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Global Textile & Apparel Industry – India’s Position


  • Overview of global textile and apparel industry
  • Indian market analysis
  • Growth factors for Indian textile and apparel sector

 

Global apparel consumption is expected to reach USD 2.6 trillion by 2025-26 from USD 1.8 trillion in 2017-18. The industry is experiencing structural changes wherein market share is moving from earlier dominated developed countries like USA, European Union (EU) to destinations like China, South Asia including India, Bangladesh and Vietnam.  These developed countries are currently facing challenges on consumption side due to ongoing slowdown in economic growth in the regions while on the other hand, countries such as China, India and other South East Asian countries are experiencing growth. EU and USA were the largest apparel market in 2017-18 accounting for ~41% share while they are home to just 11% of the world population. However, pressure from demand slowdown is expected to further trim their share in future by passing it to countries like China and India which are expected to grow at a much faster CAGR of 10-11% (2017-2025). Rise in per capita income will boost demand in both countries with higher economic growth which will in turn result into a combined ~23% share by 2025-26 from ~16% share in 2017-18 in apparel consumption.

From supply side, global textile and apparel trade is expected to cross USD 1 trillion mark in 2025-26 from USD 764 billion in 2017-18, growing at a CAGR of 3.4% during the same period. While apparel is the most traded category, holding ~58% share, fabric is the second largest category which accounts for ~19% of total trade. Though export growth rate has been slow in China lately wherein it is also losing some share in global market, it continues to be the largest exporting nation within textile and apparel industry. This could have helped countries like India, Bangladesh and Vietnam etc to increase their trade share with similar trajectory, abundance of raw material and the availability of low-cost manpower. Though, with just about 4 to 5% individual share, these countries still need to go very far to reach anywhere near China, which holds ~37% of total textile and apparel exports.

Indian market analysis

Indian textile and apparel sector is not only one of the oldest industries in Indian economy, but it is also one of the largest sectors as well in terms of output, employment and foreign exchange earnings via export. While India is the world’s second largest producer of textile and apparels, it also provides direct employment to over 45 million people making it the second largest provider of employment after agriculture in India.

Indian textile and apparel market is estimated at USD 139 billion in 2018-2019 which comprise USD 100 billion of domestic market and rest USD 39 billion constitutes exports from India. Apparel or readymade garments is the largest segment within the Indian textile and apparel industry which accounts for nearly three fourth of domestic market and approx. half of the total textile and apparel industry. In recent years, the Indian domestic market has outperformed in comparison to the world’s largest textile and apparel consumption countries like EU and USA and registered a healthy CAGR of 10% between 2005-2017. Growth in middle and lower middle-class with rising disposable income has led to continuous demand for textile and apparel in India. This growth is expected to continue in future and Indian domestic textile and apparel market is estimated to reach USD 220 billion by 2025-26, growing at a CAGR of 12%.

On the export side, India has become one the most competitive textile and apparel manufacturing centres. India is ranked 2nd in textile export with 6% of global share while it stood 5th in apparel export with 4% of global share. In overall positioning, India holds 2nd position with total 5% of global share in export of textile and apparel. The exports of textile and apparel from India have grown to USD 39 billion in 2018-19 which is further estimated to expand at a CAGR of 10% and expected to surpass USD 70 billion by 2025-26. Cotton contributes more than half share in overall textile and apparel export while man-made fibre or synthetic fibre forms second largest segment with ~28% share (2018-19).

Growth Factors and Competitiveness of India

During the past years, India has achieved a prominent position in world trade by successfully leveraging its abundant human resource pool coupled with large scale infrastructure with low manufacturing costs. While China has clearly been the frontrunner, India has also shown robust growth despite global uncertainties and overall slack demand. As per Wazir analysis, India is expected to grow at a CAGR of 12% between 2017-2025, thereby surpassing Japan by 2021-2022 (in terms of global apparel market size value). This growth rate is seen as the highest amongst all the leading consumption regions in textile and apparel sector i.e., USA, EU and Japan.

Moreover, a growth slowdown in Chinese economy is further anticipated to give India an opportunity to gain a prominent market share. India is a home to ~17% of the world’s population; increasing urbanization and young population along with rising per capita income will further aid to market expansion. Furthermore, shift in consumer preference, increasing share of designer wear and growing retail penetration with better reach via offline and online is giving strength to India’s position.

On the supply side, there is abundant availability of raw materials such as cotton, wool, silk and jute in India. Also, India holds a competitive position against major competitor nations due to low cost of production and availability of skilled workforce. According to Wazir Advisors, India has risen as the next alternative to China as it offers a large domestic market, better compliance and political stability. Further, India’s favourable trade policies and superior quality is driving textile and apparel exports.

The government of India has come up with favourable policies to support textile and apparel sector’s growth. It has allowed 100% FDI in the sector under the automatic route which is expected to attract USD 140 billion foreign investments in the coming years.  The government also made huge investments under Scheme for Integrated Textile Parks (SITP) and Technology Upgradation Fund Scheme (TUFS) to encourage more private equity and to train workforce. The new textile policy aims for USD 300 billion worth of textile and apparel export by 2024-25 and to create an additional 35 million jobs. The textile and apparel industry is largely a consumer driven industry; therefore, India’s growing economy has a direct impact on its performance. The growth in the sector is seen buoyed by strong domestic consumption as well as export demand over the medium term. India is well positioned with its plenteous raw material, especially with respect to cotton where it is quite cost competitive, and a well-integrated infrastructure and skilled labour force compared to neighbouring countries. All this is expected to provide support in expanding the country’s share in the global textile and apparel market. In the long run, India needs to diversify its fibre base, currently dominated by cotton, to well-diversified within cotton and synthetic which is in line with the global consumption pattern. This would also help to increase its share in global textile and apparel trade while also guarding its share against other rising countries like Bangladesh and Vietnam.

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