THE CONTEXT: India’s textile and apparel sector aims for $350 billion in annual business by 2030, but recent challenges have cast doubt on this goal. The industry faces a complex landscape of export slumps, raw material issues, and changing consumer trends.
THE CURRENT STATUS:
- Economic Contribution: The textile and apparel industry contributes about 2.3% to India’s GDP and 10.5% to the country’s export earnings. At current prices, it accounts for 10.6% of manufacturing Gross Value Added (GVA).
- Employment: The industry is one of the largest employers in India, providing direct employment to over 45 million people. It accounts for 10% of factory employment in textiles and 7% in apparel.
- Production and Market Size: India is the largest cotton producer The domestic textile market was valued at around $165 billion in 2022. It is projected to grow at a 10-12% CAGR to reach $250-350 billion by 2030.
- Exports: India is the 6th largest exporter of textiles and apparel globally, with a 4-4.6% share in global trade. Textile and apparel exports (including handicrafts) stood at $28.72 billion in FY24 (April-January 2024).
THE ISSUES:
- Raw Material Costs and Availability: Indian cotton is about 10% more expensive than global rates, making the industry less competitive. There’s a call to remove import duty to make cotton more affordable for domestic manufacturers.
- Import Competition: The industry faces challenges from imported fabrics and garments, particularly from China and Bangladesh. Imports of knitted fabrics from Bangladesh increased by 24% to Rs 264 crore in 2022-236, and knitwear garment imports from Bangladesh rose by 57% to Rs 2,489 crore in 2022-23.
- Export Challenges: India’s textiles & apparel (T&A) exports declined by 3% to $34.4 billion in 2023-24 compared to the previous fiscal year. FY24 exports saw a significant drop of 16.3% compared to FY22’s record $41 billion3. The readymade garments segment, accounting for 42% of combined textile exports, recorded a 10% decrease in exports in FY24.
- Capacity Underutilization: The spinning sector faced high underutilization due to reduced yarn imports by China and reduced buying by weavers and knitters.
- Global Economic Factors: Geopolitical tensions and uncertainty in supply chains have affected demand for India’s textiles & apparel in 2023-24. Recent unrest in the Red Sea has led to a 40% increase in freight costs, impacting operational expenses and pricing.
- GST and Duty Structure Issues: There are calls to streamline the tax rates of various textile products and address the GST’s inverted duty structure.
THE WAY FORWARD:
- Revise cotton import duty policy: The government should consider removing or reducing the 10% import duty on cotton, at least during the off-season months of April to October. This would help make Indian cotton more price-competitive globally.
- Streamline Man-Made Fibre (MMF) regulations: Review and simplify the quality control orders for MMF to ensure raw material availability and price stability. Vietnam’s streamlined regulations on MMF imports have contributed to its rising share in global textile exports, growing from 2.9% in 2010 to 6.4% in 2020.
- Implement long-term support schemes: Design schemes with a minimum 5-year horizon to boost investments and provide policy stability. The Production Linked Incentive (PLI) scheme for textiles, with its 5-year timeframe, has already attracted investments worth ₹1,536 crore as of January 2023.
- Invest in technology and automation: Encourage adoption of advanced manufacturing technologies through targeted incentives and easier access to finance. According to a FICCI report, automation can increase productivity in the textile sector by 40-50% and reduce labor costs by 20-30%.
- Skill development and training: Expand and enhance skill development programs to improve workforce productivity and adaptability. The Integrated Skill Development Scheme (ISDS) has trained over 11.14 lakh people in the textile sector, with a 70% placement rate.
- Promote diversification and value addition: Encourage manufacturers to diversify into growing segments like technical textiles and high-value products. The technical textiles market in India is expected to grow at a CAGR of 20% to reach $50 billion by 2024.
- Strengthen e-commerce capabilities: Support textile and apparel companies, especially MSMEs, to develop e-commerce capabilities for both B2B and B2C markets. Flipkart’s Samarth program has onboarded over 750,000 artisans and weavers, helping them reach a broader market.
THE CONCLUSION:
To achieve its ambitious targets, the Indian textile industry must invest in technology, workforce skilling, and sustainable practices. Adapting to evolving market dynamics and addressing policy challenges will be crucial for the sector’s growth and competitiveness.
UPSC PAST YEAR QUESTIONS:
Q.1 Economic growth in the recent past has been led by increased labor productivity. Explain this statement. Suggest a growth pattern that will create more jobs without compromising labor productivity. 2022
Q.2 Account for the failure of the manufacturing sector to achieve the goal of labor-intensive exports rather than capital-intensive exports. Suggest measures for more labor-intensive rather than capital-intensive exports. 2017
MAINS PRACTICE QUESTION:
Q.1 Discuss the current challenges faced by the Indian textile and apparel industry. Suggest measures that could be implemented to overcome these challenges and enhance the sector’s global competitiveness.
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