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Textile Sector – Cotton, Jute, Wool, Silk, Handloom, etc.

Why is the textile industry struggling to perform better?

Explained | Economics | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth

Why in the News?

Union Minister announced the Indian textile sector’s $350 billion business target by 2030, aiming to generate 3.5 crore jobs, despite recent challenges affecting the projected 10% CAGR.

Present Status:

  • The Indian textile and apparel industry is currently valued at $153 billion (2021), contributing significantly to India’s GDP (2.3%) and manufacturing GVA (10.6%).
  • The industry employs around 105 million people and is highly dependent on global markets, with 80% of its capacity in MSMEs.
  • India was the third largest textile exporter in FY22, but faced a slowdown in FY23 and FY24, with significant drops in exports and domestic demand.

What caused the slump in the Indian textile sector in the last two financial years?

  • Geopolitical Tensions: Global geopolitical issues reduced demand in key export markets.
  • High Raw Material Prices: Cotton and Man-Made Fibre (MMF) prices surged, hurting competitiveness.
  • Import Duties: A 10% import duty on cotton made Indian cotton more expensive than global prices.
  • Supply Chain Disruptions: Quality control measures affected the availability and price stability of MMF, further straining production.

What are the other challenges?

  • Evolving Business Models: The rise of e-commerce and direct-to-consumer retailing is reshaping traditional business systems in the textile industry.
  • Sustainability Standards: Global brands are increasingly focusing on ESG (Environmental, Social, and Governance) criteria, forcing Indian manufacturers to adopt sustainable practices.
  • Changing Consumer Preferences: Growing demand for comfort wear, athleisure, and multi-brand outlets is shifting consumer behavior, impacting smaller or less-known brands.
  • Labour Costs and Productivity: Labour constitutes 10% of production costs, and the industry faces pressure to improve productivity through technology adoption and workforce skilling.

Way forward: 

  • Enhance Global Competitiveness: The government should consider reducing import duties on key raw materials like cotton and stabilize supply chains by aligning domestic prices with international markets, ensuring competitiveness in global exports.
  • Invest in Technology and Sustainability: The industry should focus on adopting advanced technologies to improve productivity and meet global ESG sustainability standards, while simultaneously upskilling the workforce to handle these technological advancements effectively.