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Economic Survey backs MMF shift as India lags in global textile production

The survey stated that the dominance of MSMEs limits scale and efficiency, while the sector's fragmented nature increases logistical costs

Textile, Textile industry, workers

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Shine Jacob Chennai

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The Economic Survey on Friday backed the redrawal of India’s strategy for the textile sector, aligning with the rising global demand for products made from man-made fibre (MMF), where India’s share in production is 9.2 per cent—far behind global leaders like Vietnam, China, and Taiwan. This is critical for India’s future exports in the sector, as MMF comprised 77 per cent of global fibre consumption in 2024, whereas cotton accounted for just 22 per cent. India is traditionally known for cotton and cotton-based products globally.
 
The survey also raised concerns that the lack of localisation and the complexity of the value chain in the cotton segment are hindering India’s competitiveness in terms of costs, pressing the need for vertically integrated ‘fibre-to-fashion’ firms, similar to China and Vietnam.
 
 
“India's reliance on cotton, unlike the global shift towards MMF, limits its competitiveness in the worldwide market. By tapping into the MMF value chain, India will benefit from the steady rise in global MMF demand. To match the quality of our competition and reap value gains from MMF production, our MMF sector must move towards vertical integration and significantly invest in research and development and sustainable production techniques,” said the Economic Survey 2024-25.
 
India’s textile production is spread across multiple independent and clustered small and medium enterprises (SMEs) across the country. Raising concerns about the cotton segment, the survey highlighted that while India’s cotton production is concentrated in Gujarat, Madhya Pradesh, and Andhra Pradesh, the raw material has to be transported to Tamil Nadu for conversion into yarn, and then sent back to Maharashtra and Gujarat before being woven into cotton fabric.
 
“A lack of localisation and the complexity of the value chain, in turn, results in higher costs relative to global competitors. In contrast, vertically integrated ‘fibre-to-fashion’ firms in competitor nations such as China and Vietnam export low-cost products, maintain consistent quality, and are nimble enough to adjust to the fast-changing nature of the industry,” the survey added.
 
“Simple and liberal customs procedures further reduce regulatory costs and lend a competitive edge to the exports of global textile competitors such as China and Vietnam. On the other hand, in India, textile exporters are constrained by complex procedures, which, for instance, require exporters to meticulously account for every square centimetre of fabric, buttons, and zippers used. Similarly, pre-shipment inspection certificates are required for textile imports, which slow down logistics and raise costs for the textile business,” the survey said.
 
It said that India has a great opportunity to align with evolving global shifts in apparel demand.
 
“While our comparative advantage lies in cotton and cotton-based products, global demand has shifted to products made from MMF. MMF-based products range from yoga pants and athleisure wear to technical textiles used in aviation, aerospace, and automobiles,” the survey added.
 
According to the survey, India's textile export basket is skewed towards cotton, with eight out of the top 10 textile exports (by value) consisting of cotton and cotton-based products.
 
Technical textiles (manufactured for non-aesthetic needs) are another area of potential growth highlighted in the survey. India's technical textile industry is rapidly expanding, ranking fifth globally. The Indian technical textiles market stands at $26.8 billion in FY24.
 
“India is a net exporter of technical textiles, with exports valuing $2.58 billion in FY24. To assist the technical textiles manufacturing ecosystem, the government has introduced several initiatives, including the Production Linked Incentive (PLI) scheme. To ensure quality and standardisation in technical textiles, 68 items have been brought under regulation through quality control orders in various segments,” the survey added.
 
The survey further stated that the dominance of micro, small, and medium enterprises (MSMEs) limits scale and efficiency, while the sector’s fragmented nature increases logistical costs. The industry has attracted limited foreign direct investment, which has hindered technological advancements and increased reliance on imported textile machinery. A significant skill gap persists, limiting productivity and innovation.
 
The textile and apparel industry contributes 2.3 per cent to GDP, 13 per cent to industrial production, and 12 per cent to exports. It is also one of the largest employment generators after agriculture, directly employing over 45 million people, including many women and members of the rural population. As further evidence of the inclusive nature of this industry, nearly 80 per cent of its capacity is spread across MSME clusters in the country.
 
India exported textile items worth $34 billion in 2023, with apparel constituting 42 per cent of the export basket ($14.6 billion), followed by raw materials and semi-finished materials at 34 per cent ($11.7 billion) and finished non-apparel goods at 30 per cent ($7.8 billion). Europe and the US accounted for nearly 66 per cent of India’s apparel exports, 58 per cent of finished non-apparel goods, and 12 per cent of raw materials and semi-finished materials. Other prominent destinations include the UK (8 per cent of apparel exports) and the UAE (7 per cent).
 
For India’s major textile export category—apparel—the country held a global market share of 2.8 per cent in 2023. However, this remains much lower than key players in the industry, such as China (30 per cent), Bangladesh (9 per cent), and Vietnam (7 per cent).
 

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First Published: Jan 31 2025 | 4:08 PM IST

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