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Contribution to Economy: Textile Industry in India

Contribution to Economy: Textile Industry in India

Indian textile industry is one of the largest in the world and is currently estimated at more than US$ 100 billion. India continues to be a world leader in the production of natural fibers, it is steadily gaining ground in the Man-Made Fibers (MMF), Man-Made Apparels and technical textiles segment too.

The contribution of the textile industry is significant as it contributes and accounts for 2% of the GDP of the nation. Domestic Textile and Apparel market including export is around USD 140 billion in 2018-19. With growth in disposable income and domestic consumption including exports of textile and apparel is likely to increase at 12% CAGR by 2025. The following table of year-wise contribution of the textile sector to GDP and GVA makes it clear. 

India has traditionally enjoyed comparative advantage in the textiles sector. Textile sector accounts for 12-14% of the manufacturing sector GDP as reflected in table 1.  In addition, the textile sector being highly labor intensive is a major source of employment particularly for unskilled and semi-skilled labor and is a source of formal sector employment to women. According to data of 2016-17 the organized textile and apparel sector employed close to 27 lakh people thus accounting for 18.1% of the total employment in the manufacturing sector.

In fact, the textile industry is the second largest employer after agriculture, providing employment to over 45 million people directly and 60 million people indirectly. These include manufacturers, suppliers, wholesalers and exporters of Cotton Textiles, Handlooms, Woolen Textiles as well as those engaged in the manufacturing of textile machinery and equipment, dyes and raw materials, delivery of finished textiles, fabrics and garments. While yarn is mostly produced in the mills, fabrics are produced in the power loom and handloom sectors. The sector contributes around 14% to the overall Index of Industrial Production (IIP). The following table puts light on the contributions of the textile industry in terms of employment.

Indian textile is a significant foreign exchange earner for the country. India exports textiles of diverse kinds. These include natural, regenerated cellulose and synthetic fibers. The Indian textile sector has a share of ~5 % of global exports in textiles and apparel. Apparel exports are a major component of India’s export basket and play a crucial role in the domestic economy as well.

Apparel production acts as commencement for national development, and often is the typical starter industry for countries engaged in export-oriented industrialisation due to its low fixed costs and emphasis on labor-intensive manufacturing. Apparel manufacturing is an integral component of the broad textile industry, and is estimated to account for more than two-third of the total textile industry. Furthermore, the apparel industry has strong backward linkages with the rest of the textile industry. The finished apparel is an end-product of the three stage process, in which the first stage includes converting raw fibers to yarns; the second stage of converting yarns into fabric; and the final stage of dyeing/printing, stitching and finishing of fabric into an apparel. The success of the apparel industry also depends on how efficient and competitive these backward linkages that operate in the broad textile industry and have a strong bearing on the performance of the overall textile sector.

However, in recent years there has been stagnation in apparel exports, partly due to increasing competition from low cost supplier countries like Bangladesh and Vietnam. The following figures from the ministry of Textile, Government of India published in the RBI bulletin emphasizes the same.

To understand the depth and extent of the decrease in apparel export the following year-wise trend line highlights the concern.

Despite decreasing apparel exports and low cost competitors, the Indian textile sector stands strong. India possesses competitiveness in the global market of textile & apparel industry. The Indian textile industry has certain inherent strengths.

India has the third largest technological and skilled manpower in the world which boosts the production. This facilitates production as the labor cost in India is the lowest, i.e., 3% of the total production whereas in other countries the labor cost ranges between 5% and 38%, the highest being in Italy and Japan at 38% and 29%, respectively.  Also with skilled man power, the waste generation in India is the lowest at 9% of the total cost of production while the waste generation in other countries ranges between 11% and 23%. All the basic requirements are thus available for enhancing the performance of the textiles industry in India (Katti and Sen, 1999). 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. The land under cotton cultivation in India is around one-fourth of the total land under cotton cultivation in the world. It gives ready access to domestic cotton as a raw material facilitating production and generally at prices, which are extremely competitive.

With this basic availability of raw materials and also a indigenous processing unit under the handloom section, The government of India also has Public sector undertaking organizations like National Textile Corporation Limited (NTCL), under which 23 mills are operational and National Handloom Development Corporation (NHDC) to support and reap benefits from such a huge scale textile sector. Adding to it, India has the second largest consumer market consisting of more than 220 million middle income people.

Though the trend line shows decrease, the Indian textile sector still stands really very strong in terms of its contribution. Some recent contributions and facts to acknowledge are that the emerging Indian technical textiles segment is estimated at $16billion, approximately 6% of the global market. To further substantiate it one should know that India recently is the second-largest manufacturer and supplier of PPE kits in the world. More than 600 companies in India are certified to produce PPEs today, whose global market worth is expected to be over $92.5 billion by 2025, up from $52.7 billion in 2019.

With the recent initiatives like PLI technical textile scheme and planned establishment of 7 mega textile parks to double the Indian textile and apparel industry size to $190 billion by 2025-26, it is expected that the exports of Indian textiles and apparel to reach $100 billion in the next 5 years, growing at a CAGR of 11%. Although with obstacles in the growth of export in the recent past, one can be assured that the Indian Textiles sector consists of huge potential to grow.

Aayush Patil

Aayush Patil is a Research Intern at Tatvita. Presently he is pursuing his bachelors in the Liberal Arts department at the Savitribai Phule Pune University.    

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