India's textile industry faces large growth potential

India's textile industry faces a large growth potential. The industry is set to be valued at $250 billion by end of this year according to management consultancy Intueri, and if a more centralised and technologically advanced supply chain are put into place, growth in the sector could be further propelled on the back of reduced inefficiencies. 

The sector, which has historically been a key component of India’s economy, has benefitted from significant impetus over recent decades in the form of foreign direct investment (FDI). Between 2000 and last year, India’s textile industry has received FDI inflows in excess of $3 billion, driving projections for the sector up considerably.

In a market sizing report, Intueri places the value of the industry at $250 billion. According to the consulting firm, textiles add tremendous economic value for India, both in the form of a 2% contribution to the GDP as well as through substantial employment throughout the country.

At a time when India is focusing on domestic manufacturing, the sector also accounts for 7% of the total industry output in the country at present, giving momentum to exports at the same time. Intueri estimates that textiles will account for $82 billion in exports by as early as 2021.

While the sector is performing strongly, the researchers warn that it continues to operate below potential. The sector's fundament is built on the back of small, decentralised production units – as many as 80% of textile production units in India are “small operations” with less than 20 machines. 

Not only does this significantly limit production, it also leads to a lack of overall coherence in the textile supply chain. Smaller production units are in addition slower to adopt technological enhancements to their operations, which means that the sector continues to suffer from considerable inefficiencies.

Meanwhile, the sector is calling for change in the same vein as a number of other industries in India that could benefit considerably from technological advancement.

Despite these challenges, Intueri reports that India holds tremendous competitive advantage in the global textile market. “India’s leading textiles market allows for easy access to a wide variety of raw materials. Flexibility of supply chain also enables apparel manufacturers to come up with innovative designs.”

“India is highly integrated into GVCs of countries such as Bangladesh, South Africa, Sri Lanka, UAE, Belgium, US, Indonesia, Malaysia, UK and Hong Kong, India’s textile industry is at the confluence of favourable quantity and price of raw materials. In addition to cost- competitiveness over China and Brazil, India also boasts diverse supply of raw materials,” the researchers added.