India has great textile tradition dating back to centuries with stories of the famous ‘Dacca muslin’ getting around the world in older times. India’s textile sector is one of the oldest also dating back to centuries. Today also the textile sector is one of the largest contributors to India’s exports. After the agriculture sector it is the second largest employer giving employment to nearly 45 million people. It contributes to nearly 14 per cent of the industrial production and 4 per cent share of the GDP of the country. These figures are enough to highlight the importance of this sector to the nation.
In spite of such an important position of the sector, the industry is struggling for more than a decade to remain on a growth curve. Textiles have a major share (60 per cent) in India’s textile and apparel export basket while apparel exports share has is only 40 per cent. Unless apparels become the growth engine for the industry like in case of China, it would be difficult task for the country to take a quantum jump in global textile trade. Moreover cotton is a still dominating fibre with nearly 55 per cent share in textile production whereas globally manmade fibres constitute nearly 65 per cent of the textile goods production. For India to take benefit of the opportunities and increase the share in the global textile trade from 5 per cent to a higher figure, an incremental shift to manmade fibres is a must.
Indian textile industry has a distinct competitive advantage in terms of availability of all types of raw materials, skilled man power and sustained domestic demand. Increased penetration of organised retail and rising income levels are big positives for the apparel sector. The government schemes like SITP and TUFs have gone a long way in attracting investments in creating new capacities and technology upgradation. The seventh pay commission and one rank one pension (OROP) for the armed forces is also likely to help in increasing the textile consumption in the country. The technical textiles investments are also on rise due to awareness and Government support in infrastructure development.
Weaknesses affecting Indian textile industry
Traditionally the spinning sector being organised has been fairly modernised and India enjoys over 25 per cent share of the yarn exports. However some key sectors like weaving and processing have remained weaker for long time till such time Government encouraged investments by giving special incentives. The garment sector too has for long remained reserved for small scale thus seriously affecting the competitiveness of the apparel segment. Moreover there are textile centers spread across the country specialized in a single process resulting in the goods travelling long distance for value addition thus resulting in loss in efficiency and increasing the logistic cost. Need of the day is to have large integrated units or integrated textile parks which can make production more efficient.
Indian suppliers are unable to give volumes (unlike China) to the big buyers which limits our export capabilities greatly. Countries like Bangladesh and Vietnam have over the last few years marched ahead of India with efficient garment production. Another issue faced by the industry is the fluctuating cotton prices which keep margin pressure on the industry all the time. Due to limited capacities of the Indian textile machinery sector, majority of the machinery is imported from Europe and Japan, especially the high speed weaving machines, processing machinery as well as garment machinery, thereby increasing the initial investment cost considerably. Although India scores high on cost competitiveness in terms of labour cost, it loses out in initial investment cost and working capital cost (due to high interest rates) as well as power cost.
Government in supportive mode
The present Government is supportive in formulating policies in support of the industry such as 100 per cent FDI (automatic route), allocation of nearly Rs 2,600 crore in the budget for integrated textile parks and Rs 6,000 crore package for the growth of apparel sector. ‘Make in India’ campaign also has made a positive impact on the sector. Measures are also taken by the government in expediting the cargo clearance under import and export. Government is also encouraging skill development through various initiatives under which 75 apparel training centers have already been established.
Following are the likely growth drivers for the Indian textile industry in a decade to come:
- Growing domestic demand with rising incomes
- Increasing urbanisation and fashion awareness
- Low value textile production segment to be vacated by China will be an opportunity for India
- Increasing labour costs in some competing countries like China will make India more attractive buying destination
- Indian players moving up the value chain from being mere converters to value partners to the global retail chains
- Growing technical textile sector due to increasing applications
- Proposed FDI in multi brand retail
- Implementation of GST to offer level playing field for the organised sector
Following will be the key challenges which industry will continue to face:
- Lack of state-of-the-art capacities in weaving and processing becoming hurdle in consistently producing high quality products
- Lack of innovation and product development likely to hamper moving up the value chain
- Non-alignment of different segments of the industry can result in inefficient textile production chain
- Environmental and sustainability issues can become roadblocks for producers
- FTAs to shape global trade and India being slow might lose global opportunities
- TPP (Trans Pacific Pact) amongst 12 countries having 60 per cent of the global textile trade likely to affect India
In conclusion, I may say that for the year 2020, India has galore of opportunities to grab which will be thrown open due to changing dynamics of the global trade. Moreover China’s moving to high value goods and vacating space in low value segment will be a golden opportunity for India. Even 1 per cent increase in our global share from the present 5 per cent can throw open huge opportunities for the Indian textile producers. The need of the hour is to work together as one team by all the stakeholders including different segments of the industry, entrepreneurs, raw material suppliers, the labour force as well as policy makers. The future of Indian textile industry is certainly bright and the “achhe din” of our industry are looking approaching us faster than expected.