India’s real GDP growth in FY24 reached 8.2 per cent and exceeded 7 per cent for the third consecutive year, demonstrating resilience amidst global challenges. The growth is driven by stable consumption and improving investment demand. Surpassing China’s economic growth rate, Indian economic growth rate over the last few years has been one of the highest in the world. The Economic Survey 2023-24 projected country’s real GDP growth in the range of 6.5 to 7 per cent, despite taking a conservative approach. Many experts, however, believe these projections will be surpassed. Retail inflation, at 5.4 per cent, remained lowest since the pandemic due to policy interventions and RBI measures. Inflation is expected to decline further to 4.5 per cent in FY25 and 4.1 per cent in FY26, under the assumption that India will have normal monsoon and no external disruption.
India’s real GDP grew 8.2 per cent in FY24, driven by stable consumption and investment.
The 2024-25 budget focused on the textile sector with increased allocations and reduced customs duties.
Despite global challenges, exports rose in Q1 FY25.
Tiruppur saw recovery, with large orders from global players.
New BIS certification for medical textiles starts in October 2024.
A supportive budget
The annual budget for 2024-25 was presented by Indian Finance Minister on July 23, 2024. The budget addressed various aspects of textile and apparel sector, encompassing production incentives, export growth and sustainability. The key highlights of the budget for the sector include:
– The budget allocation for the textile industry was increased by 28.29 per cent, from ₹3,443 crore (FY24) to ₹4,417 crore (~$530 million), of which ₹375.41 crore are allocated for the establishment expenditure of the Centre, ₹3,866.17 crore for central sector schemes/projects, and ₹175.41 crore for other central sector expenditure. The major share of spend on schemes/projects will be consumed by top 5 centrally sponsored schemes: Programmes of the Central Silk Board (23.28 per cent), the Amended Technology Upgradation Fund Scheme (16.42 per cent), Procurement of Cotton by the Cotton Corporation of India under the Price Support Scheme (15.52 per cent), National Technical Textiles Mission (9.70 per cent) and PM MITRA (7.76 per cent).
– The budget for PLI (Product Linked Incentive) scheme was increased by 800 per cent to ₹45 crore (~$5.4 million) from ₹5 crore in the previous year.
– The funding for CCI’s cotton purchase under the price support scheme was increased from ₹0.01 crore to ₹600 crore, while funding for the Integrated Scheme for Skill Development got a boost from ₹115 crore to ₹166 crore.
– The budgets for the Development of the Jute Sector and the Amended Technology Upgradation Fund Scheme (ATUFS) were reduced from ₹75 crore to ₹50 crore, and ₹675 crore to ₹635 crore, respectively.
– The budgets towards the National Technical Textiles Mission, National Handicraft Development Programme, National Handloom Development Programme and Handicraft Cluster Development Programme (Handicraft Mega Cluster) went up from ₹170 crore to ₹375 crore, from ₹155 crore to ₹206 crore, from ₹190 crore to ₹200 crore, and from ₹15.7 crore to ₹30 crore, respectively.
– The reduction in the customs duty, as proposed in the budget, aims to reduce input costs, deepen value addition, promote export competitiveness, correct inverted duty structure, boost domestic manufacturing etc. In the same regard, the Basic Customs Duty (BCD) on MDI (methylene diphenyl diisocyanate) for spandex yarn production was reduced from 7.5 per cent to 5 per cent, to address duty inversion and reduction in input costs for manufacturers; and, lowering of BCD on real down-filling material from ducks or geese, from 30 per cent to 10 per cent aims at making premium filling materials more affordable for garment manufacturers.
– Tariff rates were reduced to zero for certain additional accessories and embellishments for the manufacture of textiles. Additionally, a bottom-up reform was proposed to create new tariff lines concerning many products including technical textiles to align them to the tariff lines with WCO (World Customs Organisation) classification and better identification of goods. These changes came into effect from October 1, 2024.
– The government also proposed to expand the list of exempted goods used in the manufacture of leather and textile garments, footwear, and other leather articles intended for export. The move aims at reducing production costs and encourage more manufacturers to enter the export market.
Trade update
In FY24 ended March 31, 2024, India’s export of textiles and apparel, including handicrafts, increased 1 per cent and reached ₹2.97 trillion (~$35.64 billion). The export value of RMG at ₹1.2 trillion (~$14.4 billion) contributed around 41 per cent to total exports, followed by cotton textiles (34 per cent) and man-made textiles (14 per cent). MSMEs contributed more than 80 per cent of India’s textile and apparel manufacturing capacity.
Particularly in March 2024, the textiles and apparel exports registered 11.18 per cent and 1.7 per cent growth over March 2023, respectively, while their combined growth was 6.91 per cent year-on-year. Category-wise, exports of cotton yarn, fabrics, made-ups, handlooms grew 6.78 per cent, carpets increased 16.23 per cent and handicrafts rose by 128.39 per cent. The categories which saw a drop in March included man-made yarn, fabrics, made-ups (-7.86 per cent) and jute including floor covering (-24.13 per cent). Imports of cotton raw & waste and textile yarn fabric, made-ups during the month fell by 11.29 per cent and 12.17 per cent, respectively.
In the first quarter period of April to June of FY25, exports of textiles and apparel increased 4.08 per cent y-o-y to $8.785 billion. In this, textile export at $4.935 billion increased 3.99 per cent and apparel export valued at $3.849 billion grew 4.2 per cent, though their combined share in India’s total merchandise exports decreased to 7.99 per cent during the period. Cotton yarn, fabrics, made-ups, and handloom products saw a 5.71 per cent increase to $2.916 billion, the shipment of man-made yarn, fabrics, and made-ups gained by 0.37 per cent to $1.165 billion, and carpet exports increased by 11.41 per cent to $263.37 million.
Despite unfavourable economic conditions in the EU, US, and West Asian nations, Indian textile exports grew 9.59 per cent in the month of May compared to May 2023, while apparel exports grew 9.84 per cent. The combined exports of textiles and apparel during the month registered a growth of 9.70 per cent y-o-y.
The Indian textile exports during two consecutive months of April and May, increased 6.04 per cent over exports during the same two months in the previous year, whereas the exports of apparel increased 4.46 per cent. Overall, aggregate exports of textiles and apparel for 2-month period surged 5.34 per cent y-o-y.
In June alone, textiles and apparel exports amounted to $2.919 billion, with textiles increasing marginally by 0.05 per cent to $1.625 billion. While cotton yarn, fabrics, made-ups, and handloom products increased 0.92 per cent to $959.55 million and the shipment of man-made yarn, fabrics, and made-ups gained 2.79 per cent to $383.16 million, the exports of carpet increased by 10.64 per cent to $121.44 million.
During Q1, FY24, imports of raw cotton and waste declined 23.42 per cent to $152.01 million, down from $198.49 million in Q1, FY23. Imports of textile yarn, fabric, and made-ups improved 7.47 per cent to reach $557.2 million, up from $518.4 million in the same quarter of the previous fiscal. The inbound shipment of raw cotton and waste dipped 26.16 per cent to $70.22 million from $95.10 million, while imports of textile yarn, fabric, and made-ups jumped 23.83 per cent to $209.23 million in the month of June 2024.
Tough time for exports
Indian government aims to achieve $600 billion in textile exports by 2047, but the sector faced challenges such as geo-political uncertainties, consumption shifts, and low overall growth in 2024. The sector was affected by the ongoing Russia-Ukraine war, the Red Sea crisis, and the Israel-Hamas conflict, which made the international trade scenario much tougher for the Indian exporters in 2024. According to a CRISIL report released in February, India’s textiles industry is unlikely to be significantly impacted by the Red Sea crisis. However, a prolonged crisis is likely to impact margins and stretch the working capital cycle. It was further highlighted that the higher freight cost due to the Houthi disruption maybe a hindrance for textile exporters with a lot of trade happening through the Suez Canal. The freight rates increased by nearly 40-50 per cent. Additionally, a global ‘weak demand’ in textiles was another worrisome factor for the industry. The May 2024 ITMF Global Textile Industry Survey (GTIS) revealed a continued stagnation in the textile business climate and that a weak demand remained the main concern since September 2022.
Tiruppur bounced back
Tiruppur – India’s textiles export hub, revived back in the first quarter of FY25, following a 14 per cent contraction in knitwear exports during FY24. The revival was triggered by large orders from global players like Primark, Tesco, George at ASDA and Decathlon. While April grew marginally at 1.5 per cent, the respective growths in May and June were 11.4 per cent and 10 per cent. The Tiruppur Exporters Association (TEA) reported US players like GAP, Carter’s and Walmart, European majors such as Next and Duns, and Australian giants like Target and Woolworths, lining up to place orders in the region. This was also due to the global majors diversifying their sourcing basket under the ‘China Plus One’ policy and a major wage hike in an important market like Bangladesh. Late last year, Bangladesh reportedly announced a 56 per cent increase in the monthly minimum wage to $113 from the previous $75 for garment factory workers. As per TEA, the region’s export in April and May amounted to $294 million and $360 million versus $290 million and $323 million in respective months of 2023.
During calendar year 2024 also, excluding a 3.8 per cent drop in January, the exports showed growth in rest of the months. The increase in February and March, compared to last year, were 6.4 per cent and 5.6 per cent respectively.
Tiruppur accounts for 90 per cent of India’s cotton knitwear exports, and 55 per cent of all its knitwear exports. The region faced issue of labour shortage, which showed sign of improvement after elections in India. Prior to elections, the region reportedly experienced around 40 per cent shortage in migrant employees, which reduced to around 10 per cent by mid-2024. Tiruppur’s textile industry hosts 600,000 inland employees and 200,000 migrants.
Mandatory BIS certification
The range of medical textile products, including hospital bed linens, pillow covers, and sanitary napkins, are now subjected to Bureau of Indian Standards (BIS) w.e.f. October 1, 2024. The move aims at ensuring quality and safety in medical textiles. BIS began the sensitisation efforts in this regard among stakeholders even before the implementation date. The compulsory ISI mark is a significant step in standardising products used in critical healthcare settings, potentially elevating the industry’s standards on a global scale.
Fibre2Fashion News Desk (SB – WE)