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Let us look at the situation of India’s ‘Commodity & Merchandise’ exports for past 5 Years, and also the importance of the ‘Textiles & Clothing’ Sector in the overall exports of the country. We will look at the export data available on the Commerce Ministry Site for Chapters 50 to 63
The overall exports of ‘commodity & merchandise’ items from India during past 5 years have practically stagnated to around 310 Billion Dollar levels.
To understand the contributions of various major export sectors in the Indian economy and also to understand, where the Textiles & Clothing sector exports stand, let us dissect the data further.
We have plotted the data for top 10 export performing sectors in the country.
In the year 2019 - 2020, the ‘Textiles & Clothing’ sector is ranked 4th in the overall export basket. It stands at 34 Billion Dollars and contributes to about 11% share.
Above Table shows ‘compounded annual growth’ levels for each of these sectors. It shows 0% growth for the ‘Total Exports’ made out of the country in the past 5 years.
For the Textile sector there is a negative growth of 2%. Its performance has stagnated at approximately 37 Billion Dollars. Its rank has also dropped from 3rd to 4th position in the last year of 2020.
Conventional Export Sectors like ‘Gems & Jewelry’ and the ‘Textiles & Clothing’ have been losing steam during the past 5 Years.
Textile & Clothing Exports has a share of about 11% to 12% in the national export basket. However it is consistently losing its importance in since 2017 in ‘% share’ terms.
Above Slide shows split exports between Textiles Segment and the Clothing Segment. The Textile segment exports have been averaging about 20 billion Dollars and the Clothing segment about 17 Billion Dollars.
The Garment manufacturing is the final link in the value addition chain of ‘Textile & Clothing’ Industry. Its consistent drop since last 4 years is not an encouraging sign.
The textile value chain in the country has become fragmented. It is growing into fragments / clusters of Spinning, Weaving, Processing and Clothing. The existence of the erstwhile Large Composite Mills has declined.
It is apparent that we are busy exporting more of intermediate products like Cotton, Yarn & fabrics to our ‘Clothing competitor’ countries like Bangladesh, Sri Lanka & Vietnam, rather than manufacturing the Garments ourselves.
We are not able to retain the full ‘Value Addition’ of the Textile & Clothing ‘Value Chain’ within the country, as very few players are vertically integrated.
There is also a kind of disconnect between the Textile Mills and the Garment Manufacturers within the country, as they do not put forward a ‘coordinated joint effort’ to market the final product, i.e. Garments.
Please look at the above Graph. It shows the breakup of 20 Billion Dollars Textiles Segment.
From Commerce ministry databank, the data at 4 Digit level HS Codes belonging to the Chapters 50 to 63 was retrieved. It was reorganized & grouped for each ‘value link of the textile chain’ like Fiber, Yarn and Fabrics. Fabrics were further split into:
• Fabrics for Apparel end-use.
• Fabrics & Made-ups for Home Textile & Upholstery end use.
The major contribution in exports comes from Home Textiles & Upholstery Segment. Its exports are about 7.5 Billion Dollars. This segment is doing the best and also consistently growing at a steady pace.
Exports for Fabrics for Apparel end-use are at much lower level of 4.5 Billion Dollars.
Unlike Apparel Fabric & Garment Sectors, the Exporters in Home Textiles are fully vertically integrated from Spinning, Weaving, Processing and finally stitching Made-ups in-house. This enables them to service their end customer directly in a better fashion.
In case of Apparel Fabrics and Clothing Items, the situation is complex:
Most of the ‘Apparel Fabric Mills’ do not make ‘Apparel Clothing’ items by themselves.
Even if some of them make, it is miniscule in size looking at their Fabric manufacturing or processing capacities.
The ‘Apparel Fabric’ supplier has to essentially depend on the third party ‘Garment’ Supplier’ and vice versa, while exporting Garments out of the country
In fact, both the ‘Fabric Mill’ and the ‘Garment Factory’ simultaneously make parallel efforts, to approach the same International Brand.
There is a race between the two to grab the business as a ‘Principal Supplier’, thereby making the other one a sub-contractor.
There clearly exists a ‘conflict of interest’ between the two, as both strive for a higher slice of margin in their respective links of the business.
Such a fragmented approach does not help either of them. As a country, we lose the business to the Vendors from the Competing countries that are either fully vertically integrated or work in well-coordinated and very efficient manufacturing clusters.
I hope this presentation has given you a fair idea of the contribution of the Textiles & Clothing Exports from India. It holds 3rd or 4th rank in the country's export basket.
It is very important. It is steadily sliding. We cannot squander it away !
The obvious question is what is the solution to the problem of stagnating / poor export performance in the ‘Textile & Clothing’ Sector?
Well it is a long subject by itself. I will present to you my thoughts and ideas on the same in the future.
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