Increasing innovations, strong domestic consumption and a healthy export demand make the prospects for the Indian textiles industry look promising, writes C Kamatchisundaram.
One of the oldest in India, the textiles industry is a major contributor to the country's exports. The industry is responsible for the huge employment of skilled and unskilled labour. It currently accounts for approximately 2 per cent of India's gross domestic product (GDP), about 10 per cent of manufacturing production, and 14 per cent of the overall index of industrial production (IIP).
The recent policy changes on demonetisation in November 2016 and the introduction of goods and services tax (GST) in July 2017 created a disruption in the entire country's economy. This highly fragmented industry, which predominantly runs on the cash and produces products for mass consumption, suffered a huge setback due to the revised tax regime.
Despite the disruptions, the Indian textiles industry is expected to grow from $120 billion to $250 billion in the next five years, representing the industry's high potential in all sectors involved. India has become a leading supplier in the global yarn trade. In order to sustain and improve this leadership and to meet the needs of high quality yarn in the domestic market, the investments in spinning machinery have to be accelerated. Similarly, the investments in post-spinning sectors like fabric forming and processing and finishing should also accelerate to meet the stringent needs of the export market and the ever-increasing needs on quality apparel from the domestic market.
Thus, the Indian government and the state governments are promoting investments offering capital, interest and other subsidies. Further, the Indian government may also come up with free trade agreements with key consuming countries to enable better access to the market. It has already allowed 100 per cent FDI in the Indian textiles sector under the automatic route. Accordingly, it is now expected that a good balance will be maintained between new capacity creation and modernisation.