Regaining India’s position in global textiles trade through PLI scheme for MMF & Technical Textiles

Through the years, global exports in Textiles & Apparels (T&A) have increased from around $768 billion in 2015 to around $818 billion in 2019. In 2019, China ranks highest as the world’s top exporter of T&A with a share of around 32 percent altogether world exports of T&A accompanied by Bangladesh (5.twenty five percent), Vietnam (4.82 percent), Germany (4.67 percent), Italy (4.4 percent) and India (4.34 percent), etc.

Globally, while China remains the most dominant player by a broad margin in both textiles and apparels, India has been beaten by both Vietnam and Bangladesh in recent years in apparel exports. It really is interesting to note that economies such as Bangladesh and Vietnam have already been able to increase their share in global T&A exports.

In the case of Bangladesh, the share in global exports of T&A has increased at a CAGR of 10.95 percent from 3.69 percent in 2015 to 5.25 percent in 2019. While for Vietnam, the share in global exports of T&A has increased at a CAGR of 9.66 percent from 3.55 percent to 4.82 percent during the same period.

Alternatively, India ranks 6th in the very best 10 world exporters of T&A and has witnessed a decline in its share in global exports of T&A from 4.84 percent in 2015 to 4.34 percent in 2018 at a CAGR of (-) 1.14 percent (Trade Map, 2019). Also, the share of the textiles sector in India’s overall merchandise exports has been sliding consistently in recent years, having dropped from as much as 13.7 percent in FY2016 to just 10.8 percent in FY2020.

Moreover, India’s textiles sector has been unable to increase its share in global T&A exports due to structural disabilities majorly impeding its growth. The sector presently is plagued with too little scale in manufacturing, a low degree of investments, slowstagnant export growth, insufficient focus on R&D, credit availability, market accessibility, inadequate infrastructure facilities, etc.

Furthermore, fibre orientation in India is skewed towards cotton while global sourcing is Man-Made Fibre (MMF) based. Therefore, while the world is moving towards MMF based apparels in overall exports (~50 percent), India’s share of the same is quite low around 20 percent. Currently, MMF dominates global textile fibre consumption with 72:28 ratio-MMF 72 percent and natural fibre 28 percent, whereas domestic fibre consumption ratio in India at the moment is 40:60 -MMF 40 percent and natural fibre 60 percent.

In a bid to improve local manufacturing and exports and shore up job creation, the federal government has announced the Production Linked Incentive (PLI) Scheme for the sector with budgetary support of Rs 10,683 crores over an interval of five years. The Focus Product Incentive Scheme (FPIS) beneath the ambit of the PLI Scheme is currently under process by the federal government and would provide financial incentives to both greenfield and brownfield investments.

According to various reports, it really is expected that the scheme may cover approximately the most notable 40 product categories under MMF and 10 in the technical textiles segment, where India’s share in exports of such products is extremely lower in the international market.

It's been observed that world exports in the top 40 traded MMF apparel lines (where India’s share in global exports is significantly less than 5 percent in each line) stand at $133.90 billion in 2019. India’s total share in global export of these top 40 traded lines stands at less than 1 percent when compared with a significant share of 40 percent of China followed by Vietnam (10 percent), Bangladesh (6 percent) and Germany (5 percent).

Also, the global market for technical textiles is likely to grow from $176.83 billion in 2018 and reach $220.37 billion by 2022, growing at a CAGR of 5.89 percent. However, it's been estimated that the consumption of technical textiles in India continues to be only at 5-10 percent against 30-70 percent in a few of the advanced economies.

In 2019, world exports in the most notable 10 traded technical textile lines stood at $81.39 billion wherein India’s total share constituted only 0.85 percent as compared to a whopping most of 21 percent of China accompanied by Germany (9 percent), the united states (9 percent) and Japan (5 percent). Even for Vietnam, the share in global exports for the most notable 10 traded lines comes at around 2 percent. It remains to be observed which products together with the eligibility requirements would get notified in the ultimate scheme by the federal government to accomplish substantial growth for the textiles sector.

As of this juncture, the FPI scheme is expected to bring structural changes in the textiles sector which continues to be largely cotton driven by shifting gears towards MMF and technical textiles. The scheme would assist in taking forward the Aatma Nirbhar Bharat Mission and promote greater MMF based textile exports as the MMF garment industry in India is poised for fast growth in the coming times on the trunk of ease of conducting business reforms and rising investor sentiment.

Also, because the conventional Indian textiles sector may have reached a level of saturation when it comes to value-addition, innovation and overall development, the technical textiles segment offers an excellent chance for further upgrading the Indian textile sector and so that it is globally competitive. The bottom line is, that is a much-needed scheme for India’s textiles and apparel export industry, which includes lost out to its Asian peers over the past couple of years, to regain its position in global textiles trade in the coming times.