India’s Textile Crisis amid Rising MMF Fabric Imports

Central Idea

Major textile hubs in India, including Ludhiana, Surat, and Erode, are grappling with the surge in imports of man-made fibre (MMF) fabrics, impacting a sector worth about $60 billion.
Fabric processors and weavers across these hubs express concerns over the influx of cheaper imports, primarily from China, affecting their businesses.

Market Dominance: Imported fabrics, especially from China, are increasingly found in Indian markets, leading to unsold stocks and production cuts by local weavers.
Price Disparity: Indian weavers face competition from cheaper imported yarns, compelling them to import materials like viscose yarn from China to remain competitive.

Doubling of Imports: In the last three years, MMF fabric imports have doubled, with a significant portion being knitted synthetic fabrics.
Import Data: Daily imports from China increased from 325 tonnes in 2019-2020 to 887 tonnes in the April-June quarter of the current fiscal year, with a notable drop in average value per kg.

Under-Invoicing Concerns: The practice of under-invoicing imported finished fabrics poses a major challenge, leading to calls for stricter customs regulations.
Quality Control Orders (QCOs): The government’s introduction of QCOs on MMF fibres and products, requiring BIS certification, has impacted the entire value chain.

Operational Capacity: The downstream industry is reportedly operating at only 70% capacity due to these challenges.
Export Decline: Exports of man-made yarn, fabrics, and made-ups have seen a year-on-year decline.
Global MMF Trade: India’s share in global MMF trade was 2.7% in 2019, with fabrics and yarn being major export components.

Innovation Gap: Industry experts highlight a lack of innovation in MMF products in India compared to countries like China, Thailand, and Korea.
Impact of QCOs: The introduction of QCOs, particularly at the fibre stage, is criticized for disrupting the industry, with calls for implementing quality controls at the garment stage instead.
Challenges for MSMEs: Small and medium enterprises face financial strain due to declining orders, high prices, and increased operational costs.
GST Issues and Financial Relief Demands
- GST Refund Delays: The introduction of GST led to higher taxes on MMF fibre and yarn, with delayed refunds causing financial burdens for weavers.
- Refund Controversy: Weavers contend that they are owed significant refunds due to the inverted duty structure, with the government potentially owing around ₹1,000 crore to the sector.

Need for Strategic Measures: Addressing the challenges in India’s textile industry requires a balanced approach, considering both domestic capabilities and global market dynamics.
Government’s Role: Effective policy measures, including rationalizing import duties and quality controls, are essential to support the industry and enhance its competitiveness.
Future Outlook: The textile sector’s resilience and adaptability will be key in overcoming these challenges and capitalizing on potential opportunities in the global market.