India year-end review 2023: Throwing its weight around

India faced some serious challenges in textile and apparel exports during mid-of 2023 though there were some positives on policy front, bilateral tie-ups and government support for the industry. 

Sluggish exports in Q2 and Q3

In September, Indian textiles exports registered a 11.06 per cent growth over the previous year, while apparel exports delivered a negative growth of 11.23 per cent. The combined result was a net growth of 1.77 per cent compared to September 2022. Despite growth, exports of both textiles and apparel had a respective drop of 23.02 per cent and 27.27 per cent, and a combined decline of 24.62 per cent when compared to 2021.

For the six-month period (April to September), the textile exports were down by 3.59 per cent and apparel exports were down by 15.36 per cent, resulting in a collective decrease of 8.81 per cent against same period last year. The decline in exports during the stated periods were attributed to rising input costs, global economic slowdown and supply chain disruptions.

In July, the textile and apparel exports dropped 1.9 per cent (from $1,695 million in 2022 to $1,663 million in 2023) and 17.37 per cent (from $1,381 million to $1,141 million), respectively, and the combined exports of textiles and apparel over four-month period (April-July) also reduced 13.74 per cent y-o-y. The decline was even sharper in volume terms during the month.

The Confederation of Indian Textile Industry (CITI) reported a 6.62 per cent increase in cotton yarn, fabrics and made-ups exports to $1,009 million (July 2023) from $946.48 million (July 2022). At the same time, shipments of man-made yarn, fabrics and made-ups, jute products, carpets, handicrafts and apparel items showed negative growth.

Since cotton yarn exports usually look up in September-October period, a demand revival in exports was expected in the remaining Q4 of 2023. If cotton prices could also stay competitive amid good cotton season, the upward numbers were hoped to change the trend.

UK withdrew zero duty

In June-end, Indian textile industry petitioned the government about the UK removing zero duty benefits and requested the government to intervene amid the ongoing free trade deal negotiation. The UK’s decision was to adversely impact $200 million worth of exports of home textiles and garments under the Indian Developing Countries Trading Scheme (DCTS) which came into effect a week earlier to this decision. It left India to lose the Scheme’s benefit till December 31, 2025, while neighbouring Pakistan, Bangladesh and Sri Lanka would continue to receive. Indian exports were to get preferential customs duty rates which were suddenly suspended by the UK. The DCTS had replaced UK’s General System of Preferences (GSP) Scheme that provided a 20 per cent concession on the overall import duty of 12 per cent for Indian home textiles and garments, thereby offering a concessional duty of 9.6 per cent. The DCTS has three tiers of preferences – Comprehensive for least developed countries, Enhanced Preference whose textile and clothing items qualify for zero duty, and Standard Preference applicable to only India and Indonesia which are not deemed as “economically vulnerable” hence withdrawal of preferred 20 per cent duty.

EU-India Conference 2023

The Annual EU-India Leaders Conference 2023 was held at Brussels in July, where industry leaders, business leaders and government representatives discussed new avenues of collaboration encompassing textile cooperation and the proposed EU-India FTA. The discussion centred around the inclusion of a zero-duty policy for textiles within proposed FTA to foster mutual growth. Both sides presented their concerns and exchanged viewpoints. India’s main concern was multiple certification requirements at different textile companies in the EU that result in amplifying the cost for an Indian company while complying with multiple registrations. At the same time, EU shared the challenges it faces associated with BIS standards for textile products in India. There were also discussions in regard to the kind of policies which can be formulated to encourage R&D and technology transfer between the parties in the field of textile design and innovation.

Roadmap to circularity

In early July, the Indian government’s plan to make it mandatory for a certain amount of textile products in government procurement to come from recycled materials, was reported. It is a part of an action plan to boost textile waste value chain and make India a global hub for circular textiles. It aims to introduce Indian standards and certification on recycling and establish textile recycling clusters. The textiles ministry will assess the current state of textile waste and associated industry and craft policies to make India a global hub for sourcing sustainable and circular textiles and garments. The assessment will include pre- and post-consumer waste generation and source identification of waste. The current practices adopted by the industry to meet international norms relating to circularity will also be analysed, for which a consultant will be hired. A comprehensive roadmap to scale up technologies to boost recycling will be built. The move is said to be in line with EU’s new Circular Economy Action Plan 2020 which sees the textiles industry as one of the key product value chains facing multiple sustainability challenges.

Fall in cotton prices

Cotton Incorporated reported a general decline in global cotton benchmarks in October. The most notable shift in open interest moved from the NY/ICE December contract to the March contract. The prices for March contract dropped to 80 cents per pound from 89 cents per pound in the month of September. The A Index also fell from 97 to 89 cents per pound. However, the decrease in cotton prices was less pronounced in India. Indian prices, specifically Shankar-6 quality, reduced marginally from 90 to 87 cents per pound. In domestic terms, this meant fall from ₹59,000 to ₹56,700 per candy of 356 kg, calculated on one $ at ₹83.

Cotton season

Commencing on 1^st October, India geared up for the 2023-24 cotton season with Indian Cotton Federation expecting cotton production to reach between 330-340 lakh bales, each weighing 170 kg. The cotton sowing covered an area of more than 12.7 million hectares. September-ended season saw over 335 lakh bales of cotton entering the market with some originating from fresh harvests in states like Karnataka and northern cotton-producing regions. The trend was expected to persist into the next cotton season, sustained by the Central government’s decision to raise the Minimum Support Price (MSP) for cotton by 10 per cent. However, the textile industry’s demand for cotton remained subdued during the year, with many textile units operating below full capacity. During the season, the import of extra-long staple cotton faced challenges due to an 11 per cent import duty.

QCO implementation deferred

In October, the ministry of textiles announced the extension of the implementation date for the Quality Control Order (QCO) for Geo Textiles. Originally scheduled to come into effect on October 7, 2023, the QCO got rescheduled for January 1, 2024. The rescheduling was done considering the repeated requests made by firms to comply with the specifications of Bureau of Indian Standards (BIS) including the ongoing certification processes at the BIS for the 19 items covered under S.O. 1706 (E) dated April 10, and the subsequent Geo Textiles (Quality Control) Amendment Order dated May 24. The ministry further expressed its commitment for ensuring quality of these products as these are used in infrastructure projects.

Growing ties with Japan

Following the Indo-Japan CEPA, Indian readymade garments’ duty-free access to Japan is expected to fetch 20-25 per cent growth in apparel exports. In comparison, China and Turkiye have around 9 per cent duty. As a result, as many as 84 prominent Japanese buyers including trading companies and retail chains/stores were in India to source their requirements from the 112-odd Indian exhibitors displaying their garments at “Upnext India 2023” held at Gurugram in February. Furthermore, the government planned for a PLI scheme including readymade garments too, to help the industry to diversify to different fabrics and increase capacity. There were also plans to operate vessels directly to Japan to reduce logistics time and cost.

Kenya invited Indian textiles

The Kenyan government’s quest to revive the textile industry received a shot in the arm through business collaborations with India-based textile machinery and technological companies. The collaboration was fostered through the ITME Africa and Middle East 2023 exhibition, which showcased a complete range of innovative textile technology and engineering in multiple chapters of textile technology. The exhibition took place from November 30 to December 2, 2023, at the Kenyatta International Convention Centre (KICC). A total of 23 countries other than India participated. Since the machinery used in manufacturing does not attract taxes from the government, the investors were urged to establish their textile factories in Kenya – the country having biggest manufacturers of Indian origins. With last wave of industrialisation coming to Africa, the continent is ripe for investments and hosts young and skilled labour as well as raw materials. Kenyan officials pointed out the advantage – investing in Kenya would be wiser than taking the local raw materials to India for manufacturing and then bringing them back as finished goods. The manufacturing in Kenya will allow access to a duty- and quota-free East African Community (EAC) market of over 400 million people. The Kenyan government supported farmers to grow 40,000 acres of cotton, with the plan to increase the acreage to 100,000 in next season.

During the year, an Indian textile company, Best Lifestyle, established an apparel unit at the EPZ, and would employ more than 3,000 people. Another Indian technology firm, Sasaran Technologies, set up shop at the Konza Technopolis, from where it will be serving the whole of East Africa.

Self-reliance

India offers to the world a complete value chain solution from farm to fashion with largest raw material availability of cotton, jute, silk and wool in the world, supported by the world’s second largest spinning and weaving capacity, and 95 per cent value addition. Additionally, the government has taken several steps such as the production linked incentive scheme and PM MITRA scheme to support the textile industry’s growth and development.

As per recent reports, the Indian government is aiming for self-sufficiency in the manufacturing of textile machinery as an essential element for the country’s growth and competitiveness. There is a growing emphasis on positioning India as a supplier of high-quality textile machinery. The FTA proposed with the UK and additional trade agreements with countries like Switzerland and Norway are expected to facilitate collaboration between Indian machinery manufacturers and businesses in these countries, resulting in the domestic production of advanced textile machinery. India, currently a $3.7 trillion economy, has the potential to reach $30 trillion by 2047, in which the self-sufficient textile machinery production could play a crucial role in enhancing India’s standing in the global textile industry and achieving broader economic aspirations.

Other developments

BRICS+ fashion summit commenced on November 28 in Moscow, where Indian delegation showcased Indian handlooms encapsulating the essence of Indian culture.

The government is setting up a mega project called Pradhan Mantri Mega Integrated Textile Region and Apparel (PM MITRA) Park at Navsari district of south Gujarat. It is expected to play a pivotal role in furthering the growth of textile industry, fostering innovation and contributing significantly to employment situation in the region.

On World Cotton Day (7^th October), the ministry of textiles hosted a conference with the theme “Enhancing Quality & Productivity of Indian Cotton through Policy, Innovation & Technology Upgradation”. The event was conducted in collaboration with the CCI (Cotton Corporation of India) and the EU-Resource Efficiency Initiative – an initiative by GIZ. In addition, Kasturi Cotton programme – a CCI-collaborated premium certified quality cotton with traceability, was introduced.

In mid-October, Birla Cellulose – a key division of the Aditya Birla Group, unveiled its ground-breaking circular fibre blend that incorporates an impressive 50 per cent mechanically recycled fibre content while retaining remarkable yarn strength. It is credible fibre with recognition from GRS for its utilisation of pre- and post-consumer waste materials, and holds various certifications including the RCS, FSC, and Higg Index. Furthermore, the blockchain technology ensures fibre’s traceability across supply chain.

Lindström India, a textile rental company and part of Finland-based Lindström Oy, is preparing to launch its 13^th unit in India. Currently, the company has 12 units distributed across different regions in the country.

ALCHEMPro News Desk (WE SB)