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Textiles Sector Analysis Report 

[Key Points | Financial Year '19 | Prospects | Sector Do's and dont's]

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  • India’s textile industry is among the oldest industries in the country dating back several centuries. It is one of the largest contributors to the economy accounting for 4% of the GDP.
  • It is the second largest contributor towards employment generation, after agriculture, contributing 10% to the country’s manufacturing, owing to its labor-intensive nature.
  • The textile and apparel industry can be broadly divided into two segments-yarn and fiber, and processed fabrics and apparel. Increased penetration of organized retail, favorable demographics, and rising income levels are likely to drive demand for textiles.
  • The textiles and apparel industry constitutes 14% of the total exports of the country. India is the second largest producer and exporter of textiles after China and fourth largest producer and exporter of apparel after China, Bangladesh and Vietnam.
  • The Indian textiles industry is extremely varied, with the hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital intensive sophisticated mills sector at the other end of the spectrum. The decentralized power looms/ hosiery and knitting sector form the largest component of the textiles sector.
  • India's inflexible labor laws have been a hindrance to investments in this segment. Unlike in home textiles, garment capacities are highly fragmented and leading Indian textile companies have been slow to ramp up their apparel capacities, despite strong order flows from overseas buyers who are trying to diversify out of China.

How to Research the Textiles Sector (Key Points)

  • Supply
  • Despite some pick-up in demand from both global and domestic markets, most new capacities in the apparel and home textile segments are not operating at full capacities.
  • Demand
  • High for premium and branded products due to increasing per capita disposable income.
  • Barriers to entry
  • Superior technology, skilled and unskilled labor, distribution network, access to global customers.
  • Bargaining power of suppliers
  • Because of oversupply in the unorganized market like that of denim, suppliers have little bargaining power. However, premium products and branded players continue to garner higher margins.
  • Bargaining power of customers
  • Domestic customers - Low for premium and branded product segments. Global customers- High due to presence of alternate low cost sourcing destinations.
  • Competition
  • High. Very fragmented industry. Competition from other low cost producing nations is likely to intensify.

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Financial Year '19

  • In FY19, India's textile and apparel exports increased 1.7% to US$ 35.969 billion as compared to US$ 35.381 in FY18. Manmade garments remain the largest contributor to total textile and apparel exports from India.
  • Under Union Budget 2019-20, Government of India allocated around US$ 691.3 million for the Ministry of Textiles. Integrated Wool Development Programme has been allocated US$ 4.1 million under Union Budget 2019-20. The government has allocated US$ 2.9 million for the Scheme for Integrated Textile Parks.
  • The National Handloom Development Programme will get US$ 65.4 million and the Integrated Processing Development Scheme will get US$ 0.50 million. Khadi Express train will be run to create awareness about the Indian khadi.
  • In FY19, growth in private consumption is expected to create strong domestic demand for textiles.
  • Increased penetration of organised retail, favourable demographics, and rising income levels are likely to drive demand for textiles. Cloth production stood at 58.1 billion square metres (provisional) in FY19.
  • Exports of textiles and apparels from India reached US$ 31.7 billion in FY19. Manmade garments remain the largest contributor to total textile and apparels exports from India.

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Prospects:

  • The Ministry of Textiles is encouraging investments through increasing focus on schemes such as Technology Up-gradation Fund Scheme (TUFS). Under the Union Budget 2018-19, US$ 355.3 million crore have been allocated for TUFS and US$ 4.6 million for the Scheme for Integrated Textile Parks, under which there are 47 ongoing projects.
  • Textile and apparel exports from India are expected to increase to US$ 82 billion by 2021. The domestic textile industry in India is estimated to reach US$ 223 billion by 2021F from US$ 150 billion in November 2017, while cotton production in India is have reached 36.1 million bales in FY19.
  • India continues to be one of the fastest growing major economies in the world and is expected to be among the world’s top three economic powers in the next 10-15 years. The Indian economy is expected to improve and close the year 2019 with a GDP growth of 7.3% (Source: IMF).
  • The Ministry of Textiles announced US$ 106.6 million for setting up 21 readymade garment manufacturing units in seven states for development and modernization of Indian textile sector.
  • The textile and apparel trade is predicted to grow at a CAGR of 3.7% during the period 2018-28. During this period, the increase in apparel trade is expected to be at a CAGR of 4.5% and textiles at a CAGR of 2.5%.
  • The sector also has the capability to manufacture all categories of products and a conducive ecosystem to provide complete service offering to brands and retailers. However, the increasing labor and energy costs have mitigated the international competitive advantage of China to some extent. The global apparel manufacturers are finding Bangladesh, Vietnam and India as competitive markets over China.

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Related Links for Textiles Sector
Quarterly Results | Sector Quote | Over The Years

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