Textiles to Transformation: Policy Roadmap for India’s Apparel Exports

Context

India’s share in global apparel trade has remained stagnant at 3%, despite being one of the largest textile producers. A recent analysis stresses the need for policy reforms and innovation to meet the $40 billion export target by 2030. With increasing global competition from nations like Bangladesh, Vietnam, and China, India must overcome internal bottlenecks and boost competitiveness.

Overview of India’s Textile & Apparel Industry

• Heritage Sector: India’s textile sector is one of the oldest industries, deeply rooted in the cultural and economic fabric of the country.

• Employment: Employs over 45 million people, making it the second-largest employer after agriculture.

• GDP Contribution: Contributes about 2.3% to India's GDP and 12% of manufacturing employment.

• Export Share:

  • India’s textile and apparel exports stand at $37.8 billion.

  • Global market size is $897.8 billion, giving India a 4.2% share in textiles and just 3% in apparel.

• MSME Dominance: Over 80% of apparel units are small-scale and fragmented, lacking scale and global integration.

Importance of the Textile and Apparel Sector

• Massive Job Provider:

  • Labour-intensive, especially in states like Tamil Nadu, Gujarat, and West Bengal.

  • 70% of workers in key apparel hubs are women, contributing to gender-inclusive employment.

  • Example: Shahi Exports employs over 70,000 women in its units.

• High Value Addition:

  • Covers entire value chain—from raw cotton to finished garments.

  • Apparel exports bring in higher value than raw material exports.

• Export Potential:

  • With current apparel exports at $37.8 billion, India aims to reach $40 billion by 2030.

• Supports Allied Sectors:

  • Boosts dyes, chemicals, logistics, retail, and machinery industries.

  • A 10% increase in garment output significantly raises demand in spinning and processing sectors.

Government Schemes and Support

For Textiles

• PM MITRA Parks:

  • 7 integrated parks planned to enhance competitiveness, reduce logistics cost, and provide plug-and-play infrastructure.

• Amended TUFS (Technology Upgradation Fund Scheme):

  • Aims to promote modernization and technology upgradation in textile units.

For Apparel

• RoSCTL Scheme:

  • Refunds state and central taxes and levies on exports, helping price competitiveness.

• SAMARTH Scheme:

  • Skilling initiative targeting the training of workers in textile and apparel operations.

• PLI Scheme for Textiles:

  • Focus on Man-Made Fibre (MMF) and technical textiles.

  • Draft of PLI 2.0 includes incentives for large garment manufacturing units.

Key Structural Bottlenecks

• Fragmentation:

  • Over 80% units are unorganised MSMEs with limited economies of scale.

• High Capital Costs:

  • Average interest rates in India are around 9%, compared to 3–4.5% in China and Vietnam, affecting expansion.

• Rigid Labour Laws:

  • Complex compliance and overtime costs at 2x regular wages hinder formalisation and scalability.

• Supply Chain Inefficiencies:

  • Dispersed and uncoordinated production processes lead to delays and higher logistics costs.

• Low Female Labour Participation (FLFP):

  • Despite sector’s potential, FLFP remains underutilized outside major hubs.

Way Forward

• Capital Incentives for Scale:

  • Provide 25–30% capital subsidy and 5–7 year tax holidays to units with 1,000+ machines.

• Labour Reforms:

  • Rationalise overtime wages to 1.25x (ILO standard).

  • Simplify labour law compliance to encourage formal hiring.

• Link MGNREGA to Industrial Wages:

  • Use 25–30% of MGNREGA funds to subsidise wages in garment factories, enhancing employment and competitiveness.

• Designate MITRA Garment Hubs:

  • Set up 2 garment-focused industrial parks in Uttar Pradesh and Madhya Pradesh to promote decentralised industrial growth and reduce migration.

• Export-Linked Incentive (ELI):

  • Shift focus from production-linked to export-linked incentives, rewarding market success and global competitiveness.

Conclusion

India’s apparel sector has immense potential to drive employment, value addition, and exports. But to achieve the $40 billion export target by 2030, the sector requires:

• Bold structural reforms,

• Scalable production models, and

• A supportive policy ecosystem.

The success of players like Shahi Exports demonstrates what’s possible — now it’s time to replicate and scale up across the nation.