How Indian Textile Exports can Hit $65 bn if Industry Majors Take the Right Steps

Achieving the $65 billion exports target up from $36 billion in 2019 will require India to double down in the five key areas - apparel, fabrics, home textiles, man-made fiber and yarn and technical textiles
How Indian Textile Exports can Hit $65 bn if Industry Majors Take the Right Steps

India’s trade performance has improved a lot in recent times. In fact, it can hit $65 billion if the industry majors take the right steps and there is proper execution of government schemes. 

Exports declined by 3 percent during 2015–2019 and by 18.7 percent in 2020, according to a joint report by global consulting firm Kearney and The Confederation of Indian Industry (CII) said. Also, during the same period, other low-cost countries such as Bangladesh and Vietnam have gained a share.

“We believe with the right actions from the industry majors and robust execution of government schemes, India can hit $65 billion in exports (implying 9-10 percent CAGR) by 2026. This, coupled with growth in domestic consumption, could propel domestic production to reach $160 billion. Given the labor-intensive nature of this industry, this growth could add 7.5 million direct jobs in textile manufacturing,” said Siddharth Jain, Partner, Kearney.

There are in fact a variety of factors that have contributed to India’s recent trade performance. India has factor cost disadvantages (for example, power costs 30 to 40 percent more in India than it does in Bangladesh). Lack of free or preferential trade agreements with key importers, such as the European Union, United Kingdom, and Canada for apparel as well as Bangladesh for fabrics also put pricing pressure on exporters.

"The high cost of capital and high reliance on imports for almost all textiles machinery makes it difficult to earn the right return on invested capital, especially given India’s slight cost disadvantage. Longer lead times than for Chinese manufacturers make India uncompetitive, especially in the fashion segment. For example, India’s lead time is 15 to 25 percent longer than the competition in fabrics. Limited presence in the global trade of man-made fiber products. The trend of nearshoring in western economies has not helped either," the report further added.

Textile products hold a key position in the global value chain, with India being the world’s fifth-largest exporter for apparel, home, and technical products. The Textile industry employs almost 45 million people in the farming and manufacturing sectors. However, many experts say that the country’s recent performance in global trade has not been commensurate with its abilities.

“Covid-19 has triggered the redistribution of global trade shares and a recalibration of sourcing patterns (“China plus one” sourcing), providing a golden opportunity for Indian textiles to stage a turnaround and regain a leadership position as a top exporting economy. We believe India’s textile industry should target 8 to 9 percent CAGR during 2019–2026, driven by domestic demand growth and significant growth in annual exports (reaching $65 billion by 2026),” Neelesh Hundekari, Partner and APAC Head - Lifestyle Practice, Kearney said.

Achieving the $65 billion export target up from $36 billion in 2019 will require India to double down in the five key areas - apparel, fabrics, home textiles, man-made fiber and yarn, and technical textiles, experts believe. And, the path to achieving these targets will entail both government and industry taking crucial steps. And the government seems geared up for the challenge. 

“The recent launches of multiple schemes such as MITRA, PLI, RoDTEP highlights the strong government focus on this sector. It will be critical for the government to follow up these launches with efficient implementation and even more critical for industry players to leverage these schemes effectively,” Jain added.

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