India losing out on up to $7 billion in apparel exports due to supply chain gaps: Study

Mumbai | Kolkata: India is missing out on an additional $3-7 billion apparel export opportunity as poor coordination across its textile supply chain proves a bigger drag on competitiveness than labour costs, trade barriers or manufacturing capacity, according to a study by Vector Consulting Group.

The report, shared exclusively with ET, estimates India could increase garment exports to $19-23 billion from the current $16 billion by improving planning and execution across the value chain, without having to invest in additional capacity.

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"India's textile industry has the capability to compete globally. The opportunity now lies in transforming fragmented operations into a coordinated production ecosystem," said P Senthilkumar, senior partner at Vector Consulting Group.

Better synchronisation across planning, information, quality and execution could improve productivity and help India capture significantly higher export growth without creating additional manufacturing capacity, he added.

The study found persistent operational bottlenecks across the value chain. Garment factories are operating at only 58-70% sewing efficiency, while on-time deliveries remain between 60% and 80%, well below the reliability expected by global retailers. To avoid missing shipment schedules, exporters airfreight as much as 20% of their orders, raising costs and eroding margins.

A significant setback is that India exports 35-45% of the fabric it produces directly instead of converting it into garments, resulting in lower value addition and export earnings, despite being the second-largest textile producer in the world.

"Every metre of fabric exported instead of being converted into garments represents a loss of value addition, jobs and foreign exchange," said Kapil Sadh, partner at exporter SK Overseas, adding that predictable lead times, collaborative planning and demand-driven production between mills and garment manufacturers could unlock billions of dollars in exports without significant fresh investment.

Other industry executives, however, said supply-chain integration is only one piece of a broader competitiveness challenge.

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TT Ltd managing director Sanjay Jain said India's apparel exports have remained stuck in the $15-17 billion range for nearly a decade because of multiple factors, including weak labour productivity and trade barriers that have favoured competing manufacturing hubs such as Bangladesh and Vietnam.

"Our labour productivity and efficiency are the lowest in the world. There are trade barriers too which have made Bangladesh, Vietnam and other countries more competitive than us," he said.

While the India-UK free trade agreement, which came into force Wednesday, could add about $1 billion to apparel exports, broader trade pacts with Europe and the proposed bilateral agreement with the US would play a larger role in helping India recover the lost export opportunity, Jain added.