Can the Indian Textile Industry be the gateway to the global textile economy?
22 April 2023, Mumbai
Even before the epidemic began, there were signs of slow development in the global economy. Covid-19 served as a potent catalyst in this process, which almost caused the economy to collapse.
This global economic crisis has impacted numerous regions, industries, and sectors. One of the sectors that suffered was the Indian textile industry.
India's Textile Industry
In terms of its contribution to increasing the economy, advancing global integration, and bringing Indian craftsmanship and talent to the globe, this industry has significant historical significance. As a developing economy, the textile sector has contributed considerably to national output, employment, and exports in India's recent phase.
The data not only demonstrate the significance of the textile sector but also highlight its enormous potential to spur economic growth: A source of employment for over 35 million people, the textile sector in India contributes roughly 14 percent to industrial production, 4% to the GDP, and 17% to export revenues. It is, after agriculture, the primary source of employment.
Yearly growth
While 2020 started looking like a year with potential growth, it swiftly became a nightmare for the world's economies. Lockdowns and curfews were implemented everywhere as the world came to a stop. Economic activity had to stop the virus's spread and the deaths it would cause. This severely impacted both supply chains and overall consumer demand.
India's domestic textile and apparel market is anticipated to reach US$75 billion in the 2020–2021 fiscal year. The market decreased by 30% from US$ 106 billion in the 2019–20 fiscal year. The reduction in imports has been about 35%, whereas the decline in exports has been about 15%.
The catastrophe has ensured that its impact is felt at every turn.
The Landscape of the Global Economy
The global financial crisis and increased competition from emerging nations like Vietnam, Bangladesh, and others dealt a blow to the Indian textile industry, which was already struggling with problems like outdated technology, a slow pace of upgrades, a lack of infrastructure, a distributed industry structure, etc.
Since 2020, trade restrictions must cause an unanticipated increase in inventories. The danger of new variations remains enormous, immersing significant economies like the US and the UK in a continuing crisis, even as economies open up with the arrival of vaccinations.
The volume of textile exports from India has been significantly impacted. Domestic consumer demand also precipitated due to the widespread shutdown of markets, retail centers, and everyday activities.
The manufacturing and industrial setup
Numerous companies and manufacturing facilities were shut down due to government regulations since they did not qualify as vital services. Due to supply chain interruptions at many levels, the textile industry hasn't been able to recover despite the start of nationwide unlocking.
Obtaining raw materials from other countries, such as China, has been challenging due to trade restrictions, manufacturing activity, and social distance conventions. This industry's myriad challenges range from sourcing raw materials from foreign countries to maintaining plants without domestic and international demand.
Unleashing India's Textile Industry Potential for Global Growth
It is apparent how the sector has suffered on several fronts. This effect has substantially influenced a wide range of livelihoods intimately connected to the Indian textile sector, not just on statistics and a decline in revenue.
Although the administration has proposed social packages and programs, they should be expanded. One way to lessen hardships' impact is to offer tax breaks, reduce customs regulations, and waive exporter duties.
Amid this catastrophe, a chance has also emerged that needs to be seized with both hands.
Balancing Ambition and Realism
Blockers vs Impediments; Make no mistake the Indian textile industry currently faces several challenges such as cost inflation/heightened raw material costs, fierce competition, and changing consumer preferences and choices.
India should concentrate on reclaiming the markets that the Chinese are abandoning. Trends indicate that this is not the case. Even with free-trade agreements like Japan's, our garment exports have not increased significantly.
However, there is a case built by naysayers that, challenges such as outdated machinery, lack of innovation, and complex regulations must be overcome for India to fully realize its potential and all this can disrupt and spoil the Indian party.
Brightspot: The semblance is that the Indian Textile sector is in a sweat spot currently. The objective is for textile exports to reach $100 billion over the next five to six years.
In 2021–2022, the nation's textile industry shipped out over USD 42 billion. This commendable performance is a testament to the resilience of the Indian textile industry, which has been able to tide over the difficult & challenging COVID-19 pandemic times and the subsequent disruptions caused by the outbreak of the Russia & Ukraine war in global supply chains (GSCs). India's textile industry should aim for $65 billion in exports over the next five years.
Indian textile industry hoping for an "aspirational" goal to export $100 billion worth of goods in the coming five to six years, bringing the total value of the sector's home and foreign markets to USD 250 billion.
Gateway to Global Economy?
India can become a manufacturing hub if international businesses focus solely on the domestic market and economic recovery. The government and the populace must actively support and participate in realizing this goal and the Post-Covid country has a real chance to lead the global Market.
Sum & substance; There is a case to be made that, given the Indian textile industry is the second-biggest textile economy globally, accounting for 2% of a tall economy like India's GDP and employing a giant figure of 45 million people.
The country proudly enjoys a plentiful vast pool of raw materials and away from China is the only complete supply chain globally, with easy availability of skilled labor, and supposed to be globally competitive prices, India is the country with the right potential to become the gateway to the global textile economy today and should be well positioned exploiting this favorable global position post-Covid world.
Someone's Loss Is Someone's Gain; Moreover, the clamor for CHINA Plus One/ Credible alternative to China is getting louder. Industry players also indicate that following the China Plus One strategy, there is at least a 20 percent shift of exports from that country to India".
Aside from that, the government needs to assist at this juncture with ease of doing business to assure the seamless running of supply chains for brands and merchants wishing to de-risk operations.
Also, if India controls its cotton supply well enough, we can add more value to raw cotton or yarn exports, allowing us to expand our operations and market share.
The export and import laws should be formulated so that the industry, particularly textiles, has a level playing field.
