India is the world’s sixth largest textile and apparel exporter having an 11.4 per cent share in India’s overall exports. The government aims to achieve $600 billion of textile exports by 2047 from $44 billion in FY22. However, this one’s a bumpy road for the Modi government. Will Budget 2024 be able to push the sector towards its goals?
India also aims for the domestic market to grow to $1.8 trillion from $110 billion in 2022 owing to a rise in e-commerce and fast fashion. Furthermore, the domestic market is seen growing to $250 billion by 2030 and exports to $100 billion.
Global exports of textiles and apparel has grown at a compound annual growth rate of 3.4 per cent in 2018- 2022 but India’s exports during this period have grown around 1 per cent only. Geo-political uncertainties, consumption shift to other essential and discretionary spends, adverse demographics, and low overall growth of this segment have led to this slow growth.
Textiles sector stained by a few key issues
The ongoing Russia-Ukraine war, the Red Sea crisis and the Israel-Hamas conflict, have lately made the international trade scenario much tougher for the Indian exporters.
In a report published by CRISIL in February this year, it was noted that the textiles industry is unlikely to be significantly impacted by the Red Sea crisis. However, a prolonged crisis is likely to dent margins and stretch the working capital cycle, it had said.
Also Read: How Sitharaman can steer the trade ship amidst two wars and Red Sea crisis to achieve $2 tn export goal
It is worth to note that the higher freight cost due to the Houthi disruption maybe a hindrance for textile exporters with a lot of trade happening through the Suez Canal. The freight rates increased by nearly 40-50 per cent, as per a TOI report.
Additionally, a global ‘weak demand’ in textiles is another worrisome factor for the industry. The May 2024 ITMF Global Textile Industry Survey (GTIS) revealed a continued stagnation in the textile business climate and that a weak demand remains the main concern since September 2022.
Inefficiency in PLI
The government, in 2021, had approved the Rs 10,683 crore PLI scheme for textiles for five years to promote the production of man-made fibre apparel, fabrics and products of technical textiles.
The scheme has two parts: Part-1 promotes a minimum investment of Rs 300 crore and minimum turnover of Rs 600 crore per company and the second part envisages a minimum investment of Rs 100 crore and minimum turnover of Rs.200 crore per company.
“As per Quarterly Review Reports (QRRs) as on 30.09.2023, the eligible investment made under the Scheme was Rs 2,119 crore of 30 selected applicants, out of which 12 selected applicants started commercial production, turnover achieved was Rs 520 crore including export of Rs 81 crore and employment generated was 8,214,” the government in December 2023.
In a recent PLI review meeting, it was noted that the progress as part of the government’s glagship scehem has been slower than anticipated in the textiles sector.
What the budget can do for the textiles sector
With the forthcoming budget, the industry may expect the government to address certain key issues and provide measures from finance minister Nirmala Sitharaman.
Primarily, Modi & Co can provide higher fund allocation to MSME which are 80 per cent of the textile market.
Further, an extension of the PLI scheme for garments sector, which the government is already mulling, may take shape.
Earlier on June 25, Textiles Minister Giriraj Singh said the government is now considering to extend the scheme to the garments sector with a view to boost domestic manufacturing and exports.
Singh said that huge opportunities are there to increase exports and the industry should target $50 billion worth of shipments in the coming years.
The ministry is also looking at reviving Scheme for Integrated Textile Parks (SITP), which aims to create new parks of international standards. Under the scheme 54 textile parks were sanctioned.
