The Bangladesh crisis has hugely impacted the Indian Textile Industry especially exports of fibre, yarn and fabrics (cotton and MMF Made). But the most worrying aspect is payments for supplies already made. The opening of letters of credit – the usual mode for receiving such payments has proved unworkable. This is because Bangladesh bankers in India are reluctant to honour the LCS. This has led to financial uncertainty and losing growing business in Bangladesh, a key market for our textile items. The alternative is to resort to export on “collection Basis” if the LCS are continuously discouraged. But this mode can be employed only by mills which have adequate funds to meet the cost of manufacture and export of goods for which orders have been placed by Bangladesh importers. The Central Governments immediate intervention is called for to set right matters.
Furthermore for any delay in payment by foreign buyers, which does not form part of that price of exporters of the exported commodity leading to working capital stress and reduction in the margin say industry sources. It is in this context textile industry leader’s request to the central government assumes importance. They want the banks in India to continue the practice of discounting bills and initiate a dialogue with the Bangladesh government to issue an advisory to its importers to settle the LC payments within a prescribed time. The domestic industry is apprehensive of cancellation of export orders being diverted to the domestic market that will only lead to a significant drop in prices due to excess capacity.
Bangladesh textile industry has resumed production but it will take quite same time to achieve normal levels, which is likely to disrupt our exports for some time. It is known that Bangladesh’s garment exports are over three times those of India. Our exports have been stagnating for the past few years. After reaching dollar 16 million 10 years ago, these exports are now around dollar 15 billion.
According to projections made by Southern India Mills Association (SIMA), India’s textiles and apparel exports are to touch a level of 100 bn by 2030 up from $65 bn in 2025. From 2010 exports climbed from $29 bn to $34 bn. A decline to $31 bn is forecast for 2020 which is to rise to $13 bn in 2021. Of the $85 bn, the share of apparel to set the reach $45 bn by 2030, rising from $12 bn in 2020 to $16 bn in 2021 to $28 bn in 2023. The rest is accounted for textile items. The domestic market is projected to increase from $80 bn in 2020 to $110 bn in 2021 to $165 bn in 2025 and to 250 bn in 2030. Of the $250 bn, apparel is to account for $55 bn and to increase to $80 bn in 2021, $120 bn n 2025 and $180 bn in 2030. The increase has taken into account China’s exports which may be constrained in future.
Beating global head-winds, Tamil Nadu’s textiles and readymade garment exports rose to $1.3 bn in April – June 2024 up from $1.17 bn in 2023. Exports of cotton yarn / fibrics stood at $0.5 bn same as in April – June 2023. The performance is praiseworthy. These two items constitute the top five exportable commodities. Tamil Nadu’s total exports increased from $10.5 bn to $12bn in this period reveal data compiled by NIRYAT. While the going is good for the state, its export run is heavily dependent on top five products. Apart from textiles and readymade and cotton yarn / fabrics, the other items are engineering goods electronics, petroleum goods and leather goods. The top five products accounted for almost 43 percent of the states total exports. Gujarat occupied the first position in exports followed by Maharashtra and Karnataka in the fourth position.
Amidst the crisis in Bangladesh an encouraging development that is to happen is that 30 – 40 Indian garment units in Bangladesh are likely to shift part of their production to India after normalcy is restored. Bangladesh depends or India for supplies of yarn and fabrics. This has been corroborated by Raymond CMD Gautam Singhania. He expects a large chunk of garment manufacturing units moving to India in the coming years due to the political turmoil in Bangladesh. He believes his company is ready to tap into the opportunities with investment it had made to supply to global players.
“We sell fabrics to Bangladesh, all that business is coming back here (India) after the crisis. Once the business shifts to India, it won’t go back. They don’t have a fabric base you will succeed when you are integrated. Today the ball has been thrown, we have to catch it”, he said. Raymond had invested around Rs.200 cr to expand its manufacturing capacity, which Singhania expects to come in handy, given that the company is already supplying to large buyers.
He said “We are the third largest garment manufacturer in the world. We do 10 mn pieces a year. Two Chinese players are bigger, they have higher volumes, but they sell cheaper stuff. Today all the marque customers are with us. For example, Huge Boss, CK, Macy’s, & JC Penney. Out of Rs.7000 cr revenue Rs.1200 cr will come from there, 95 percent of that is exports”.
Raymond has ruled out a re-entry into India for womenswear. It is however seeking to expand its portfolio with sleep wear, inner wear and bolstering Ethnic. It is as difficult for me (as it is) to make cement and steel” he said. We did a market survey which showed that the male took very strong objection to Raymonds extending it to womens wear he said.
While some in the garment sector say overseas buyers have already begun scouting for potential manufacturer in Tirupur. Others say the complete picture of the impact on the global textile supply chain would emerge only after few days. Vietnam, the second largest exporter of textile goods after China has posed a serious threat to the Indian garment industry. Due to lower production cost, aided by government sops and cheap labour, Bangladesh had been flooding the Indian domestic market, posing a challenge to local manufacturers. Labour laws are more flexible in Bangladesh.
“These have helped Bangladesh to attract investment from India and other countries into its garment industry. Production is perhaps the most labour intensive sector globally and there afore lower wages and flexible labour laws are important factors for the investor, say DK Nair, a textiles expert and former Secretary General of the Confederation of Indian Textile Industry (CITI).
Nair wants the government to create proper eco system to attract higher investments through helpful and predicable policy inputs. Periodically tampering with the import policy for raw materials, especially fibres, is a case in point. Both cotton and MMF imports have been facing tariff as well as non-tariff barriers and such measures do not inspire large investment to capacity building in our textile sector.