The story so far: Union Minister for Textiles Giriraj Singh recently said that the Indian textile and apparel sector is aiming for a total business of $350 billion annually by 2030, which is to generate 3.5 crore jobs. However, the industry went through a tumultuous phase during the last two financial years, casting a shadow on the possibility for 10% CAGR.
What is the status now?
The size of the Indian textile and apparel industry was estimated to be $153 billion in 2021, with almost $110 billion contributed by domestic business. In FY22, India was the third largest textile exporter globally, enjoying a 5.4% share. India is also said to have the second largest manufacturing capacity, with a robust capability across the value chain. The sector’s contribution to GDP is close to 2.3% (FY21) and 10.6% of total manufacturing Gross Value Added (GVA) in FY23. About 105 million people are employed by the textile and garment units, directly and indirectly. For an industry that has 80% of its capacity spread across MSMEs and is sensitive to international developments as it is strongly linked to global markets, FY2021-2022 saw tremendous growth with $43.4 billion exports.
However, slowdown in demand that started in 2022-2023 only worsened in FY24 with a slump in exports and domestic demand. This impacted manufacturing clusters severely. For instance, Tamil Nadu, which has the largest spinning capacity in the country, saw the closure of nearly 500 textile mills in the last two years. In Tiruppur, which is a knitwear production destination, many units saw a 40% drop in business in FY23.
Why did exports slump?
Geopolitical developments and a slump in demand in buying countries hit the exporting units. This was exacerbated by high raw material prices of both, cotton and Man Made Fibres (MMF), and the growing import of fabrics and garments.
The imposition of a 10% import duty on cotton has made Indian cotton more expensive compared to international prices. In the case of MMF, introduction of quality control orders has disturbed raw material availability and price stability. The industry is repeatedly demanding removal of the import duty on cotton at least during the off-season months of April to October. “This is an industry in which the stakeholders compete in the international market with countries that heavily support their domestic production capabilities. So, India needs schemes that run for at least five years and boost investments. Raw material should be available for the domestic industry at internationally competitive prices,” says a spokesperson of a leading industry association.
What are the other challenges?
Apart from policy issues, the industry is also staring at disruptions in its traditional business systems. Direct retailing to customers through e-commerce is a trend that is catching on among garment and home textile manufacturers, with more startups entering this space. A report by Wazir Advisors notes that “(Foreign) brands are fast-tracking the adoption of ESG sustainability across the supply chain.” They are defining their sustainability targets and want to source from vendors who will meet these targets. Further, there is a rise in comfort wear, loungewear, and athleisure as the emphasis on comfortable clothing has increased among consumers. “Even in the domestic market, much has changed in the way business is done. Customers in rural and semi-urban areas prefer to shop in multi-brand outlets or hyper markets. They do not want to step into outlets of less known brands,” said Palanisamy, a basic garment producer in Tiruppur.
What next?
The industry is looking at a $100 billion investment across various segments of the value chain by 2030 to augment production capacities and meet the $350 billion target. Labour constitutes roughly 10% of the production cost in the textile sector. The average daily wage of a trained textile worker is reported to be ₹550 a day. Unskilled workers earn about ₹450 a day. The industry has no option but to look at technology and skilling of its workforce to improve productivity and reduce wastages, say industry sources.
Published – October 09, 2024 08:30 am IST