Textile & Apparel Industry In India worth US$ 223 billion by 2021

The domestic textile industry in India is estimated to touch US$ 223 billion by 2021 from US$ 150 billion in November 2017. The textile industry contributes 2 per cent to the GDP of India.

Definition / Scope
Market Overview
Market Risks
Top Market Opportunities
Market Drivers
Industry Challenges
Technology Trends
Regulatory Trends
Other Key Market Trends
Market Size and Forecast
Market Outlook
Competitive Landscape
Key Market Players
Strategic Conclusion
References
Appendix

Definition / Scope

The textile industry refers to the industry concerned with research, design, development, manufacturing, production and distribution of textiles, yarn, fabrics and clothing. The textile industry utilizes mainly two types of fabrics namely: Natural fabrics and Synthetic fabrics

Natural Fabrics – These fabrics occur naturally from things like animals (silkworms, sheep) and plants (flax and cotton).
Synthetic Fabrics – These fabrics are created by human in factories using chemical synthesis. Some examples of synthetic fabrics are rayon, nylon, polyester and spandex.

Market Overview

The textile industry is one of the oldest industries in India. The first cotton textile mill of Mumbai was established in 1854 followed by first cotton mill of Ahmedabad in 1861.

The number of mills increased to 417 from 178 in 1945. In 2000, National Textile Policy was declared for the overall development of the textile and apparel industry. After 2000, Scheme for Integrated Textile Park was implemented to simplify setting up of textile units.

In 2017-18, there were around 3,544 operational textile mills which include 2,184 non-small scale industry and 1,360 small scale industry.

India is the world’s second largest producer of textiles and garments after China.
The textile industry contributed seven per cent of the industry output of India in 2017-18.
The textile industry employed more than 45 million people in 2017-18.
The textile industry contributed two per cent to the GDP of India in 2017-18.
The industry contributed 15 per cent to the export earnings of India in 2017-18
Indian textile industry possess a share of 4.7 per cent in global textile market.
India is the largest producer of jute, second largest producer of silk, third largest producer of cotton, second largest in cellulosic fibres and fifth largest in synthetic yarns in the world.

Market Risks

The productivity level in Indian apparel industry is relatively low as compared to other nations Turkey, China and Bangladesh.
GST has created distortions in the Apparel industry in India, hindering its competitiveness. The man-made yarn is now taxed at 18 per cent while the fabric is taxed at 5 per cent.
The high power costs and cost of capital increases the cost of production in India. The current lending rate in India is between 11 to 12.5 per cent while this rate is only 5 to 7 per cent in China, Vietnam and Turkey.
The slowdown in the import growth of major apparel markets like the US and the EU is slowing down India’s export growth.

Top Market Opportunities

The textile sector is projected to touch US$ 226 billion by 2023. The growth is supported by strong domestic consumption, export demand and urbanization.
The Central Silk Board sets targets for raw silk production, To achieve these targets, farmers and private players are encouraged to grow silk and alliances with the major agro-based industries in pre-cocoon and post-segments has been stimulated.
The organized apparel segment is projected to grow at a CAGR of more than 13 per cent over a 10-year period.
In order to attract foreign investment in the textile sector, the GOI is taking initiatives through promotional visits to countries such as Germany, Japan, Italy and France.
The growth in ecommerce has led to sell of textile products through e-commerce platforms such as Myntra, Flipkart, Amazon, eBay and Snapdeal.

Market Drivers

Robust Demand

The rising income and favorable demographics is driving the demand for textiles in India. The per capita income in India has increased from US$ 945.90 in FY12 to 1,548.22 in FY2017. There has been increase in demand in domestic market due to changing tastes and preferences.

Competitive Advantage

There is an abundant raw material such as jute, cotton, wool and silk in India as compared to other nations. Additionally, India has advantage in terms of skilled manpower and cost of production relative to other major textile producers.

Policy Support

100 per cent FDI is allowed in Indian textile sector. The GOI has allocated US$ 4 million for the Scheme for Integrated Textile Parks under Budget 2018-19. Under this Scheme, 47 projects are ongoing.

Increasing Investments

The textile sector recorded investments worth US$ 4 billion between June 2017 and May 2018. International apparel players such as Hugo Boss, Diesel, Kanz and Liz Claiborne have already entered Indian market.

Industry Challenges

The Indian textile industry is highly fragmented and is dominated by the unorganized sector and small and medium industries.
There is high competition from China, Bangladesh, and Sri Lanka in the low price garment market.
The growing labour costs in India are stealing away India’s competitive advantage in the apparel industry. The labor cost in India is higher than that of Bangladesh and slightly lower than Vietnam and China.
Bangladesh, Turkey, Pakistan, Cambodia, etc. enjoy duty free access to all the major textile markets of the EU and the US. Whereas India still lacks FTA advantages to major markets which makes Indian apparel industry expensive.

Technology Trends

3D printed textiles are being used to create clothes. 3D printing will be used on thinner and resilient fibers to make soft clothing.
The textile industry is using nanotechnology to create scientific clothing like self-cleaning, water repellent and fire-repellent items.
With the help of laser printing, designs are created on jeans and shirts more quickly and precisely.

Regulatory Trends

The Cabinet Committee on Economic Affairs has approved a new skill development scheme named ‘Scheme for Capacity Building in Textile Sector’ with an outlay of US$ 202.9 million from 2017-18 to 2019-20.
The GOI approved Integrated Wool Development Programme to provide support to the wool sector starting from wool rearer to end consumer.
The GOI declared a Special Package to boost exports by US$ 31 billion, create one crore job opportunities and attract investments worth US$ 11.93 billion during 2018-2020.
The Union Ministry of Textiles along with Energy Efficiency Services Ltd. launched a technology upgradation scheme called SAATHI (Sustainable and Accelerated Adoption of Efficient Textile Technologies to Help Small Industries ) for reviving the powerloom sector of India.

Other Key Market Trends

The high quality apparel makes Indian textile companies a leader in the US and the UK, contributing two-third to their exports.
India is expected to be a key growth market for the technical textile sector and the sector is expected to expand at a CAGR of 12.20 per cent during FY18-23 to US$ 32 billion in FY23.
The manufacture of textiles under IIP index grew at the rate of 5.4 per cent y-o-y showing a positive trend in September 2018.

Market Size and Forecast

As of November 2017, the size of textile market in India was worth US$ 150 billion.
India’s textile export stood at US$ 39.20 billion in FY18 and is projected to increase to US$ 82 billion by 2021 from US$ 18.56 billion in FY2019.
The cloth production stood at 67.45 billion square metres in FY2018.
The production of raw material increased to 35.1 million bales in FY17 from 28 million bales in FY07, growing at a CAGR of 2.3 per cent.
The production of fibre in India stood at 1.319 million tonnes during FY18.
The production of cotton grew from 28.0 million bales in FY07 to 35.1 million bales in FY17.
The production of yarn grew from 4,712 million kgs in FY11 to 5,676 million kgs in FY18.
Man made garments and cotton had a share of 24.53 per cent and 54.36 per cent respectively in FY19.

Market Outlook

The domestic textile industry in India is estimated to touch US$ 223 billion by 2021, growing at a CAGR OF 12.28 per cent between 2009-21.
The new textile policy targets to achieve US$ 300 billion worth of textile exports by 2024-25 and create additional 35 million jobs.
India’s home textile industry is projected to increase at a CAGR OF 8.3 per cent during 2014-21 to US$ 8.2 billion in 2021.

Competitive Landscape

Indian textile industry is characterized by small-scale, non integrated spinning, weaving, and apparel enterprises. Few large companies operates in the organized sector where firms must comply with rules and regulations.

While most firms operate in the small-scale unorganized sectors where rules are less strict. The Indian textile industry is fragmented, with few large companies and a dominant share of small, independent and unorganized players.

Key Market Players

Arvind Limited

Arvind Limited’s principal products are finishes fabrics and garments. The company has 15 global apparel brands and employs 42,000 people. The company is the largest fire protection fabric producer in the country. The total income of the company was US$ 258.76 billion in Q2FY19.

Sutlej Textiles and Industries Ltd.

It is a leading producer of value-added yarns in India. It has market presence in over 60 countries. It has largest product portfolios of spun-dyed, cotton blended and cotton melange dyed yarns. The total income of the company was US$ 88.49 million in Q1FY19.

Vardhman Textiles Ltd.

The company is engaged in manufacturing of cotton yarn, woven fabric, sewing thread, synthetic yarn, tow and garments. It has 1,276 looms and 140 mmpa processing capacity. It is the second largest producer of sewing threads in India. The total income amounted to US$ 241.52 million in Q1FY18.

Zara, Mark & Spencer, Benetton, Rieter, Diesel, Hugo Boss, CMT, Saurer, Levi’s are some of the key foreign textile companies operating in India.

Strategic Conclusion

The textile industry is one of the leading and largest segments of the Indian economy. The industry is one of the most important sectors in the Indian economy in terms of output, employment and foreign exchange earnings.

India has abundance of natural resources like silk, jute and cotton. In order to be competitive in the global market, the Indian textile industry requires support from both government and private players.

Appendix

CAGR – Compound Annual Growth Rate
FDI – Foreign Direct Investment
FTA – Free Trade Agreement
FY – Fiscal Year
GDP – Gross Domestic Product
GOI – Government of India
GST – Good and Service Tax
US – United States