Textile Industry

Table of contents

Context (TH): The Indian textile Industry has been reeling under insurmountable challenges adversely impacting the industry and the manufacturers.

Status of India’s Textile Industry

The sector contributes 4% to the global trade in textiles and apparel, 2% to the GDP (approx. $60 billion), and constitutes 7% of industry output in terms of value (2023).
Employment: It provides direct employment to around 35 million people.
The industry is expected to grow at 10% CAGR from 2019-20 to reach US$ 190 billion by 2025-26.
India’s share in global trade in textiles and apparel: 4%.
India is the world’s second-largest producer of silk, accounting for 95% of all hand-woven cloth.

Rising demand and per capita consumption of fibre: India’s exports of textiles and apparel are expected to grow at a CAGR of 11% by 2025-26.
Production levels: India is the largest cotton producer (23%) in the world and has the highest area under cotton cultivation (39% of the world area).
Competitive advantage in terms of skilled manpower and cost of production, relative to major textile producers.
Policy support: 100% FDI (automatic route) allowed in textiles, Production-Linked Incentive (PLI) Scheme in Man-made fibre and technical textiles.

Economic contribution: The sector contributes about 14% of manufacturing value-addition, and accounts for around one-third of country’s gross export earnings.
Employment potential: The Indian textile and garment industry is the second-largest employer in the country after agriculture, employing around 4.5 Cr workers.
Cultural heritage and Identity: Traditional textile techniques, designs, and motifs are often passed down through generations, representing a nation’s cultural heritage.
Export Earnings: The share of textile, apparel, and handicrafts in India’s total exports was 11.4% in 2020-21. Exports were the highest ever in FY 2021-22, crossing US$ 44 Bn.

Global competition and shock: India’s global market share post-2014 has declined from 5.9% to 4.6% in 2020 (textile sector) and from 3.9% to 2.9 % (apparel sector).
Underutilization: The industry operating at 70% capacity due to import pressure with a year-on-year decline in the export of man-made yarn, fabrics, and made-ups.
Financial constraints: As per the Confederation of Indian Textile Industry, 58% of textile and clothing exporters faced challenges in accessing credit, impacting their ability to invest and expand operations.
Technological advancement: The processing sector is largely decentralized with low levels of automation leading to inconsistency in production and meeting quality standards.
Price competitiveness: Rising cheap imports of man-made fabrics primarily from China, undervaluation on imports, causing local spinners, knitters, weavers, and processors to struggle in offering competitive prices.
Other issues: Increased compliance costs due to GST, unorganized nature of spinning mills, expensive local cotton, and shortage of skilled workers, particularly in areas like design, technical expertise, etc.

Promote innovation: Establish design centers, incubation facilities, and platforms for collaboration between designers, weavers, and manufacturers.
Market Diversification by diversifying export destinations to reduce dependence on a few countries and expand market reach.
Cluster Development: Facilitate industry associations, trade bodies, and government-industry partnerships to address common challenges and advocate for the sector’s interests.
Promote compliance with international standards for social and environmental sustainability to enhance market competitiveness and access to global markets.
Simplify Tax Structure by providing clarity and consistency in tax laws and regulations, ensuring a smooth transition to new tax systems like the GST.
Trade Policy Support: Abolition of anti-dumping duty on Purified Terephthalic Acid (PTA), which is a critical input for man-made textile fibre and yarns.