The pandemic that erupted in 2020 brought entire businesses across the world to a standstill. The crisis affected the apparel sector most due to its discretionary nature. The clothing industry survived on rising demand for PPE and other health and well-being related clothing in these times of crises. As per an Apparel Resources report, the world’s largest importer of apparel and textiles, the European Union experienced serious growth turbulence during the year. As per WTO estimates, on an average, the EU accounts for nearly 21 per cent of the world’s apparel and textile imports value.

Eurostat data shows, overall European apparel import declined 13.30 per cent from 2019 to 2020 due to the pandemic. The EU imported 23.70 billion units of clothing in 2020, a meager growth of 0.8 per cent from previous year. From 2016-2019, the EU market grew at an average annual rate of 4.7 per cent. It is slowly recovering its growth pace though recurrent COVID-19 outbreaks are holding it back.

China’s import share declines in 5 years

Currently, EU imports clothing from both within the Union and outside. Imports from within the Union account for 50.80 per cent while from outside its 49.20 per cent. Clothing imports from EU are mainly sourced from Asian countries such as China, Bangladesh and Turkey. These three account for 27.3 per cent of all apparel imports into the EU. China dominated EU’s apparel imports with 12.2 per cent value in 2020; followed by Bangladesh 9.5 per cent; Turkey 5.5 per cent.

From 2016-2020, China’s import share declined 6.6 per cent and is expected to drop further in coming years due to an acute labor shortage, and an ongoing trade war with the US. The newly introduced environmental legislations following China’s signing of the Paris Agreement on Climate Change, is also likely to impact exports.

Accounting for 72.9 per cent of total apparel import market in EU, Germany, France, Spain, Italy, the Netherlands and Poland are top six apparel importers in the EU. Germany topped with an import value of €30.2 billion in 2020 followed by France, Spain, Italy, the Netherlands and Poland. Poland’s imports are growing at a rapid rate of 13.3 per cent every year, making it the sixth largest importer of apparel in the EU.

Pants top import as prices vary across member-states

Prices of apparels imports by EU member states varied considerably across the Union. The highest prices were paid by Scandinavia while the lowest were paid by South-East Europe. Eurostat figures show, prices of Latvia’s imports increased 36 per cent compared to overall import prices of the EU. Pants were the largest apparel product category imported in 2020. The EU imported €28.60 billion worth of pants or trousers during the year; followed by shirts and blouses, coats and jackets, knitwear and dresses and skirts which together accounted for 78.30 per cent of all apparel imports to the EU.

In the last five years, the import value of dresses and skirts grew on an average 5.20 per cent each year while imports in the other top five categories grew on an average 1.70 per cent each year. Imports of sportswear category grew 2.80 per cent while imports in the shirts and blouses, denims, suits and ensembles categories declined.

India’s textile industry has been significantly impacted by the COVID crisis. The pandemic has caused an acute labor shortage with rising cotton prices adding to its woes. Smaller nations like Vietnam and Bangladesh are overtaking India in the textile segment even though India’s textile exports surged 41 per cent from April-December 2021. Hence, the sector needs to gain in competitiveness to deal with emerging new challengers.

A report by the Confederation of Indian Industry (CII) and global management consulting firm Kearney in October last year had urged textile leaders in India to aim for exports worth $65 billion during the next five years. The country can especially benefit from the growing ‘China Plus One’ sentiment amongst global companies looking to diversify sourcing and manufacturing from China. KK Lalpuria, Executive Director & CEO, Indo Count Industries believes, India has a clear opportunity to benefit from diversifying of sourcing by global textile brands and retailers. Even if India is able to gain 1 per cent share from this shift, it would open a $10-billion market.

Currently, India produces $140 billion worth of textiles and apparels and exports around $40 billion. Over the next five years, the government plans to increase India’s textile exports to $100 billion from $34 billion (2019-20), saysthe commerce ministry.

Polices can help achieve targets

Achieving this export target needs proper framework, long term policies and better planning by Indian entrepreneurs, says Lalpuria. Brands and retailers looking to de-risk operations need to ensure smooth functioning of supply chains. They also need to boost supply chain efficiency to increase value addition in raw cotton or yarn exports.

Neelesh Hundekari, Partner, Kearney adds, growing China Plus One Sentiment amongst global brands and retailers gives India with an opportunity to boost apparel exports to $16 billion. Exporters can target $4-billion in revenues by boosting fabric exports.

Exporters can also boost man-made fibers and yarns shipments by $3 billion besides targeting a $4-billion increase in home textiles exports. They can aim for a $2 billion jump in technical textiles exports as demand is increasing. Signing new FTAs can also help exporters leverage the current growth opportunity.

Digitization, sustainability can offset machinery import costs

One major impediment in growing textile exports is the high import duty on textile machinery. To import textile machinery, India needs to pay 27 per cent duty plus an 18 per cent GST. This leads to 45 per cent additional increase in capex, adds Hundekari. Digitization, design capabilities as well as sustainability and traceability can help India boost textile exports, says Rahat Wahi, Partner, Deloitte India. Companies need to be transparent in raw material sourcing and production. They need to maintain the quality, sustainability and timeliness of exports, he adds.

Exporters are demanding a more broad-based Production-Linked Incentive (PLI) Scheme in textiles. They are also urging for a reduction in working capital pressures, implementation of new schemes and building scale for the sector. To compete with competitors like Bangladesh and Vietnam, India also needs to create new manufacturing facilities and boost product quality, adds Wahi.