Growth scope for Indian Textile Industry

Context:

India needs to have new textile policy

Key facts related to Indian textile industry:

• India’s textile sector covers everything from fibre to garments is the second-largest employment generation sector after agriculture, employing an estimated 32 million workers.
• Textile industry not only provides livelihoods to millions of households, but is a storehouse of traditional skills, heritage and a carrier of heritage and culture too.
• India’s textiles sector is one of the oldest industries in Indian economy.
• Textile sector is one of the largest contributors to India’s export with approximately 11 per cent of total exports.
• Textile industry is a labour intensive industry.
• The textile industry consists of two broad segments- Organised and Unorganised sector. The unorganised sector consists of handloom, handicrafts and sericulture, which are operated on a small scale and through traditional tools and methods. While the organised sector consisting of spinning, apparel and garments segment which apply modern machinery and techniques such as economies of scale.
• India’s overall textile exports during FY 2015-16 stood at US$ 40 billion.

Importance of textile industry in India:

• Textiles industry has made a major contribution to the national economy in terms of direct and indirect employment generation and net foreign exchange earnings.
• The sector contributes about 14% to industrial production, 4% to the gross domestic product (GDP) , and 27% to the country’s foreign exchange inflows.
• It provides direct employment to over 45 million people.
• The textiles sector is the second largest provider of employment after agriculture.
• Growth and all round development of this industry has a direct bearing on the improvement of the India’s economy.

Reasons for decline in Indian textile industry:

• Global recession is one of the factor responsible for decline of Indian textile industry.
• Less export orders due to reductions in inventories by global retail giants like Wal-Mart.
• Infrastructure bottlenecks such as power, particularly in Tamil Nadu.

Problems associated with textile sector:

• Lack of finances: Inadequate credit availability has dried the production and export capacity of these powerlooms.
• International tariff: The tariff on Indian textiles varies from 3 to 14% which is very high as compared to tariffs on Pakistan, Egypt, japanese and veitnamese textiles. Thus India is losing competence due to almost zero tariff on textiles from Pakistan, being imported by US and China.
• Expensive cotton export: Cotton corp of India exported good quality cotton abroad at prices higher than international market that may have led to instant profits but ultimately made Indians lose their textile market.
• High input costs: expensive raw material and transaction costs (high excise and custom duties)made this sector more unviable. Long staple cotton imported from Uganda, Egypt etc are very expensive
• High MSP: Minimum support price for cotton was too high which further made the Indian textile sector unviable.

Challenges before Textile industry:

• This sector is undergoing a huge churn due to automation, digital printing and the relentless rise of e-commerce.
• The world operated under a patently unfair quota system called the Multi Fibre Agreement (MFA), has shackled the growth of India’s textile and garment exports.
• India’s share of textile exports in total exports stood, at 12%, is half of what it was in 1996. While the other sectors like petrol and diesel went from zero to 20% of export share.

Comparison with other countries:

• Bangladesh’s garment exports exceeded India’s in absolute terms back in 2003. Presently it export more than $ 35 billion worth of garments, twice that of India.
• Even late starter Vietnam overtook India in 2011, and now exports garments worth $ 32 billion.
• These two nations (Bangladesh and Vietnam) have preferential access to the European Union and US markets. Their growth in exports has been at 20 % per year, against India’s 8%.
• In overall textile trade globally, India has a share of merely 5%, against China’s 39%.
• In the sub-segment of synthetic fibres, India’s share is just 2%, against China’s 66%.
• India has a rich mix of synthetic and natural fibres and yarns, including cotton, jute, silk, polyester and viscose but it remains a cotton-focused country
• The presence of cotton in yarn, fibre, fabric and garments is close to 70% of usage within India, which is also reflected in exports. Only 30% is from synthetics and man-made fibres. The global trend is exactly the obverse, i.e. 70% consists of man-made fibres. So India’s domestic and export mix is the opposite of global fashion and demand trends.
• The other big factor looming large on the sector is the overhang of excess capacity in the fibre and yarn sectors in China. This results into a downward pressure on prices.

Some statistics related to textile industry in India:

• India is first in global jute production and shares 63% of the global textile and garment market. India is second in global textile manufacturing and also second in silk and cotton production.
• 100% FDI is allowed via automatic route in textile sector
• India is the second largest producer of fibre in the world and the major fibre produced is cotton.
• Other fibres produced in India include silk , jute , wool and man-made fibres.
• India’s is the largest producer of raw jute and jute goods and the second largest exporter after Bangladesh.

Government Initiatives

• The 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 Indian textiles sector under the automatic route.
• Rs 6,006-crore special package for textiles and apparel sector was rolled out in June, expected to create one crore new jobs in three years, attract investments of USD 11 billion and generate USD 30 billion in exports.

The key initiatives announced in the Union Budget 2017-18 to boost the textiles sector are listed below:

• Encourage new entrepreneurs to invest in sectors such as knitwear by increasing allocation of funds to Mudra Bank from Rs 1,36,000 crore (US$ 20.4 billion) to Rs 2,44,000 crore (US$ 36.6 billion).
• Upgrade labour skills by allocating Rs 2,200 crore (US$ 330 million)

Some of initiatives taken by the government to further promote the industry are as under:

• The Government of India plans to introduce a mega package for the powerloom sector, which will include social welfare schemes, insurance cover, cluster development, and upgradation of obsolete looms, along with tax benefits and marketing support, which is expected to improve the status of power loom weavers in the country.
• The Ministry of Textiles has signed memorandum of understanding (MoU) with 20 e-commerce companies, aimed at providing a platform to artisans and weavers in different handloom and handicraft clusters across the country for selling their products directly to the consumer.
• Memorandum of Understanding (MoU) worth Rs 8,835 crore (US$ 1.3 billion) in areas such as textile parks, textile processing, machinery, carpet development and others, were signed during the Vibrant Gujarat 2017 Summit.
• The Clothing Manufacturers’ Association of India (CMAI) has signed a memorandum of understanding (MOU) with China Chamber of Commerce for Import and Export of textile(CCCT) to explore potential areas of mutual co-operation for increasing apparel exports from India.

• The Government of India has started promotion of its ‘India Handloom’ initiative on social media like Facebook, Twitter and Instagram with a view to connect with customers, especially youth, in order to promote high quality handloom products.

• The Government of India has implemented several export promotion measures such as:
  1. Specified technical textile products are covered under Focus Product Scheme.
  2. Under this scheme, exports of these products are entitled for duty credit scrip equivalent to 2 per cent of freight on board (FOB) value of exports.
  3. Under the Market Access Initiative (MAI) Scheme, financial assistance is provided for export promotion activities on focus countries and focus product countries.
  4. Under the Market Development Assistance (MDA) Scheme, financial assistance is provided for a range of export promotion activities implemented by Textiles Export Promotion Councils.

Why there is need for new textile policy?

• The previous policy for textile industry was formed about 17 years ago, during that time world was operating under a patently unfair quota system called the Multi Fibre Agreement (MFA)
• While MFA was dismantled in 2005, India did not upgrade it’s policy accordingly.
• During previous 2 decades, India has been left behind by both Bangladesh and Vietnam in textile exports.
• Global Technological developments in the field of synthetic fibres necessitates that India should reconsider and align it’s policy accordingly.
• As this sector employs a significant population, government cannot afford it to die out.
• It will make Indian garments more competitive in international markets by reducing the cost of production.

Solutions:

• Need a national textile policy document, an articulation much like the national telecom policy of 1999.
• There is need for massive skill upgradation.
• There is also need to come up with a fibre-neutral tax policy.
• A big digital push in design and automation
• Meeting the needs of the e-commerce phenomenon
• India also need to diversify it’s exports market and find more big customers other then China.

Conclusion:

It is a high time that the government along with other stakeholders take steps for sustainability and growth of Indian textile industry. The Indian textile industry need to focus on all major sectors right from fibre to fashion and planned for an organised growth across the supply chain so as to compete with China and other countries like Pakistan, Vietnam, and Thailand. There is need for revised national textile policy which can addressed the present day challenges faced by industry. With effective implementation of sector related policies, substantial financial support from government and creation of investment opportunities, textile sector has immense potential to contribute significantly in ‘Make in India’ program.