Texturing a revival

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SummarySME norms have become imperative if India wants to double textile exports to $64 billion by the end of 12th Plan.

Once a major driver of India's growth, the textile sector has been witnessing a tumultuous time in the past decade with countries such as China, Bangladesh and even Vietnam throwing a stiff competition in the global arena. While China trebled its market share to 33% between 2000 and 2012, India's share crept up to 5.3% from 3.6%. A host of reasons including high borrowing costs, rigid labour laws, inadequate infrastructure and slow modernisation may have eroded India's competitiveness and held back growth of the sector. While domestic firms are wary of scaling up their capacities, foreign investment into the sector has also been sluggish.

The tide seems to turn in favour of India after a 20% fall in the rupee value against the dollar in the last 12 months as it helped textiles exports script a 13% yoy jump in first half of FY14 as against a 9% decline during FY13. Rising wages in China coupled with appreciation of the yuan and a less severe currency depreciation in Bangladesh and Vietnam turned the fortunes for Indian textiles firms. In fact, textiles firms are scrambling to meet overseas orders under the present capacity and are on a hiring spree. During Q1, the textile sector hired the most increasing bench strength by 88,000, compared to other labour intensive sectors such as auto, gems and jewellery and IT/BPO sectors. Even in FY13, textiles accounted for more than a third of job creation hiring 1.4 lakh workers. Even this could fall short of meeting the demand. The textile industry has urged government to relax labour laws and is eager to hire unskilled labourers at twice the benefit that government offers under NREGA.

While the advantage of a sharp currency depreciation will start waning in coming months as the economy gathers steam and CAD is reined in, reforms including relaxation in labour laws and changing SME norms have become imperative if India wants to double textile exports to $64 billion by the end of 12th Plan.

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