It’s high time India diversified its textiles product basket: CITI India

Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA), holds strategic significance for India, as it is the first agreement with a European block.

EFTA has committed to promoting investments to increase the stock of foreign direct investments by $100 bn in the next 15 years, observes the Apparel Export Promotion Council.

India is negotiating trade agreements like never before. Better strategic negotiations and diplomatic engagements towards addressing non-tariff barriers in these agreements will further ease down restrictions for Indian exporters and will thus open new avenues for textile products, says Chandrima Chatterjee(CC), Secretary General, Confederation of Indian Textile Industry (CITI), in an exclusive interview with Bizz Buzz (BB).

BB: Considering India’s economic interests, what potential benefits does it anticipate from signing a free trade agreement with the European Free Trade Association (EFTA) particularly focusing on textile investments and export growth in the textile industry?

CC: The Trade and Economic Partnership Agreement (TEPA) with the EFTA countries is a significant step towards boosting India’s textile trade with those countries. Switzerland and Norway imported apparel worth $14.2 billion in 2022. The agreement holds strategic significance for India, as it is the first agreement with a European block.

Under TEPA, EFTA has committed to promoting investments to increase the stock of foreign direct investments by $100 billion in the next 15 years, which is also likely to generate 1 million employment opportunities in India. This is the first of its kind happening under any of India’s trade agreements.

India and EFTA countries, particularly Switzerland complement the needs of each other in the Textiles and Apparel (T&A) space. Switzerland can be a good supplier of specialized yarns, Textile Technology, and Machines to India in return can offer raw materials and intermediate products to be converted into high-quality and sustainable end-products.

Since the majority of the trade in this region is through Switzerland, considering the potential in trade and investment, The Confederation of Indian Textile Industry (CITI) and Swiss Textiles (an important member of the Swiss National Association of Textiles and Apparels), signed an MoU in November 2023 to promote bilateral trade and investment and engage in product-specific B2B interactions, knowledge sharing, & capacity building, etc. based on the respective core competencies of both countries.

In this context, CITI also led a delegation to Techtextil 2024, Germany, from April 23 to 26, 2024. The CITI delegation actively participated in a series of engagements, especially with textile companies and associations in Switzerland. It offered insights into the latest innovations and developments in the textile industry, fostering networking and knowledge-sharing opportunities among industry leaders of both countries.

BB: The recent free trade agreements with the United Arab Emirates, Australia, and the EFTA bloc, do they contribute to India's overall textile trade strategy and economic goals?

CC: UAE, Australia, and EFTA are important trade blocks for India’s Textiles & Apparel (T&A) industry. Each of these countries has unique importance for the Indian T&A industry. UAE is the 4th largest market for India’s T&A products. India is exporting about $2.1 billion worth of T&A products to the UAE about 20 per cent of the UAE’s total T&A imports from the world. With the India-UAE CEPA in place, the trade of T&A between the two countries is likely to increase in the coming years.

Similarly, Australia is also one of the important markets for T&A products. After the India-Australia Economic Cooperation and Trade Agreement (ECTA), India’s T&A exports to Australia will increase. However, import is also an important aspect of this ECTA. The Indian cotton industry depends on imports of specialized varieties of Australian cotton due to nominated business and non-availability domestically. Their businesses were hit after the imposition of import duty on cotton during the Budget 2021. However, the duty-free imports of Australian cotton with a TRQ of 51000 MT have relieved the Indian cotton industry.

Similarly, the trade pact with EFTA holds promise for the Indian textile industry, offering access to advanced markets, technology, and opportunities for growth and innovation. An important expectation from this FTA is an increase in FDI in innovation and new-generation products.

BB: The Global Trade and Research Initiative (GTRI) report says that India’s textiles and garments exports have declined over the last five years by 7.6 per cent to $34.24 billion in the calendar year 2023 from $37.16 billion in 2018, with China, the EU, Bangladesh, and Vietnam dominating the global garments trade. From 2018 to 2023, India saw a 25.46 per cent increase in textile and garment imports, indicating a domestic demand unmet by local production. What are the key reasons behind India’s declining textile and garment exports over the past five years, as highlighted by the GTRI?

CC: If we look at year-on-year data, there has not been a consistent decline in India’s exports. During these periods, the world has witnessed challenges such as COVID-19, the Russia-Ukraine ongoing war, US inflation, etc., which affected the global demand for textiles & apparel. During this period only in 2021, India achieved its highest-ever export of $41.5 billion, which was a testimony of India’s stronghold in the global Textile & Apparel arena. However, we are concerned about the shrinkage in the export market and stagnation in the domestic market.

During the last 5 years, several significant policy measures have been announced for the textile industry particularly export-related measures such as Rebate of State and Central Levies and Taxes (RoSCTL), Remission of Duties and Taxes on Exported Products (RoDTEP) and flagship schemes like Production Linked Incentive Scheme (PLI), Pradhan Mantri Mega Integrated Textile Region and Apparel (PM-MITRA). Moreover, the Government has signed multiple trade agreements with major markets like Australia, UAE, and EFTA, and trade negotiations with countries like EU-27, Canada, Peru, UK are going on. It would not be wrong to say that in the last few years, the Government has paid special attention to the textile sector based on its importance for exports as well as employment generation. All these policy measures clubbed with the inherited strength of the Indian textile sector are likely to pave the way for India to emerge as the major player in the global T&A arena and India will surely achieve the T&A export target of $100 billion by 2030 or before.

BB: What steps do you suggest to enhance the competitiveness of India’s textile and garment industry, particularly in promoting the production and export of synthetic apparel and strengthening the weaving and processing sectors?

CC: India is a major exporter of textile & apparel products to the world. One of the important requirements of enhancing competitiveness is the availability of raw materials at internationally competitive prices. To improve the quality of textile products, the Government has come up with mandatory Quality Control Orders, particularly to man-made fibre (MMF) raw materials (fibre and yarn). While the industry is trying to adapt to the QCOs, its implementation has resulted in the disruption of the MMF value chain, not only in terms of pricing but also in terms of the availability of raw materials in the required quality and quantity, especially for those specialized varieties for which India is majorly dependent. It might result in the increased import of products next in the value chain i.e. fabric and apparel which will hurt the domestic industry. To avoid such a situation, the Government may consider imposing QCOs through a more gradual process to ensure no supply disruption.

Further, technological advancement and economies of scale are other important aspects for increasing the cost competitiveness of the Indian T&A products. To achieve the same, the Government may consider the early announcement of the Alternate Scheme to Technology Upgradation Fund Scheme (TUFS) as also PLI 2.0 with a lower investment threshold and wider product coverage. It will bring the much-needed investment in technology and infrastructure which will be the key to transforming the Indian T&A industry into a competitive entity on the global stage.

BB: How can Indian exporters adapt to the demands of the fast fashion industry, and what role do negotiations of non-tariff barriers in free trade agreements play in this context?

CC: There’s a rising demand for sustainable, ethical, and responsible products and production materials. Brands aspiring to meet the expectations of a growingly conscious consumer need not just reputational risk management through better compliance but also to meet aspirational environmental standards. These expectations call for improved environmental and social footprints, leading to a greater emphasis on sustainable materials, production methods, and waste and pollution reduction. While India has a good ecosystem for sustainable fibres, plant-based fibres, increasing use of renewable energy in energy-intensive processes, and increasing investment in energy-efficient technologies, there is still a technology and capacity gap in the requirements from some of our importing country requirements which can limit our market access to these countries in the coming years.

India is negotiating trade agreements like never before. Better strategic negotiations and diplomatic engagements towards addressing non-tariff barriers in these agreements will further ease restrictions for Indian exporters and will thus open new avenues for textile products. Collaborative efforts towards capacity building of the manufacturers, better institutional mechanisms for fast responses to new requirements as well as new opportunities through better material management, etc., can help India further strengthen its position as a responsible supplier.

BB: Can India diversify its textile and garment exports to better compete with major players like China, the EU, Bangladesh, and Vietnam in the global market?

CC: At present India’s export of T&A is mainly dominated by Cotton and its blends. Trade analysis shows that during 2022-23, Cotton accounted for about 55 per cent of India’s Textile & Apparel exports, while MMF accounted for only about 30 per cent. However, this trend is just opposite to what Indian competitors like China, Bangladesh, etc., are supplying to the world. Today, most formal, sports and fashion wear uses synthetic fabrics. They are more durable and allow easy blending and experimentation with other fibres. It will not be wrong to say that synthetics have overtaken cotton and become favourites of the fashion industry.

Thus to have a larger share of the pie, there is a dire need for India to diversify its product basket by focusing more on MMF and its blends rather than focusing only on cotton. While schemes like PLI will surely help in increasing India’s share of MMF-based T&A products, the FTAs can also be leveraged for easier access to the raw material required for product diversification and enhance FDI and investment in the development of indigenous capacities for manufacturing of these.

With India becoming the fastest-growing economy, and the cost of labour and raw materials increasing consistently, the only way to move forward is value-added growth through more niche and specialized products, growth in technical textile products in the area of medical textiles, geotextiles, industrial wear, high altitude garments.