Why is India’s Textile Industry Struggling to Perform Better?

Syllabus: GS3/ Economy

Context

• India’s textile industry faced a challenging period, raising doubts about achieving the target of $350 billion annually by 2030.

Textile Industry of India

• Share in Domestic Trade: The domestic apparel & textile industry in India contributes approx. 2.3 % to the country’s GDP, 13% to industrial production and 12% to exports. 
• Share in Global Trade: India has a 4% share of the global trade in textiles and apparel.
• Export: In FY22, India was the third largest textile exporter globally, enjoying a 5.4% share.
• Production of Raw Material: India is one of the largest producers of cotton and jute in the world. India is also the 2nd largest producer of silk in the world and 95% of the world’s hand-woven fabric comes from India. 
• Employment Generation: The industry is the 2nd largest employer in the country providing direct employment to 45 million people and 100 million people in the allied sector. 
• Regions: Andhra Pradesh, Telangana, Haryana, Jharkhand, and Gujarat are the top textile and clothing manufacturing states in India.

Challenges Faced by the Textile Industry 

• Expensive Raw Material:  Recent Quality Control Orders issued for fabric imports have complicated the process of bringing in essential raw material.
  • This scenario forces exporters to use expensive domestic supplies, making Indian garments overpriced and unappealing to global buyers who prefer specific fabric sources.
• Cotton Price Fluctuations: India is a major producer and consumer of cotton. Fluctuations in cotton prices impact the cost of production for textile manufacturers. 
• Imports from Bangladesh: With Bangladesh having duty-free access to the Indian market, those garments are available at 15-20% less cost in India.
  • When fabric is imported, jobs are lost in cotton, spinning, knitting, compacting, and processing segments in India.
• Competition in the International Market: The overall cost difference between Indian and Bangladesh garments should be about 2-3%, but the labor costs are lesser in Bangladesh by almost 30%.
  • Between 2013 and 2023, garment exports from Vietnam have grown nearly 82% to hit $33.4 billion while that of Bangladesh has grown nearly 70% to hit $43.8 billion. 
• Infrastructure Constraints: Infrastructure challenges, including inadequate transportation systems, power shortages, and outdated technology, hinder the efficiency of the textile manufacturing process.
• Technology Upgradation: Many textile units in India still use outdated machinery and technology. 

Initiatives by Government of India for the Growth of the Textile 

• Amended Technology Upgradation Fund Scheme (ATUFS): To achieve the vision of generating employment and promoting exports through “Make in India’’ with “Zero effect and Zero defect” in manufacturing, ATUFS was launched in 2016 to provide credit linked Capital Investment Subsidy (CIS). 
• Scheme for Capacity Building in Textile Sector (SAMARTH): To address the skilled manpower requirement across the textile sector, the scheme was formulated, under the broad policy guidelines of “Skill India” initiative.
• National Technical Textile Mission: The Mission for a period of 4 years (2020-21 to 2023-24) was approved for developing usage of technical textiles in various flagship missions, programmes of the country including strategic sectors.
• Production Linked Incentive (PLI) Scheme – The PLI Scheme for Textiles to promote production of Manmade Fibre (MMF) apparel, MMF Fabrics and Products of Technical Textiles in the country.
• PM-MITRA: To boost employment generation through setting up of 7 PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks in Greenfield /Brownfield sites with world class infrastructure.
• Scheme for Integrated Textile Parks (SITP): SITP is designed to promote textile industry clusters by providing infrastructure support, including common facilities, utilities, and services.
  • The goal is to encourage a more organized and efficient approach to textile manufacturing.
• Integrated Skill Development Scheme (ISDS): ISDS focuses on skill development in the textile sector to address the industry’s labor challenges.
  • It aims to provide training to workers and enhance their employability, contributing to the overall growth of the sector.

Way Ahead

• The industry continues to hope for a revival in demand but, what the industry needs urgently is policy intervention at the Centre and State-levels and holistic measures to improve competitiveness.
• So, on the lines of the ‘Make in India’ campaign, the government should encourage purchase of Indian garments. 
• While the current volume of imports are not much compared with the overall size of the domestic market, diversion of these orders to local manufacturers will bolster production.

Source: TH