News Excerpt:
India’s garment exports in 2023-24 totaled $14.5 billion, down from $15 billion in 2013-14, according to a report by the Global Trade Research Initiative (GTRI).
Key Highlights of Report
- The report titled “How Complex Procedures, Import Restrictions and Domestic Interests Hinder India’s Garments Exports,” attributes this decline to high import duties on raw materials and cumbersome trade procedures, rather than the competitive strengths of other nations.
- Exporters struggle to obtain quality raw fabrics, especially synthetic fabrics, while competitors like Bangladesh and Vietnam do not face these issues.
- This situation forces exporters to use costly domestic supplies, making Indian garments overpriced and less attractive to global buyers who prefer specific fabric sources.
- Additionally, outdated procedures from the Directorate General of Foreign Trade and Customs require exporters to meticulously track every square centimetre of imported fabric and components, ensuring they are used in production and accurately reflected in export descriptions.
- While India's garment exports have stagnated, Vietnam's exports grew by nearly 82% to $33.4 billion and Bangladesh's by nearly 70% to $43.8 billion over the same period.
- In contrast, China's garment exports stood at about $114 billion in 2023, though this is nearly 25% lower than a decade ago.
- The report also points to a rise in India’s garment and textile imports, which reached nearly $9.2 billion in 2023.
Way Forward:
- The report calls for a comprehensive overhaul of these procedures to improve the current state of garment exports.
- Production Linked Incentive (PLI) scheme for textiles launched in 2021 has not attracted significant investor interest and requires major changes to be effective.
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Production Linked Incentive (PLI) Scheme for Textiles
- Government Approved PLI Scheme for Textiles in 2021.
- In this scheme incentives worth ₹10,683 crore was allocated to boost industry over the next five years.
- This scheme is expected to have a significant positive impact, particularly in states like Gujarat, Uttar Pradesh, Maharashtra, Tamil Nadu, Punjab, Andhra Pradesh, Telangana, and Odisha.
- This initiative will significantly boost the high-value man-made fiber (MMF) fabric, complementing the efforts of the cotton and other natural fiber-based textiles industries in generating new employment and trade opportunities.
- Currently, MMF fabrics, apparel, and technical textiles account for about two-thirds of international trade in textiles. The PLI scheme aims to increase India's share in these segments.
Two-Part Scheme
- The PLI scheme is divided into two parts, with different investment and turnover criteria.
- The first part requires a minimum investment of ₹100 crore and a minimum turnover of ₹200 crore,
- While the second part requires a minimum investment of ₹300 crore and a minimum turnover of ₹400 crore.
- Entities opting for higher investment and turnover criteria will receive higher incentives.
- There have been “shortfalls” in progress under PLI schemes for textile products with regard to targets of investment.
Factors Hindering PLI Adoption in Textiles
- Complex Application Process - The application process for the PLI scheme is very complicated and takes a long time to get approved, making it especially difficult for smaller companies.
- Strict Eligibility Criteria: High investment requirements and post-pandemic uncertainties have discouraged potential investors who are unsure about getting good returns.
- Unclear Incentive Structure: Confusion about how incentives are calculated and given out has created uncertainty, leading to delays in investment decisions.
- Infrastructure Problems: Power shortages, logistics issues, and high import duties on raw materials have increased production costs, making the PLI benefits less attractive.
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Some Fact About Textile Industry
- India's textile industry, valued at USD 250 billion, employs 50 million people and spans three broad categories: Textiles (fibre, yarn, and fabrics); Garments; and Made-ups (bed sheets, curtains, etc.).
- India participates across all parts of the value chain.
- In 2023, China led the world in garment exports with USD 114 billion, followed by the EU (USD 94.4 billion), Vietnam (USD 81.6 billion), Bangladesh (USD 43.8 billion), and India with USD 14.5 billion.
- From 2013 to 2023, Bangladesh's garment exports grew by 69.6%, Vietnam's by 81.6%, and India's by only 4.6%.
- India's global market share in garment trade declined between 2015 and 2022.
- The share of knitted apparel dropped from 3.85% to 3.10%, and non-knitted apparel decreased from 4.6% to 3.7%.
- Additionally, garment imports in India surged by 47.90%, from USD 1.06 billion in 2018 to USD 1.56 billion in 2023.
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