CITI urges textile and cotton policies reforms to boost competitiveness and reach $350 bn target
The Indian textile industry, is facing numerous hurdles at the moment. Rising raw material costs, particularly of cotton and man-made fibers (MMF) is the biggest bane. To overcome these challenges and achieve the ambitious target of $350 billion in textile output by 2030, including $100 billion in exports, industry stakeholders including CITI are calling for urgent policy reforms.
Raw material challenges and policy solutions
Domestic raw material prices in India are considerably higher than global rates. The imposition of Quality Control Orders (QCO) on MMF fibers and yarn has created non-tariff barriers, hindering the free flow of these essential inputs.
To enhance competitiveness, several key policy reforms are crucial. Liberalizing import policies and reducing the basic customs duty (BCD) on MMF fibers, filaments, and essential chemicals will significantly lower production costs for downstream textile products, safeguarding millions of jobs in the sector. Moreover, removing import duties on all cotton varieties, particularly specialized types like organic and sustainable cotton, will bolster India's competitiveness in the global market.
Moreover, measures to stabilize cotton prices are essential. Establishing a Cotton Price Stabilization Fund, along with interest subventions and extended credit limits, will mitigate price volatility and support farmers. Transitioning the Minimum Support Price (MSP) procurement to a Direct Benefit Transfer (DBT) model will empower farmers to sell their cotton at prevailing market prices, improving liquidity and reducing reliance on government intervention.
Finally, reintroducing the Technology Mission on Cotton II, with a focus on advanced seed technologies and improved agronomy practices, will be crucial to increasing cotton production from 5.5 billion kg to 7.5 billion kg by 2030. Additionally, extending the crucial Interest Equalization Scheme for at least three more years will provide continued support to textile exporters and enhance India's global competitiveness.
Addressing raw material deficits issues
India faces significant production shortfalls in several key categories of polyester-based textile raw materials, hindering growth in high-demand segments. Polyester Mother Yarn, particularly variants like 210 Denier and 360/12 Denier, crucial for warp knitting and high-speed looms, faces a substantial 36.4 per cent production deficit. Moreover, Mechanical Stretch Yarn, essential for high-end women's fashion due to its elasticity and durability, is currently not produced domestically. Polyester Monofilament Yarn, used extensively in carpets and curtains, also faces a significant shortfall, with domestic production meeting only half of the demand.
Also, the availability of specialized yarns and proprietary products is severely limited. Critical innovations like low-melt yarn, BSY (Bi-Shrinkage Yarn), and high-tenacity yarns face significant production shortfalls. Additionally, proprietary fibers like Polylana and Solucell, manufactured abroad, are unavailable locally due to patent restrictions. High Tenacity Low Shrinkage Polyester, vital for twisted embroidery threads, fails to meet domestic quality standards, necessitating reliance on imports. Addressing these critical supply gaps requires a concerted effort to foster local production through strategic policy interventions, technology upgrades, and robust industry collaborations.
Supporting MSMEs and promoting indigenous machinery
The textile sector is heavily reliant on Micro, Small, and Medium Enterprises (MSMEs). To boost their growth, industry leaders advocate for an Alternate Technology Upgradation Fund Scheme to provide MSMEs with crucial capital subsidies and performance incentives. Furthermore, a dedicated scheme for developing indigenous textile machinery is essential to reduce reliance on imports and encourage sustainable manufacturing practices within the domestic market.
By implementing these comprehensive reforms, India can create a sustainable and competitive textile industry, paving the way for achieving the ambitious $350 billion target by 2030.