. No other country can compete with China in fabrics like rayon, viscose and polyester. So China has a total control of the World demand in these fabrics and textiles. Also India imports the fibres from China. But China lacks its control over Cotton due to which it turns down a step from India in cotton production. This is because China’s Climate cannot match for the production of cotton. China is trying to produce cotton in controlled conditions so that it can compete in the World market but till now the reports have not been confirmed. So China is completing the requirement of Cotton by Importing from India and United States of America. So exporters of China have been able to get that competitive edge in production of Cotton articles. India being a major controller of Cotton in the World markets still has not been able to procure its edge as countries like China and Bangladesh have been able to control even when they are not the producers of Cotton.

Indian Textile Industry

The Indian textile industry is one of the largest in the world with a massive raw material and textiles manufacturing base. Our economy is largely dependent on the textile manufacturing and trade in addition to other major industries. About 27% of the foreign exchange earnings are on account of export of textiles and clothing alone. The textiles and clothing sector contributes about 14% to the industrial production and 3% to the gross domestic product of the country. Around 8% of the total excise revenue collection is contributed by the textile industry. So much so, the textile industry accounts for as large as 21% of the total employment generated in the economy. Around 35 million people are directly employed in the textile manufacturing activities. Indirect employment including the manpower engaged in agricultural based raw-material production like cotton and related trade and handling could be stated to be around another 60 million. Textile is the largest single industry in India (and amongst the biggest in the world), accounting for about 20% of the total industrial production. It provides direct employment to around 20 million people. Textile and clothing exports account for one-third of the total value of exports from the country. There are 1, 227 textile mills with a spinning capacity of about 29 million spindles. While yarn is mostly produced in the mills, fabrics are produced in the powerloom and handloom sectors as well. The Indian textile industry continues to be predominantly based on cotton, with about 65% of raw materials consumed being cotton. The yearly output of cotton cloth was about 12. 8 billion m (about 42 billion ft). The manufacture of jute products (1. 1 million metric tons) ranks next in importance to cotton weaving. Textile is one of India’s oldest industries and has a formidable presence in the national economy inasmuch as it contributes to about 14 per cent of manufacturing value-addition, accounts for around one-third of our gross export earnings and provides gainful employment to millions of people. They include cotton and jute growers, artisans and weavers who are engaged in the organised as well as decentralised and household sectors spread across the entire country.

India’s Textile Industry Structure and Growth

India’s textile industry is one of the economy’s largest. In 2000/01, the textile and garment industries accounted for about 4 percent of GDP, 14 percent of industrial output, 18 percent of industrial employment, and 27 percent of export earnings (Hashim). India’s textile industry is also significant in a global context, ranking second to China in the production of both cotton yarn and fabric and fifth in the production of synthetic fibres and yarns. 7. JPGReady made garments have the largest share in the exports of textiles. 8. JPG

Source: Central Board of Excise and Customs

The European Debt Crisis

The Problem

The global economy have been experiencing slow growth since the U. S. financial crisis in 2008-2009, which has exposed unsustainable fiscal policies of the countries in Europe and around the globe. Greece, which has spent heavily for years and failed to undertake the fiscal reforms, was one of the first in feeling the pinch of the weaker growth & development. When growth slows, tax revenues slowdown too – making high budget deficits unsustainable. The result was that the new Prime Minister ” George Papandreou”, in late 2009’s, was forced to announce about the previous governments failure to reveal the size of the nation’s deficits. In truth Greece’s debts were so large that they actually exceeded the size of the nation’s entire economy, and the country could no longer hide the problem. Investors responded by demanding higher yields on Greece’s bonds, which raised the cost of the country’s debt burden and necessitated series of bailouts by the European Union and European Central Bank (ECB). The markets also began driving up bond yields in the other heavily indebted countries in the region, anticipating problems similar to what occurred in Greece. The reason for rising bond yields is simple: if the investors see that the risk is higher associated with investing in a country’s bonds, they will definitely require a higher return to compensate them for the risk. This begins with a vicious cycle: the demand for higher yields equalizes to higher borrowing costs for the country in crisis, which leads to further fiscal strain, prompting the investors to demand even higher yields, and so on. A general loss of investor’s confidence is typically caused by selling to affect not only the country in question, but also other countries with similarly weak finances – this effect is typically referred to as ” contagion.”

What did the European government do about the crisis?

The European Union has taken action, but it has moved slowly because it requires the consent of all nations in the union. The primary course of action thus far has been a series of bailouts for Europe’s troubled economies. In spring 2010 when the European Union and International Monetary Fund had disbursed 110 billion Euros (the equivalent of $163 billion) to Greece. Greece required a second bailout in mid-2011, this time the worth was about $157 billion. On March 9, 2012, Greece and its creditors had agreed to debt restructuring that set the stage for another round of bailout funds. Ireland and Portugal also received bailouts, in November 2010 and May 2011, respectively. The Euro zone member states also created the European Financial Stability Facility (EFSF) to provide emergency lending to countries in financial difficulty. The European Central Bank also became involved. The European Central Bank announced a plan, in August 2011, to purchase government bonds if necessary in order to keep yields from spiraling to a level that countries such as Italy and Spain cannot afford. In December 2011, the ECB made €489 ($639 billion) credit available to the region’s troubled banks at ultra-low rates, and then a second round was followed in February 2012. The name of this program was the Long Term Refinancing Operation, or LTRO. Numerous financial institutions had debt coming due in 2012, causing them to hold on to their reserves rather than to extend loans. Slower loan growth, in turn, could weigh on economic growth and make the crisis worse. As a result, the European Central Bank sought to boost the balance sheets of the banks to help forestall this potential issue. Although the actions by European policy makers usually helped stabilize the financial markets in the short term, they were widely criticized as merely ‘ kicking the can down the road’, or postponing a true solution to a later date. In addition, a larger issue loomed: while smaller countries such as Greece are small they can be rescued by the Europeans, Italy and Spain are too big to be saved. The perilous state of the countries’ fiscal health was therefore an issue for the markets at various points in 2010, 2011, and 2012. In 2012, the crisis had reached a turning point when European Central Bank President Mario Draghi announced that the ECB would do ” whatever it takes” to keep the Euro zone together. Markets around the world rallied on the news immediately, and yields in the troubled European countries fell sharply during the second half of the year this didn’t solve the problem, it made investors more comfortable in buying bonds of the region’s smaller nations. Lower yields, in turn, have bought time for the high-debt countries to address their broader issues.

The financial Default problem

European banks remain one of the largest holders of region’s government debt, although they reduced their positions throughout the second half of 2011. Banks are required to keep a certain amount of assets on their balance sheets relative to the amount of debt they hold. If a country defaults on its debt, the value of its bonds will plunge. For banks, this could mean a sharp reduction in the amount of assets on their balance sheet – and possible insolvency. Due to the growing interconnectedness of the global financial system, a bank failure doesn’t happen in a vacuum. Instead, there is the possibility that a series of bank failures will spiral into a more destructive ” contagion” or ” domino effect.” The best example of this is the U. S. financial crisis, when a series of collapses by smaller financial institutions ultimately led to the failure of Lehman Brothers and the government bailouts or forced takeovers of many others. Since European governments are already struggling with their finances, there is less space for the government to backstop of this crisis compared to the one that hit the United States.

Affect on Financial Markets

The possibility of a contagion has made the European debt crisis a key point for the world financial markets in the 2010-2012 periods. With the market turmoil of 2008 and 2009 in fairly recent memory, investors’ reaction to any bad news from Europe was swift: sell anything risky, and buy the government bonds of the largest, most financially sound countries. Typically, European bank stocks and the European markets as a whole performed much worse than their global counterparts during the times when the crisis was on centre stage. The bond markets of the affected nations also performed poorly, as rising yields means that the prices are falling. At the same time, yields on U. S. Treasuries fell to historically low levels reflecting to investors’ ” Flight to Safety”

Political Issues

The political implications of the crisis were very large in size. In the affected nations, the push toward austerity or cutting expenses to reduce the gap between revenues and outlays led to public protests in Greece and Spain and in the removal of the party in power in both Italy and Portugal. On the national level, the crisis had led to tensions between the fiscally sound countries, such as Germany, and the countries with higher-debt such as Greece. Germany pushed Greece and other affected countries to reform the budgets as a condition of providing aid, leading to elevated tensions within European Union. After a great deal of debate, Greece ultimately agreed to cut their spending and raise taxes. However, an important obstacle to addressing the crisis was Germany’s unwillingness to agree to a region-wide solution since it would have to foot a disproportionate percentage of the bill. The tension created the possibility that one or more European countries would eventually abandon the euro (the region’s common currency). On one hand, leaving the euro would allow a country to pursue its own independent policy rather than being subject to the common policy for the 17 nations using the currency. But on the other, it would be an event of unprecedented magnitude for the global economy and financial markets. This concern contributed to periodic weakness in the euro relative to other major global currencies during the crisis period.

Purpose Of The Study

Objective(s) of conducting the research areTo explore the factors that are affecting the Indian Garment Export IndustryTo study the impact of European crisisTo study the challenges & issues involved due to competition from the other countries

Chapter 2 : Review of Literature

Anand, Gupta, Dash(2012), The sovereign debt problems in the peripheral economies of the euro zone has started to pose a serious threat to the main economies of the Europe and perhaps to the future of the euro itself. Such a situation is a far cry from the optimism and grand vision that marked its launch. This paper showed an attempt to understand the implications of the ongoing euro zone crisis and the factors that make it somewhat unique as the contradictions of a monetary union without a fiscal union are coming to fore. The paper shows that the crisis is not merely related to sovereign debt and bank financials but also rooted in the real economy with structural problems. The manner in which the crisis is dealt is likely to be of far reaching significance to Europe and to the rest of the world. The stage seems set for a change in the way in which the euro zone will need to manage its monetary, fiscal and financial system. Over the last two years, the euro zone has been going through an agonizing debate over the handling of its own home grown crisis, now the ‗euro zone crisis‘. Starting from Greece, Ireland, Portugal, Spain and more recently Italy, these euro zone economies have witnessed a downgrade of the rating of their sovereign debt, fears of default and a dramatic rise in borrowing costs. These developments threaten other Euro zone economies and even the future of the Euro. Such a situation is a far cry from the optimism and grand vision that marked the launch of the Euro in 1999 and the relatively smooth passage it enjoyed thereafter. While the Euro zone may be forced to do what it takes, it is unlikely that the situation will soon return to business as usual on its own. Yet, this crisis is not a currency crisis in a classic sense. FICCI Report (2011), On the current economic crisis in Greece, Spain, Ireland, Portugal and now in Italy, there has been absolute unanimity in the surveyed companies that the ongoing crisis is the manifestation of larger issues and economic ills plaguing the European economies today. 53% of the companies have said that the ongoing crisis has already resulted in their businesses prospects in the region adversely impacted. The concern point is that over 75% of the surveyed companies have quoted a loss of 10-15% in terms of business generation from the European region. To keep their balance sheets stable, over 30% of the Indian companies surveyed have already begun to look beyond Europe. They have begun to gradually look for greener pastures in African countries, Middle East, South Asia and even in North America. To further compound the situation, over 25% respondents have pointed out that during the current economic turmoil, rather than facilitating foreign investments and businesses, the respective European Governments have made its processes more stringent in obtaining and renewing long-term visas, work permits, family and dependent visas and overall ease of doing business in the region. The bilateral trade figures that stand at over USD 67 billion, makes Europe, India’s largest and most important trading partner globally. The current economic situation, though resulting in number of procedural and regulatory obstacles for Indian companies to expand and or do business in the continent, still provides for needed returns on the investments made and business relationships forged in the years to come. In the initial years of liberalization, Indian companies focused on increasing exports, getting into joint ventures or technology transfer agreements with foreign companies to make their presence felt in the global markets. Sabnavis(2011), The current global economic slowdown has its epicentre in the Euro-region but the contagion is being witnessed in all major economies of the world. Several countries are seeing a slowdown in their economic activities and overall pace of investments. Despite the strong growth delineated by the Indian exports sector in the last few years (CAGR 2005-11 of 20. 2%), India continues to be a domestic economy with the share of exports to its GDP being around 11% on an average for the last 5 years. In the recent past, investors were venturing into the emerging markets that offered attractive returns. This brought about increased flow of funds into the emerging markets and in turn increased economic activities in these countries. However, in the last couple of months with the inability of the emerging economies to tame inflation clubbed with rising uncertainties over the euro-region and the volatility in the exchange rate, investors have been rushing to ‘ safe haven’ assets like the US Treasury, US Dollar or Gold. India’s exports are fairly well diversified across countries. The share of West Asian and North African (WANA) is the most followed by the other Asian countries. While UAE was the most important destination in 2010-11 with a share of 13. 7% followed by US at 10. 2%, East Europe has a share of only 0. 06%. The 27 EU countries have a share of 18. 6% in India’s exports. The share of EU countries in India’s total exports has declined from 20. 2% in FY10 to 18. 6% in FY11 on account of the sovereign debt crisis in major economies of this region. Kumar & Kumar(2012), The current global financial crisis is the worst of its kind in the history of world economy since great depression of 1930s. The present study makes an attempt to identify the immediate impact of the financial crisis on indian economy in terms of selected economic indicators. This study examines the trends in export, import, gdp growth rates etc in the context of indian economy against the background of global financial crisis and subsequent global recession. India is considered to be highly vulnerable to a crisis like this because of its greater integration with the rest of the world. However, indian economy shows the symptoms of rapid recovery from the sudden set back it had to undergo during 2008-09 and future trends also. The impact of financial crisis is already felt in terms of reduced export earning, drastic decline in industrial growth and employment, depreciation of rupee, reduction in foreign exchange reserves, down turn in stock markets and many other indicators. The stock of foreign exchange declined from $330 billion some six months before to 245 billion by the first week of december 2008 and the bse index declined from over 20000 during the early months of 2008 to 9000 during the last week of november 2008. However, the indirect –or secondround– impact of the crisis has affected india quite badly. The liquidity squeeze in the global market following lehman brothers’ collapse had serious implications for india, as it not only led to massive outflows of foreign institutional investment (fii) but also compelled indian banks and companies to shift their credit demand from external sources to the domestic banking sector. Gangadhar & Yoonus(2012), This paper using the daily returns of the indices of US (S & P 500) and the Indian stock market (CNX S & P Nifty) examining the impact of the Global Financial Crisis on the level of financial integration between the US and the Indian stock market from March 2005 to November 2010. The paper examines the existence of co-integration and the dynamic relationship between the two indices during the Pre-Crisis, Crisis, and Post-Crisis and in the last 5 years using Johansen Co-integration analysis and the Vector Autoregression (VAR) Model. The paper finds no co-integration between the two indices in all the four periods. The returns from the Indian Stock market with reference to the previous day’s return of the US stock market shows lot of feedback effect from US to India, whereas the returns from the US stock market shows no significant reaction. Besides this, the removal of capital controls, the financial innovation and technological advancement in communications and trading systems added further support to this presumption. A study on the financial Integration of a well-developed and large stock market such as India is of particular importance for corporate managers as it influences the cost of capital. IMF Report (2012), The weakness that is being seen in major developed economies poses a risk to world economic stability. The abysmal fiscal deficit situation has also now evolved into a source of political contention. According to certain sections the prime reason behind the increasing deficits has been falling government revenues and rising social benefit payments. The rise in the borrowings cost has further compounded this situation. This rising public debt has engendered political and financial stress in a number of European countries and, more broadly, has undermined support for further fiscal stimuli. A much weaker recovery of the world economy is far from a remote possibility, especially as continued high unemployment, financial fragility, enhanced perceptions of sovereign debt distress and inadequate policy responses could further undermine business and consumer confidence in the developed countries. Economic growth may remain moderate over coming quarters owing to weak global outlook in general and contagion of the Euro Zone crisis in particular. Primarily talking about the slowdown that is being seen in the Euro Area, one can see that it is spreading through the channels of trade, finance and business and investor confidence sentiments to other emerging economies as well. Kalra, Edwards & Renardson(2012), The impact of the ongoing economic downturn and the uncertainty surrounding the future of the Euro have been of grave concern to executives across the banking and financial services (BFS) industry. These will range from restoration of trust and limiting financial losses to dealing with increased liquidity pressures, additional capital adequacy requirements, increased business risk, major systems and process changes and lower profitability. The Eurozone that emerges following the current crisis is likely to be structurally different from the Eurozone we know today. The financial debt crisis in Europe exposed numerous loopholes in the European Union’s principles of integration, notably in the enforcement of fiscal discipline. This problem was compounded by the recent downturn in financial markets and the decrease in market willingness to lend to sovereigns and the private sector in the Eurozone. The Eurozone agreement to stabilize the Euro through the implementation of austerity measures initially had a stabilizing effect in early 2012, despite the unpopularity of the measures in a number of countries. However, popular rejection of these fiscal policies in recent weeks has resulted in the failure of governments. Continued implementation of these austerity programs has become politically untenable in certain countries. The likely resolution of the Euro crisis is expected to have a major economic impact on BFS institutions that are exposed to the ailing sovereigns. To understand the global impact of the Eurozone crisis, it is important to consider the level of exposure of the banks of various countries to Eurozone sovereigns. The tremors from a negative outcome of the Euro crisis will be felt by almost every country in the world and could lead to a ” perfect financial storm.” Massa, Keane & Kennan(2012), This paper analyses the vulnerability of developing countries to the euro zone crisis, looking at differences across countries and groups of countries. In addition to this, it simulates the potential effects of trade shocks due to the crisis on lower-income economies, and establishes a set of stylised facts on the actual impacts of the European debt crisis on poor countries. Policy responses at the country and international level are also discussed. From the analysis it emerges that the developing countries likely to be more at risk from the euro zone crisis are those which: direct a significant share of their exports to European crisis-affected countriesexport products with high income elasticitiesare heavily dependent on remittances, foreign direct investment, cross-border bank lending and aid flows from European countrieshave limited policy room to counter the effects of the crisis. Significant differences in the degree of vulnerability to the euro zone crisis exist among countries as well as across developing regions and groups of countries. The European debt crisis is likely to hit poor countries hard through the trade channel. The impact of the crisis on developing countries is already visible in the form of reductions in exports, declining portfolio flows, cancelled or postponed investment plans, and falling remittances and aid flowsIwan(2012), Asia’s rapid economic and social development over the past several decades has been an inspiration for all. The region has significantly boosted its share of global output and forged strong links with the global economy. Its success in economic growth and poverty reduction has been among its greatest achievements. Yet, sustaining its growth momentum while confronting new and existing challenges remains a formidable task. Since the onset of the global financial crisis in 2008, developing Asia has proven its resilience. Nonetheless, some of the fundamental structural weaknesses in developed economies are unlikely to be resolved soon, and the region might be exposed to financial contagion. Developing Asia therefore must adapt to what could be a prolonged slowdown in mature markets. Currently, the focus is on ways to contain risks emanating from trade and financial transmission channels. These include ensuring adequate availability of trade finance, sufficient foreign currency liquidity, managing large and volatile capital flows, and protecting the region’s financial stability. It is imperative to establish strong regional financial safety nets to complement both national and global financial arrangements. These regions represent markets for diversification as well as sources of sustained future growth, given their endowments of natural resources. If regional cooperation and integration initiatives are to succeed, whether within or across regions, their overall goal must be to increase the welfare of people through shared prosperity. The re-emergence of Asia as the world’s growth engine has brought enormous responsibilities as well as opportunities. How Asia responds to the global economic transformation is critical. Asia must pursue growth that is inclusive and sustainable, and above all, growth that enhances the welfare of the people. Asia also must grapple with how to effectively balance environmental considerations against its aspirations for growth. Basu, Freire, Puapan, Sirimaneetham and Tateno(2012), The ongoing euro zone debt crisis creates an undesirable scenario for the global economy as well as for the Asia-Pacific region given that the region has close economic linkages. The paper aims to provide quantitative estimates of the potential impact of the euro zone debt crisis on merchandise exports as well as on economic growth and poverty reduction efforts in the region. The results indicate that a one-percentage-point fall of output growth of the euro zone would result in a total export loss of $166 billion. In addition, the protectionist threats could further increase the loss in exports by $27 billion. On social development, the disorderly euro zone debt crisis scenario would prevent 8. 19 million people to get out of poverty and another 1. 15 million would be pushed back into poverty as per the $1. 25-a-day poverty line. This paper illustrates that macroeconomic policy space appears adequate in most economies that tend to be more heavily affected by the euro zone debt crisis. But strong inflationary pressures and less favourable public debt conditions could prevent some economies from implementing swift and forceful macroeconomic policy responses. The economies of the Asia-Pacific region are still struggling to keep their dynamism in the aftermath of the global economic and financial crisis of 2008-2009, and now they face the downside risk of a disorderly sovereign debt default in Europe, or which would be even worse, the breakup of the euro common currency area.


3. 1. Purpose of The Study

After the prevailing European crisis there has been sever decline in the garment trade from India to the rest of the World. Also, competitive nations because of the policies and India losing control of Cotton to China has left India with lesser orders from countries like the Europe Nations and America. Also after the crisis the Indian Garment Exports have reduced tremendously so this study will elaborate the reasons for lesser exports and what are the challenges to be faced by the Exporters and how well prepared they are for the further repercussions of the ongoing crisis.

3. 2. Research Design

To analyse the markets for the Indian Garment Exporters and to understand the relativity of the Exporters understanding of the crisis. In the current ongoing scenario the Indian Garment exporters have to be specific under the industry of Exports as due to the crisis there is reduction in the orders and due to which they are not able to utilize the total capacity of their plants.

3. 3 Participants

Data was collected from Exporters in Delhi/NCR. A total of 59 samples were collected within a month’s time frame. The Respondents in the Study were the Large and Small Exporters categorized by the Turnover. These exporters were selected randomly and they were asked to fill the questionnaire for the further analysis.

3. 4 Data Collection

Primary Source:-Primary data have been collected through a questionnaire and the research was conducted amongst exporters who are engaged in garment trade. Sample SizeThe data was collected from 59 exporters in Delhi/NCR.

3. 5 Instruments used

For descriptive research design, following instruments were used for collection and analysis of data. Questionnaire based surveyInternetResearch papersBooksJournals


Inference: According to the data collected from the exporters 25. 42% exporters export to Europe23. 73% export to USA, 25. 42% exporters export to other countries like asian countries like Japan. D/P- Documents against paymentD/A – Documents against AcceptanceL/C- Letter of CreditInference: The exporters in this question state that L/C s used more frequently as a payment term. D/A is the second most frequently used payment term. Open Account is used as the third most frequently used payment term. And Documents against payment and advance payment are the least used payment terms. Inference: 28 % of the exporters state that their orders have reduced by 20-40%, 25% of the exporters state that their orders have reduced by 40-60 %, 20 % exporters state that their orders have reduced by 10-20 % and 60-80% respectively and only 5% exporters state that their orders have reduced by 80-100%. Inference: 34% exporters agree that the buyers have shifted to more competitive nations, 27 % exporters disagree that the buyers have shifted to competitive nations, 18% exporters are neutral and 18% strongly agree that the buyers have shifted from the competitive nations and only 2% strongly disagree. Inference: 41% exporters agree that the banks are becoming rigid on giving packing credit for the orders from Europe, 24% exporters are neutral, 19% exporters disagree, 9% Strongly agree and 9% Strongly Disagree with the banks policy. Inference: 35% exporters state that the buyer has reduced the orders, 22% state that the quantity of orders have been reduced, 17% exporters state that there can be other possible reasons, 12% exporters state that buyers have insufficient funds for orders and 13% exporters state that the price have been reduced of the orders. Inference: 34% of the exporters disagree that they are getting any help from AEPC and FICCI, 27% exporters agree that they are getting help20% exporters have a neutral view point about the help12% exporters strongly disagree that they are not getting help7% exporters strongly agreeInference: 46% exporters agree that the turmoil in the PIIGS nations have affected the buyers in European Countries, 24% exporters are neutral on the fact, 17% exporters strongly agree that the buyers have been affected due to the crisis7% exporters disagree and strongly agree respectively that the buyers have been affected due to the crisisInference: 56% exporters agree that the market is shifted due to the economic scenario29% exporters are neutral on this statement15% exporters do not agree that the market is shifted for them

on other than Europe?

on other than Europe?

Inference: 31% exporters state that they are focusing on USA as the market for future24% exporters are focusing on Australia21% exporters are focusing on Middle EastAnd 12%, 9% and 3% are focusing on Japan, South America and ASEAN respectively


Indian garment export has always been giving a large contribution towards Indian Exports and because of this the Government also has been trying to give more opportunities to the exporters of garments by giving them incentives and including the purchase of raw materials for export as Deemed exports but all these incentives are currently not working for the Indian exporters as the market is currently in a state of Recession and especially Europe being the largest trade partner for India is undergoing a turbulent time due to which the Indian Exporters are facing a lot of problems. The inference which has been taken out from the study is that most of the exporters of garments in India are exporting to countries like Europe and America, they are currently facing a lot of problems due to the crisis and they are not able to cope up with their fixed cost as the buyers from the European countries have reduced their orders and they are not giving any orders further as the demand in their country has reduced. Also the Indian exporters feel that they are not getting any help from the government regulated organizations like FICCI and Apparel Export Promotion Council due to which they are not getting any information about the new buyers they can contact for further revenue generation. The Garment Exporters also feel that the banks have become more stringent with their rules and regulations in giving packing credit to the Exporters for the orders of European countries this is because even the banks are not sure that if the payment would be secure or not. This clearly indicates that the crisis has also affected the credibility of the buyers of European countries. This situation is very critical for the Indian Exporters as most of the exporters take packing credit from the banks which is the only source from where they can get finance to complete the order. The exporters also agree that the buyers have shifted to more competitive nations like China, Bangladesh and Sri Lanka this is a major problem where India is lagging behind. The Indian Exporters of Garments are not able to give such competitive prices like the exporters of China and Bangladesh because Chinese labour is even more economical than Labour in India and cost of running the units is higher in India than China, Bangladesh and also Sri Lanka because these countries have achieved Economies of Scale and the Government in Bangladesh and Sri Lanka are trying to promote more and more exports and they are giving the Exporters of their countries more benefits so that their economy grows well due to exports.


The government of India should introduce more incentives for the Indian exporters so that the exporters are able to quote a better price than its competitive nations like China and Bangladesh. The government should increase the duty drawback on Garments by 2 to 3 percent as it would help the exporters to quote a better price. The government should also not overlook the fact that Indian Textile Industry as a whole is the second largest Employer after Agriculture and if this industry is not able to survive it can lead to a lot of unemployment so specific policies have to be undertaken to promote more exports from India so that the buyers of other countries know that they will get the best price from the Indian Exporters. The Indian Garment exporters should focus more on markets like South America, Australia and Middle East Nations as these economies are more stable and promoting exports to these countries can again replenish the exports from India. Also the exporters should try to reduce their margins for a while so that they are able to generate enough revenue to recover their fixed costs in their units.

5. 1 Limitations

The research was conducted in a short span of 4 months which itself acts as constraint. Moreover it also puts pressure for data collection and analysis of the data. The study is based on a sample of 59 exporters of Delhi and NCR. The study reveals the reasons only from the point of view of the exporters and not of the various government institutions. Some errors while collecting the data or feeding the data must have occurred due to which results might not be that accurate. Approximate values are used for the analyzing. Hence the results also reveal the approximate values.