Outlook for textile sector looks promising post GST
Indian Textiles industry extends from the hand-woven sector on one end to the capital intensive mill sector on the other. The industry has inherent linkage with agriculture and with the culture & traditions of the country making for its versatile spread of products appropriate for both domestic and the export. The segments include the decentralized power looms, hosiery and knitting sectors; the handloom and handicrafts segments; as also the wide range of fibres which include man-made fibre, cotton, silk, jute and wool. The textile industry contributes 10% of manufacturing production, 2% of country’s GDP and 13% of the country’s export earnings.
The extensive range of the Indian textiles sector includes the Cotton segment, the Organized Textile Mills, the Man-Made Fibre and Filament Yarn Industry, Wool and Woollen Textiles, Sericulture and Silk Textiles, Power looms, Handlooms, Handicrafts, Jute and Jute Textiles, and Apparel & Garments. The size of India’s textile market in 2016 was around $137 billion, which is expected to touch $226 billion market by 2023, growing at a CAGR of 8.7% between 2009-23E. The textile industry is one of the largest sources of employment generation in the country with over 45 million people employed directly.
The government’s central focus has been on increasing textile manufacturing by building the best-in-class manufacturing infrastructure, up-gradation of technology keeping view with the goal of making India’s development inclusive and participative. The government has notified the Amended Technology Up-gradation Fund Scheme (A-TUFS) for technology up-gradation of the textiles industry with one time capital subsidy for eligible benchmarked machinery. Segments which have got higher employment and export potential such as Garmenting and Technical Textiles are eligible for Capital subsidy at the rate of 15% subject to a cap of Rs 30 crore. Segments such as Weaving for brand new Shuttle-Less Looms (including weaving preparatory and knitting), Processing, Jute, Silk and handlooms are eligible for subsidy at the rate of 10% subject to a cap of Rs 20 crore. Budget provision of Rs 17,822 crore has been approved for seven years from 2015-16 to 2021-22. The scheme will attract an investment of Rs 1 lakh crore and generate employment of 30.51 lakh.
Production of Man-made fibre, filament yarn, spun yarn and cloth
Man-made fibre production decreased by 3% and filament yarn production increased by 7% during April-May 2017-18 as compared to same period of the previous year. The production of cotton yarn decreased by 3% during April-May 2017-18. Blended and 100% non-cotton yarn production decreased by 2% during the year April-May 2017-18. Cloth production by mill sector decreased by about 5% during April-May 2017-18. The cloth production by decentralized sector decreased by 1% during April-May 2017-18 as compared to same period of the previous year. The total cloth production during April-May 2017-18 has also decreased by 2% compared to same period of the previous year.
The Indian textile industry is the second largest manufacturer and exporter in the world, second only to China. India’s textiles products, including handlooms and handicrafts, are exported to more than hundred countries. However, the USA and the EU, account for nearly half of India’s textiles and apparel exports. Other major export destinations include UAE, China, Bangladesh, Sri Lanka, Saudi Arabia, Republic of Korea, Turkey, Pakistan, Brazil, Hong-Kong, Canada and Egypt. The share of textile and apparel in India’s total exports stands at a significant 15%. India has a share of 5% of the global trade in textiles and apparel. It employs 4.5 crore people directly and another 6 crore people in allied sectors, including a large number of women and rural population.
Exports of Textiles and Apparel products including Handicrafts from India decreased to $40 billion during 2015-16 from $40.7 billion during 2014-15. However, its share in overall export basket of India increased from 13.6% in 2014-15 to 15% in 2015-16. In Rupee terms, the same was valued at Rs 2,58,041 crore and Rs 2,59,712 crore during 2014-15 and 2015-16 respectively. During 2014-15, Readymade Garments (RMG) accounted for almost 40% of the total textiles exports; while in 2015-16, the export of RMG increased to 42% of total textiles exports. The total textile and apparel exports during 2016-17 (April-Sept) period is valued at $18.7 billion with a share of 14% in India’s total export of $132 billion during the same period.
India is a major textile and apparel exporting country and exports are far in excess of imports. Majority of import takes place for re-export or for special requirements. The import of textiles and apparel products in India increased marginally from $3.1 billion during April-Sept 2015-16 to $3.4 billion during same time period of 2016-17. Import of textiles & apparel products in India marginally reduced from $6.1 billion during 2014-15 to $6 billion during 2015-16.
India’s textile sector dates back to several centuries and is even today one of the largest contributors to the country’s export with approximately 15% of total exports. The industry is labour intensive and is one of the largest employers. India enjoys a comparative advantage in terms of skilled manpower and in cost of production, relative to major textile producers on account of abundant availability of raw materials such as cotton, wool, silk and jute. The capacity built over years has led to low cost of production per unit in India’s textile industry. This has also provided a strong competitive advantage to the country’s textile exporters relative to key global peers. The country’s growing population and favorable demographics has been a key driver of textile consumption growth. Rising incomes has also been a key determinant of domestic demand for the sector. The implementation of GST has brought business to a standstill as unregistered suppliers and customers try to stay out of the ambit of the new tax regime, however, the positive impact of GST will be largely felt by companies engaged in manufacturing and/or dealing with fibre and yarn components. The retail segment has also experienced a rapid growth in the past decade with the entry of several international players which will further drive the growth of the industry.