Foreign news on July 23, India’s share of global cotton yarn exports dropped from 29% in 2015 to 23% in 2020. In the field of ready-made garments, its share It has been stagnant at 3-4% for the past 10 years. The lack of free trade agreements (FTAs) and significant improvements in competitiveness among peers are the main reasons for this year’s decline. The textile industry is very important to India’s US$313 billion in merchandise exports, accounting for 11% of India’s total exports.
Given its economic importance, the industry has recently seen a series of government measures, including textile parks announced in the 2021/22 budget, and production-linked incentives. (PLI) program to the industry.
While these are steps in the right direction, CRISIL Research’s analysis shows that more needs to be done to address these issues and stimulate recovery. In terms of cotton yarn, India’s market share has been taken away by Vietnam and China in the past 10 years due to high costs, intensified competition, and no free trade agreement. In readymade garments, India maintained a good share despite contraction in global trade.
But competitors such as Vietnam and Bangladesh have performed much better – they have taken advantage of India’s declining share over the past five fiscal years. In addition, Indian textile companies were pushed to the edge in 2020 as the Indian government reduced export incentives in compliance with World Trade Organization guidelines.
CRISIL Research does not expect that the launch of the tariff reduction scheme for export products aimed at reducing the tax burden on exporting entities will not lead to any significant improvement in incentives. However, to revive the textile value chain, the government has announced additional structural reforms, the impact of which needs to be assessed. The recently announced PLI scheme for man-made fibers and technical textiles is expected to boost the export potential of man-made fiber-based readymade garments, where India’s share has been low.
Along with the integrated textile park scheme, the PLI scheme, if implemented properly, may help the industry increase its export share in the medium to long term. Continued support in trade negotiations, however, may require more investment in larger-scale infrastructure improvements. India is well-positioned as China faces a global political backlash, but taking advantage of the opportunity will require sustained and concerted efforts.
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