After a challenging year marked by low demand, excessive inventory, limited supplies, and surging cotton prices, the textile sector is poised for a turnaround. Industry experts predict a revival in demand, particularly in the third quarter of FY24, as global retailers reduce their inventories and place orders for the upcoming Summer/Spring 2024 collections. 

Analysts Optimistic About Textile Sector's Rebound in FY24 

Favorable market conditions, including geopolitical uncertainties faced by competitor countries, are expected to inject vibrancy into the sector. Consequently, textile players are projected to experience consistent earnings growth and improved cash flows. With completed capital expenditure, the focus will shift toward strengthening balance sheets and enhancing return ratios. Additionally, falling cotton and crude prices are set to bolster margins and enhance India's competitiveness in export markets. The industry has already gained market share in key export markets for garments and home textiles. 

The prospects of a UK free trade agreement and the China+1 strategy further enhance the sector's potential for recalibrating earnings and multiples. 

India has eliminated China from the list of countries exempt from mandatory testing for the presence of azo dyes in textiles. 

The Directorate General of Foreign Trade (DGFT) announced the update, which includes the addition of the UK, Canada, Australia, South Korea, and Japan to the list. This decision aims to address the potential health hazards associated with azo dyes. 

However, industry representatives express concerns regarding the impact on importers, as this non-tariff barrier could increase costs and cause delays. It is anticipated that China will attempt to route its textile and product exports through its trade partners, such as Japan and South Korea, as well as countries exempt from testing under the Regional Comprehensive Economic Partnership, like Australia. 

In the fiscal year 2023, India imported textiles and related items worth $925 million and apparel worth $240 million from China.

UK Fashion and Textiles (UKFT) is leading a £4 million project with partners like Marks & Spencer, Tesco, Pangaia, and New Look to divert large quantities of waste textiles from landfills. 

The initiative, called Autosort for Circular Textiles Demonstrator (ACT UK), focuses on developing an automated sorting and pre-processing facility for waste textiles over a two-year period. The consortium includes recycling technologies, textile collectors/sorters, academia, manufacturers, industry associations, technologists, and renowned brands/retailers. Funding is provided by the Circular Fashion Programme, supported by Innovate UK, AHRC, and NERC under UKRI. Project partners involve IBM, Reskinned, Salvation Army, Oxfam, and others. 

ACT UK aims to overcome current challenges in achieving circularity by integrating advanced technologies such as optical scanning, robotics, AI, and size reduction equipment in a single facility. 

UKFT aims to create a model for large-scale sorting and preparation of non-reusable textiles, potentially preventing hundreds of thousands of tonnes of materials from reaching landfills and supplying resources to the UK textile manufacturing sector. Brands, retailers, and stakeholders are encouraged to participate.

The ILO and IFC have introduced the Better Work program in Uzbekistan, aiming to improve working conditions and competitiveness in the textile and garment industry. On May 30, a memorandum of understanding (MoU) was signed by the IFC, ILO, Uzbekistan's government, employers, and workers' organizations, outlining the program's terms. Better Work will focus on compliance assessments, training, and advisory services to promote labor standards and enhance competitiveness in textile and garment factories.

This partnership is a significant step for Uzbekistan's cotton, textile, and garment production, opening doors to new export markets. As a leading cotton producer, Uzbekistan has undergone notable reforms. Better Work will play a crucial role in upholding labor standards across the country's textile and garment factories, acting as an industry facilitator.

The program seeks to support sustainable growth in the sector, creating decent job opportunities, especially for women in rural areas. Conor Boyle, Officer-in-Charge of Better Work, emphasized the program's dedication to this objective.

The MoU builds on collaborative efforts among the Uzbek government, World Bank Group, ILO, and other stakeholders to enhance labor and environmental standards in cotton fields. Since 2016, the IFC has provided advisory support and investments to Uzbekistan's cotton and textile industry. In 2022, the ILO successfully eradicated systemic child and forced labor from Uzbekistan's cotton production cycle. Initial funding for the Better Work Uzbekistan program was contributed by the European Bank for Reconstruction and Development (EBRD).