(The Gist of Kurukshetra) TEXTILE AND CLOTHING INDUSTRY: CHALLENGES AND OPPORTUNITIES [DECEMBER-2019]
(The Gist of Kurukshetra) TEXTILE AND CLOTHING INDUSTRY: CHALLENGES AND
TEXTILE AND CLOTHING INDUSTRY: CHALLENGES AND OPPORTUNITIES
- The T&C Industry has the potential to grow significantly and to contribute to the Government's ambitious target of achieving USD 5 trillion economy by 2024-25. Though the domestic demand is further likely to accelerate, the stagnancy in exports is a concern.
- The performance on the export front, having about a quarter share in present overall demand, will significantly influence the development path of the industry. The present article explores the growth potential, challenges and opportunities in T&C Sector at the present stage of macro-economic and dynamic international trade environment.
Initiatives to Realize Growth Potential:
- The majority of the T&C units are Small and Medium Enterprises. Ministry of Textiles presently provides support to T&C sector under different schemes: for technology up-gradation, infrastructure, R&D, Technical Textiles and Capacity Building. Briefly the areas of concerns are as follows:
- Technology Up-gradation Fund Scheme (TUF): A credit linked subsidy scheme was introduced in 1999 to catalyze capital investments for technology up-gradation and modernization of the textile industry. The present scheme is known as Amended TUFS (ATUFS) which was launched in January, 2016. More than USD 50 bn worth projects have been sanctioned in the last 18-20 years under this scheme, which has also brought some desirable results in some segments chiefly spinning, weaving and fabric processing. Still, the modernization of weaving and processing segments continues to be an area of concern.
- Fabric Sector: The high productivity shuttle less loom population in China was about 8.35 lacs against India's 72,000 only in 2017, which greatly explained the weak global competitiveness in terms of quality, scale and price of fabric segment of India's textile value chain.
- Infrastructure and Logistics: The Scheme for Integrated Textile Parks (SITP) was launched in 2005 to neutralize the weakness of fragmentation in the various sub-sectors of textile value chain, and the non-availability of quality infrastructure. This again continues to be an area of concern.
- Cotton Sector: The Technology Mission on Cotton (TMC) by 2012 achieved reduction in trash content in Indian cotton from high levels of 4-8 per cent during the pre-TMC period to 1.5-3 per cent post modernization under Mini Mission-IV of TMC. Cotton fiber production, productivity and quality need focused attention.
- Environmental Concerns: The major challenges faced by the textiles processing are availability of water, effluent treatment and disposal of the treated water and solid effluents. These concerns need to be factored and addressed for sustainable growth.
- The high growth potential of Technical Textiles remains to be tapped.
- Low FDI in T&C Sector.
- Lack of commensurate growth in textile machinery sector in India.
Changing Global Retailers Sourcing Pattern:
- Cotton Continues To Be Fiber of Privilege Especially in Wearable Segments: Despite of the fact that cotton share in world fiber consumption is reducing with varied use of manmade fibers, the importing trends of textile and clothing products in the USA clearly shows that cotton textiles account for about 40 percent-45 percent of imports, even in blended textile/clothing products for wearable segment, cotton has significant presence. The experience of other developed countries and newly industrialized countries is also not likely to be very different from the USA and as such cotton will continue to be a product of choice in wearable category and its demand would not recede in coming years. This calls for focused efforts to increase the cotton productivity, cotton quality and even branding of Indian cotton to fetch premium. In turn, such a move would increase the cotton farmers' income manifold.
- High Energy Cost Burdened with Cross Subsidy: The electricity prices for industry, with cross subsidy burden of about 15 per cent to 20 per cent and other factors, compare unfavorably in India. The electricity prices in India for industry are about 20 per cent higher in comparison to China (IEA, 2017). Given the fact that power cost accounts for somewhere about 13-15 percent of the sale value of textile products, incidence of cross subsidy works out to be about 2.5 percent-3 percent of export value of textile products. All such costs need to be identified and neutralized through WTO compatible mechanism.
- On the export front, the relatively higher tariff rates faced by Indian exporters in most major markets vis a vis exports from competing exports from Bangladesh, Vietnam and similarly positioned countries calls for further cost competitiveness, if the same is not addressed by trade policy measures. The challenge in this direction is to further simplify the ease of doing business and to remove disadvantage on account of input factors including logistics.
- Further, the World Trade Organization (WTO) ruling against India in a crucial trade dispute with the US, ordering all export promotion schemes to be stopped within the next four months has thrown a challenge to expeditiously come out with WTO consistent measures at the earliest.
- The export performance of textile and clothing products in major importing market especially with which India has preferential trade arrangement reveals discouraging performance. A partial explanation of such a scenario may lie with absence of competitive manufacturing capacities capable of delivering world class quality at desired scale and speed. Other contributing factors are tariff or non-tariff barriers placed by importing countries.
- The range of challenges for achieving cost competitiveness by the Man Made Fiber (MMF) downstream industry is also varied. Growth of MMF in India is a must to increase global share in T&C exports. The way the MMF industry develops in the near term will be strongly influencing the overall T&C industry and exports. This requires initiatives by industry, investments and required policy measures to facilitate its integration with textile value chain.
- The next 15 years can prove to be transformative for Indian textile industry. An invigorated textile and clothing industry is best suited and can give Indian economy necessary impetus to shift to more value added industrial activities and achieve higher per capita income level.
- India needs to work with an approach of holistic development of the complete textile value chain acknowledging its integration with global value chain at each stage. It is established that global cost competitiveness is the key to attract textile and clothing manufacturing in India. Some of the prominent reasons of high cost structure, which inhibited growth in the past and still persist that need to be addressed on priority.
- Therefore, focus on global cost competitiveness of each segment to benefit from textile and clothing manufacturing relocation wave taking place in Asia due to economic fundamentals and regional integration, is a must.
- Achieving 10-15 per cent share in world textile and clothing trade and thereby channelizing trickle down impact towards rural sector through cotton connection and shifting of disguised unemployed workforce in agriculture and allied sectors towards more productive usages in industrial activities, should be the utmost priority.
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