Pocketing even 1% market share from China means India gets a $10-billion opportunity in textiles, says industry

The textiles industry has been struggling to stay afloat in the midst of a raging pandemic that caused acute labour shortages and a surge in cotton prices. If these weren't enough, smaller nations such as Vietnam and Bangladesh are now overtaking India in this segment. Though there has been a 41% increase in textile exports from April-December 2021 against last year, a lot remains to be done to help the sector be more competitive and on a par with global challengers.

A report by the Confederation of Indian Industry (CII) and global management consulting firm Kearney released in October last year had stated that India’s textile industry should aim for $65 billion in exports in the next five years, especially with the “China Plus One” sentiments lending India a favourable position — as global companies look at sourcing and manufacturing destinations outside the “factory of the world”, China. Affirming such views, KK Lalpuria, Executive Director & CEO, Indo Count Industries, says a clear opportunity exists for India as textile brands and retailers are trying to de-risk their supply chain by looking at alternative hubs. “China’s cost competitiveness is waning. Their market share is still 30%-36% and even a 1% market share shift will imply a $10-billion market, because the global textiles trade is $1 trillion. So that is the kind of scale that India is looking at,” he says.

India’s domestic textile and apparel production is worth $140 billion, including $40 billion of textiles and apparel export, according to the Press Information Bureau. The government has set an export target of $100 billion over the next five years, 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 scale up its presence in this segment.


Target path
The government’s target of $100 billion in textile exports over the next five years can be achieved only if there is a proper framework, longer term policies and better planning by Indian entrepreneurs, he says. “Besides this, hand-holding on ease of doing business is needed so that we can ensure smooth functioning of the supply chains to the brands and retailers looking to de-risk operations. Also, if India manages its cotton supply well enough, we can have more value addition in raw cotton or yarn exports, which can enable us to scale up operations and grow our market share,” the CEO adds.

Adding to this chain of thought, Neelesh Hundekari, Partner, Kearney, says India’s strategic depth in textiles is an advantage that few can boast of. “The biggest opportunity or market is in exports. So at least a $16-billion growth opportunity exists in apparel, and China Plus One is the perfect sentiment (to take advantage of). Every company that sources apparel wants an alternative to China. Another opportunity is in fabrics, where we target a $4-billion jump by positioning India as a regional fabric hub,” he says.

Other areas of potential he points to are man-made fibres and yarn, in which India can aim for a $2.5 billion-$3 billion jump; home textiles where a $4-billion increase can be targeted as Indian companies dominate this space; and technical textiles, which can aim for a $2-billion jump on the back of domestic demand growth as well.


India’s home textile exports stood at $4.1 billion in FY20, accounting for 7% of the global home textiles trade, according to the CII-Kearney report. India’s market has seen a strong growth trajectory of 9-10% CAGR during 2015–2019. Apparel, which grew at about 10% CAGR from 2015 to 2019, forms the bulk of India’s consumption. The remaining market is technical textiles (23%) and home textiles (7%), the report added.

Capex pain
Referring to another major impediment, Hundekari says high import duties on machinery act as a deterrent for the industry. “There is a 27% import duty on textile machinery and 18% on GST. So, there is almost 45% additional increase in capex when importing machinery. Till some of these duties can be rationalised or indigenous manufacturing promoted, we have to find a way to keep capex down,” he adds.

Industry experts also reckon that aspects such as digitisation, design capabilities as well as sustainability and traceability are becoming significant tools for differentiation in the sector. Rajat Wahi, Partner, Deloitte India, says traceability is a big play now. “People want to know if natural fertilisers are being used or synthetics, how the farm is, the quality of the people on the farm, how it impacts the product, etc. We have to see how we can enable such aspects. Besides this, home-textile players have created a big presence here. This should be scaled up further by assuring them of quality, sustainability and getting the products on time whenever they buy from India,” he says.

In the Union Budget, experts want the Production-Linked Incentive (PLI) Scheme in textiles to be more broad-based, focus on reducing working capital pressures, spell out ways to implement schemes and build scale for the sector. “Scale will help in our logistics and procurement, and bring down our cost of manufacturing. We need to create manufacturing facilities to be able to compete with the likes of Bangladesh and Vietnam and put our product in parity to them,” Wahi adds.