Future of Textile Industry

Context

The Indian textile sector is under threat due to a less concentrated approach.

Background

The Indian textile industry is now in an era of threats and opportunities. While it enjoys opportunities to gain access to unrestricted markets, it also sees unexpected threats. Since the beginning of 2010, Indian textile industry has been facing one or the other difficulties. Earlier, global economic crisis causing a series of financial difficulties such as closures, less capacity utilizations, layoffs, decline in sales etc. Now, a sharp increase in the textile input prices, and declining exports to US due to competition are putting, the textile industry in a challenging situation. Although, some amount of recovery produced a ray of hope in the minds of textile people.

Indian Textile Industry

The history of textiles in India dates back to nearly 5000 years to the Indus Valley Civilization. The foundations of India’s textile trade with other countries started in the second century BC. India has been trading silk in return of spices.

The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital-intensive sophisticated mills sector on the other end. The decentralised power looms/ hosiery and knitting sector forms the largest component in the textiles sector. The close linkage of textiles industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles makes it unique in comparison to other industries in the country.

India is the world’s second largest producer of textiles and garments and the world’s third largest producer of cotton after China and the USA. The Indian market is also the second largest in terms of consumption of Cotton, after China.

Challenges Faced by the Indian Textile and Apparel Industry

• For long, government policies supported and subsidised only small and medium enterprises. Therefore, to make the most of such benefits, several textile players did not scale up.
• Geopolitical tensions puts pressure on the smooth functioning of every industry, of which textile sector is the most affected, in the short, medium and long term growth.
• India deals in cotton based textiles. High volatility in cotton prices has an adverse impact on complete supply chain.
• Government policies are much favorable to give impetus to the Textile Industry in China and in Vietnam, as compare to India.
• Inflation ridden economy, poses constant demand to raise worker's wages, makes Indian textile become less competitive in global market.
• Unskilled labour force and the reluctance in accepting the modern technology.
• Lack of knowledge of modern apparel demands makes the sector under-developed
• Power in India is relatively costly as compared to other nations like Vietnam, Indonesia, Bangladesh and Turkey.
• Contrary to the global trend of investing in Research & Development and innovation, India’s low-value focus has hindered innovation.
• For long, government policies supported and subsidised only small and medium enterprises. Therefore, to make the most of such benefits, several textile players did not scale up.
• Unlike China, Bangladesh, Vietnam, or Cambodia, India still doesn’t have large factories to make millions of garments.
• Indian industry did not look at segments like high-value fashion, activewear, sportswear, and performance wear with focus largely confined to the low-value casual wear segment.
• India lacks in trade pact memberships, which leads to restricted access to the major markets and make the industry un-competitive sometimes. For instance Bangladesh, which is allowed duty free access in over 50 countries, by signing more free trade agreements.

Vision 2025

The domestic textile and apparel industry is projected to grow at a CAGR of 12%, upto 2025, so as to reach a level of US $350 billion. Encouraged by the turnaround in the textile exports, India is expected to grow at a CAGR of 20% for the next 5 years so as to reach a level of US $300 billion.

Government Intervention

• Historically the Government policies on textiles and garments had forced the industry to restrict itself, with the change in mindset coming in only recently. India’s policies began changing only in the early 2000s, buoyed by the global policy on multi-fibre agreements by the World Trade Organization.
• Indian government has come up with a number of export promotion policies for the textiles sector. It has also allowed 100 per cent FDI in the sector under the automatic route.

Other Initiatives taken by Government of India

• Under Union Budget 2020-21, a National Technical Textiles Mission is proposed for a period from 2020-21 to 2023-24 at an estimated outlay of Rs 1,480 crore (US$ 211.76 million).
• In 2020, New Textiles Policy 2020 is expected to be released by the Ministry of Textiles.
• CCEA approved mandatory packaging of foodgrains and sugar in jute material for the Jute Year 2019-20.
• The Directorate General of Foreign Trade (DGFT) has revised rates for incentives under the Merchandise Exports from India Scheme (MEIS) for two sub-sectors of Textiles Industry, Readymade garments and made-ups, from two per cent to four per cent.
• The Government announced a special package of US$ 31 billion to boost export, create one crore job opportunity and attract investment worth Rs 80,000 crore (US$ 11.93 billion) during 2018-2020.
• The Government of India has taken several measures including Amended Technology Up-gradation Fund Scheme (A-TUFS), estimated to create employment for 35 lakh people and enable investment worth Rs 95,000 crore (US$ 14.17 billion) by 2022.
• Integrated Wool Development Programme (IWDP) was approved by Government of India to provide support to the wool sector, with an aim to enhance quality and increase production during 2017-18 and 2019-20.
• The Cabinet Committee on Economic Affairs (CCEA), Government of India approved a new skill development scheme named 'Scheme for Capacity Building in Textile Sector (SCBTS)' with an outlay of Rs 1,300 crore from 2017-18 to 2019-20.

Conclusion

The size of the market in India stood at $162 billion in FY19, including exports worth $37 billion. It has, however, been stagnant since.
According to the Confederation of Indian Textile Industry (CITI), it has the potential to reach $350 billion, including $125 billion in exports by the FY25.

Programs like Skill India and Make-in-India, along with continuous development and growth in the management consulting firms in India for foreign companies, is working in favor of the developments in the Indian textile industry. The access to skilled manpower and a good market for textile products, the industry would become competitive in the global market. With proper market entry strategy for global giants in the market, the future for the Indian textile industry looks promising, buoyed by both strong domestic consumption as well as export demand.

Connecting the Article

Question for Prelims

With reference to the Indian Textile Industry, consider the following statements:

1. India has allowed 100 FDI in textile sector via automatic route.
2. India is a largest exporter of textile and garments.

Which of the statements given above is/ are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Question for Mains

Discuss the Government initiatives to upsurge the Indian textile sector.