Consolidation Is In The Air: How Is It Affecting Textiles & Apparel Industry

03 June 2022, Mumbai:

For the Indian textile sector, 2021 might be regarded as a year of recovery. When orders began to flow in the fourth quarter of 2020, sectors with significant exposure to international markets (such as home textiles, yarn, fabric, and so on) were among the first to begin the recovery process. Consumption in the domestic market began to build up towards the end of 2020, albeit with a minor lag.

As export demand started to wane in early 2021, owing to new waves of diseases and lockdown restrictions in many nations, the industry's development was maintained by the local market.

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Although an outbreak of diseases in the second quarter of 2021 resulted in regional lockdown restrictions, manufacturing activities were only disrupted briefly since enterprises were better prepared to handle operations.

As a result, the ensuing months saw a faster recovery in demand. Most value chain sectors have now returned to pre-Covid levels, with home textiles and cotton spinning outperforming other segments like apparel.

According to ICRA's examination of publicly traded firms, turnover for home textile and cotton spinning companies increased by roughly 27% and 21% in the first nine months of 2021, respectively, as compared to the same time in 2019.

Fabric and clothing exporters, on the other hand, saw somewhat reduced turnover in the first nine months of 2021, at roughly 1% and 7%, respectively, compared to the first nine months of 2019.

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Amid the Covid epidemic, escalating US-China trade tensions, and significant global customers' China Plus One sourcing policies, Indian textile producers have an excellent chance to get into the global textile industry, which China presently controls.

These changes can already be spotted in the drop in China's share of US textile and apparel import volumes from 47 percent in 2019 to 42 percent in Jan-Oct 2021.

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In volume terms, India's contribution has climbed to 9.6 percent in Jan-Oct 2021 from 9.1 percent in CY2020 and 8.7 percent in CY2019. Initiatives like the Production Linked Incentive plan and the Mega Integrated Textile Region & Apparel Parks could help India solidify its position in the global textiles market.

According to Wazir Advisors, by 2024-25, the Indian textile industry will have attracted over $120 billion in investment and export $300 billion worth of goods.

New projects and the construction of textile parks will grow the textile equipment sector from Rs 220 billion to Rs 450 billion in the next seven years if they are successful.

Increased expectations resulting from retail consolidation might range from establishing minimum standards for supply-chain employees to prohibiting the use of specific chemicals in the dyeing process.

These store demands have a financial and non-financial impact on the supplier chain. The capacity to cut unit pricing, on the other hand, is the true bargaining strength that bullish retailers have and the one that suppliers fear the most.

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