The top 10 markets in the world for textile and apparel constitute for 48 per cent of India’s total textile and apparel exports.
The current global apparel market is worth $1.7 trillion and it constitutes around 2 per cent of the world’s GDP. The European Union, USA and China are the world’s largest apparel markets with a combined share of approximately 54 per cent.
The top 8 apparel consuming nations form a dominating share of 70 per cent of the global apparel market size. The global apparel market size is expected to reach $2.6 trillion in 2025 growing by a projected rate of 4 per cent. The major growth drivers of the global apparel market will be the developing economies, mainly China and India, both growing in double digits. China will become the biggest apparel market adding more than $378 billion in market size by 2025 while India will be the second most attractive apparel market adding around $121 billion by 2025.
A large and growing domestic demand coupled with increasing spending power of people in these two countries will result in the combined addition of around $500 billion in the global apparel market size by 2025.
The combined apparel market size of China and India, i.e., $795 billion is expected to exceed combined market size of EU and USA, i.e., $775 billion, by 2025.
The global textile and apparel trade stood at $820 billion in 2014 growing at a CAGR of 5.6 per cent over the last decade. Apparel categories had a larger share of 56 per cent while textiles categories had the remaining share of 44 per cent in the overall trade.
The global textile and apparel trade is expected to reach at a level of $1,600 billion in 2025 growing by a CAGR of 6.3 per cent over the next decade.
Major markets and supplier
EU and USA are the largest markets for textile and apparel with a share of 36 per cent and 14 per cent respectively. On the supply side, China is the largest supplier of textile and apparel in the world with a dominating share of 40 per cent. It is distantly followed by countries like India, Italy, and Germany, etc. each with an approximate share of 5 per cent in the global textile and apparel exports.
Textile industry has witnessed a major shift in the last three decades in terms of its production bases. Till the 1980s, production of textile and apparel was centered in USA and EU but over the period of time production of these commodities shifted majorly to Asian countries.
This shift was a result of an attractive low cost manufacturing advantages in these developing Asian countries. As the production of textile commodities was becoming unprofitable for the manufacturers in USA and Europe due to rising costs of manufacturing, they sought for alternative destinations for the manufacturing of textile products. Asian countries with availability of abundant and cheap manpower, vast natural resources and favourable economic policies were the most attractive destination for manufacturing of textile products.
China has taken the maximum gain from this shift. After the liberalisation of China’s Industrial Policy in 1980’s, China experienced a massive boost in industrialisation and as a result China became a hub of manufacturing. Over this period, China emerged as the biggest manufacturing base for textiles in the world and has remained the largest exporter of textiles and apparel in the world maintaining a dominant market share of around 40 per cent since 2000s. Other Asian economies such as India, Bangladesh, Indonesia, Pakistan, Vietnam, Cambodia and Thailand also experienced an upsurge in their textile and apparel manufacturing during this period.
Now, USA and Europe have become the largest consumption bases in the world while manufacturing is concentrated in Asian countries such as China and India (large consumption bases as well), Bangladesh, Vietnam, Sri Lanka, Pakistan, etc.
Role of FTAs
FTAs have played a significant role in shaping the global textile and apparel industry. Due to the price sensitive and labour-intensive nature of the textile industry, manufacturing nations adopt a protected regime by imposing high import duties to safeguard the interest of domestic manufacturers. FTAs provide a gateway to these manufacturing nations for the development and investment in the sector. Key apparel markets – EU and US have multiple market access arrangements with several key manufacturing nations. They have entered into trade arrangements with certain countries thereby lowering or eliminating tariff rates on the imports of those countries.
Several smaller nations such as Bangladesh, Turkey, Sri Lanka, Pakistan, etc. have leveraged their preferential duty access to these large markets by increasing their textile and apparel exports manifolds. Bangladesh is one such nation which has successfully leveraged its trade access agreement with EU signed in 2001. After this agreement came into force, Bangladesh’s apparel exports to EU grew from $2.4 billion in 2000 to $17.9 billion in 2015, registering a CAGR of 14 per cent. Bangladesh is now the second largest apparel exporter to EU after China with a share of 9.2 per cent in total.
However, there are certain exceptions to the above trend. China, the largest exporter of textile and apparel in the world doesn’t enjoy any preferential trade access to the large markets of US, EU or Japan.
Also there are nations which have not been able to leverage their duty advantages successfully for e.g. Sub-Saharan African (SSA) nations have preferential market access to US under African Growth Opportunity Act (AGOA). But their share of textile and apparel exports to US market is insignificant.
Upcoming trade agreements
In recent times, plurilateral negotiations have been launched on establishing three mega FTA’s, i.e., Transatlantic Trade and Investment Partnership (TTIP); Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP). The US and the EU have begun negotiations on the TTIP; TPP involving US and 11 other countries has been recently signed and India, China, ASEAN nations and four others have initiated negotiations to establish RCEP. These three mega FTAs have the potential to change the global trade and investment flow owing to their cumulative economy size as well as population.
It is important to note that there are several nations which are a part of both TPP and RCEP and hence will gain from both the agreements. Vietnam is one such nation which is poised to gain a lot from these trade agreements especially TPP.
With the signing of this agreement, import duties in the US on 73 per cent of apparel categories will be removed immediately, while for rest of the categories, duties will be reduced or completely removed in the coming years. Vietnam apparel exports to US, i.e., largest importer of apparel are growing at a fast rate and with the advantage that TPP will offer, a significant trade diversion is expected from the USA’s other large suppliers – China, Indonesia, Bangladesh and India to Vietnam.
China’s slowdown and opportunities ahead
China has been the undisputed leader in global trade over the last three decades. In the textiles and apparel segment especially, China has maintained a dominant share of over 40 per cent over the last 20 years. Exports have played a pivotal role in this economic success of China. Between 2001 and 2014, Chinese apparel exports increased more than five-folds from $54 billion to $193 billion, growing at 10 per cent CAGR. China has achieved this status in the world trade by leveraging its large human resource base, low manufacturing costs and large scale infrastructure, which has resulted in large scale investment across the sectors.
However in the recent years, China’s growth in the global textile and apparel trade has slowed down. After the economic crisis of 2009, China’s growth in the trade has slowed down from an average 15 per cent to around 4 per cent in 2014. This trend is expected to continue further in the future also.
The major factors behind this growth slowdown are as follows:
- Growth of domestic demand: The present apparel market of China is worth $237 billion and it is growing at a robust rate of 15 per cent since 2007. A similar trend is observed in China’s per capita expenditure on apparel (PEAP), which has also grown at a rate of 15 per cent to reach a level of $171 during the same period. This clearly indicates that domestic demand of apparel in China is growing and is panned for further high growth over the coming years. It is estimated that China’s domestic apparel market will reach $615 billion and its PEAP will reach $434 by 2025. This ever growing demand in the domestic market will put pressure on exports as the focus of manufacturers will shift towards domestic supply.
- High wage growth: One of the primary reasons of the exponential growth of Chinese industry was the presence of an abundant workforce available at low wage rates. But this scenario has changed over the last decade as China is no longer a low-cost destination as it used to be. Wage rates in China have grown in double digits over the last two years and is expected to grow further. This is the result of a shrinking labour pool due to demographic changes and reduced flow of migrant labour from rural areas. High growth in wages is putting pressure on labour-intensive industries like garmenting, and will likely result in a slower growth of manufacturing.
- Increasing focus towards value-added segments: As the manufacturing costs are increasing in China, production of conventional textile and apparel products for export purpose will become less viable and less profitable. In order to maintain its export competitiveness and to reinforce higher productivity and greater incomes, Chinese enterprises will start concentrating more on innovation-driven industries like aerospace, artificial intelligence, biotechnology, photonics, nanotechnology, robotics, etc., which in turn will result in a slower growth of apparel output.
- Relocation of manufacturing to neighbouring countries: China has established trade agreements with several Southeast and East Asian countries where manufacturing costs are lower than China. Going forward, China is expected to support investment in manufacturing set-ups as well as in overall infrastructure in these countries, to cater to China’s own demand as well as exports to other markets.
The above mentioned trends give an indication that China’s share in the global textile and apparel trade will reduce in the coming years. The apparel exports CAGR of China is expected to reduce to 4 per cent over the next decade compared to last 10 year CAGR of 12 per cent.
As a result, the share of China in global apparel exports will reduce from 41 per cent currently to around 35 per cent by 2025. During this period, global exports of apparel will grow from $457 billion to $850 billion at a CAGR of 5.8 per cent. This reduction in China’s share will lead to the generation of a gap of around $50 billion which will serve as an opportunity for the competing nations to increase their share in the global trade by filling it.
Emerging manufacturing nations like Vietnam, Ethiopia, Kenya, Myanmar, Bangladesh, etc. can benefit most from Chinese growth slowdown. These nations not only have manufacturing competitiveness in terms of low wage rates, low power and land costs, etc. but they also enjoy trade access arrangements with major markets of EU and US giving them an added advantage.
As compared to all the nations mentioned above, India is the largest and more resourceful country, which has the capability to take maximum advantage because of its huge textile base, manpower availability and infrastructure. But India has yet to tap its potential as far as apparel exports are concerned. For India to capture this opportunity, large scale structural changes in policy framework starting from refining of labour laws to exit policies to fast tracking the approval process, among several others bottlenecks need to be made. Also, finalisation of FTA with EU can bring about a huge positive impact for Indian apparel exports.
Also, nowadays, most of the large international buyers are now adopting ‘China Plus One’ sourcing model wherein they are active in at least one other country than China. Bangladesh’s infrastructure cannot support the high growth it witnessed in the last decade; in addition, social and environmental compliance in Bangladesh are already under question. In other competing nations like Vietnam, East Africa, Myanmar, etc. there are issues of labour unrest, political instability, higher wage growth, etc. In comparison, India is a far better and stable sourcing destination for international buyers.
Indian textile & apparel market
The total textile and apparel exports of India stood at $40 billion in 2015. Apparel is the largest exported category in India’s exports with a dominant share of 43 per cent. It is followed by the exports of others category, which includes home textile products, made-ups and handicrafts. Others category contributed a share of 25 per cent in the total textile and apparel exports of India. Fibre/filament category has registered the highest growth in India’s export of textile and apparel with a CAGR of 13 per cent however their exports have fallen down since 2011-12.
EU and USA are the largest markets for Indian textile and apparel exports with shares of 19 per cent and 18 per cent respectively. The other major export markets for India are UAE, China and Bangladesh which have a share of 9 per cent, 8 per cent and 5 per cent respectively.
India has a large textile manufacturing set-up and is among the very few countries with production facilities across each level of the manufacturing value chain, from fibre to finished product (garments, home textiles and technical textiles). The domestic apparel market of India is worth $59 billion (2015) and it has registered a robust CAGR of 10 per cent since 2005 despite global uncertainties and slack demand. Indian domestic market has performed better than the largest consumption regions like US, EU and Japan, where depressed economic conditions led to lower demand growth.
The key drivers of this growth in domestic market of India are the presence of a large and growing consuming class and an increase in spending power of people. Following are the major aspects of the market growth in India:
- Demographic dividend: India has a large population base comprising of more than one and a quarter billion people. Almost half of the Indian population is under 25 years and as this population joins the workforce and gets more money in their hands, their spending power will increase. Apparel category will be the prime beneficiary of this increase in purchasing power.
- Aspirational buying: Over the last two decades, the consumer buying habits have changed significantly in India. They have shifted from a need based purchase to aspiration-based purchase. Nowadays consumers are inclining more towards branded product, especially in fashion segment People in in tier-II, tier-III and tier-IV cities are spending much more on apparel than they did a decade ago which has resulted in an increased focus by brands and retailers in these cities.
- Increasing urbanisation: Since the turn of this century, an increase in the urban population, expansion of cities and a growing influence of urban patterns and services in rural areas is being witnessed in India. The combined effect of these changes is putting more money in the hands of people and is creating new aspirations and demand which will in turn will have a major growth impact on apparel consumption.
- Growth in online retail sales: India is experiencing a digital revolution over the last few years and millions of people are now connected to the internet. This has resulted in an upsurge in online retailing as more and more people are looking for ease of shopping, heavy discounts offered by online portals, and better payment and return policies. Online apparel sales in 2015 stood at $1.5 billion forming a large share, i.e., 30 per cent in the overall online sales in India and it is expected to grow at a CAGR of 41 per cent to reach $45 billion by 2025.
Share in global trade and exports
Global textile and apparel trade grew at a rate of 5.6 per cent over the last decade to reach a value of $820 billion in 2014. During the same period, India’s export of textile and apparel grew at a comparatively higher rate of 9.5 per cent to reach an export value of $42 billion.
India enjoys the position of being the second largest exporter of textile products to the world, however its share in the global exports tell a different story.
As compared to the share of the largest exporter i.e China (40 per cent), India’s share is a mere 5 per cent in the global trade. Countries like Italy, Germany and Bangladesh which are comparatively much smaller than India have similar share of around 4-5 per cent in the global trade. Its indicates that, India has not been able to realise its potential even though it enjoys the presence of a complete value chain and an abundant supply of cheap and skilled labour.
USA is the largest importer of the textile and apparel products in the world with an import value of $115 billion in 2014 and a share of 16 per cent in the global trade. Germany is the second largest importer with a share of 8 per cent followed by Japan with a share of 6 per cent.
All the top importing nations (except Hong Kong) have shown positive growth in their imports over the last decade with Netherlands imports registering the highest growth rates of 12 per cent.
The top 10 markets in the world for textile and apparel constitute for 48 per cent of India’s total textile and apparel exports. USA is the largest market for India making up for 18 per cent of India’s overall textile and apparel exports. However, India’s share in the total imports of USA is only 6 per cent with an export value of $7 billion in 2014. Similarly, it can be seen that amongst the entire top ten markets of textile and apparel in the world, India’s share in their less than even 10 per cent.
In 2014, sweaters were the largest traded category globally with a share of 6 per cent closely followed with the imports of jeans and other category. Top 10 categories make up for around 38 per cent of the world textile and apparel trade. Amongst these top categories, trade of dresses category has registered the highest growth of 18 per cent over the last decade.
The top 10 globally traded categories make up for 40 per cent of India’s exports. India has a significant share of 25 per cent in the global trade of cotton yarn and 11 per cent share in the trade of blouses and carpets each. However, amongst the top 6 traded categories, India’s share is less than even 7 per cent. This signifies that Indian textile and apparel industry has not able to cater to the growing demand of these products. The main reason behind this is the low focus on value added products and innovation.
Manufacturing competitiveness vis-à-vis major manufacturing nations
- Raw material scenario: India is the largest producer of cotton with a share of 26.5 per cent of the world cotton production. China ranks second with a share of 24 per cent. The production of cotton in Bangladesh and Vietnam is minuscule and both rely on imports of cotton to fulfil their demand for textile and apparel sector. China is the largest producer of manmade fibres in the world while India is the second largest producer. Vietnam and Bangladesh, on the other hand, produce nominal quantity of manmade fibres. India is also the largest producer of jute, second largest producer of silk and tenth largest producer of wool.
- Factor costs:
1. Labour scenario: The wage cost in India is higher than Bangladesh, but lower than China and Vietnam. China has the highest labour wages amongst the competing nations, but it has developed sufficient training infrastructure to meet industry requirements. On the other hand, there is limited availability of skilled labour in Bangladesh, India and Vietnam. India is focusing on development of pool of skilled workforce in the textile industry. The Ministry of Textiles, GoI under Integrated Skill Development Scheme (ISDS) is undertaking training of 15 lakh people in between 2012-17.
2. Power scenario: The cost of power in India is high in comparison to Bangladesh and Vietnam. There is erratic and limited power supply in some parts of India and Bangladesh. Vietnam enjoys a lower power cost than India and a consistent supply. China has the highest power cost but its supplies are consistent and reliable.
3. Lending rates: The lending rates in India is very high in comparison to China and Vietnam, while it is comparable to that in Bangladesh. High lending rates affects cost of production and hence its competitiveness.
- Scale and level of integration: China and India are the largest manufacturers and exporter of textile and apparel products in the world. Both the countries feature in complete value chain, i.e., from fibre to finished products Bangladesh and Vietnam have strong garment manufacturing capacity but very limited backward linkages to support the industry.
The cumulative FDI in Indian textile sector from 2000-01 to 2014-15 is approximately $1.5 billion During the initial years, the FDI inflow in textiles was very low. Growth has been seen immediately after MFA phase-out in 2005, depicting the confidence of the foreign investors in the Indian textile industry.
FDI inflows in textile sector peaked in the year 2013-14, reaching $194 million. However, it is important to note that despite of the manufacturing competitiveness of our textile sector, it has failed to attract large scale foreign investment. T&A sector attracted average share of 0.4 per cent in the total FDI inflow in country from 2000-01 to 2014-15.
For international investors, ease of doing business carries significant importance while selecting an investment location. Beyond market opportunities, low cost of manufacturing, availability of skilled manpower and infrastructure availability, the investment climate reflected in ease of doing business is the factor which can make or mar an investment decision by an international investor. World Bank’s annual flagship report series Doing Business measures the relative ease of doing business in various countries across the globe. The latest edition viz. Doing Business 2015 published by World Bank (reflecting data as of 1st June 2014) positions India at a rank of 142 out of 189 countries covered. India’s ranking in various sub-components, which are considered to arrive at the overall rank.
The report mentions that India has made reforms aimed at starting a business, protecting minority investors and getting electricity in the period considered; but a lot remains desirable. When compared with other major textile exporting nations in Asia, India features among the bottom of the ranking.
However, since publishing of Doing Business 2015 report, Indian investment landscape has seen a seachange in policy environment propelled by a stable Government in centre. Some of the recent policy reforms which will improve India’s economy and/or investment attractiveness include taking final steps towards implementation of GST, direct benefit transfer of subsidies, rolling back of fuel subsidies, power sector reform at all levels, public-private partnerships in many areas of infrastructure, and trade and investment building initiatives with major economies led directly by Prime Minister of India. These steps will bear a positive impact not only on doing business ranking next year but in long run as well.
- Higher input costs compared to competing nations: India has one of the highest costs of capital compared to most competing countries which affects the cost of production and thus its competitiveness. The present lending rate in India is 11.0 per cent to 12.5 per cent while that in other competing countries like China, Turkey, Vietnam,, etc. ranges from 5 to 7 per cent. Also, the power cost in India is much higher compared to competing nations.
- Absence of fibre neutrality: Globally, manmade textiles and garments are in high demand. But India, despite being second largest textile exporter in the world, lags in this category because of unavailability of manmade fibres at competitive prices. The textiles value chain in India bears a differential tax treatment while countries like China, Pakistan, Sri Lanka, Indonesia and Thailand follow a fibre neutral policy. There is a need to align our production with the world consumption patterns through the introduction of a fibre neutral tax policy.
- Low technology level: The Textile Industry suffers from the use of low and outdated technologies especially in the powerloom sector, processing,, etc. In general, spending on R&D, product development, etc. by textile companies in India is quite low. As a result, India has had a nominal presence in high value added segments and innovation driven technical textile segment.
- Poor access to credit: Poor access to credit is one of the major hindrance in the growth of the sector. Major institutions providing input-credit are largely centralised and unable to reach the dispersed and largely home-based weavers and artisans. Also, very few institutional sources are there to provide working capital to them. Due to this, artisans/weavers depend on their own sources of fund to cater to their fixed as well as working capital needs.
- Absence of FTAs with major markets: Countries like Bangladesh, Turkey, Cambodia, Pakistan,, etc. have duty free access in the major Textile markets of US and/or EU. Exporters from these countries enjoy duty advantage ranging from 10 per cent to as high as 34 per cent, depending on product. The absence of a FTA in the case of India with EU and US makes Indian exports to these nations significantly more expensive compared to that from various other competing countries.
- Fragmented nature of industry lacking economies of scale: Indian textile sector is largely unorganised and small in size, especially the fabric manufacturing, fabric processing and garment manufacturing segments. These segments suffer from lack of capacities and use old technologies. Capacity expansion or technology upgradation is a big challenge for these small and medium scale units with limited resources because of higher risks perceived by lenders and also because of lack of awareness.
Textile and apparel industry plays a major role in India’s social and economic scenario. Apart from being the largest employer in the country, providing employment to around 105 million people (direct and indirect), and the sector also contributes to around 4 per cent in the county’s GDP and 14 per cent in India’s overall exports. Owing to the importance of this sector, Government of India has taken several measures for the upliftment of the textile industry.
- Improving productivity and efficiency: A major reason behind the lack of productivity and efficiency is that the Indian textile sector is largely unorganised and small in size, especially the fabric manufacturing, fabric processing and garment manufacturing segments. So to increase the productivity and efficiency, India needs to focus on building manufacturing scales and develop integrated manufacturing set up. Also the other factor which significantly effects the productivity and efficiency is the type of labour engaged in the manufacturing. Textile manufacturing being a labor intensive sector, has a deep impact of the quality of labour in deciding the productivity and efficiency. Hence, focus should be on acquiring skilled labour as manpower for the improvement. Machinery being used in Indian textile industry is mostly old and outdated. These machineries are unable to provide the level of productivity and efficiency which is the need of the hour. Hence, up gradation of the existing technology is a must to achieve higher level of productivity.
- Upgradation of technology: The Indian textile industry suffers from the use of low and outdated technologies especially in the power loom sector and processing sector, etc. In general, the conventional perception of Indian textile industry spending on R&D, product development,, etc. is quite low. As a result, India has had a very low presence in high value added segments and innovation driven technical textile segment which are growing in other countries tremendously. As mentioned in the above chapters, the largely unorganised state of our textile industry adds up to the challenge of technology up gradation. These small and medium scale units which have limited resources are reluctant and apprehensive of spending money on upgradation and R&D because of higher risks perceived by lenders and also because of lack of awareness. However, the Indian government has taken some major steps in checking this problem by continuing schemes like TUFS (Technology Upgradation Fund Scheme) which provide capital subsidy on the purchase of textile machinery. Increased focus on R&D is required for our industry to become internationally competitive as the global trends are shifting towards value added products. For achieving this, setups are required for R&D for outcome-based research focusing on machine, instrument and process development as well as on material and product development.In the processing section a big issue was related to the environmental norms as the older technology couldn’t withstand for the terms and condition regarding effluent generation. So a huge requirement is there in section of processing technology for the upgradation of existing technology so that this sector does not face any challenge in meeting the standard quality norms.
- Improving quality of products and services: Quality of the product and the service levels are the foremost things that a buyer seeks while purchasing products from any country. In terms of quality, India is amongst the top quality suppliers of yarn and home textile products as we have a well- established spinning sector with the latest technology. However, in the weaving and processing sector, due to the lack of latest technology and technological knowhow, India is not able to develop high quality products especially in synthetic textiles. Also in the garmenting sector, India needs to develop strong capabilities in several products which are in high demand in the export market for example, outerwear, suits, sweaters, lingerie, etc. In order to achieve the quality levels required by international buyers, Indian textile industry needs to raise the performance of machinery, process and skill training of the manpower. Indian companies also need to focus on providing full package services to buyers and become long term supply chain partners. India is a reliable destination for buyers in terms of service levels. Indian companies (organised and unorganised) have the flexibility to cater to different order sizes (although there is a restriction in catering high bulk orders in garmenting). However India needs to further develop its product and services to tap the huge global export market potential.
- Attracting FDI: Indian textile industry is a less attractive destination for investments due to the tariff barriers it faces in major international markets, high input costs, low margins,, etc. In fact, reverse FDI flows in the sector driving new investments to competing countries like Bangladesh, Vietnam, Ethiopia, etc. is a major challenge. In order to achieve the desired growth in our textile and apparel industry, it is imperative to get large scale investment both foreign and domestic. To make Indian textile and apparel industry an attractive destination for investment, certain policy initiatives need to be taken such as:
a. Early finalisation of FTA with EU to address the tariff disadvantage of the industry vis-à-vis competing countries.
b. Lending rates to be made more competitive for textile sector
c. Establishing a fibre neutral duty structure to align industry with the global demand
d. Incentivising setting up of mega textile clusters to promote scale in the industry.
Earlier, strict labour laws in the textile industry were also a problem for the investors. However, these labour laws have now been relaxed in the recently released Rs. 6,000 cr. garment sector package. This move by the government has been very well received by the industry. Steps like these will further help in attracting the desired investment in the sector.
- Development of artificial clusters: One of the challenges of Indian textile and apparel industry is the lack of scale in its manufacturing. Majority of our manufacturing is sparsely distributed amongst a large number of players which have small production capacity. This poses as an unattractive feature for the investors who look for suppliers which can cater to their bulk demands. To check this problem, establishment of large scale textile/ mega textile parks of more than 1000 acres need to be carried out, where in multiple textile companies across the value chain will be setup in a common area and will function as an integrated unit thus creating scale. In addition to these mega textile parks, theme-based textile parks should also be set-up to encourage new investment in priority sub-segments of garmenting, technical textiles and processing.
- Government policy initiatives: Further to the recommendations provided in the above points, support of the government is required through relevant policy measures that will pave the path for the growth of the textile industry in India. Some of the policy initiatives which the government should address are mentioned below:
a) Focus on establishing free trade agreements with major textile and apparel markets such as EU and USA, to curb the disadvantage against competing nations such as Vietnam and Bangladesh
b) Implementing fibre neutrality regime and incentivising indigenous production of high specialty fibres/yarns and work towards a favourable duty structure to ensure availability of high specialty fibres/yarn at competitive price
c) Support in building up R&D centres in partnership with industry focused on developing high end products
d) Launching new schemes for the upliftment of traditional sectors such as jute, silk, handloom, etc.
e) Providing easy credit availability to small and medium scale enterprises for technology upgradation
f) Increasing focus on technical textiles by developing specific initiatives for different segments of technical textiles including promotion of ventures, addressing the challenge of lack of awareness,, etc.
g) Promoting use of identified technical textile products among institutional users, especially in the area concerning public health, human safety and environment protection.
h) Formulation of special schemes for incentivising production of value added garments
i) Increasing focus on promoting of handlooms and handicrafts by through branding and marketing.
j) Focus on developing methods for achieving the standard norms in the processing industry through R&D.
Excerpts from the Knowledge Paper on ‘Global Shifts in Textile Industry & India’s Position’ presented by Wazir Advisors at the FICCI TAG meet in Mumbai.
Government schemes for textile sector
- 15 per cent capital subsidy on eligible machinery in garmenting and technical textile sector with a cap of Rs 30 crore per individual entity
- 10 per cent capital subsidy on eligible machinery in weaving for brand new shuttle less looms (including weaving preparatory and knitting), processing, jute, silk and handloom sector with a cap of Rs 20 crore per individual entity
- 15 per cent capital subsidy on eligible machinery for composite units with a cap of Rs 30 crore per individual entity (*if the eligible capital investment in respect of garmenting and technical textiles is more than 50 per cent of the project cost)
- 10 per cent capital subsidy on eligible machinery for composite units with a cap of Rs 20 crore per individual entity (*if the eligible capital investment in respect of garmenting and technical textiles is less than 50 per cent of the project cost)
Scheme for Integrated Textile Parks (SITP)
- Grant/equity up to 40 per cent of the textile park development project cost subject to a ceiling of Rs 40 crore.
- GOI support under the scheme will be generally in the form of grant to the SPV unless specifically decided by the PAC to be equity. However, the combined equity stake of GOI/State Government/State Industrial Development Corporation, if any, would not exceed 49 per cent.
- Grant at 90 per cent of the project cost subject to a ceiling of Rs 40 crore for first two projects in the states of Northeast region.
Integrated Skill Development Scheme (ISDS)
- Assistance up to 75 per cent of the cost of the project, within an overall ceiling of Rs 10,000 per trainee. Technology Mission on Technical Textiles (TMTT)
- Upgrade existing Centre of Excellences and set up of four new COEs
- Support for business start-up
- Providing fund support for organising workshops
- Support for standardisation
- Market development support for sale to the institutional buyers
- Market development support for export sales
- Grant for conducting contract R&D in identified institutes
Swarnjayanti Gram Swarozgar Yojana (SGSY)
- Provide assistance to people by providing them income generating skills through a mix of bank credit and Government subsidy.
- Subsidy at a uniform rate of 30 per cent of the project cost, subject up to Rs 7,500 per individual.
Integrated Processing Development Scheme (IPDS)
- Grant up to 50 per cent of the project cost (excluding land cost) with a ceiling of Rs 75 crore for projects with Zero Liquid Discharge Systems and Rs 10 crore for projects with conventional treatment systems. Support for marine discharge projects would be analysed on a case to case basis with a maximum ceiling of Rs 75 crore.
- The project cost shall be borne by the Centre, State, Beneficiary, Bank loan in the ratio of 50:25:15:10 respectively.
Merchandise Exports from India Scheme (MEIS)
Rewards for export of products shall be payable as percentage of realised FOB value:
- For handloom, jute and coir based products – reward rate is 5 per cent for all countries
- For all other eligible textile and apparel categories – reward rate is 2 per cent for EU (28), USA, Canada and Japan.
Drawback rates for key textile and apparel categories:
- Cotton yarn: 2.8 per cent to 4.7 per cent
- Cotton fabric: 4.3 per cent to 7.1 per cent
- Apparel: 7.5 per cent to 9.8 per cent
Market Development Assistance (MDA)
- Financial support to exporters for conducting export promotion activities abroad
Market Access Initiative (MAI)
- Financial assistance for carrying out marketing projects abroad, including:
1. Opening of showrooms
2. National level participation in trade fairs
3. Displays in international departmental stores
4. Publication of world class catalogs to create brand identity for Indian products
5. Publicity campaign and brand promotion
6. Research and product development
- Assistance for building capacity for exporters, export promotion organisations etc:
1. For imparting training to Indian exporters
2. For upgradation of laboratories, research institutes, universities and other national institutions for creating testing facilities
- Assistance on reimbursement basis to individual exporters for charges paid by them for fulfilling the statutory requirements in the buyer country.
- Assistance for conducting studies:
1. Survey for promoting exports of the identified product groups from the state
2. Project/study which the Empowered Committee in its deliberation feels would further the objectives of the scheme
3. Studies on WTO-related matters and JSG/FTA studies