India’s textile industry has set its sights on a bold target: $100 billion in exports by 2030. Riding on a recent upswing in exports, particularly in apparel, the sector is urging the government to address key challenges to fully capitalize on global opportunities. As the nation prepares for Budget 2025, industry experts are advocating for strategic tweaks to quality control orders (QCOs) and proactive measures to overcome non-tariff barriers, maximizing the potential of existing and upcoming free trade agreements (FTAs).
Current Performance and Future Outlook
Indian textile and apparel exports increased by 6.93% between April and November 2024 compared to the same period in 2023. Apparel exports led this surge, registering an impressive 11.3% increase, driven by heightened demand in key markets like the USA and the EU. This positive momentum has fueled optimism for continued growth throughout the fiscal year. Currently, the world’s sixth-largest textile exporter, India’s T&A sector accounted for approximately 8% of the nation’s total exports in 2023-24.
However, uncertainty surrounding the continuation of crucial export incentive schemes, such as the Remission of Duties and Taxes on Exported Products (RoDTEP) for advance authorization (AA), special economic zones (SEZ), and export-oriented units (EOU), along with the fate of the Interest Equalisation Scheme beyond December 31, 2024, casts a shadow on future growth prospects.
QCOs: A Source of Contention
While Quality Control Orders (QCOs) are intended to elevate product quality by enforcing mandatory standards, their current implementation is causing concern within the industry. Unlike voluntary BIS standards, QCOs are compulsory, impacting manufacturers, importers, and sellers. The industry argues that focusing QCOs on raw materials like fibers and yarns, rather than finished goods, has created supply chain bottlenecks. Many overseas suppliers are still awaiting BIS certification, restricting access to crucial raw materials. Although exemptions exist for AA, SEZ, and EOU units, these only apply to physical exports, not intermediate supplies, impacting manufacturers of specialized downstream products reliant on imported materials. This situation risks a surge in imports of finished fabrics and garments, undercutting domestic manufacturers. Industry stakeholders are calling for a reassessment of the QCO policy and a comprehensive impact assessment before implementing further regulations, suggesting a top-down approach starting with finished garments.
Cost Competitiveness and Investment Incentives
The price of Indian fibres, including cotton and man-made fibres (MMF), remains 12% to 30% higher than those available to international competitors, eroding the cost-competitiveness of Indian garments and made-ups. The industry is urging the government to ensure access to raw materials at globally competitive prices by eliminating import duties on all cotton varieties and liberalizing MMF fibre import policies.
The discontinuation of the Technology Upgradation Fund Scheme (TUFS) has also created a vacuum in investment incentives, particularly for MSMEs, which form the backbone of the industry. The sector is advocating for the reintroduction of TUFS-like schemes with upfront capital subsidies and simplified procedures to stimulate capacity building and attract investment, especially in downstream segments.
Leveraging FTAs and Addressing Non-Tariff Barriers
Free Trade Agreements (FTAs) offer significant opportunities for the textile and apparel sector by providing tariff concessions, improved market access, and a level playing field. India’s recent trade agreements with key markets like the UAE, Australia, Mauritius, and the European Free Trade Association (EFTA) are welcome developments. The industry is particularly focused on finalizing the FTA with the EU, India’s second-largest export destination for T&A products.
Beyond tariffs, the industry emphasizes the need to address non-tariff barriers faced by Indian exporters. As both the EU/UK and India implement stringent quality measures, the industry proposes negotiating mutual recognition of testing and quality norms to further boost bilateral trade and streamline export processes. By addressing these critical issues, India’s textile industry believes it can confidently achieve its ambitious export targets and solidify its position as a global textile powerhouse.
