Has Indian textile industry missed the bus? High input cost overshadows capacity, technology

The higher cost of raw material and manpower can prevent the Indian textile industry from making the most out of the opportunity.

Gujarat textile unit, solar power, Gujarat, textile industry
According to Gujarat-based power-loom operators, the cap of eight power-looms under the scheme was too low and it should be increased to at least sixty to encourage the use of solar energy. (Bloomberg image)

The paradigm shift driven by the ongoing trade war between the US and China has opened new opportunities for the Indian textile industry but the higher cost of raw material and manpower can prevent the industry from making the most out of this opportunity. “We have good capacity, we have better technology, but the drastic increase in cotton yarn prices in India and increased labor cost has made the Indian textiles less competitive in the world,” Sharad Kumar Saraf, President, Federation of Indian Export Organisations, told Financial Express Online. These problems are already informed to the Textile Ministry but no positive action has been taken so far, he added.

What is pulling down Indian textile industry?

  • Once the cheapest in the world, cotton yarn produced in India is now among the most expensive in the world due to a 28 per cent rise per year in the minimum support price. This has also led to Indian cotton exports falling to half in the month of June, Sharad Kumar Saraf added.
  • Duties and taxes are not being refunded in time. Faster processing of Rebate of State Levies (ROSL) has been requested from the government, but the support did not come, he further pointed out. 
  • Exports of textiles to the USA and Europe has primarily been dominated by the Chinese market over the years as almost half of the total textile exports to these regions are from China. Despite being the second largest manufacturer and exporter of textiles in the world, the share of India in the total global exports of textile and clothing to the US and Europe is only 8.3 per cent and 9.5 per cent respectively, according to the data provided in Lok Sabha.  
  • “India faces competition from countries like Bangladesh which have competitive manufacturing costs and enjoy duty-free access to major textiles and apparel markets like Europe. China and Vietnam’s textile industry has attained economies of scale, thereby giving competition to India’s textile industry globally,” said Textile Minister Smriti Irani in a reply to a query in Lok Sabha. 

Employment in the textile industry constitutes 18 per cent of the entire manufacturing industry. In 2016-17, around 1.5 crore persons were employed in the manufacturing sector, out of which around 27 lakh persons were employed in the textile industry, according to the data provided in Lok Sabha. The textile industry has the potential to boost employment as well as exports in the country.

The government has taken initiatives like Amended Technology Upgradation Fund Scheme (ATUFS), Scheme for Capacity Building in Textile Sector (SCBTS), PowerTex India, National Handloom Development Programme and National Handicrafts Development Programme, etc to make the Indian textile industry globally competitive, boost exports and facilitate modernisation thereby increasing employment and exports.


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