The export demand will partly benefit from the low base effect and is likely to be supported by the increasing the focus of large buyers on diversifying their sourcing base beyond China.
But the risk of a fresh wave and surge in infections remains, said ICRA.
Following a contraction in the calendar year 2020, global apparel trade is expected to revert to pre-Covid levels in CY2021 and grow at a muted pace of one to two per cent per annum in the near to medium term in line with the past five years.
Growth in the near term is likely to be driven by volumes as realisations may decline amid softer raw material prices, downtrading, and shift in preference towards lower-value apparel.
On the other hand, said ICRA, domestic apparel demand is estimated to have reverted to pre-Covid levels in recent months supported by pent-up demand and festive buying.
Even as sustained recovery in offline retail to normal levels may take longer, domestic apparel players are expected to report a healthy recovery in FY2022.
Growth in some segments like formal wear and party wear is likely to remain lower as compared to other essential product categories.
With improved demand from the downstream segments, fabric production is also likely to revert to growth in FY2022.
Within fabrics, cotton knitted fabrics and blended knitted fabrics are likely to perform better, given the shift being witnessed in consumer usage and preferences in favour of casual, active, and loungewear.