Budget 2022: Pocketing even 1% of China’s market share means India gets a $10 billion textile opportunity, industry says
A report by the Confederation of Indian Industry (CII) and global management consultancy Kearney released in October last year said India’s textile industry should target $65 billion in exports over the of the next five years, especially with the “China plus one” sentiments. giving India a favorable position – as global companies consider sourcing and manufacturing destinations outside of the “factory of the world”, China. Affirming these views, KK Lalpuria, Executive Director and CEO of Indo Count Industries, says there is a clear opportunity for India as apparel brands and retailers try to de-risk their supply chain. supply by researching alternative hubs. “China’s cost competitiveness is declining. Their market share is still 30% to 36% and even a 1% change in market share will imply a $10 billion market, as the global textile trade is $1 trillion. So that’s the kind of scale that India is looking at,” he says.
India’s domestic textile and garment production is worth $140 billion, including $40 billion in textile and garment exports, according to the Press Information Bureau. The government has set an export target of $100 billion over the next five years, up from $34 billion (2019-20), according to the Commerce Ministry. Experts have pointed out that India, being a leading textile player, has the opportunity to massively increase its presence in this segment.
The government’s target of $100 billion in textile exports over the next five years can only be achieved if there is the right framework, longer-term policies and better planning by Indian entrepreneurs, says -he. “On top of that, there is a need to hold hands on the ease of doing business so that we can keep supply chains running smoothly for brands and retailers looking to reduce transaction risk. Also, if India manages its cotton supply well enough, we can have more value addition in raw cotton or yarn exports, which can allow us to scale up our operations and increase our market share. “, adds the CEO.
Adding to this chain of thought, Neelesh Hundekari, Partner, Kearney, says India’s strategic depth in textiles is an advantage few can boast of. “The biggest opportunity or the biggest market is in exports. So there is at least a $16 billion growth opportunity in apparel, and China Plus One is the perfect sentiment (to take advantage of). Every company that sources clothing wants an alternative to China. Another opportunity is in fabrics, where we are targeting a jump of $4 billion by positioning India as a regional fabrics hub,” he says.
Other areas of potential he points to are man-made fibers and yarns, in which India can aim for a jump of $2.5 billion to $3 billion; home textiles where a $4 billion increase can be targeted as Indian companies dominate this space; and technical textiles, which can also aim for a $2 billion jump on the back of growing domestic demand.
India’s apparel exports to EU over 5 years grew 2.6%, while Bangladesh and Vietnam soared 9.6%
The textile industry has tried to defend itself against challenges such as soaring cotton prices, acute labor shortages and competition from smaller countries like Vietnam and Bangladesh. Industry experts mention why FTAs will prove extremely important for textiles in the future and how the China Plus One sentiment is the time to capitalize on the opportunity at hand. Watch this panel discussion to learn more.
Indian home textile exports amounted to $4.1 billion in fiscal 2020, accounting for 7% of global home textile trade, according to the CII-Kearney report. The Indian market has witnessed a strong growth trajectory of 9-10% CAGR during the period 2015-2019. Garments, which grew by around 10% CAGR from 2015 to 2019, make up the bulk of Indian consumption. The remaining market is technical textiles (23%) and home textiles (7%), the report adds.
Referring to another major hurdle, Hundekari says high import duties on machinery are having a chilling effect on the industry. “There is a 27% import duty on textile machinery and 18% on the GST. Thus, there is nearly 45% additional increase in capital expenditure when importing machinery. Until some of these tasks can be streamlined or local manufacturing promoted, we need to find a way to reduce capital expenditure,” he adds.
Industry experts also believe that aspects such as digitization, design capabilities as well as sustainability and traceability are becoming important tools of differentiation in the industry. Rajat Wahi, Partner, Deloitte India, says traceability is now a major issue. “People want to know if natural or synthetic fertilizers are used, how is the farm, the quality of the people on the farm, what is its impact on the product, etc. We have to see how we can activate these aspects. On top of that, home textile players have created a big presence here. This should be further intensified by assuring them of quality, sustainability and getting the products on time whenever they buy from India,” he says.
In the EU budget, experts want the Textiles Production Linked Incentives (PLI) program to be broader, focus on reducing working capital pressures, specify ways to implement implements programs and strengthens the scale of the sector. “The scale will help us with our logistics and purchasing, and reduce our manufacturing costs. We need to create manufacturing facilities to be able to compete with countries like Bangladesh and Vietnam and put our product on par with them,” adds Wahi.
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