Silver Lining for Indian Textile Industry with Spike in Domestic Demand and Exports

Since the pandemic hit the world, India’s one of the richest industry that is textiles, has been suffering until in the past few months, positive aspects happened with the rise in the export of cotton yarn and a marginal surge in the demand for textile products from the European and US markets. The main force behind the revival of the textile industry is the lower prices of raw cotton in the domestic market, which is helping this labor-intensive industry to keep the prices on the lower end of the spectrum, and in turn, exports are rising. 

As per Niryat Portal’s official data, between October 2023 and May 2024, the textile export value touched $17.9 billion against $17.5 billion for the same period last year. The exports included cotton yarns, readymade garments, and other fabrics. Cotton yarn constituted the major portion of the export volume and it increased in export volume as well by 51% compared to last year’s volume. 

Perks and Challenges in the Textile Industry

Experts analyzing the textile industry growth suggest that this uptick in demand can only be sustained when it is backed by favorable policies by the government. While the demand has surged compared to last year’s level it is still lower than the pre-covid levels. 

The driving factor behind the export and domestic demand growth was the lower prices of raw cotton, but in the last week, the prices again surged which neutralized the profits earned by the textile manufacturers. The cost of production has mainly risen due to an increase in freight charges which has gone up by around 40% to 50%. 

Apart from prices, higher Indian cotton production levels compared to last year’s figure also helped the industry grow. The production of cotton was higher compared to Brazil and the US and this helped the Indian textile companies to keep the prices lower than the prices of its international peers. 

Talking about the international peers, here comes another challenge for the domestic textile industry, and that is related to the geo-political crises. Due to ongoing crises in different parts of the world, importers from European countries and US-based countries are not maintaining much inventories. This has taken a toll on the exports of Indian textile markets. Earlier the domestic textile manufacturers used to have a 6-month order book cycle, which has been reduced to a 3-month one due to the non-maintenance of inventory by importers. 

E-commerce penetration in tier II and tier III cities has been a perk for the industry. This growing market has been driving higher sales of readymade textile products. Impulsive purchase has also played its role nowadays and textile is no longer a seasonal industry. 

Another thing that is helping the Indian textile production boom is the China +1 policy. Consumption patterns have been evolving as this policy has been implemented by different economies.

The government with its newly appointed textile minister Giriraj Singh made an announcement recently about including garments in the PLI scheme for the textile industry and helping the SITP scheme to revive. The SITP is nothing but a Scheme for Integrated Textile Parks. According to the textile ministry, textile shipments in FY25 will rise to a whopping $50 billion. 

Wrapping up

Though there has been a silver lining in the textile industry, all these targets of the government and anticipations are subjective to policy changes, geopolitical situation in the world, economic growth of the importing nations, and easing inflationary trends to boost consumers’ demand and confidence. 

Source: https://www.financialexpress.com

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