In 2000, India held almost a 4.5% share of the overall global textile and clothing (T&C) trade, of which nearly 40% was contributed by exports of clothing and other apparel products. At that time, India’s share of the pie was more than the combined shares of Vietnam, Bangladesh and Cambodia.
However, over the last 15 years, newly emerging textile exporting countries such as Bangladesh and Vietnam – and even smaller apparel-exporting countries including Sri Lanka, Ethiopia and Cambodia – have been stealing India’s thunder and have reduced its global T&C trade share to a mere 3%.
Both Vietnam and Bangladesh have edged up their exports to almost US$32bn-35bn. In this scenario, the Government of India’s target of achieving textile exports of US$45bn for the year ending March 2018 looks very challenging indeed, if not impossible.
By 2016, the scenario had changed drastically, with Bangladesh reaching 6.5% and Vietnam 5.5% of global T&C trade. This became a cause of concern for the government, which wanted the textile sector to be the driver of the nation’s employment. It set an ambitious target of US$45-50bn for textile exports, and also realised that the driver for future exports had to be the ‘value-adding’ garment sector. A new A-TUF scheme was brought in to shower much-improved capital and employment subsidies from the Centre and the States.
The competition
With a rising middle class, and fast-rising labour wages cost, China is expected to quickly move out of the high-cost/low-value-added manufacturing of textile commodity products such as yarns and fabrics. China is targeting a move up the value chain, relinquishing the low-cost manufacturing domain to countries including Bangladesh, Vietnam, Cambodia and India, in SE Asia, and also to countries in Africa. With China’s share set to decline considerably by the year 2025, a US$50bn opportunity in global T&C trade will fall to the key textile producing countries, of which the key players are India, Vietnam and Bangladesh.
The Indian textile industry is keenly eyeing this opportunity and making plans to grab its share, despite severe competition, especially in value-added textile products from Vietnam, Bangladesh, Turkey, Ethiopia, Poland and others. India would like to harness and leverage its strengths in the labour-intensive (eg garment-making) and/or cotton-dominated textile sectors such as cotton yarn spinning and cotton fabric manufacturing, where India enjoys a significant advantage over its peer competitors. In fact, apparel exports still make up 40% of India’s textile exports, and India wants to fill the gap to be left by China.
However, with their growing presence, especially in apparel exports, and with rising costs in India too, the 4-5 newly emerging players have the potential to act as spoilers to the above ambition. India will thus have to focus hard on expanding its capacities in apparel manufacturing, considering that this segment has high export-earning potential, as well as delivering employment generation, especially for women workers.
The challenges
The competitors are ramping up their efforts to increase their exports, by reducing value-chain costs through the introduction of new capacities in backward yarn/fabric output, and these new players represent a challenge to India’s attempt to increase its global share. Global growth in the T&C sectors is forecast to rebound in 2018, driven by industrial and consumer demand growth, especially in the US and China. However, India may not be in a position to fully take advantage, due to its increasing workforce costs and issues of lower productivity, etc.
Though the US continues to be the largest destination for India’s textile exports, Vietnam and Bangladesh, with the special benefit of the GSP+ concessions, are increasing their penetration and cutting into India s share. With stagnation in textile and jewellery imports to the USA, and faced with the onslaught of similar but cheaper products from Bangladesh and Vietnam, India’s share of trade to the USA may leave it in 4th spot and unlikely to move up, as Ethiopia, Cambodia and Kenya are aggressively pushing their apparel exports, with support from the AGOA trade agreement and nil import duty payable.
On the other hand, China also remains a huge and growing market for imports of T&C products; yet India is not well placed to grow its exports into China. One case in point is the drastic reduction in exports of Indian cotton fibres and yarns to China, mainly due to China’s imports form Uzbekistan and Vietnam – and now from Ethiopia, where the larger Chinese textile companies have made big investments to produce commodities for re-import. There is already a huge trade deficit of $50bn in trade with China, as it moves further into value-added manufacturing, a trend that will gradually reduce its need for Indian commodities such as cotton fibres and yarns.
The road forward for India is clearly to keep expanding its apparel-making capacities through new investments and skill upgradation, to grow its own domestic retail markets, and to realign its textile export basket to focus on value-added products.
Source: www.wtin.com