The headlines have been reading staggering jump in textile exports in April 2021, but the devil is in the details; the 3.4 times increase in textile exports in April-21 is primarily because of the low base effect where April-20 last year was a month of extreme Covid restrictions and lockdowns across the globe, which significantly affected the industrial activity across the world including Pakistan and the number of export orders coming in as well. Month-on-month, textile exports in April-21 have been slightly lower by 1.3 percent.

Despite the misleading growth percentage and the month-on-month decline, the textile exports in April-21 are the third highest monthly figure in the last one year at $1.337 billion as per the data by Pakistan Bureau of Statistics (PBS). In April-21, all segments within the textile group posted triple digit growth year-on-year. Where a major part of the growth in April is attributable to the low base effect, the textile exports have been on an upward trajectory due to growth in export of the value-added segment.

As per PBS data, textile export in 10MFY21 were up by over 17 percent year-on-year to $12.7 billion. While the trend of textile export growth coming from the value-added segment continued in April-21 and overall 10MFY21, April also saw a jump in the exports of basic textiles like cotton yarn and cotton cloth. However, in 10FY21, the exports from the two segments remained negative – in line with what’s been going on in the previous months. In the value-added segment, knitwear, bedwear and home textile ruled, recording double digit growth in 10MFY21. Readymade garments - though a key value-added product – continued its relatively slow-paced (12.6% YoY) growth in 10MFY21.

Given how the textile export have been growing in FY21, the SBP expects current account deficit to be below one percent of GDP for FY21. Some say that textile exports of Pakistan are experiencing a surge in the global third wave of Covid; the deadly wave of COVID-19 particularly in India along with decline in textile exports from China are giving Pakistan’s textile exports another boost. At the same time issues at home like cotton shortage have temporarily been addressed as the ECC has allowed the duty-free import of cotton yarn until June 30, 2021. But the downside risks such as any future rise in interest rates, supply constraints due to long term cotton shortage, or currency appreciation loom. Also, the much-awaited textile policy has also not been revealed, while policy consistency such as the continuation of LTFF and TERF schemes and competitive energy tariffs are the key drivers that will determine the growth in textile exports going forward.