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General Studies 3 >> Economy

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INDIA'S TEXTILE INDUSTRY

INDIA'S TEXTILE INDUSTRY 

 
 
 
1. Context
 
Union Minister for Textiles Giriraj Singh recently said that the Indian textile and apparel sector is aiming for a total business of $350 billion annually by 2030, which is to generate 3.5 crore jobs. However, the industry went through a tumultuous phase during the last two financial years, casting a shadow on the possibility for 10% CAGR.
 
2. India's Textile Industry
 
  • In 2021, the Indian textile and apparel industry was valued at approximately $153 billion, with nearly $110 billion coming from domestic operations. By the end of FY22, India ranked as the third-largest textile exporter worldwide, holding a 5.4% share of the global market.
  • The country is also recognized for having the second-largest manufacturing capacity in this sector, showcasing a strong presence across the entire value chain.
  • The textile industry's contribution to the GDP was around 2.3% in FY21, while it accounted for 10.6% of the total manufacturing Gross Value Added (GVA) in FY23. The sector employs about 105 million people, both directly and indirectly.
  • Given that 80% of the industry’s capacity is distributed among micro, small, and medium enterprises (MSMEs), it is highly sensitive to global market changes. The fiscal year 2021-2022 witnessed significant growth, with exports reaching $43.4 billion.
  • However, the demand slowdown that began in 2022-2023 continued to worsen into FY24, resulting in declines in both exports and domestic demand. This downturn severely affected manufacturing hubs, such as Tamil Nadu, which houses the country’s largest spinning capacity.
  • Over the past two years, approximately 500 textile mills have closed in the state. In Tiruppur, a key center for knitwear production, many businesses experienced a 40% reduction in sales during FY23

 

3. India's Textile Exports

 

  • Geopolitical changes and a decline in demand from purchasing countries have significantly impacted exporting units. This situation has been worsened by rising prices of raw materials, including cotton and Man-Made Fibres (MMF), along with an increase in imported fabrics and garments.
  • The introduction of a 10% import duty on cotton has made Indian cotton less competitive compared to global prices. In the case of MMF, the implementation of quality control orders has disrupted the availability of raw materials and caused fluctuations in pricing.
  • Industry stakeholders are consistently advocating for the removal of the import duty on cotton, especially during the off-peak months from April to October. A representative from a prominent industry association emphasized, “This is an industry where stakeholders compete globally against countries that significantly support their domestic production.
  • Therefore, India requires long-term schemes, lasting at least five years, to encourage investments. Raw materials must be accessible to the domestic industry at prices that are competitive with international markets.”
4. Challenges
 
The textile industry aims to attract $100 billion in investments across various segments of its value chain by 2030 to enhance production capacities and achieve the ambitious $350 billion target. Labor costs make up about 10% of the overall production expenses in this sector. Reports indicate that the average daily wage for a trained textile worker is approximately ₹550, while unskilled workers earn around ₹450 per day. Industry experts emphasize the necessity of adopting technology and enhancing the skills of the workforce to boost productivity and minimize waste
 
5. What is the Compound Annual Growth rate (CAGR)?
 
Compound Annual Growth Rate (CAGR) is a useful measure that indicates the mean annual growth rate of an investment over a specified time period, assuming that the investment grows at a steady rate. It is often expressed as a percentage and can be particularly useful for comparing the growth rates of different investments or industries over time
 

 

The formula for CAGR is:

CAGR = (Ending Value / Beginning Value)^(1/n) - 1

where:

  • Ending Value is the final value of the investment.
  • Beginning Value is the initial value of the investment.
  • n is the number of years.
Source: The Hindu

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