Apparel and footwear contribute significantly to inflation in FY ’23: Economic Survey

The Economic Survey for 2022-23 says that apparel and footwear are among the major contributors of headline inflation in FY ’23. The prices of apparel and footwear have risen consistently over the last three years with average annual retail inflation at 9.7 per cent in FY ’23.

As per the survey, average Annual Retail Inflation (based on consumer price index) for clothing and footwear as a category stood at 1.6 per cent in FY ’20 and it touched 3.4 per cent in FY ’21 before more than doubling to 7.2 per cent. In FY ’23, average annual retail inflation in clothing and footwear was 9.7 per cent.

It can be mentioned here that India’s inflation rate peaked in April 2022 at 7.8 per cent before moderating to 5.7 per cent in December 2022 on the back of good monsoons as well as government measures that ensured adequate food supply.

As inflation is still a challenge and impacting demand also, Indian apparel retail industry has suggested that the Government should focus on curbing inflation in the upcoming budget so that the greatest challenge of lesser cash flow in consumers’ pockets can be compensated, which would directly impact retail sales.

Also Read: Textile value chain stakeholders’ expectations from the Union Budget

To be sure—among the key inputs used by apparel manufacturers, domestic prices of cotton almost doubled between April 2020 and May 2022, according to an August report by ratings agency Crisil. Despite some moderation since June 2022, they are expected to remain higher that what it was before the pandemic, the report added.

To benefit the textile industry and lower prices for consumers, the government waived customs duty on cotton imports from 14th April 2022, until 30 September 2022. But industry is demanding to remove this duty permanently.

It can be mentioned here that Crisil Ratings expects large apparel retailers to grow at 25-30 per cent this fiscal, compared to 10-15 per cent by their small and mid-sized counterparts.

The survey also highlights that the production-linked incentive (PLI) scheme will help make domestic manufacturers globally competitive, attract investment in cutting-edge technology and make India an integral part of the global value chain. The scheme will benefit the MSME ecosystem in the country.