India’s textile industry has been on a rollercoaster ride since the end of 2016. This is primarily due to the sudden ‘demonetisation’ of the India rupee that was quickly followed by the universal GST (Goods and Services) tax regime which took the wind out of the majority of small and medium industrial enterprises which were mainly servicing the domestic textile consumer market.
It seems that the two year-long hick-up period for India’s textile industry, which was seriously and negatively impacted by this double whammy is now almost over with various sectors within the textile industry showing signs of improvement. The current favourable situation for garment export demand and stabilisation of new cotton prices have also helped the ongoing recovery process.
Favourable cotton output of the new crop, followed by increasing acceptance of the GST tax regime, has improved the consumption and offtakes in the expanding domestic retail markets.
It is now clear that India’s textile industry is ready and geared up, yet again, to take off and seize a sizeable share of the global textile trade, which China has started to vacate due to the impact of its rising manufacturing costs compared to more competitive producing countries like India, Vietnam, Bangladesh and a few others.
The Government has also become an active player in supporting the domestic textile industry by imposing an enhanced import duty on a large number of textiles and apparel items being imported into country by competing markets like Bangladesh and China. This will have a roll-over effect for enhanced demand for the domestic textile industry. Despite this welcome action from the Indian government, the industry still has strong resentments on what it sees as easy imports coming in from the likes of Bangladesh, including those finding their way from China via Bangladesh and the Nepal route, which benefits from full exemption to basis duty and has thus become a sort of illegal gateway for Chinese textiles to enter into India duty free.
India’s dilemma is reflected in the slow growth of its textile and apparel exports, while the textile and apparel imports into India from the competitors mentioned grew to US$7bn through the alternative routing mentioned. This happened more so after the GST imposition in July 2017 when the imports, in effect, became cheaper in relation to local textile products. This aggravated the market further until the recent imposition of a 20% customs duty.
In the current scenario, things are looking positive for India’s textile exports. For example, with favourable cotton and fabric prices, India’s garment export market is expected to do better.
India’s Ministry of Commerce & Industry estimates that the exports of textile industry recorded over US$2,903,000 in October 2018 compared to the same month of over US$2,095,500 in October 2017. This is leading to an impressive overall growth of 38% in exports for the same period.
The positive IIP (Index of Industrial Production) data is also very reassuring in terms of likely future growth in textile outputs. The IIP data for the textile and clothing sector has recorded impressive growth in the quarter ending September 2018, compared to same period for September 2017. The growing and positive trends are visible signs of recovery post-GST stabilisation as are the optimisation in cotton prices. It is now expected that the Indian government will take due cognizance of excess imports happening via the Bangladesh route and the domestic textile industry will get its right to fair play.
With the anticipated domestic retail demand, India’s textiles and clothing industry for 2019 projects a phase of growth in both the domestic and export markets. This is reflected clearly in the strong investment and growth disposition of mid-corporate companies like Filatex India who are undertaking a major expansion of its product and investment portfolios by making an investment of almost US$71m in its polyester yarn and chip plants. Many similar mid-corporate companies are also showing such appetite for growth. It seems that the New Year (2019) will bring in good tidings to India’s textile and clothing exports which are likely to boost India’s global share from its existing 4.5% to around 6%.
