The textile sector of India is one of the oldest sectors in its economy.The Indian apparel exports data shows that textile exports have a dominant share of 43% of the total Indian exports. Though India has a large textile manufacturing set up and has production facilities across all levels of manufacturing chain, there are still some challenges faced by the Indian textile and apparel sector while competing in the global market. On comparing the export share of the world’s largest exporter, China (boasting 40% of total global textile exports), India captures only 5%.
Other countries like Bangladesh, Germany, and Italy, which are smaller nations in comparison to India, have a similar share of around 5%. This reveals that India has not realised its potential even after having a complete value chain and an abundant supply of cheap and skilled labour.
Here are some of the key issues faced by the second-largest sector in the Indian economy:
High Input Cost: The higher cost of the initial capital in India affects the production cost and thus impacts its competitiveness among the other competing countries. Currently, the lending rate is around 11-12.5% wherein other countries have it around 5-7%. Other than this, the cost of power is also very high in India.
Poor Technology: The textile and apparel sector is very dynamic and versatile and evolves every day. While considering the cost and speed of production, brands and manufacturers have to consider quality, compliance, and capacity to survive globally. The use of outdated technology in this sector is the major hurdle in this regard. The textile companies spend very less on R&D and product development. As a result, the country has a very nominal presence in the high value-added and technical textile segments.
The Absence of Fibre Neutral Policy: High demand is there for man-made fibres and garments in the global market. Despite being the second-largest textile exporter in the world, India lags behind as man-made fibres are not available at competitive prices. This is because of the differential tax treatment as compared to the fibre neutral policy in other countries such as China, Indonesia, Sri Lanka, Thailand and Pakistan. With the rollout of GST, it was expected to have a uniform duty structure but it also led to an inverted duty structure.Along with this, there is a need to revive the entire textile policy.
Fragmented Nature of the Sector: The major part of the Indian textile sector is unorganised. This part suffers from the use of high-end technologies and has lack of capacities. The limited resources and lack of awareness become the biggest challenge in technology up-gradation and capacity expansion in these small and medium units.
Credit Unavailability: Major institutions that provide input credit are centralised and thus cannot reach dispersed and home-based artisans and weavers, as a result, they have to depend on their own funds. There are only a few sources that provide them with the capital to start work but that does not suffice them all.
Lacking FTAs with Foreign Markets: Competing countries have duty-free access to major textile markets of the US and the EU but the absence of FTAs in India makes exports from the country to these nations even more expensive.