Of late, there has been some discussion over whether India’s garment exporters can grab a slice of the market vacated somewhat abruptly by Bangladesh, thanks to the political disruption there. As reported recently by this newspaper, there are at least two related factors holding up the prospect of any lasting spurt in India’s textiles and garments exports: the shortage of fabric and the fragmentation of the industry. Small units account for about 75 per cent of the $176 billion annual textiles sector output; exports of garments and textiles account for about $40 billion in a 2:3 ratio.
But first, the positive news. India’s garments exports, according to the Apparel Export Promotion Council, touched $8.7 billion in the first seven months of this fiscal, up 11.6 per cent over the like period in FY24, with October exports up 35.1 per cent at $1.2 billion. This has given rise to hopes that apparel exports might cross $16 billion in FY25, possibly breaching the FY18 record of $16.7 billion. The US, which accounts for a third of India’s garment exports has driven this spurt this fiscal, with India’s shipments to the US growing 11.5 per cent in the first half. Readymades’ exports to the UK, which makes up about 9 per cent of India’s apparel exports, were up 7 per cent as well.
But the sobering fact is that garment exports have bounced back after a 10.3 per cent fall in FY24; it touched $16.1 billion in FY23 in the wake of a post-Covid, pent-up boom. Bangladesh garment exports, at about $50 billion, are more than thrice India’s, making it the second largest exporter after China. Bangladesh does not have notable upstream capacities in the textiles value chain; but it has large garment capacities, unlike India -- giving it economies of scale as well as the ability to ramp up output at short notice. China is by far the world leader, with garment exports in the region of $170 billion, nearly a third of the global market.
Whatever optimists say, it is far-fetched to expect India to enhance its 5 per cent global share in the near future. The biggest problem faced by India’s garment sector is paucity of both cotton and synthetic fabric. This is because its MSME-dominated capacities are unable to convert yarn, cotton or synthetic, into reams of fabric of consistent quality for global markets. There is another problem: India’s production system is geared towards producing cotton garments, whereas world demand is driven by synthetics. A complicated and protectionist duty and tariff structure in synthetics has rendered India’s exports uncompetitive. As a result, India’s yarn is shipped out to fabric and textiles producers such as China and Vietnam. India can secure a competitive advantage only if it sorts out its lack of competitiveness in man-made fibres in particular. That could lead to creation of large downstream capacities. Recent incentives to create capacities are a step in the right direction, but these should be accompanied by a removal of age-old policy distortions.