Increasing India’s Competitiveness in the Global Textile Industry
To emerge as a global leader in the textile industry, India must tackle the challenges arising from both global and domestic conflicts while seizing the unique opportunities these situations present.
The Union Budget 2024-25 brought a mixed response from India’s textile industry, with an increased allocation to the sector, yet falling short of industry expectations. Despite notable enhancements in funding for research and capacity building, key demands, such as the removal of import duties on cotton, were unmet, limiting competitiveness. Challenges remain, including high cotton prices and lack of incentives for new capacities. However, India has substantial opportunities to enhance its global position by leveraging its strengths, supporting MSMEs, and focusing on innovation in textiles. Strengthening policy frameworks and fostering sustainable practices can further elevate India in the global textile industry.
Budget impact and industry status
In the Union Budget 2024-25, the allocation for the textiles sector was increased by ₹9.74 billion, reaching a total of ₹44.17 billion. Union Finance Minister Nirmala Sitharaman announced this budget on Tuesday, which included a rise in funding for research and capacity building, boosting it from ₹3.80 billion to ₹6.86 billion. Despite this increase, the industry had anticipated a larger boost.
“Unfortunately, the budget proved to be inconsequential. It passed without offering significant benefits, and despite our efforts to identify any advantageous elements, there was little of substance. The budget has largely become a minor event for the textile industry, with only marginal increases in allocations. Notably, two expectations from previous budgets were not met: the first being the removal of the import duty on cotton, which was unexpectedly imposed in 2020 despite the protection offered to farmers through MSP. Despite our continued requests, this duty remain in place,” says Sanjay Jain.
He added, “The industry has proposed a reduction of the import duty on cotton from April to September, which is the off-season for cotton and would not adversely affect farmers. This measure would primarily impact traders and their management of cotton prices, which often leads to stocking issues and leaves the industry with less competitive cotton. Unfortunately, this minor adjustment was not implemented. However, we remain optimistic that the budget is only one aspect of broader economic planning. We hope for future incentives, such as those potentially included in PLI 2.0 or other formats for the MSME and garment sectors, which were notably absent in PLI 1.0. It is crucial that any investment incentives be unconditional, as conditional incentives that depend on future performance are not favoured by banks or funders. We look forward to potential improvements as the new government continues to address these concerns.”
Despite this, credit was given for the government’s attention to MSMEs, particularly for providing credit guarantee loans without collateral, which was seen as a significant positive development for the sector, especially since much of the textile industry comprises MSMEs.
Rakesh Mehra, opines, “In international contexts, such as in Turkey, MSMEs are pivotal in driving the downstream textile industry, including both fabric and garments. Therefore, supporting and encouraging MSMEs is a positive development. Additionally, the budget introduced the PM Mitra parks, which represent a promising initiative. Although the successful implementation of these parks remains to be seen, they aim to establish large-scale facilities with shared resources, which could greatly benefit smaller enterprises. Furthermore, the provident fund subsidy provided through EPFO, offering up to ₹3,000 per month for salaries up to ₹1 lakh, is another advantageous measure for MSMEs.”
It was expected that the cotton duty would be abolished or removed, but this did not occur, leading to decreased competitiveness in the downstream segments of the value chain. Higher cotton costs result in more expensive yarn and fabric, which was a measure that should have been implemented. Additionally, there was anticipation for incentives to establish new capacities, as the entire value chain from spinning to garments creates more jobs for the same investment compared to the upstream industry.
Prashant Agarwal, informs, “While expectations were present, it was not anticipated that the announcements regarding PLI or TF would be made. The ministry is currently working on new TF schemes, with a timeline of two to three months anticipated for their development. Although the ministry has indicated that PLI announcements might be forthcoming, these are no longer part of the budget. It is important to recognise that the budget primarily provides direction rather than implementing specific policy initiatives. As India grows, all sectors are expected to benefit, though the finer details will remain.”
Global market position
Despite global turmoil, the Indian textile industry has managed to achieve impressive export figures in recent months. Additionally, Western markets are presenting promising opportunities as India prepares to capitalise on them.
Robert Antoshak, states, “India stands out as one of the leading exporters in the global textiles and apparel industry. The country currently has a significant opportunity to excel in the market, particularly in basic textiles and apparel. Many sourcing companies in the US are seeking alternatives due to market uncertainties and challenges faced by other suppliers. While China remains a dominant player, there is a noticeable shift towards diversifying sourcing options. India is well-positioned to capitalise on these changing sourcing strategies, with companies increasingly looking to expand throughout South Asia. This makes it crucial for India to be recognised as a reliable source of supply in these uncertain times.”
Supporting Anotshak’s statement, Jain adds, “India is recognised for its stability and safety, making it an increasingly preferred sourcing location compared to certain Far Eastern and African countries. This evolving perception aligns with the “China plus one” strategy, which gained traction post-COVID. Although initial enthusiasm diminished as competitors rapidly adapted, India has maintained consistent export figures, sustaining approximately $30 to $33 billion annually over the past decade after reaching a peak of $43–$44 billion. While India’s overall growth has been substantial, the expansion of its textile industry remains uncertain, particularly regarding its share in the global market. Nonetheless, significant opportunities continue to exist despite the associated challenges and concerns.”
While there are numerous opportunities, challenges persist and must be continuously addressed. Sachin Arora, says, “China’s National Development and Reform Commission (NDRC) is actively promoting domestic production abroad, not only in textiles but also in industries like electrical, plastics, and capital goods. These industries are offering buyers credit terms of three to five years without interest, creating a challenging situation for our manufacturers and producers. This is a concerning development.”
Despite India’s significant growth potential in the knitting industry, the country is struggling to maintain the growth it has previously achieved, and this issue requires further analysis. Raja Shanmugham, comments, “The Indian textile industry is facing significant challenges in sustaining itself, particularly in the current geopolitical climate. As noted, many establishments are now focusing on the domestic market, leading to intense competition on pricing, which could have a profound impact on the industry’s survival. Despite being a globally promising and progressive industry, it requires much more attention and support to navigate these difficulties.”
Battling industry headwinds
Amidst these trends, which are supported by timely government initiatives, certain concerns could pose potential roadblocks to the growth of the textile sector. However, the industry also faces multiple opportunities, some of which may initially appear as challenges.
Antoshak adds, “It is often observed that while India excels in textiles and cotton, there is a need for further development in synthetics and a more robust cut-and-sew sector. Addressing these areas will take time. Therefore, engaging with buyers now, as these sectors are being developed, presents a valuable opportunity for India. This strategic timing allows India to align with buyers’ sourcing plans amidst global uncertainties, making it an intriguing opportunity for growth.”
It was noted that, despite having strong state-level policies, international investors are often unaware of the benefits India offers. Increased awareness is needed, and engaging with companies directly to encourage them to invest in India is essential. Additionally, as the Indian domestic market grows, brands are increasingly being sought after, with some experiencing a 30 per cent to 40 per cent compound annual growth rate (CAGR).
“International investors are encouraged to invest in India, but upon arrival, they often find that the country is not uniform in its investment environment. Different states offer varied incentives and conditions, leading to confusion about where to invest. While Invest India can provide guidance, it does not offer specific recommendations tailored to individual requirements. Consequently, investors face challenges navigating India’s diverse bureaucratic landscape, which lacks the streamlined processes found in countries like Vietnam or China, where approvals are more efficiently managed. To attract and retain international investors effectively, India must adopt a mission-oriented approach and improve follow-up and support beyond initial meetings with high-level officials. Simply permitting 100 per cent FDI in textiles and offering a warm welcome is insufficient without a more cohesive and responsive system,” quotes Agarwal.
Instead of exploiting challenges faced by others, the focus should be on leveraging one’s own strengths and competencies to seize opportunities. During the COVID-19 pandemic, there was a widespread belief that India would surpass China in various sectors, with many anticipating India’s rise as China’s dominance appeared to wane. However, China has demonstrated its resilience and emerged as a leading player once again.
Mehra explains, “We should not seek to capitalise on the difficulties or misfortunes of others. Instead, we must focus on enhancing our own competitiveness through our own strengths. Regarding Bangladesh, there is no cause for celebration. We should extend our sympathy as they navigate a challenging period. Currently, our fabric exports to Bangladesh are delayed, and payment issues are arising, which adversely affects our business. While, as noted, improvements are underway and normalisation is expected, we must rely on our own capabilities rather than the unfavourable conditions faced by others.”
Additionally, sustainability is the key focus, and it is crucial to properly promote its importance within the Indian textile industry, which is predominantly comprised of MSMEs. The government needs to play a significant role in this by providing guidance and support, as achieving international sustainability standards requires both knowledge and financial investment. Sudden implementation of stringent measures could be challenging for MSMEs, although larger corporations may manage more easily. Therefore, a well-structured government mechanism is essential to support industries in adapting to these changes and ensuring their growth and sustainability in the global market.
How policy makers can drive industry growth
Although this is an opportune moment for attracting buyers to India, numerous constraints within the Indian business environment need to be addressed.
“Product development is crucial, whether for cotton or synthetic materials. To capture a greater share of consumers’ disposable income, companies must continuously introduce new products. Consumers will not be satisfied with only basic options like white, blue, or grey shirts, or a limited selection of chinos. Innovation in product offerings is essential, as demonstrated by successful models in countries like Turkey, China, Korea, and Japan.
In India, while government institutions initially support product development, this support typically lasts only for three years. Subsequently, the industry takes over, investing substantial amounts in projects to develop and commercialise new products. Patenting these innovations incurs additional costs, whereas non-patented developments are subject to standard fees,” Agarwal explains.
As per the recent report by Wazir Advisors, the retail sales in the US have grown by 5 per cent, while imports have decreased by 20 per cent. This situation presents a significant opportunity as the supply pipeline continues to shrink. However, questions remain about how to capitalise on this opportunity and improve productivity. Simply discussing the issue is not enough. Currently, there are no real centers of excellence focused on ground-level improvements to advance the industry. While organisations like TRA are researching unique fabrics, this approach does not address the need for mass growth. To achieve substantial growth, it is essential to reduce the cost of stitching, cutting, and packing basic items like round-neck or polo t-shirts. Compared to countries like Bangladesh and Vietnam, our competitiveness is lacking. If MSMEs receive support from agencies or government initiatives to lower production costs, this could drive significant industry interest and advancement.
While QCO is a positive development, its implementation should be targeted where it is most needed. The recommendation was to apply QCO to fabrics and garments rather than raw materials, as the focus should be on ensuring the quality of the final product for the consumer. High-quality raw materials do not necessarily guarantee a high-quality garment, as other factors influence the final product’s quality. Therefore, it was suggested that the government reconsider the approach and begin implementing QCO with fabrics and garments.
Charting the future course
To remain relevant in the market, adopting modern manufacturing methods such as AI, digitalisation, and machine learning is essential. Additionally, various forward-looking technologies should be made available on a cluster basis, possibly through government or institutional support. MSMEs often recognise the need for these advancements but struggle with implementation due to a lack of guidance and the high cost of consulting services. As a result, they may find themselves unable to effectively integrate these technologies into their business, despite initial enthusiasm and promising presentations.
“We need to tailor solutions specifically for MSMEs and provide them with customised support. Regarding future trends, it is anticipated that non-cotton fabrics will dominate. The days of cotton leading the market are over. Instead, performance fabrics, activewear, and developments in man-made fibres (MMF) will be key. Companies such as Grasim and Reliance are actively working in these areas and are eager to collaborate. They are willing to assist with guidance on implementation and functionality, although they have their limitations. Therefore, it is essential to create a supportive framework to address these needs,” adds Jain.
India is well-positioned in cotton products and there remains consistent demand for them, the significant growth in the marketplace is driven by fast fashion, which is increasingly oriented toward synthetics. Therefore, India should focus on better utilising its synthetic fibre capacity to meet the demand from overseas buyers seeking high-quality synthetic materials. This is seen as a key challenge for India moving forward, with the primary emphasis on developing a robust synthetic base.
Lastly, there is a need to upskill the existing workforce to enhance productivity and maintain quality. This aspect is crucial and must be addressed. Additionally, optimising processes to support increased production scale is also necessary.
(The inputs has been taken from the recently held ITJ webinar)
The industry has proposed a reduction of the import duty on cotton from April to September, which is the off-season for cotton and would not adversely affect farmers. Sanjay Jain, MD, TT Ltd
We should not seek to capitalise on the difficulties or misfortunes of others. Instead, we must focus on enhancing our own competitiveness through our own strengths. Rakesh Mehra, Chairman, The Confederation of Indian Textile Industry (CITI)
International investors are encouraged to invest in India, but upon arrival, they often find that the country is not uniform in its investment environment. Prashant Agarwal, Jt MD, Wazir Advisors
India is well-positioned to capitalise on the changing sourcing strategies, with companies increasingly looking to expand throughout South Asia. Robert Antoshak, Partner, Gherzi Textil Organisation, USA
Many comapnies are now focusing on the domestic market, leading to intense competition on pricing, which could have a profound impact on the industry’s survival Raja Shanmugham, MD, Warsaw International
The Chinese industries are offering buyers credit terms of three to five years without interest, creating a challenging situation for our manufacturers and producers. Sachin Arora, Executive Director, Textile Machinery Manufacturers’ Association (TMMA)
