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Challenges and Prospects for the Indian Textile Industry


Why is it in the news?

  • Minister for Textiles recently announced that the Indian textile and apparel sector aims for a total business of $350 billion annually by 2030, with the potential to generate 3.5 crore jobs.
  • However, the industry has faced significant challenges in the last two financial years, raising doubts about achieving a 10% compound annual growth rate (CAGR).

Current status

  • As of 2021, the Indian textile and apparel industry was estimated at $153 billion, with about $110 billion coming from domestic business.
  • India ranked as the third-largest textile exporter globally in FY22, holding a 5.4% market share, and has the second-largest manufacturing capacity in the sector.

Factors Contributing to the Slump

  • The textile industry experienced a slowdown in demand starting in 2022-2023, which worsened in FY24, leading to a decline in both exports and domestic demand. This downturn severely impacted manufacturing clusters.
  • For example, Tamil Nadu, which has the largest spinning capacity in India, saw nearly 500 textile mills close over the past two years. In Tiruppur, a key knitwear production hub, many units reported a 40% drop in business in FY23.

Reasons for Export Decline

  • The slump in exports can be attributed to geopolitical developments and reduced demand from buying countries. High raw material prices for cotton and man-made fibres (MMF) further exacerbated the situation.
  • The imposition of a 10% import duty on cotton has made Indian cotton more expensive than international alternatives. Additionally, quality control orders for MMF have disrupted raw material availability and price stability.
  • Industry stakeholders are calling for the removal of the import duty on cotton, especially during the off-season from April to October, arguing that the Indian industry competes against countries that heavily support domestic production.

Emerging Challenges

  • Beyond policy issues, the textile industry faces disruptions in traditional business models. Direct retailing through e-commerce is gaining traction, with startups entering the market.
  • According to a report, foreign brands are rapidly adopting sustainability practices across their supply chains and are setting sustainability targets that vendors must meet.
  • There is also a growing consumer preference for comfort wear, loungewear, and athleisure, which reflects changing shopping habits. Customers in rural and semi-urban areas now prefer shopping at multi-brand outlets or hypermarkets over lesser-known brands.

Conclusion

  • To meet the ambitious target of $350 billion by 2030, the industry anticipates a $100 billion investment across various segments of the value chain to enhance production capacities.
  • Labor costs constitute roughly 10% of production expenses, with trained textile workers earning around ₹550 per day and unskilled workers earning about ₹450.
  • To improve productivity and reduce waste, industry sources emphasize the need for technological advancements and workforce skilling.
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