Lower scale of production, lack of sectoral investment, and delays in product delivery are the ‘tridoshas’ the industry must conquer, to acquire global competitiveness.
Textile product manufacturers see three major problems in the Indian textile industry in taking advantage of the anti-Chinese sentiments in the global exports market, post-novel Coronavirus (Covid-19) situation.
These product-making sectors are spinning mills, fabric manufacturers, apparel producers and garment manufacturers, who are all handicapped by one or the other problem the sector badly suffers from.
According to the Union Textile Ministry, the country has 1961 mills — spinning and composite — in the non-small scale industries segment, 173 weaving mills, 1,340 spinning mills and 3.12 lakh powerloom units classified as small scale industries.
This has resulted in a total of 48.66 million spindles to make yarn in the country. Looms that convert yarns to fabrics are 0.52 million in the organised sector, while powerlooms and handlooms make up 23.16 million and 23.77 million respectively.
These help in total fabric production of 26,554 million square metres in India, data from the Ministry shows.
According to D K Nair, a textile industry expert, the first problem India faces is the scale of production.
“We have small factories whose cost of production are high. Wages in China are high but the higher scale of production there helps,” said Nair who served as Secretary-General of Delhi-based Indian Cotton Mills Federation, now Confederation of Indian Textiles Industry, during the 2000s.
Things can improve if the definition of micro, small and medium enterprises (MSME) is changed. “A Bill introduced in Parliament for the change is pending,” said Dr K Selvaraju, Secretary-General of Southern India Mills Association, a body of south India’s entire textile value chain.
The change was approved by the Cabinet and once the Bill is approved by Parliament, it can go a long way in upping the scale of production.
Textile product manufacturers are now facing a different kind of problem — the long-term sustainability of their machinery.
“Many Indian entrepreneurs of the textile manufacturing industry are recording their dissatisfaction over the Chinese machinery in the spinning sector not being sturdy. So, they can’t sustain the machinery in the long run,” said N D Mhatre, Director-General (Tech), Indian Textile Accessories and Machinery Manufacturers’ Association.
Nair said the second problem was lack of investment in the textile industry.
“No large industry in India has come forward to invest in the textile industry. Big investments can especially make the garment sector competitive,” said the expert.
One of the major disadvantages that the Indian textile industry suffers is that it is up against Chinese investments in Bangladesh and Vietnam.
In contrast, China, which has been vacating some of the textile markets owing to higher costs, has not invested in India.
Data show that between April 2000 and December 2019, the textiles sector attracted foreign direct investments (FDI) of only $3.41 million, including in garments. During the same period, total FDI inflow into the country was $456.79 billion.
This is a paltry 0.74 per cent of the total FDI investments in the country. Investments have shown a rising trend since 2014 after the government came up with a slew of export promotion policies.
Selvaraju said the industry has a huge capacity to increase the exports two-and-a-half times from the current $100 billion.
“The additional capacities have not been put to use,” he said.
The first two issues of the lower scale of production and lack of investments have resulted in garment exports losing a competitive edge in the global market.
One example of India lagging behind in cost competitiveness is that it has not been able to fill in the gap left behind by China in the global textiles market.
“We have a free trade agreement with Japan that came into force 15 years ago. Till now, textile exports to Japan have not increased at all,” said Nair.
Banks’ failure to pass on interest reduction to all across the industry is also affecting new investments since costs of finance rise with a higher rate of interest, said SIMA’s Selvaraju.
According to industry sources, the third problem dogging the sector is Indian manufacturers taking more time for delivery of products.
Industry sources said Indian manufacturers take many weeks to deliver products. This is because of the current ecosystem that doesn’t take into consideration the competitiveness in the global market.
“Fabrics imported by garment manufacturers takes a month to get to their factory gates. This sort of delay prevents them from providing quicker delivery of products,” said Nair.
Other aspects affecting delivery are labour problems and trade union activism.
“Our people will have to be aware of export competitiveness to take advantage of the anti-Chinese sentiments. The industry incurs huge overheads, especially with regard to migrant labour,” said Selvaraju.
Nair said trade union activism sometimes chokes the timely supply of products to buyers overseas.
“Trade unionism has become some sort of a career-oriented profession in the textile industry, affecting productivity,” he said.
That most of the workers in the apparel sector are migrants also doesn’t help the sector’s cause.
Since the sector is labour-intensive, it depends on these migrants.
Industry sources say that this sometimes results in the manufacturing units sacrificing on realising the full potential of the employees, which in turn affects productivity.
The post-Covid-19 situation could see the manufacturing units hiring many new hands. “It will take time to train the newcomers,” said Nair.
“Starting any new unit is easy, but we need the right infrastructure,” said Anand Popat, a Gujarat-based raw cotton and cotton yarn trader.