International Observation: The Development Of Indian Textile Industry Is In A Difficult Situation, And The Optimistic Attitude Nearly Collapses

Ravi Kishore, former chairman of the Apparel Export Promotion Council, said India's loose textile supply chain has raised transport costs between end-to-end and thus extended production and delivery times, making it difficult for the country's textile industry to open a gap with countries such as Bangladesh and Vietnam.

According to industry insiders, it takes 90 to 120 days for an Indian manufacturer to complete 20000 to 30000 orders; In contrast, Bangladesh and Vietnam have more intensive supply chains, with the same number of orders completed in 14 to 21 days. H & M, for example, is one of the customers of chaiti group in Bangladesh, which has about 5000 machines, but only 300 to 500 machines rumble at factories in Delhi, Punjab or tiruba in India.

According to the recent statistical report of WTO, Vietnam and Bangladesh are second only to China in textile export volume, while India ranks fifth. According to the data of the Ministry of Commerce of India, from 2020 to 2021, India's textile export volume decreased by 20%, and the scale of income generation dropped to 29 billion US dollars.

At the same time, according to Wazir advisors, India's domestic textile market has shrunk by 30% and the overall size has dropped to $75 billion. By 2026, the market is expected to grow to $190 billion. The textile industry accounts for about 3% of India's GDP, 7% of industrial output, 12% of export revenue and 45 million jobs.

In order to stimulate export growth, the government announced a production linked incentive plan (PLI) of about 100 billion rupees in September last year to increase the production of man-made fibers such as polyester and textiles such as sportswear, fishing nets and disposable surgical supplies. According to the plan, manufacturers only need to invest 1 billion rupees to 3 billion rupees, and there is a good chance that they can obtain revenue about twice as much as the investment.

However, the views of manufacturers are relatively less optimistic for two reasons

First of all, the plan only covers man-made fibers and technical textiles, and the market share of clothing category is as high as 73%, and even some important man-made textile categories are not covered;

Second, as shujaul Rehman, chief executive of Garware, a high-tech fiber manufacturer, says, the financial threshold for the government support program is daunting.

"Some of these indicators do not apply to the machine textile industry. The threshold of 1 billion rupees for investment is relatively high, and it is not easy to achieve a value-added target of 25% to 60%. It is difficult to achieve the desired input and output unless our manufacturing enterprises move into new areas and gain more market share," he said

As one of India's more famous machine textile manufacturers, Garware's revenue in the 2021 fiscal year has just broken through the 1 billion rupees mark. It can be seen that even with the support of relevant government programs, the top manufacturing enterprises in the market also need to make a lot of efforts in order to return to their original cost. For the industry as a whole, it will be difficult to deal with it easily.

At the same time, the second support measure announced by the Indian government seems more sincere. The plan aims to build seven large-scale integrated textile parks across India, each of which will be equipped with modern industrial infrastructure and bring all key links of the commercial value chain together to reduce production cycle and logistics costs.

But then, it is still the doubts of the industry. Since the implementation of the last similar plan, entrepreneurs have seen "rise and fall of buildings" in the past 12 years, and the effect is mediocre. They said that even if the industrial park and PLI plan can be carried out as scheduled, they still can not solve the two essential pain points that the industry has to face: the scarcity of labor resources and the lack of trade agreements between India and Europe and the United States.

#I can't scratch the pain point

In 2005, India launched the integrated textile park program (SITP) to promote the development of the textile industry. In 2017, a government commissioned report released by Wazir advisors showed that the functions of these industrial parks did not meet the initial expectations because manufacturers generally believed that they had no reason to relocate their factories.

These industrial parks are far away from cities and towns, so it is difficult to find enough labor resources. In addition, the international footprint of such industrial parks exceeds 150 acres. In India, only five approved industrial parks have such scale. Most industrial parks are less than 75 acres.

Upendra Prasad Singh, India's textile minister, said: "so far, site selection has not been decided, but there are 10 to 12 states showing import demand. First, a minimum of 1000 acres of land needs to be identified, and other important factors should also be carefully considered, such as the availability of raw materials, electricity and water resources, as well as national labor laws and industrial policies." At the same time, he also refused to disclose the relevant schedule for the construction of the industrial park.

The success of textile park needs four fulcrums - labor force, machinery, raw materials and marketing. The lack of effective marketing and skilled labor force are the two main reasons for the failure of early industrial park construction. But the new plan still does not mention the corresponding solution, which is confusing for a moment.

The key to reduce the labor intensity of textile industry is to promote machine automation. Manufacturers say it also means that a large number of workers face unemployment, so the head of the Union has been opposing the upgrading of key technologies. Indian manufacturers, on the other hand, believe that the government needs to reform labor laws to strike a delicate balance. However, at present, the construction plan and PLI plan of India's integrated textile park have failed to touch the above pain points, which belongs to the itching for a long time and also failed to scratch the right position.

#Code conflict

Pli is currently only applicable to technical and man-made textiles. Piyush Goyal, India's textile minister, said at a recent press conference that although India is mainly focused on cotton textile production, man-made and technical textiles account for about two-thirds of Global trade.

Pli plan will make Indian enterprises in the forefront of the global industry.

At the same time, HSN (unified naming system) is a globally recognized 6-digit code, which can classify more than 5000 products. Shujaul pointed out that many of the products made from these textiles, such as sportswear, knitted shirts and woven tops, are not covered by the HSN specification planned by the government, so they are not eligible for entry. In fact, the plan does not even seem likely to boost exports of technical textiles. S.N. modani, general manager and CEO of Sangam group, said: "the government has adopted 40 HSN codes with less than 5% export, and relevant associations have submitted feedback to the government on this."

While the Indian government is collecting entrepreneurs' advice, PLI does not mean full democracy either. Anil peshawari, general manager of MEENU creation, said: "PLI programs will not directly benefit small and medium-sized enterprises, especially garment export companies in India. The benefits of these programs are based on enterprise investment, and the investment threshold needs to be more than 1 billion rupees. The clothing industry will not invest so much money in plants and machines. Therefore, it is difficult for us to be a participant in PLI program." He added that the investment threshold of 250 million rupees is likely to appeal to small and medium-sized enterprises. A recent report from CII and Kearney, a global management consulting firm, suggests that PLI should extend its support to fabrics and garments made from natural products, so as to truly benefit the majority of manufacturing enterprises.

#Create new needs

The economic rise of Bangladesh and Vietnam as export centers is not only because of their short production time and technological progress, but also because they have signed free trade agreements (FTA) and preferential trade agreements (PTAs) with European countries.

"If we sign a free trade agreement with Europe, the export volume will double. Bangladesh has reached a free trade agreement with Europe in the past 10 years, so it has also obtained a certain scale of clothing export growth."

At the same time, the lack of such agreements also increases the cost of landing for importers. "India's exports to Europe are 9% more expensive than similar products made in Bangladesh. So a lot of orders go to Bangladesh. And we, India, are more competitive in terms of price and delivery. When buyers are willing to move this 9% to land costs, we get rid of the disadvantage."

Industry insiders say it is crucial for India to sign free trade agreements with the United States, the United Kingdom, Europe, Australia and Canada.

At the same time of creating new overseas demand, the textile industry also urgently needs technological upgrading.

India still relies mainly on imports to solve the problem of equipment and technology upgrading. The government can also consider reducing import tariffs to make it more competitive. Industry executives say the government should also support labor training, which will also reduce resistance to workers learning technology.

For India's textile industry development difficulties, the Indian government can be said to provide solutions. The key to guide the development direction of the industry lies not only in the foresight of the superstructure, but also in listening to the real needs of people in the industry at the grass-roots level. Only in this way can we accurately strike at the existing pain points and solve the "itch of development".