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.
