The year 2023 painted a picture of resilience and learning for the Indian textile industry. The tumultuous start to the financial year witnessed some relief in fragments, but the sunny days were short-lived. A similar scenario was observed in the global textile landscape, where the industry presented diverse trends throughout the year.
In Asia, China took centre stage with impressive performance. Meanwhile, retail sales in the Middle East swiftly accelerated in the second quarter, with profit margins surging by 5.5% on a year-on-year basis. In the U.S., retail sales followed an upward trajectory; however, the Japanese and UK markets faced a slowdown due to internal factors. Here in India, the retail industry experienced a cycle of ups and downs, marked by sporadic rises in demand and unexpected setbacks, set against the backdrop of the festive season and the wedding fervour.
The complex export dynamics
As per the Confederation of Indian Textile Industry (CITI), the export of Indian textiles surged massively by 24.29% in October 2023, while apparel exports receded by 8.08% during the same period. Cumulatively, the export of textiles and garments in the first seven months of FY24, at the end of October 2023, dropped by 6.67% compared to the same months of the previous fiscal year. The Indian textile industry has been grappling with this challenging period for over a year. Weaker global demand, coupled with the rising cost of living and economic instability in Russia, Ukraine, Turkey, Egypt, and the UK, has added to the complexity. In the Middle East, Turkey grapples with currency devaluation, while Egypt faces constraints related to the availability of USD. The UK is dealing with a similar challenging economic scenario, arising after both Brexit and the COVID-19 pandemic. Additionally, the ongoing war between Russia and Ukraine has led to unrest across the globe, thereby receding the global demand for textiles and garments.
The excessive dependence of the Indian textile market on cotton and the volatile cotton prices, attributed to the low yield of the cotton crop, has also adversely affected the production and export of textile products. For the fiscal year 2022-23, cotton production was limited to 31.89 million bales, resulting in the shutdown of numerous small-scale industries struggling to acquire raw materials due to shortages and high prices. The cotton production forecast for India in the fiscal year 2023-24 is equally alarming. It is anticipated that India’s cotton production for this fiscal year might be the lowest in the last 15 years, shrinking to just 29.51 million bales. However, the demand is expected to remain the same. If Indian mills continue to operate at a capacity range of 80-85%, the textile industries would require 31.1 million bales in FY23-24.
Additionally, the rising demand for Bangladesh-made textiles and garments across the globe has added to the woes. Bangladesh imports cheap raw materials from China and exports finished products to the EU and the US. Under the “least developed country” tag, no import tax is levied on any of its products, providing them a competitive advantage.
The stagnant domestic market
Even in the domestic market, the demand for textiles and garments remains stagnant for the first half of the fiscal year, deepening the industry’s challenges. Despite the industry shifting its focus to the domestic market due to low demand in the international arena, surging retail inflation has deterred people from spending on desired goods and services. Meanwhile, in Ludhiana, the hub of the hosiery and woollen garments industry, the transition from winter to summer production has impacted the utilization of knitting capacity. In the third quarter of the fiscal year, the sale of textile products did pick up due to the festive season. It is further expected to increase with the onset of the wedding season post-Diwali and the arrival of winter, heightening the activity in the market.
The imports plight
Worsening the matters, the garment imports from Bangladesh to India have also surged significantly by 57% in 22-23, reaching Rs. 2489 crore from Rs. 1576 crore in 21-22. This rising trend has put the domestic garment manufacturing industry at risk. The escalating pattern poses a threat for the domestic garment manufacturer, which is already reeling under pressure from decreased demand on the international platform. Furthermore, it might impact the livelihood of about 100 million workers employed in the textile and garment sector directly and through allied activities. That’s not it, the quantity of fabric imported from China has spiked in recent years. From 568 tons per day in the previous fiscal year to 887 tons per day in FY23-24, the number raises concerns about potential impacts on domestic production and trade dynamics.
The glimmer ray of hope among uncertainty
Though the first two-quarters of FY23-24 haven’t been gleeful, the third quarter presents a glimmer of hope for recovery amid uncertainty. The festive season, coupled with wedding fervour, may succeed in turning things around with increased consumer activity and a surge in shopping trends. While many apparel retailers and manufacturers are predicting a potential 25% dip in demand on the domestic front compared to the previous quarters, lowering prices could be a better strategy. Sprucing up offerings may allure consumers to open up their wallets and indulge in retail therapy. This may bring some short-term relief to the garment sector and spike sales in FY24. For sustained relief in the textile sector, it is time for the industry to work rigorously to diversify the portfolio and reduce dependency on cotton.
In the coming year, the demand for Man-made Fiber (MMF) is anticipated to surge amid evolving global fashion trends. This presents a perfect opportunity for India to capitalize and become a key player in meeting the escalating global demand for MMF. The Indian textile industry already excels in producing all types of synthetic fibers, including polyester, viscose, nylon, and acrylic. The textile industry just needs to make a little extra effort to overtake China, which currently leads the global market in the export of Man-made fibers. With the implementation of the Production Linked Incentive (PLI) scheme for producing man-made fiber and the creation of seven mega textile parks in the country, shifting the focus from cotton to MMF will become even more convenient. Higher factory productivity, digitalisation, and sustainability could be other crucial factors that may help India take over its competitors and dominate the textile and apparel market.
On the international front, the ‘China plus one Factor’ and the ongoing production disruption in Bangladesh due to production halt, and simmering political tension in the light of the upcoming polls in the country can also play a noteworthy role in India’s textile growth story.
