India's $172.3 billion textile and apparel industry (IMARC Group, 2022) is at a crossroads. The choice is between prioritizing garment manufacturing for the global market, a role where it currently holds 4 per cent market share as per Invest India, or focusing on creating domestic brands and capturing the hearts of Indian consumers, a market projected to reach $135 billion by 2025. Both strategies have their strength and weakness, and weaving a path to sustainable prosperity requires navigating this sartorial conundrum with strategic vision.

Production prowess, export enigmas

As the second-largest global producer of cotton, boasting 60 per cent cotton yarn spindles and 34 per cent of woven fabric looms, India has competitive edge in cost and scale. This prowess makes it a go-to supplier for global brands like H&M and Zara. “India's strength lies in its robust infrastructure, skilled workforce, and diverse raw material base,” points out Rahul Mehta, Chief Mentor of CMAI. "We can produce anything, from basic to high-end garments, at competitive prices."

However, over-reliance on exports is a double-edged sword. Fluctuations in global demand, as seen during the pandemic-induced 27 per cent slump, can wreak havoc. Additionally, the "production for others" model restricts brand recognition and higher margins.

Moving ahead with FTSs 

Free Trade Agreements or FTAs aim to ease trade barriers between countries, often involving tariff reductions and simplified customs procedures. For India's export-heavy textile industry, FTAs are a powerful tool. For example, the recent Comprehensive Economic Partnership Agreement (CEPA) with the UAE eliminates tariffs on 96.4 per cent of Indian exports, boosting garment shipments by 30 per cent. "FTAs can open up new markets and reduce competition," says economist Aparna Sharma. "They can also give Indian exporters a level playing field by lowering tariffs compared to competitors." But FTAs are not a panacea. Complex negotiations, non-tariff barriers, and domestic sensitivities can limit their effectiveness. Critics also point to the potential loss of government revenue from reduced tariffs.

Growing domestic market an attraction

India's burgeoning domestic market, fueled by a rising middle class with a disposable income of $2,329 per annum as per Statista, presents a good alternative. The demand for high-quality, locally-inspired apparel is growing, creating a fertile ground for homegrown brands. "The Indian consumer is becoming increasingly brand-conscious and discerning," says Minakshi Agarwal, founder of a successful homegrown fashion brand. "There's a huge opportunity for domestic brands to cater to this evolving taste and capture a larger share of the pie." Indeed, success stories like Aditya Birla Fashion & Retail and Fabindia illustrate the viability of this approach. These companies have tapped into India's rich cultural heritage, offering contemporary yet rooted designs that resonate with domestic consumers.

However, the way forward is fraught with numerous challenges and opportunities. Counterfeiting, infrastructure bottlenecks, and a complex tax regime remain major bug bears. However, opportunities abound. Rising consciousness about ethical and sustainable fashion presents a new frontier for Indian brands.

Need to balance exports with domestic market

The answer lies not in a binary choice, but in a balanced approach. India must continue to leverage its production prowess while nurturing domestic brands. This can be achieved through various means. One way to go forward is by investing in R&D to create innovative and differentiated products for both the global market and domestic consumers. Skill development to enhance the workforce's ability to cater to the demands of both export and domestic markets is another important step to move ahead.

Then there are the government initiatives like incentives for domestic brands, creating an enabling environment for entrepreneurship, and negotiating FTAs that unlock new markets and minimize negative impacts.

India's textile and apparel industry stands at a crucial juncture. By embracing a balanced approach, maximizing production prowess while nurturing domestic brands, and strategically utilizing FTAs, it can move forward with sustainable growth. The onus lies not just on industry players but also on the government to create a supportive ecosystem that fuels both production and brand creation. Whether India becomes a garment factory for the world or a fashionista's paradise rests on its ability to navigate this critical juncture with strategic vision and nimble execution.