Textiles, fabrics, and apparel have been central to India’s identity. In ancient Greece and Babylon, the very word “cotton” was regarded as synonymous with the country’s name. The trade of Indian fabrics formed famed global routes.
Yet today, Indian exports in this sector face challenges. World Trade Organization statistics report put India in sixth position in terms of the export of finished clothing. According to the report, India’s clothing exports in 2022 amounted to $18 billion, while in comparison, Bangladesh exported $45 billion worth of clothing. An even more worrying trend is that India’s share in world exports in clothing in 2022 was 3.1%, a rise of only 0.1% from 2000. At the same time, Bangladesh went from 2.6% to 7.9%. Currently, it is one of India’s other neighbour that dominates clothing exports. China, with a total of $182 billion exports in 2022, captures 31.7% of world exports in this sector.
The aforementioned outlook paints a picture where alarm bells are ringing for India in clothing export (it can also be understood as readymade garments). However, India has some important competitive advantages. There is easy availability of raw material for apparel manufacturing. India produced 23.83% of the world’s cotton in 2022-23. And it consumes 22.4% of the world’s cotton. Additionally, India is the second largest producer of silk globally; and 95% of the world’s hand-woven fabrics are manufactured in India. The textiles and apparel industry directly employs 45 million people, and another 100 million in allied industries.
However, are these advantages sufficient for India to increase its level of value addition in the textile sector?
Apparel, which is the last stage of a textile value chain, is also the stage where maximum value addition happens. While India, with a $7,205 million trade balance, is a net exporter in textile products, its readymade garment (RMG) exports have been lowest in 2023-24 in comparison to the years following the pandemic.
Cumulatively, India’s RMG exports for April-March 2023-24 were $14,536.2 million, showing a decline of 10.2% over April-March 2022-23, a decline of 9.3 % over April-March 2021-22, and a growth of 18.3% over April-March 2020-21, shows data compiled by the Apparel Export Promotion Council (AEPC). The figures are based on the Directorate General of Commercial Intelligence and Statistics and provisional data released on the Press Information Bureau by the ministry of commerce and industry on April 15. Further, in AEPC’s view, of the top 15 apparel products that are in high demand globally, only five are Indian exports, as against 11 by Bangladesh, 14 by Vietnam, and nine by Turkey.
The biggest impediment to India’s apparel industry has been its poor economy of scale. The Economic Survey 2024 mentions that 80% of the textile and apparel producers are micro, small and medium enterprises, where the average scale of operations is relatively small. The manufacturing capacity is further marred by the fragmented nature of the apparel sector. While Maharashtra, Gujarat, and Tamil Nadu are important sources of raw materials for the industry, the spinning facilities are predominantly in the southern states. This leads to delays and higher transportation costs, thereby limiting efficient large-scale manufacturing and increasing the cost of production.
The powerloom sector, which produces 60% of the fabric meant for export and 58.4% of the total cloth produced in the country, further contributes to the issue. In Tamil Nadu, for example, demands have risen to exempt the powerloom sector from a recent electricity tariff hike. According to data published on the National Import-Export for Yearly Analysis of Trade portal, Tamil Nadu exported 22.58% of textiles, the highest percentage for an Indian state. Yet, the textile industry is struggling in the state. According to the Tamil Nadu Federation of Powerlooms Association cited in an article in The Hindu last month, the economic burden of this hike can have a severe impact at a time when looms are being sold as scrap on account of lack of orders and weavers not being able to run them due to several other reasons. In addition, the Economic Survey 2024 highlighted technological obsolescence as one significant contributor to the problems in the textile and apparel industry.
Lack of capacity is thus a serious issue. As India aspires to raise its garment exports to $40 billion by 2030, AEPC estimates suggest an additional 1,200 manufacturing units are needed. However, the current growth rate indicates that only around 200 new units are likely to be established by then.
To some extent, geopolitical crises prevalent all over the world are also responsible for India’s falling textile exports. An FE article published last month mentioned that globally, freight charges have risen by 40-50%, contributing to increased cost of production. Furthermore, with importers in Europe and the US still not maintaining inventories, the manufacturers’ order book cycle has reduced to three months, compared to six months previously. Nevertheless, India needs to find stronger and deeper foundations to build its readymade garment manufacturing and export set-up for the future.
Moving India’s global value chain integration toward higher value-generating downstream activities such as readymade garments (or clothing or apparel) and capacity creation is important. Investment in technology upgrade of weaving and processing segments is required. At the same time, improving the brand image of Indian apparel and garments is needed to increase the unit value realisation.
India’s textiles have been unrivalled throughout history. Its diverse weather patterns, geographic regions, and cultures created unique fabrics and crafts like the golden silks of Assam, Banarasi silk of Varanasi, and pashmina of Kashmir. In contemporary times, as India’s garment and textile manufacturing has suffered, it is necessary to look at past errors and appreciate the reasons for the gaps in performance.
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