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Textile sector in India

Textile sector in India

Introduction

  • India’s textiles sector is one of the oldest industries in Indian economy dating back to the 19th century.
  • The Indian textiles industry is extremely varied, with the hand-spun and hand-woven textiles sectors at one end of the spectrum and the capital-intensive sophisticated mills sector at the other end of the spectrum.
  • The sector caters to a wide range of segments ranging from traditional handloom products to cotton, wool and silk products and has products that vary across natural & man-made fiber, yarn and apparel.

Market Size

  • The Indian textiles industry, currently estimated at around US$ 150 billion, is expected to reach US$ 230 billion by 2020. The Indian Textile Industry contributes approximately 2 per cent to India’s Gross Domestic Product (GDP), 10 per cent of manufacturing production and 14 per cent to overall Index of Industrial Production (1IP)
  • The production of cotton in India is estimated to increase by 9.3 per cent year-on-year to reach 37.7 million bales in FY 2017-18. The total area under cultivation of cotton in India is expected to increase by 7 per cent to 11.3 million hectares in 2017-18, on account of expectations of better returns from rising prices and improved crop yields during the year 2016-17.
  • Indian exports of locally made retail and lifestyle products grew at a compound annual growth rate (CAGR) of 10 per cent from 2013 to 2016, mainly led by bedding bath and home decor products and textiles.

Importance of Textile Industry to India

  • The close linkage of the textile industry to agriculture for raw materials such as cotton has helped the growth of both the sectors and contributing to Indian economy.
  • The ancient culture and traditions of the country in terms of textiles make the Indian textiles sector unique in comparison to the industries of other countries.
  • The industry is capable of producing a wide variety of products suitable to different market segments, both within India and across the world.
  • The demand for textiles can be increased by penetration of organized retail, favourable demographics.
  • The textile industry in India has large and diversified segments that in-turn enable businesses and end-consumers to choose from a wide array of products.
  • The availability of highly skilled manpower provides a suitable platform for the textile industry to have an upper hand as compared to its counterparts.
  • There is a huge potential in the domestic and international markets that will help the industry tackle any possible headwinds in the coming decade.
  • The incomparable employment potential owing to the presence of the entire value chain from fibre to apparel manufacturing within the country is an inherent and unique strength of the industry.
  • It promotes buyer-driven value chains where large retailers, marketers and branded manufacturers play the pivotal roles in setting up decentralized production networks in a variety of exporting countries, typically located in developing countries.

Challenges in Textile Sector 

  • Outdated technology: The Indian textile industry has its limitations of access to the latest technology (especially in small-scale industries) and failures to meet global standards in the highly competitive market.
  • Highly fragmented: The Indian textile industry is highly fragmented and is being dominated by the unorganized sector and small and medium industries.
  • Lack of foreign investment: Due to challenges given above the foreign investors are not very enthusiastic about investing in the textile sector which is also one of the areas of concern. Though the sector has witnessed a spurt in investment during the last five years, yet the industry attracted Foreign Direct Investment (FDI) of only US$ 3.41 billion from April 2000 to December 2019.        (Textile sector in India)
  • Tax structure issues: The tax structure GST (Goods and Service Tax) makes the garments expensive and uncompetitive in domestic as well as international markets. Another threat is rising labour wages and workers’ salaries.
  • Inflexible labour laws: India’s system of labour regulations is rather complex. There are over 200 labour laws, including a quarter of Central Acts. Several labour laws such as the Industrial Disputes Act, 1947 put limitations on firm size and not allow manufacturing firms to grow.
  • Lack of scale: The apparel units in India have an average size of 100 machines which is very less in comparison with Bangladesh, which has on an average of at least 500 machines per factory.
  • Stagnant exports: The export from the sector has been stagnating and remained at the $40-billion level for the last six years.

India’s Textile Export

  • India is the world’s second-largest exporter of textiles and apparel, and the textile industry contributes significantly to the country’s economy, making up 7% of industry output, 2% of the national GDP, and 15% of the country’s total exports earnings.
  • A third of India’s textile production is exported.
  • India’s Textile Exports was worth US$37.74 billion in 2017-18.
  • The US and the European Union are the two largest markets for Indian textile exporters, followed by various Asian countries and the Middle East.

Government Initiatives | Textile sector in India

Indian government has come up with a number of export promotion policies for the textiles sector. It has also allowed 100 per cent FDI in the sector under the automatic route.

Initiatives taken by Government of India are:

  • Under Union Budget 2020-21, a National Technical Textiles Mission is proposed for a period from 2020-21 to 2023-24 at an estimated outlay of Rs 1,480 crore (US$ 211.76 million).
  • In 2020, New Textiles Policy 2020 is expected to be released by the Ministry of Textiles.
  • CCEA approved mandatory packaging of foodgrains and sugar in jute material for the Jute Year 2019-20.
  • In September 2019, textiles export witnessed a 6.2 per cent increase post GST as compared to the period pre-GST.
  • The Directorate General of Foreign Trade (DGFT) has revised rates for incentives under the Merchandise Exports from India Scheme (MEIS) for two subsectors of Textiles Industry – readymade garments and made-ups – from two per cent to four per cent.
  • The Government announced a special package of US$ 31 billion to boost export, create one crore job opportunity and attract investment worth Rs 80,000 crore (US$ 11.93 billion) during 2018-2020. As of August 2018, it generated additional investments worth Rs 25,345 crore (US$ 3.78 billion) and exports worth Rs 57.28 billion (US$ 854.42 million).
  • The Government of India has taken several measures including Amended Technology Up-gradation Fund Scheme (A-TUFS), estimated to create employment for 35 lakh people and enable investment worth Rs 95,000 crore (US$ 14.17 billion) by 2022.
  • Integrated Wool Development Programme (IWDP) was approved by Government of India to provide support to the wool sector, starting from wool rearer to end consumer, with an aim to enhance quality and increase production during 2017-18 and 2019-20.
  • The Cabinet Committee on Economic Affairs (CCEA), Government of India approved a new skill development scheme named ‘Scheme for Capacity Building in Textile Sector (SCBTS)’ with an outlay of Rs 1,300 crore (US$ 202.9 million) from 2017-18 to 2019-20. As of August 2019, 16 states signed pacts with the Ministry of Textiles to partner with it for skilling about four lakh workers under the scheme.

Achievements | Textile sector in India

Following are the achievements of the Government in the past four years:

  • As of 2019, 348 technical textiles products were developed according to Bureau of Indian Standards (BIS).
  • Employment increased to 45 million in FY19 from 8.03 in FY15.
  • I-ATUFS, a web-based claims monitoring and tracking mechanism was launched on April 21, 2016. 381 new block level clusters were sanctioned.
  • Under the Scheme for Integrated Textile Parks (SITP), 59 textile parks were sanctioned, out of which, 22 have been completed.

Conclusion | Textile sector in India

  • The future for the Indian textiles industry looks promising, buoyed by strong domestic consumption as well as export demand.
  • With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with the entry of several international players like Marks & Spencer, Guess and Next into the Indian market.
  • High economic growth has resulted in higher disposable income.
  • This has led to rise in demand for products creating a huge domestic market. (Textile sector in India)

 

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