Knitting the Future - India

Knitting the future - India

Cotton Industry a Glance

One of mankind’s great discoveries, cotton is available virtually everywhere -?testifying both to its utility, as well as the awe-inspiring impact capitalism, has had on human production and consumption.

Cotton production in India has focused on textiles for thousands of years, generating significant employment for both skilled and unskilled labour - thus helping strengthen the Indian economy.?

The cotton sector in India is considered the second most developed sector in the textile industry (after man-made fibres). At 18% of the global total, India is the world’s largest producer of cotton. It also has the largest area under cotton cultivation in the world, representing about 25% of the world’s area under cultivation.

The states of?Gujarat,?Maharashtra,?Andhra Pradesh,?Haryana,?Punjab,?Madhya Pradesh,?Rajasthan,?Karnataka?and?Tamil Nadu?are the major cotton-producing areas in India.

How significant is the Textile Industry in India?

India is among the world's largest producers of Textiles and Apparel.

(with reference to FDI Policy, India)

The domestic apparel & textile industry in India contributes 2.3% to the country’s GDP, 13%?of industry output?in value terms,?and 12% of the country’s export earnings.?India is the 6th?largest exporter of textiles and apparel in the world.

India is?one of the largest producers of cotton and jute in the world. India is also the 2nd?largest producer of silk in the world and 95% of the world’s hand-woven fabric comes from India. The Indian technical textiles segment is estimated at $16?bn,?approximately 6% of the global?market.

The textiles and apparel industry in India is the 2nd?largest employer in the country?providing direct employment to 45 million people and 100 million people in allied industries.?

India has also become the second-largest manufacturer of PPE in the world.?More than 600 companies in India are certified to produce PPEs today, whose global market worth is expected to be over $92.5 bn by 2025, up from $52.7 bn in 2019.

• FDI in the textiles and apparel industry in India has reached up to $3.75 bn till March 2021
• India’s exports of textiles and apparel are expected to reach $100 bn in the next 5 years, growing at a CAGR of 11%
• To double the Indian textile and apparel industry size to $190 bn by 2025-26, 7 mega textile parks have been planned
• The Indian technical textiles market was estimated at $20 bn in 2019-20 and grew at a CAGR of 10% from 2015-16

Challenges of the Textiles Sector:

India's share in global exports of cotton yarn shrunk 600 basis points to 23 per cent in the calendar year 2020 (CY2020) from 29 per cent in CY2015, while in readymade garments (RMG), its share has stagnated at 3-4 per cent over the past decade.

This crisis was further accentuated due to the levied 10 per cent customs duty on the import of cotton fibre. Also, since cotton yarn prices have increased by about 78 per cent, this year has had an impact on the sector significantly.?

• Highly Fragmented:?The Indian textile industry is highly fragmented and is being dominated by the unorganized sector and small and medium industries.
• 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.
• 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.
• Stagnant Exports:?The export from the sector has been stagnating and remained at the USD 40-billion level for the last six years.
• Lack of Scale:?The apparel units in India have an average size of 100 machines which is very little in comparison with Bangladesh, which has on an average of at least 500 machines per factory.
• Lack of Enthusiasm: Due to the 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.
• Lack of Investment: Though the sector has witnessed a spurt in investment during the last five years, the industry attracted?Foreign Direct Investment (FDI)?of only USD 3.41 billion from April 2000 to December 2019.
• Protection of Handloom: ?The growth in power looms, now supplying more than 70% of Indian textiles, according to textile ministry statistics, came on the heels of the systematic destruction of the handloom industry. There is illegal encroachment of handloom markets through perfect imitations of handloom products. Textile Industry is also in the urge of taking care of the Handloom sector.

Way Forward

• Toward an organized sector:?India can make the sector organized by?setting up mega apparel parks and common infrastructure for the textile industry.
• Duty-free Import of cotton fibre/yarn - This will increase the scale of production and help Indian players to produce faster and at a lower cost with maximum efficiency in operation. If the import of cotton fibre and yarn is made duty-free it would help in?increasing supply domestically.
• Legacy modernisation of the industry:?Focus should be on the modernisation of obsolete machinery and technology. Interest-Free Financial reforms from the Government is sought by the Domestic and Export Textile Manufacturers. This can help increase the production and productivity of the textile industry and thereby increase the export also.
• Need for flexible labour laws:?Textile industry is deploying more migrant workers. Also, child labour is another menace in the industry. The industry suffers limitations on firm size and stringent policy on allowing flexibility in hiring and firing. Thus, there is a need for the rationalization of such labour laws.
• Unemployability - States should give up Liquor sales. The liquor consumption rate is high in the southern states and local youth are being unproductive. There is a huge shortage of labour in certain states where states operate liquor shops. The Manufactures shouldering high-cost migrant labourers from other states.
• Increasing export:?India also needs to sign trade agreements(FTAs) with developed countries to enhance export opportunities.

China+1 Policy in Global Market and Textile Industry

As far as the Indian textile industry is concerned, this is the dawn of a bright future that upholds the plethora of hopes of growth. The recent China+1 policy adapted by global manufacturers upon the slowdown in China will enable outsourcing destinations such as India to grab a significant share of the global textile market.

Our manufacturing abundance of raw materials and regulated labour force has already made us a preferred destination for sourcing by leading global brands of repute to source products. It is time to provide required support in terms of sops to the textile industry to propel textile industry growth further and significantly enhance its position globally.

As per the 2021-22 budget, Government initiatives to bolster the sector have raised hopes of the sector growing to $300 billion by 2025-26, a growth of 300% in the next 2 years, according to a report by rating firm Infomerics Valuation and Rating.

For the pandemic-hit Indian economy, the upcoming Union Budget is a beacon of hope for the future filled with optimism, strengthened by the sobriety lessons learnt from the mayhem causing COVID-19. The focus of the Budget is expected to be on-demand generation and job creation which are the pillars of robust economic growth. In this light, it is expected that the annual budget exercise is a roadmap for economic recovery by ensuring tax and trade policy stability.

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