Textile & Clothing Exports: A Fading Star in India’s Trade Portfolio

The Government of India recently published the annual Trade Statistics for the FY 2022-23 (for 8 Digit HS Codes). In the past two decades the Textile & Clothing (T&C) sector has lost a substantial share in the India’s overall portfolio of the Merchandise Exports.

T&C sector was ranked first among all the sectors in the year 2003-04 with a portfolio share of 21% in the India’s Merchandise Exports. Two decades later in 2022-23 it is ranked fifth with a portfolio share of mere 8%.

India’s T&C Sector Exports Are Stuck in a Rut

Standalone analysis of the past two decades show a 11% CAGR growth during the earlier decade of 2004-14. However, the subsequent decade of 2014-23 show a negative growth of -1% CAGR. For past 10 years India’s T&C exports are stuck in the range of 36 to 37 US Billion Dollars.

The following two graphs show the trend for the past 2 decades.

India’s Textile Industry: Lost Ground to Rivals

For benchmarking India’s T&C exports against the competitors, annual data available on WTO site was analyzed.

Our T&C exports have lost ground to Bangladesh & Vietnam. Both have overtaken India in exports last year in 2022.

India’s Skew - Away from Clothing:

Smaller share of the clothing sector in India's T&C exports is the main reason for India losing the exports race to its two tiny South Asian rivals. Clothing is far more value added than Textiles.

Following graph shows dominant share of clothing over textiles in the world trade as well as our two tiny neighbors.

Bangladesh & Vietnam have done exemplary well in the Clothing exports. Whereas India is stuck in a rut busy exporting intermediate products like Raw Cotton, Yarn, and Fabrics, thereby losing out on value addition.

Following two graphs show the export trend in clothing & textiles separately.

Conclusion:

If India wants to become a dominant player in the international T&C market, the share of Clothing exports has to go up and it must become the driver of exports.

Unfortunately the Clothing exports from India have remained uncompetitive.

The clothing industry has continued to remain fragmented and dominated by small players lacking vertical integration. On government policy front, the Garments sector was de-reserved from SSI reservation very late in 2005. Absence of labor market flexibility, coupled with absence of effective exit policy, has discouraged big Textile players to forward integrate into this sector.

As a result the sector has lost out on reaping economies of scale and investing in the latest technology to improve quality & productivity. These factors have culminated into India being a costlier, unreliable supplier with longer lead times.

It is so unfortunate that India has missed the opportunity and squandered the entire textile value chain advantage it had, post dismantling of Quota Regime in 2005.