Indian textile exports can hit $65 billion if industry majors take the right steps and there is proper execution of government schemes, a joint report by global consulting firm Kearney and The Confederation of Indian Industry (CII) said.
Exports declined by 3 per cent during 2015–2019 and by 18.7 per cent in 2020, the report observed and went on to add that during the same period, other low-cost countries such as Bangladesh and Vietnam have gained a share.
Siddharth Jain, Partner, Kearney said in a statement.
We believe with the right actions from the industry majors and robust execution of government schemes, India can hit $65 billion in exports (implying 9-10% CAGR) by 2026. This, coupled with growth in domestic consumption, could propel domestic production to reach $160 billion. Given the labour-intensive nature of this industry, this growth could add 7.5 million direct jobs in textile manufacturing
The report said a variety of factors have contributed to India’s recent trade performance. India has factor cost disadvantages (for example, power costs 30 to 40 per cent more in India than it does in Bangladesh). The lack of free or preferential trade agreements with key importers, such as the European Union, United Kingdom, and Canada for apparel as well as Bangladesh for fabrics also put pricing pressure on exporters.
"The high cost of capital and high reliance on imports for almost all textiles machinery makes it difficult to earn the right return on invested capital, especially given India’s slight cost disadvantage. Longer lead times than for Chinese manufacturers make India uncompetitive, especially in the fashion segment. For example, India’s lead time is 15 to 25 per cent longer than the competition in fabrics. Limited presence in the global trade of man-made fibre products the trend of nearshoring in western economies has not helped either," the report suggested.
Textile products hold a key position in the global value chain, with India being the world’s fifth-largest exporter of apparel, home, and technical products. The Textile industry employs almost 45 million people in the farming and manufacturing sectors. However, the country’s recent performance in global trade has not been commensurate with its abilities.
Neelesh Hundekari, Partner APAC Head of Lifestyle Practice at Kearney said
Covid-19 has triggered the redistribution of global trade shares and a recalibration of sourcing patterns (“China plus one” sourcing), providing a golden opportunity for Indian textiles to stage a turnaround and regain a leadership position as a top exporting economy. We believe India’s textile industry should target 8 to 9 per cent CAGR during 2019–2026, driven by domestic demand growth and significant growth in annual exports (reaching $65 billion by 2026)
Achieving the $65 billion export target up from $36 billion in 2019—will require India to double down in the five key areas - apparel, fabrics, home textiles, man-made fibre and yarn and technical textiles.
The path to achieving these targets will entail both government and industry taking crucial steps. And the government seems geared up for the challenge. “The recent launches of multiple schemes such as MITRA, PLI, and RoDTEP highlight the strong government focus on this sector. It will be critical for the government to follow up these launches with efficient implementation and even more critical for industry players to leverage these schemes effectively,” Jain said.
