India is changing its colour from traditions to fashion and textile and apparel industry is the best observer to witness the same. We are growing and expanding to be precise we are developing beyond boundaries. From a country once considered only as a farmers land. India today has explored and is competing in each and every segment from textiles to electronics, our presence is dominant everywhere.
The scenario for Indian textile is however slightly different. Back in the British era, we were rulers in export of textiles. Composite mills were present in India which handled spinning, weaving, dyeing and finishing; complete manufacturing of fabrics use to take place. These fabrics were then exported for final garmenting to the fashion continent of that time, Europe.
Back then, as only cotton garments were used, most of the mills were based in Mumbai. Mumbai was strategically located close to Gujarat and Maharashtra that produced rich variety of cotton. Mumbai being nearest to the sea was also a preferred destination for European trade. Mumbai was then considered as an export hub for Indian textile.
The scenario however changed in Post British Era, India lost its significant position in global textile trade as a result of strike down by Mills mainly to encash highland prices in Mumbai resulting in complete shutdown of major mills in Mumbai. This massive shut down changed our global position drastically; the period was thus labeled as black period for Indian textile.
After this period, there was rise of internet era; the fashion design from Europe became easily reachable to any part of the world, the garmenting units thus shifted from Europe to Asia where there was abundant labour and low cost for infrastructure. Countries like China, Bangladesh and Vietnam built up garmenting units and began third party manufacturing garments to big brands at lower cost.
India on the other hand started producing and exporting only yarns. A wrong strategy by India according to me, as yarn is at the flag end of the value chain having least amount of conversion but highest amount of capital cost. As the focus got shifted to yarn export we lost our strength in weaving & garmenting. However, we have slowly coped with this rapidly changed pace and have begun value addition beyond yarns.
Today, India has become second largest textile fibre producer in the world. We are also having second largest textile manufacturing capacity globally. The Indian textile and apparel sector constitutes 15 per cent of the country’s export earnings. Although India has once again gained its reputation of being one of the giant contributors of textile trade globally, our export values seem to be fluctuating every year.
The exports have seen a decline during 2013-15, but with recent government initiatives, the exports have shown a steady increase and reached $40.12 billion in 2015-16 as against $37.16 billion in 2014-15.
Top textile segments exported from India are apparels, yarns, woven fabric, knitted fabric and fibre. Indian export of apparels is estimated to reach $28.4 billion by 2020 at CAGR of 5 per cent. Woven fabric trade in terms of value is projected to increase at a CAGR of 1 per cent to reach $4.9 billion. By 2020, yarn export is expected to grow at a CAGR of 4 per cent to reach $7.1 billion.
Home textile is one of the fastest growing category in Indian textile and apparel trade with around 12 per cent share of total trade. Although our yarn exports are growing its high time, we stop exporting yarns and focus on converting them to finished products and then exporting the value-added product with better margins.
Over the years, United States has been the biggest export destination for Indian textiles and apparel. In 2015-16, the export to United States alone accounted for 21 per cent of total textile and apparel exports from India. Other major export destinations are the UK, UAE, Bangladesh, and Germany. Indian exports are relying on US and EU markets. We should explore other neighboring export destinations for increasing our overall export share.
The Developed countries are very much keen on the quality parameters of the products; there is a lot of certification and approvals in line before exporting to the developed countries. So India should at front avoid compromising on the quality parameters.
The recent set back faced by one of top textile manufacturer in India, due to use of mislabeled fibre, is a classic example of how quality and standards must be given upmost priorities. Such allegations and negligence affect the export of goods, from the entire country. India’s as a manufacturing destination for textiles comes to question. For Indian industry to survive and thrive, we need to adopt global standards. There is a great need for third-party auditing and self-regulation.
If we look globally, the top textile and apparel exporting nations are China, India, Italy, and Germany. China is the single largest exporter with 38 per cent share whereas India stood at a distant second place with 5 per cent share in 2015. This share of India is at great threat from the countries like Vietnam and Bangladesh contributing 3.8 per cent and 3.6 per cent.
ConclusionIn order to survive and become top textile exporter, India needs to study the model adopted by country like China. In China they are converting each and every fibre produced into finished garments. Their strategy is simple; they export only the finished garment. Thus China does contract manufacturing job for EU and US brands at much cheaper rates. They are also having economy of scale which further helps them in selling products at lower prices.
We should revisit our strategy and start manufacturing the finished goods and export them This strategy will earn higher profits even for the conventional textiles. Home textiles are performing at its best in India due to such strategies.
From futuristic point of view, if we see, the value addition in consumable textiles is not much, so our strategies should be to focus on our core strength, which is still cotton and adopt techniques to convert cotton into high value added cotton garments that will reap higher profits. In Synthetics, as we are already producing fine quality of man made fibres, polyesters, we must now think of value-added products in this segment.
We must also focus on economy of scale which is completely missing. Larger units will minimise operational cost and decrease overheads and on the same time have positive control. We must invest in state-of-the-art technology. We have already implemented this for spinning but not much in weaving and total finishing.
India’s contribution is negligible in technical textiles, which is the major profit earner as far as functional textiles are considered. We in India have great scope in this segment due to infrastructure support, developing economy and our skilled population that can be ultimately used to manufacture value added technical textile products that have great export demands.
Third and the ultimate game changer strategy will be to create Indian brands just as US & EU brands that are currently catering to markets globally. The Indian brands can dominate globally as India’s overseas population is the largest in the world with 16 million people from India living outside their country in 2015, these people can be our target customers and also seeing recent trend the desi fashion is slowly tapping the western market.
About 100 years back India was the best destination for manufacturing textile fabric to cater to global demands. Today India is distant second after China in the global market, and in coming years, India will encash on its strength of availability of raw materials, huge skilled population, innovative marketing know how and futuristic brand positioning would take a much larger share in the global textile and apparel trade. Fortunately the new Government is all set to create infrastructure suitable for industrial development. The stage is all set to encash on our capabilities and come out with flying colours.
The article is authored by: Avinash Mayekar, MD & CEO, Suvin Advisors Pvt. Ltd