Indian textile exports can hit $65 billion if industry majors take the right steps: Report
According to a joint report by global consulting company Kearney and The Confederation of Indian Industry (CII), Indian textile exports might reach US$ 65 billion if industry majors take the required steps and government programmes are properly implemented.
Exports fell by 3% between 2015 and 2019, and by 18.7% in 2020, according to the research, which also noted that other low-cost countries such as Bangladesh and Vietnam gained market share during the same time period.
“We believe with the right actions from the industry majors and robust execution of government schemes, India can hit US$ 65 billion in exports (implying 9-10% CAGR) by 2026. This, coupled with growth in domestic consumption, could propel domestic production to reach US$ 160 billion. Given the labour-intensive nature of this industry, this growth could add 7.5 million direct jobs in textile manufacturing” Kearney Partner Siddharth Jain stated in a statement.
According to the research, a number of variables have contributed to India's recent trade performance. India suffers from factor cost disadvantages (example, power costs 30- 40% more in India than it does in Bangladesh). The absence of free or preferential trade agreements with significant importers such as the European Union, the United Kingdom, and Canada for garments, as well as Bangladesh for fabrics, puts exporters under pricing pressure.
"The high cost of capital and high reliance on imports for almost all textiles machinery makes it difficult to earn the right return on invested capital, especially given India’s slight cost disadvantage. Longer lead times than for Chinese manufacturers make India uncompetitive, especially in the fashion segment. For example, India’s lead time is 15-25% longer than the competition in fabrics. Limited presence in the global trade of man-made fiber products. The trend of nearshoring in western economies has not helped either," the report suggested.
Textile items play an important role in the global value chain, with India ranking sixth in the world in terms of apparel, home, and technological product exports. In the farming and manufacturing sectors, almost 45 million people are employed in the textile business. However, the country's recent performance in global trade has been inadequate in comparison to its capabilities.
Neelesh Hundekari, Partner and APAC Head of Lifestyle Practice at Kearney said, “Covid-19 has triggered the redistribution of global trade shares and a recalibration of sourcing patterns (“China plus one” sourcing), providing a golden opportunity for Indian textiles to stage a turnaround and regain a leadership position as a top exporting economy. We believe India’s textile industry should target 8- 9% CAGR during 2019–2026, driven by domestic demand growth and significant growth in annual exports (reaching US$ 65 billion by 2026).”
Achieving the US$ 65 billion export target—up from US$ 36 billion in 2019—will necessitate a significant increase in India's investment in five major areas: garments, fabrics, home textiles, man-made fibre and yarn, and technological textiles.
To meet these aims, both the government and industry must take important initiatives. And the government appears to be up to the task. "The recent launch of several schemes such as MITRA, PLI, and RoDTEP demonstrates the government's significant attention on this sector. It will be vital for the government to follow through on these announcements with efficient implementation, and it will be even more critical for industry actors to successfully use these schemes," Jain said.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.