As per Comtrade figures, till 2017 India was the world’s second largest exporter of textiles and clothing after China. However, since 2019, India’s rank dropped to 5th position with the country experiencing negative 1 per cent CAGR in the past five calendar years.
Lack of total garment package solutions
One of the reasons for this is the largely fragmented nature of the Indian clothing industry, and low-scale, says Astute Consulting. As per their report, India’s archaic labor laws prevents factory owners from laying off workers during slack business period. The small size of factories also makes it difficult for owners to invest in technology and product up gradations.
Another challenge the industry faces is the lack of access to global markets. Currently, India does not have preferential trade agreements with other nations, preventing exporters from accessing key markets. Also, like other nations, India does not offer total garment package solutions to leading International brands and retailers. Its textile mills ship fabrics to other garment conversion countries like Bangladesh, Vietnam, that have flexible labor laws and bigger manufacturing facilities.
To regain lost glory, India needs to introduce flexible labor laws besides encouraging entrepreneurs to set up large scale units employing 30,000 to 50,000 workers under one roof. This will boost productivity and reduce per unit cost of manufacturing. It will also help the country allocate higher investments in product development equipment.
Vertical integration of facilities
India also needs to set up integrated vertical setups ranging from fiber, yarn and fabrics to garments at a single location. Fabric mills here need to be either vertically integrated into garment manufacturing setup or backward integrated into fabric and yarn manufacturing. However, this requires huge capital investment.
The US and EU are the largest markets for Indian textiles and clothes. Both countries have free trade and preferential trade agreements with India’s competitors, negatively impacting its exports.
Expedite FTAs with EU
Indian companies also face trade barriers unlike other countries like Bangladesh, Vietnam, Sri Lanka and Pakistan who benefit with a 10 per cent discount on landed price of products due to GSP+ status with EU. Recently, even Vietnam and Korea have entered into FTAs with the EU to improve market access. Therefore, India needs to expedite an FTA with the Union. This will not only benefit its apparel, made-ups and textile industry but also neutralize some of the price disadvantages that it faces today.
Focus on product innovation and sustainability
Another important initiative Indian companies need to undertake is encourage their product development teams to make innovative products that also meet sustainability standards
Companies also need to set up manufacturing facilities equipped with latest state-of-art sampling machines. This will help them manufacture products in smaller batches, reducing their turnaround times. They need to use eco-friendly processing and finishing technologies both for fabrics and the garment washing. Their processes need to be re-engineered to save energy consumption, increase water recycling and improve effluent treatment. Also, they need to adopt new processes to use recycled raw materials, extracted from pre-and post-consumer wastes, like Polyester and Cotton.
India already has a vibrant domestic market and abundant labor force. Now, it only needs to address the above mentioned issues to regain its position in the global textile and clothing market.