Strong demand from the US and Europe and a weak rupee have set the stage for India's garment exports to post a recovery. This is good news for an economy struggling with a large current account deficit.Revenue from garment exports is expected to increase 16 per cent to around $15 billion during the year ending in March. Exports between April and August increased more than 12 per cent from a year earlier. 

Garment exports account for a significant portion of India's total export revenue. Higher exports will help India reduce its large current-account deficit, which was equal to 4.9 per cent of the gross domestic product in the three-month period ended June 30. This wide current account gap is putting pressure on the rupee as the supply of dollars earned from exports is less than the demand for dollars for imports.

The weak local currency, however, has made Indian products cheaper for foreign buyers, helping exporters such as garment manufacturers. The rupee’s depreciation would likely give an edge to shipments being contracted now for deliveries in November-December, as bookings are made 60 to 90 days in advance. This could also help India increase its market share. 

The US and Europe together account for about two-thirds of India's exports. However, India’s market share in the European Union has fallen to 47 per cent now from 51 per cent in the last fiscal year because of cheaper supplies from countries like Bangladesh.