How to make India a global textile powerhouse?

How to make India a global textile powerhouse?

Shares

Many changes in the market are in favour of the Indian textile industry. However, it needs to work hard to take care of many negative factors and build inner strengths to make strong footprints in exports while accelerating the growth.

Gurudas Aras suggests ways to encash upon these favourable factors for India to become a global textile powerhouse.
After a long wait, the star positions have changed in favour for India in the global textile world. Many factors are getting aligned one after the other for the Indian textile industry to take advantage of. As per the report of Wazir Advisors the Indian textile industry worth USD 140 billion today, which has grown at CAGR of 8.3% in the last few years, is expected to grow at 11% CAGR to reach size of USD 225 billion by year 2026. This growth is likely to come mainly from increased exports but partly also from the domestic sector.
The factors which changed the situation in favour of the Indian textile industry:

  • Growing global demand alongside robust domestic demand
  • India’s strong market position to gain market share
  • China+1 policy of buying houses
  • US ban on Xinjiang cotton
  • Increasing Government support
  • Weak INR vis a vis strong RMB to play in India’s favour

However, it will not be easy for the Indian textile industry to encash upon all the above favourable factors. It needs to work hard to take care of many negative factors and build inner strengths to make strong footprints in exports while accelerating the growth. After China started vacating the space in the global textile world, Vietnam and Bangladesh have been in the forefront to take fastest advantage which resulted in significant share getting transferred to these countries. India to that extent lagged behind due to various reasons. However, India holds a better chance in the long run to gradually increase its share due to its inherent strengths such as availability of all types of raw materials, reasonable cost of labour force, capacities across the value chain and favourable policies. However, all the constituents in the textile value chain need to work together as one team and make Indian government its partner in overcoming the hurdles and achieving the goal of making India a global textile powerhouse.

What the government needs to do?
Below are some steps that the government needs to take:
Expedite closing of Free Trade Agreements (FTAs) with the trading blocs/countries:
Indian exporters are at a disadvantage in terms of import duty treatment vis a vis Turkey, Vietnam, Sri Lanka, Bangladesh, Pakistan and Cambodia in the EU and UK markets. If India fails to close FTAs with EU,
UK, Canada and Australia in the near future, it is likely to lose the market opportunity to other competing nations. The Textile and Commerce minister Shri Piyush Goyal has taken good initiatives in this respect and we can hope for some faster results.
Create an efficient Ecosystem for textile manufacturers to grow: India lacks in proper infrastructure which causes delays in shipments as well as adds to the logistics costs. Especially the textile value chain being scattered across the country Indian manufacturers lose the competitiveness. More SEZs and integrated manufacturing parks/facilities with plug and play infrastructure is a need of an hour to have cost efficient manufacturing.
Encourage manufacturing of import substitute products: Lot of man-made fibre-based textile items, many simple technical textile products (diapers, sanitary napkins, seat belts etc.) and accessories required for garment industry are in the import list which actually can be manufactured locally with some push from the government side. The government should come out with a scheme to incentivize local manufacturing of these import substitute products.
Encourage local textile machinery manufacturing: No country can grow its textile industry without a strong support from its domestic machinery industry. One of the major success factors of China’s phenomenal growth in the global textile world had been the strong support from its domestic textile machinery manufacturing sector. Today in India more than 60% of the requirement of textile machinery is met through imports more so in weaving, knitting, processing and garmenting. Government needs to incentivise domestic machinery manufacturing by encouraging joint ventures and collaborations on one hand and inhouse R&D and innovations on the other hand.
Skill Development initiatives: Indian labour force lacks in the required job skills and this leads to lower productivity, quality issues as well as waste generation. Efforts are being taken by the government through Textile Skill Council but there is a long way to go for aligning our labour towards the global manufacturing culture. Skills will be very crucial in maintaining India’s competitiveness. Government must continue its efforts in skilling the workforce of the textile industry through various schemes.
Need to change age old laws and regulations: The age-old labour laws have restricted many big players from venturing into garment manufacturing and this can be a negative factor going forward. India needs to create big capacities in garments to increase its global market share but big companies are shying away from investing due to age old labour laws. India also needs land reforms allowing industries to acquire land without huge hurdles which it has to face today.

What the industry needs to do?
Industry will also have to take some initiatives to tap emerging opportunities:
Focus on cost-competitiveness: There is a risk of India losing the advantage if it is not able to control the costs. The lower labour cost is an advantage at present but in case of any increase in the same, the competitive edge will be lost to other competitors like Bangladesh, Vietnam and Cambodia. Indian labour productivity is also lower compared to other countries which also adds up to cost inefficiency. Both these factors are crucial as garmenting is a labour-intensive process. Indian manufacturers must focus on adopting cost efficient manufacturing processes and also pay attention to reducing wastages and lowering the requirement of resources like power, water and chemicals etc.
Inculcate Zero Defect quality culture: One of the main reasons for China’s long-time success in the global textile markets has been the ability to deliver consistently high-quality goods. India lacks in this area considerably due to inconsistency in quality. The biggest challenge for the Indian manufacturers is to create a stringent quality infrastructure and the ecosystem. The world will demand sustainable high standards of quality and today Indian manufacturers are lagging behind in this area. A serious initiative and investments are required by the industry
to inculcate ‘zero defect’ and ‘do it right the first time’
kind of culture.
Create large capacities in garments: China’s growth engine has been garments unlike India where it has been the textiles and made ups. The main reason being the scattered garment capacities. If India aims to take away any share from China in cotton and man-made fibre-based goods, it needs to have large size state of the art manufacturing facilities in garmenting, which India
lacks at the moment. Also, the downstream capacities in weaving, knitting and processing need to be augmented to support garmenting.
Take care of sustainability and environmental issues: Since the textile industry is one of the most polluting industries, a lot needs to be done towards safeguarding the environment. According to evaluations of the World Bank, about 17 to 20 percent of all present water pollution is solely induced by colouring and finishing patterns. The buyers will be far more stringent on this issue while placing orders. The demand for sustainability in the textile industry will be for reducing waste, and reducing the harm to the environment created by production and consumption. Indian manufacturers have to invest a lot in new technologies to become compliant in this important area.
Diversify the product basket and focus on value addition opportunities: At present Indian manufacturing is still cotton oriented due to which it is missing larger export opportunities. The textile manufacturers need to diversify their product basket by including man-made fibre-based products. Also, there is a need for value addition to move up the value chain. This would need investments in coating and finishing technologies. Today Indian suppliers are mainly playing in the low to mid segment while there are large size opportunities in high value segment. With investments in finishing technologies by the textile players, it would be possible for India to succeed in manufacturing value added products and then aim for increased share of this lucrative segment.
Explore untapped markets like Japan: India has miniscule share of 1.5% in the apparel imports of the lucrative but tough Japanese market. The Japanese buyers demand very high quality on a consistent basis and the approval process takes much longer time. In view of the stringent quality framework of Japan most of the Indian manufacturers and exporters prefer to turn their back to Japan. An MOU has been signed by the Textile ministry and the Nissen ken Quality Evaluation Centre of Japan to enhance exports of textiles and apparels from India to Japan. This will certainly help India improve its position in the Japanese textile market over a period of time.

Conclusion
At this point of time India is certainly in a sweet spot with many factors now favouring a major structural shift in the global textile trade towards India. The space gradually being vacated by China, as a result of changing geopolitical landscape, have put India in the race now due to its strong manufacturing base. However, for gaining a substantial global market share India needs to diversify its product basket by including many man-made fibre-based products, create world class capacities in garmenting, adopt automation and digitization for efficient and smart manufacturing, inculcate stringent quality culture, improve the infrastructure, adopt sustainability initiative at each stage and above all create trust in the minds of buyers. If this can be done jointly by the industry and the government, nobody can stop the juggernaut of the Indian textile industry.
Ten per cent market share in the global textile trade (from the present 5.5%) might appear ambitious at this stage but it is not impossible if India plays the cards well. The time is most opportune for taking bigger strides. The textile value chain constituents need to align and work as one team supported by the government to achieve this goal. I believe that for the Indian textile industry the best time is around the corner but the success would largely depend on how well we team up as a nation and encash on the opportunities.

CATEGORIES
TAGS