Syllabus
GS Paper 3 – Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Context
Textile industry is staring at disruptions in its traditional business systems.
Source
The Hindu | Editorial dated 9th October 2024
Why is the textile industry struggling to perform better?
The Indian textile and apparel sector is poised to achieve a $350 billion business target by 2030, with the aim of generating 3.5 crore jobs. Despite its significant potential and strong domestic base, the industry faced challenges during the last two financial years, affecting its growth prospects. This article outlines the current status, challenges, and future goals of the industry.
Status of the Indian Textile and Apparel Industry
- Industry Size: The Indian textile and apparel industry was valued at $153 billion in 2021, with $110 billion coming from domestic business.
- Global Position: In FY22, India ranked as the third largest textile exporter, with a 5.4% share of global exports.
- Manufacturing Capacity: India has the second largest manufacturing capacity, contributing to 10.6% of total manufacturing Gross Value Added (GVA) in FY23.
- Employment: The sector employs around 105 million people both directly and indirectly, primarily through MSMEs.
Challenges Faced by the Industry
- Slowdown in Demand:
- The Indian textile and apparel industry faced a significant decline in demand, both domestically and internationally.
- The global economic slowdown, coupled with inflationary pressures in key markets, led to reduced purchasing power. This resulted in lower demand for textile products.
- Manufacturing hubs like Tamil Nadu saw 500 mill closures, and Tiruppur experienced a 40% business decline.
- Export Slump:
- Geopolitical tensions and a slump in buying countries impacted exports.
- Raw Material Issues:
- The Indian textile industry faced higher raw material prices, especially for cotton, due to a 10% import duty imposed on cotton.
- This made Indian cotton more expensive than the globally competitive prices, increasing input costs for manufacturers.
- The higher cost of Man-Made Fibres (MMF) was also problematic due to disruptions caused by quality control orders (government regulations that set standards for materials).
- These regulations led to limited availability of affordable MMF in the domestic market, thereby raising costs further and reducing competitiveness in the international market.
- E-commerce Disruptions:
- Direct retailing via e-commerce is disrupting traditional sales models, with new startups entering the space.
- Sustainability Demands:
- Foreign brands are setting ESG sustainability targets across the supply chain, influencing sourcing preferences, thereby ignoring small scale manufacturers
- Changing Consumer Preferences:
- There is rising demand for comfort wear, loungewear, and athleisure, which is reshaping the product offerings.
- Rural and semi-urban consumers now prefer shopping at multi-brand outlets or hypermarkets rather than smaller, lesser-known brands.
Way Forward for the Indian Textile and Apparel Industry
Policy Interventions
- Remove Import Duty on Cotton (Seasonally):
- Temporarily removing or reducing the 10% import duty on cotton during the off-season (April to October) can help lower costs and improve global competitiveness.
- This would ensure affordable raw materials for manufacturers and help them compete with global producers who benefit from government support.
- Stable and Long-term Schemes:
- Introduce long-term incentives (minimum 5 years) to attract investment in the sector. Stable policies, like those focusing on exports, R&D, and technology adoption, can encourage both domestic and foreign investments, ensuring steady growth.
- Strengthen Trade Agreements:
- India should explore new bilateral and multilateral trade agreements to offset the impact of geopolitical tensions, ensuring better market access and reduced tariffs for Indian textiles in key markets.
Technological Upgradation and Skilling
- Automation and Digitization:
- Invest in technology-driven manufacturing, such as automation and AI, to increase productivity, reduce wastages, and minimize labor costs, which currently account for 10% of production costs.
- This would help the industry stay competitive, especially in fast-changing global markets.
- Skill Development Programs:
- Launch specialized training programs for workers in advanced textile technologies, ensuring the availability of a skilled workforce.
- This would boost productivity, product quality, and adaptability to emerging demands such as athleisure and sustainability.
Sustainability and ESG Compliance
- Adopt Sustainable Practices:
- Embrace sustainable production practices to meet the ESG targets (Environmental, Social, and Governance) increasingly set by foreign brands.
- This includes eco-friendly processes, waste reduction, and better labor practices. Meeting these targets will open up more export opportunities.
- Invest in Green Technologies:
- Encourage green energy usage, water conservation, and recycling technologies in production processes.
- Government incentives for companies that adhere to environmental standards could attract foreign investments and reduce operating costs in the long term.
Enhancing Domestic and Global Market Reach
- Focus on E-commerce:
- Given the rise in e-commerce and direct-to-consumer trends, especially in rural areas, textile manufacturers should invest in digital platforms to sell directly to consumers.
- Leveraging e-commerce for both domestic and export markets can diversify revenue streams and reduce reliance on traditional retail channels.
- Expand into New Product Segments:
- Target high-growth segments like athleisure, loungewear, and comfort wear, which are seeing rising demand.
- Focusing on innovation in these segments can cater to evolving consumer preferences, especially in international markets.
Conclusion
The Indian textile and apparel industry, despite facing significant challenges like export slumps and rising costs, remains a crucial sector with immense growth potential. By addressing these hurdles through policy reforms, investments in technology, and skilling its workforce, the industry can achieve its ambitious $350 billion target and continue to play a pivotal role in India’s economy.
Related PYQ
Account for the failure of manufacturing sector in achieving the goal of labour- intensive exports rather than capital-intensive exports. Suggest measures for more labour-intensive rather than capital-intensive exports? [ UPSC Civil Services Exam – Mains 2017]
Practice Question
Discuss the challenges faced by the Indian textile industry and suggest measures to ensure sustainable growth? [150 words]
Guidelines to Answer
- Introduction:
- Briefly explain the importance of the Indian textile industry, mentioning its role in GDP, employment, and exports.
- Highlight the current challenges, including export slumps and rising input costs.
- Body:
- Current Status: Outline the market size, recent decline in demand, and key issues like import duties and international competition.
- Challenges: Emphasize policy hurdles, the need for technology upgrades, and sustainability trends affecting business models.
- Way Forward: Suggest reducing import duties, focusing on technology and skill development, and enhancing global market access.
- Conclusion:
- Summarize the need for policy support and modernization to help the industry achieve its growth targets while sustaining employment and exports.