Web Exclusive | August 2014
Vision, strategy and action plan for Indian textile sector
Over the last 10 years, Indias textile and apparel exports have grown at the rate of 11 per cent. After the phasing out of export quotas in 2005 Indias export performance has been below expectations. Vietnam and Bangladesh have shown remarkable success. Vietnam could achieve a peak export growth rate of 30 per cent while Bangladesh could achieve a growth rate of 18 per cent.
There is no reason why India, provided it takes the necessary steps, cannot achieve 20 per cent growth in exports over the next decade. In the domestic market, sustaining an annual growth rate of 12 per cent should not be difficult.
This implies that with a 12 per cent CAGR in domestic sales the industry should reach a production level of $350 billion by 2024-25 from the current level of about $100 billion for the domestic market.
With a 20 per cent CAGR in exports India would be exporting about $300 billion of textile and apparel by 2024-25. India should by then have a market share of 20 per cent of the global textile and apparel trade from the present level of 5 per cent.
During this period India should attempt a structural transformation whereby it exports only finished products. This would imply that growth rates in exports of fibre and yarn start declining and growth rates of apparel, homes furnishing, technical textiles and other finished products should grow very rapidly. This would maximise employment generation and value creation within the country. In the process, investment of about $120 billion would take place and about 35 million additional jobs would get created.
Achieving the ambitious vision of exports of $300 billion and 20 per cent share of global trade by 2024-25 is not going to be easy. It is unlikely with business-as-usual approach. A clear strategy, which can be implemented and would enable success would be an essential prerequisite. Accordingly, the following 10 point strategy is suggested for adoption.
Achieving scale across the value chain
In the Indian textile and apparel sector, the sub sectors of weaving, processing and garmenting are fragmented and lacking in the requisite scale for success in global markets.
Most of the manufacturing units have small capacities and low manufacturing efficiencies which are a disadvantage in the global arena. To bring them at par with global counterparts there is a need to facilitate rapid growth and modernisation of existing firms with potential for success.
In addition, it would be necessary to attract large scale investment to establish world class manufacturing set-ups at each level of the value chain. The advent of large manufacturing set ups which will be able to realise economies of scale will help India in achieving global competency. Large scale capacity additions will enable India to achieve the targets of higher global trade share and generate significant employment opportunities in the sector.
Attract investment into the sector
The sector needs to be made attractive enough for investors. Its needs to get $120 billion investment for achieving the size of $650 billion by 2024-25. This is a formidable challenge. The key to getting investments on this scale is for returns on investments to appear attractive enough. Investments need to be adequately incentivised.
The essential prerequisites for getting investments on the scale required would be ready availability of developed land with adequate infrastructure, skilled manpower and easy connectivity to ports. Creating new mega textile parks would be the way forward.
Lowering the cost of production as well as the cost of logistics would be of paramount importance and should be given<