An article published in the recent RBI bulletin has rightfully taken note of ‘stagnation’ in India’s apparel and textile exports in recent years, attributing it to tariff concessions enjoyed by countries like Bangladesh, Vietnam, and Cambodia. The article further builds a case for India to aggressively pursue Free Trade Agreements (FTAs) with major destination markets, including the US and the EU, to overcome the stagnation and increase the apparel shipments.
The recommendation is timely. India’s apparel and textiles sector has historically enjoyed a competitive advantage around the world. It has also regularly contributed more than 10 percent to the country’s overall exports pie – the share was 11.34 percent in 2019-20 – and its continuous growth is key to realizing our stated goal to ‘make in India for the world’. And yet, India’s share in global apparel exports has stagnated at 3-4 percent over the last decade.
In September, Union Commerce and Textiles Minister Piyush Goyal set a lofty goal for the industry to increase the textile exports from $33 billion currently to $100 billion at the earliest. To put that figure in perspective, India’s overall exports for 2019 stood at $330 billion. For the ongoing fiscal, the minister has set a goal of reaching a total of $44 billion worth of exports for textiles and attire, together with handicrafts.
Achieving such ambitious targets needs driving forward significant structural changes at the industry level as well in government policy. Much as signing FTAs for tariff concessions is an important intervention almost deemed necessary – a report by Crisil echoed this demand a few months ago – there are a handful of other factors needlessly constraining the sector’s growth that we also need to address immediately.
The first obvious limitation is the heavily fragmented nature of Indian textile and apparel production facilities. There are very few large-scale mills and sewing houses, and then there is a huge population of micro or small-sized units. Our policymakers need to prioritize addressing this gap and set a target to raise a substantial number of small-sized units to midsize. Two recently launched schemes – the Production-Linked Incentives (PLI) scheme for textiles, and the PM-MITRA (Mega Integrated Textile Region and Apparel) parks scheme, under which seven integrated textile parks are to be set up in the country, are steps in the right direction.
