India's apparel industry struggles amid synthetic demand: GTRI Report

India's apparel industry confronts a pressing challenge meeting the demand for mixed synthetic clothing, resulting in a dwindling share of global exports, as per a Global Trade Research Initiative (GTRI) report. Describing this predicament akin to a handicapped horse, the report underscores its adverse impact on competitiveness, leading to low exports, wages, and investments in the sector.

The rise of synthetics and the gap in production

The report emphasizes the dominance of synthetic fabrics in the global market, accounting for 70 per cent of clothing purchases in developed countries. However, India's exports of synthetic garments fall short, making up only 40 per cent of its total textile exports. This gap, according to the GTRI, is a key reason behind the industry's struggles. This disparity affects garment exports negatively, as synthetic fabrics offer durability, color retention, and versatility in blending with other materials for innovative designs, catering to various segments like formal, sports, and fashion wear.

The report also highlight, the industry's focus on cotton results in seasonal operations, with factories shutting down or operating at reduced capacity during off-seasons, leading to worker layoffs and high fixed costs. It says, seasonal operations of textile units, focusing on cotton apparel for six months, results in shutdowns or lower capacity during the rest of the year due to limited demand for synthetics or winter wear, leading to layoffs and increased costs for factories. Moreover, India's emphasis on informal cotton-wear exports keeps wages low, but transitioning to synthetics could enable year-round operations, significantly boosting wages.

The report also identifies weaknesses within India's textile value chain, encompassing yarn making, weaving, fabric processing, and apparel manufacturing. The weaving and processing sectors are particularly concerning, characterized by small, informal units lacking expertise, scale, and technology. This results in high weaving costs comparable to developed nations and inconsistent fabric quality

Challenges like power outages and underutilization lead to weaving costs comparable to developed nations, despite lower wages. Inconsistent quality is also a concern as batch processing methods in smaller units lead to inconsistent fabric quality, making it difficult to compete with international standards. Moreover, the inability to meet environmental standards like zero-liquid discharge (ZLD) further weakens the sector. Compared to China, India's weaving and processing units have a significantly lower daily capacity, hindering overall production and efficiency. The report however, highlights India's dominance in yarn exports (23 per cent share) compared to China (13 per cent), showcasing potential in the raw material sector.

Only a small portion (around 1,200) Indian garment factories currently meet fast fashion industry standards, further limiting market access. Rigid labor laws and challenges with contract enforcement are also cited as impediments to industry growth.

Multipronged approach the way forward

The report recommends a multi-pronged approach to address these challenges.

• Focus on synthetics: Consumer preference has shifted towards mixed synthetics, accounting for 70 per cent of clothing purchases in developed countries. However, India's synthetic fabric exports remain below 40 per cent, significantly impacting its garment export performance. Prioritize enhancing the production of synthetic apparel to meet growing global demand.
• Strengthen value chain: India's weaving and processing sectors are fragmented and lack scale, leading to high costs, inconsistent quality, and difficulty in meeting environmental standards. This is evident in the stark difference between India's 23 per cent share in yarn exports and its meagre 6 per cent share in fabric exports, compared to China's dominance in both areas. Investing in upgrading weaving and processing capabilities through larger, more technologically advanced units could thus be the way forward.
• Embrace fast fashion: Encourage domestic firms to comply with fast fashion industry standards to access wider markets.
• Address regulatory hurdles: Advocate for relaxation of rigid labor laws and improved contract enforcement to promote industry growth.
• Liberalization of labor laws:Improved contract enforcement to foster a more conducive business environment. The reliance on cotton exports keeps wages stagnant and prevents India from tapping into the fast-growing synthetic textile value chain.

Indeed, the GTRI report highlights a crucial turning point for the Indian apparel industry. Setting up 10 big-scale weaving and processing units could be an annual goal. In 2023, India's garment exports were a mere $14.5 billion, significantly trailing behind China ( $ 114 billion), the EU ($ 94.4 billion), Vietnam ($ 81.6 billion), and even Bangladesh ($ 43.8 billion), the report said. By addressing the synthetic fabric gap and modernizing its value chain, India has the potential to increase garment exports and compete effectively with leading countries like China, Vietnam, and Bangladesh. Boost job creation as year-round factory operations due to increased demand for synthetics would lead to more employment opportunities. Enhance worker wages as transitioning to synthetics can significantly improve worker wages compared to the current cotton-centric model. And regain textile glory as India's rich textile heritage can be revitalized by embracing innovation and adapting to changing market trends. The report serves as a wake-up call for the Indian apparel industry. Embracing the shift towards synthetics and modernizing its infrastructure will be critical for the industry to continue on its growth path.