Indian Textile Industry Growth and Challenges

Syllabus:

GS 3: Indian economy

Why in the News?

Recently, the Indian textile industry has recorded impressive growth, with exports increasing by 36.65% in four years, driven by diversity, quality improvements and increasing global demand.

Indian Textile Industry Growth and Challenges

Introduction

  • India’s textile sector has shown impressive strength, growing 36.65% in the last four years.
  • Despite global economic challenges, it has consolidated its position as a major player in the global trade, with quality products, competitive prices and an expanding export market across Europe, the UK, Latin America, Africa and North America.

India’s Textile sector at boom

  • The Indian textile industry has shown impressive strength and growth, emerging as a major contributor to the export scenario of the country.
  • Over the last four years, the company has achieved an impressive growth demonstrating its ability to adapt to global economic challenges and changing business dynamics.

Increased textile exports

  • India’s textile export value increased from $17.05 billion in April-November 2020 (FY21) to $23.30 billion in the corresponding FY24 period.
  • This significant growth highlights the recovery of the sector and its ability to meet global demand, especially in key markets such as Europe, UK, US.

Role in reducing trade deficits

  • India’s growing textile exports helped ease the trade deficit to some extent, exacerbated by higher imports of crude oil and gold.
  • In November 2023 the trade deficit reached a record high of $37.84 billion.
  • The increase was largely driven by gold imports of $3.44 billion in November alone due to festival and wedding demand.

Rising imports and their consequences

  • Cumulative gold imports rose 49% from April to November fiscal year to $49 billion compared to $32.93 billion in the same period last fiscal.
  • current oil and gas imports in April and October stood at $79.3 billion, up from $69.2 billion a year ago last year.
  • These rising import tariffs continue to put pressure on India’s trade balance.

Challenges in the textile industry

  • Despite the growth of the overall industry, the ready-to-wear segment has not seen consistent growth except for the recent growth of 8-10% in the last six months in the financial.
  • Industry stakeholders believe that growth is limited especially considering the significantly lower impact of the COVID -19 pandemic.

Growing popularity of India

  • The ever-expanding textile exports highlight India’s emergence as a global textile hub, catering to the needs of different customers in different regions.
  • The growth of this sector reaffirms its important role in strengthening India’s economy, reducing trade imbalances and strengthening global trade linkages.

Strong expansion in textile exports by India

  • India’s textile sector has experienced tremendous growth, driven by increased exports to global markets.
  • This expansion highlights the industry’s flexibility and ability to meet customer needs.

Growth in European markets

  • India’s apparel exports to Europe grew sharply, from $4.56 billion in FY21 (Apr-Nov) to $6.36 billion in FY25 (Apr-Nov).
  • This growth of 39.47% reflects strong European demand for quality Indian clothing, its affordable prices and wide range of products showcased.

Strengthening relations with the UK

  • United Kingdom emerged as the largest market for Indian textiles, with exports increasing from $946.47 million in FY21 to $1.31 billion in FY25.
  • This growth of over 38% highlights the growing presence of Indian textiles in the UK, particularly in the luxury apparel and home furnishings sectors.

Population growth in Latin America

  • Latin American countries like Suriname, Brazil, Argentina, Peru and Chile have become promising destinations for Indian textiles.
  • The exports of the sector increased from $602.76 million in FY21 to $969.59 million in FY25, showing an impressive growth of over 60%.
  • This expansion reflects India’s efforts to enter new markets and diversify its exports.

Growth in African markets

  • African region saw a steady increase in textile imports from India.
  • South Africa, Madagascar, Zambia, Ivory Coast, Senegal, Niger and Nigeria collectively imported $1.13 trillion worth of textiles by 2021, rising to $1.29 trillion by 25 year 25.
  • The sector’s focus this growth on providing affordable yet high-quality products.

NAFTA and Textile boom

  • India’s textile exports have surged under the terms of the North American Free Trade Agreement (NAFTA), with the U.S., Canada and Mexico.
  • This increase highlights the industry’s growing popularity in the global market and its ability to satisfy North American demand management.

Developments in NAFTA Markets

  • Textile exports in the NAFTA region increased from $5.11 billion in FY21 to $7.62 billion in FY25.
  • Most of this growth came from the US, where exports increased from $4.77 billion in FY21 to $7 billion in FY25.
  • This growth was driven by strong demand for luxury Indian products and a post-pandemic recovery in consumer spending across North America.

Growth factors

  • Policy support and trade agreements: Government projects and trade agreements play an important role in facilitating market access and improving competition.
  • Technological Advancement: Adoption of latest technologies has improved efficiency and efficiency, enabling India to meet global standards.
  • Sustainability and innovation: Increased focus on sustainable practices and innovative solutions has further enhanced India’s interest in international markets.

Challenges and opportunities

  • The Indian textile industry benefits from three key strengths:
    • a skilled workforce,
    • high cotton production, and
    • growing capacity in man-made fibers.
  • These advantages provide a strong base for growth. However, the industry is yet to have a significant share of the global finished goods market.

Importance of focus on planning

  • Despite its potential, the textile industry often receives little attention in policy formulation.
  • Increased emphasis on supporting this labour-intensive industry could lead to economic growth and job creation.
  • Strengthening value chains, encouraging investment and ensuring policy priorities at the central and state levels will be essential to realize the full potential of the sector.

Conclusion

India’s textile sector holds tremendous potential to generate economic activity amidst global demand driven by strong growth. Prioritizing policy support and innovation can open up its full global competitiveness.

Source: Livemint

Mains Practice Question:

“Indian textile industry has shown strength and resilience in recent years, yet challenges remain.” Discuss the growth factors of the textile industry in India and the obstacles it faces in realizing its full potential.