Apparel Export Pie: India Still Looking for that Bigger Slice

Ever since the Multi Fibre Agreement (MFA) came to an end (2004) close on the heels of China becoming a member (2001) of the World Trade Organization (WTO), much of the talk in India has been about how it can grab a bigger share of the global textiles-apparel exports pie.

Except that the talk has not translated into dollars. At least, enough dollars. According to the last World Trade Statistical Review 2021, India's share in world exports slipped from 3.0% in 2000 to 2.9% in 2020 with very nominal increases in between (3.1% in 2005 and 3.2% in 2010). India stands at the fifth position with exports worth $13 billion in 2020, behind China ($142 billion), Vietnam ($29 billion), Bangladesh ($28 billion) and Turkey ($15 billion).

The latest figures are not available on the Ministry of Textiles website, but slightly older data shows that the textiles-apparel industry has grown in importance over the years. The share of the overall manufacturing sector in India's GDP grew from 16.11% in 2011–12 to 18.21% in 2016–17. Over the same period, the textiles-apparel sector's share in GDP manufacturing grew from 10.51% to 12.65%. As a result, the sector's contribution to India's GDP grew from 1.69% to 2.3%.

Even without getting into the complications of comparing oranges with mangoes, it should be clear that the apparel exports segment is lagging behind. It needs some help.

There are numerous reasons for this, and if India has to meet the Union Textiles Minister Piyush Goyal's objective of $100 billion by 2030 (incidentally, India's exports for textile items in 2020 was $15 billion, bringing the cumulative textiles-apparel exports to $28 billion), then the apparel manufacturing/exports segment has much work to do.

The most recent study that has ascertained the situation was prepared by the Indian Institute of Foreign Trade (IIFT) in 2018. Titled 'Challenges and Strategies to Promote India as a Sourcing Destination', the study had examined four major product segments in the textile sector—apparel, carpets, cotton and man-made fibre.

The study was rooted in realities, as pointed out in the preface: "A select group of buying houses and exporters of each product category located in various parts of India were contacted to understand the challenges faced with respect to quality, delivery, pricing and compliances. Based on the survey, a detailed recommendation to overcome some of the major challenges have been given."

The report is, obviously, pre-pandemic, but the challenges outlined in the executive summary still stand good, though some might insist that matters have worsened:

• rising competition from neighbouring countries such as China, Bangladesh, Vietnam and Turkey in areas such as cotton fabric, apparels, MMF and carpets;
• sluggish demand in major export destinations—the EU and US—as a result of global economic crisis, and
• domestic challenges such as lack of technology upgradation, inefficient infrastructure and fragmented industry structure among others.

But before diving deep into the reasons and solutions, a quick look at the 2021 Fashion Industry Benchmarking Study published by the United States Fashion Industry Association (USFIA) will give an idea about how India is perceived. Symptoms, if you please.

A section of the report which sought to understand the strengths and weaknesses of each primary sourcing destination, respondents rated them against five criteria with the most significant impact on sourcing decisions. On a scale of five, India scored 2.5 on speed to market, 3.5 on sourcing cost, 3.0 on flexibility and agility, 2.5 on risk of labour and social compliance, and 2.5 on risk of environmental compliance.

Similar ratings for the European Union—the other big and attractive market for India—do not exist. But the US ratings clearly state where India stands.

RMG export prospects cannot be seen in isolation; those have to be rooted in realities (as the IFFT study was) and conflate them with the US study.