Despite the US trade war with China, which led to a significant shift in global apparel sourcing, India has failed to capitalise on the opportunity, as revealed by a recent study by the US International Trade Commission (USITC).
While China’s dominance in the US apparel market has declined, Vietnam and Bangladesh have emerged as the primary beneficiaries of this shift. Vietnam’s share of US apparel imports surged by 7.8 percentage points, while Bangladesh’s share increased by 3 per cent between 2013 and 2023. In contrast, India’s share grew by a modest 1.8 per cent.
The USITC report highlights several factors hindering India’s competitiveness in the global apparel market:
- Higher Costs: India is perceived as a relatively expensive sourcing destination compared to regional competitors.
- Scale and Efficiency Challenges: The predominance of Micro, Small, and Medium Enterprises (MSMEs) in India’s textile industry limits economies of scale and efficient production.
- Domestic Market Dominance: The large domestic market reduces the incentive for Indian firms to focus on exports, as it is often more profitable to cater to domestic demand.
- Logistics and Transit Time Concerns: Long transit times to the US market add to costs and hinder timely deliveries.
While India remains the US’s fifth-largest apparel supplier, its potential remains untapped. To fully leverage the opportunities presented by the shifting global trade landscape, India must address these challenges and implement strategic reforms to enhance its competitiveness in the global apparel market.
Key takeaways from the USITC report:
- China’s share of US apparel imports declined significantly.
- Vietnam and Bangladesh emerged as major beneficiaries of the shift.
- India’s share increased modestly, hindered by cost and efficiency issues.
- The US remains India’s top export market for apparel.
