By Mahesh Patil
Globally, the size of the textile trading industry is estimated at $800 billion, with India’s export contribution being around $35 billion. Recently, the government of India announced a road map for the industry to reach $100 bn by 2030, implying a 19% CAGR over the next six years. This would not only entail investments of close to Rs 200,000 crore, but also generate direct employment for 3 million people.
Between 2001 and 2014, the sector witnessed a 9% CAGR. However, over the past 10 years, textile exports from India stagnated due to the expiry of the EU trade treaty, COVID and high channel inventories. While growth aspirations may look stretched, besides ‘China plus one’, two key catalysts – PLI and FTA with the EU/UK – could help India achieve its lost glory in textiles.
India emerging as a strong player: MNCs are now increasingly looking to diversify their supply lines away from China due to geopolitical tensions as well as high labour costs.
This has led to a potential shift of exports from China towards other countries. Some of the biggest global brands have already begun reducing their exposure to China. We believe India’s competency across factor cost and a well-established textile ecosystem (across cotton segment) will allow it to benefit from the ‘China plus one’ theme.
Despite Bangladesh being a very strong player in garments trade due to FTAs and low labor costs, the recent political turmoil may force retailers to evaluate other options, with India once again emerging as a country of choice.
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Apparels and home textiles to lead the way: Within the textile sector, we remain most excited about garmenting and home textile space rather than the commodity-based weaving, spinning and yarn manufacturers who are prone to cyclicality. What excites us about garmenting is global retailers looking to diversify away from China and now Bangladesh as well, along with vendor consolidation. This means certain large garment manufacturers will get disproportionate share in contracts, with Indian companies being already strategically positioned with retailers. Moreover, technical textiles, used in human protection (for doctors, fire fighters, Army), industrial belting, ropes etc, are growing at a fast pace owing to domestic demand and export opportunities.
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