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Textile Industry Struggling to Perform Better
Context:
According to the Union Minister for Textiles the Indian textile and apparel sector is targeting $350 billion annually by 2030, potentially generating 3.5 crore jobs.
About Indian Textile Industry Market:
- The sector was valued at $153 billion in 2021, with $110 billion from domestic business.
- In FY22, India ranked as the third largest textile exporter globally with a 5.4% share.
- It also has the second largest manufacturing capacity.
- The textile industry contributes 2.3% to GDP (FY21) and 10.6% to total manufacturing GVA (FY23).
- The sector employs about 105 million people directly and indirectly.
- Around 80% of the sector consists of MSMEs, making it highly sensitive to international developments.
Challenges Faced by the Sector
- Export Slowdown:
- Growth in FY 2021-2022: The sector experienced significant growth with exports reaching $43.4 billion.
- Decline in FY23: A sharp decline in demand has affected exports, especially from Tamil Nadu, where nearly 500 spinning mills have shut down.
- Tiruppur, a major textile hub, has seen a 40% drop in business.
- Geopolitical Issues: Reduced demand in major international markets, combined with geopolitical tensions, has impacted exports negatively.
- Raw Material Prices: High costs of cotton and Man Made Fibres (MMF) have added to the sector’s challenges.
- Policy and Import Issues:
- Import Duty on Cotton: A 10% import duty on cotton has made Indian cotton less competitive in the global market, as it is now more expensive compared to international cotton prices.
- Quality Control Orders on MMF: Regulatory restrictions on MMF have disrupted the availability of raw materials and affected price stability.
- Shift in Business Models
- Rise of E-commerce and Direct Retailing: Increasing consumer preference for online shopping has led to a shift towards e-commerce and direct retailing.
- Competition from Startups: The entry of new startups is intensifying competition in the sector.
- The MSME-dominated textile sector faces several challenges, including limited economies of scale, a fragmented structure, high transportation costs, reliance on imported machinery, and insufficient skilled manpower.
- Sustainability and Changing Consumer Preferences
- Sustainability Targets: Foreign brands are setting stricter environmental, social, and governance (ESG) standards, influencing supply chains and production methods.
- Consumer Preferences: There is a growing demand for comfort wear, loungewear, and athleisure, driving changes in production priorities.
Government Initiatives to Boost the Sector:
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Way Forward
- Removal of Cotton Import Duty: Industry stakeholders are pushing for the removal of cotton import duties during off-seasons (April to October) to remain competitive globally.
- Enhance Technological Adoption: Invest in modern machinery and automation to improve productivity.
- Strengthen Infrastructure: Develop logistics and power supply to support seamless operations.
- Focus on Skill Development: Implement training programs to equip workers with necessary skills.
- Encourage Sustainable Practices: Align production methods with global sustainability standards to attract international business.
By addressing these challenges through strategic initiatives and investments, the Indian textile industry can enhance its competitiveness and achieve its growth targets.