Global brands, new stores and unique experiences are penetrating the Indian market and allure customers of the Apparel Industry. The Textile Industry together with garments industry contribute to 14% of India’s GDP and 13% of merchandise exports. Trailing only agriculture, the Textile Industry is the 2nd largest employer providing 45 million jobs in the country. In the last year, the Apparel Sector contributed to 42% of the overall textile and apparel export business of India. The Government of India is directly supportive as it has already extended various benefits to this sector, which has immense potential for expansion.
Out of 45.19 million workers in the Textile Industry, 11.22 million people are employed by the readymade garment sector making it the biggest employer in this industry. By 2017, this number will increase to 12.9 million. With the Government’s proactive policies, such as the Free Trade Agreement (FTA) with the European Union and other incentive plans, the domestic Apparel Sector has turned out to be the largest segment of the Indian Textile and Clothing Industry (IT&C).
In the 2016-17 budget, the Government allocated about $218.5 million for the Amended Technology Upgradation Fund (A-TUF) scheme for the Textiles Industry that will lead to better quality and productivity and in turn increase exports and employment. The Government has also announced 15% capital subsidy for investments in technical textiles under the A-TUF Scheme. Also, about $14.7 million was allocated to the Scheme for Integrated Textile Parks (SITP). Currently, the Textile Sector spends 10-11% on R&D and the investment is expected to double in the coming years.
The Indian Government allowed foreign investments for those global luxury, apparel and accessories companies who own their retail chains in India. This still continues to work today through local franchise and distributors. After the 51% relaxation in FDI for multi-brands and 100% for single-brands, the Indian market has become more enticing for foreign investors. This allowance for 100% FDI in single-brand retail has led to 28 apparel and accessories brands entering India of which 23 came through a franchise or distribution partnership. In regards to this type of partnership, the global retailer partners with a local company in which the latter pays a fee to the brand owner and gives support in marketing and launching the brand in India.
According to Global Retail Development Index by AT Keamey, India is the second most attractive market for the global retailers due to ease of doing business in the past few years and transparency on FDI. The global retailers entering India through franchise and distribution partnership are making sure that they chose the right partner, who can help in overcoming challenges (infrastructure bottlenecks, archaic labour laws, complex regulations, attrition rates and limited high quality retail price) related to the complex Indian market.
With growth in per capita income, change in spending styles and rapidly growing urban population, India is becoming a profitable market for global brands. The urban buyers of India are shopping for apparels at least 10-12 times in a year, which was not the same a couple of years back. India is a supply constrained market where demand arrives far ahead of the supply. The omni-channel and e-commerce approach have become new trends that are shaping channel strategies for the mid-sized companies that are targeting India’s digital and high-tech population. These have become impeccable platforms for many retail brands who wish to enter the Indian market. Online shopping has played an important role in expanding the fast fashion culture, with many international brands selling exclusively online. The tier II and tier III cities in India show great potential for this sector; therefore, the foreign companies investing in metro cities like Delhi and Mumbai are also planning to open stores in the comparatively smaller cities.
In the last month, the Fixed Term Employment scheme was introduced in the Apparel Manufacturing sector under the Industrial Employment Act by the Ministry of Labour and Employment. With this move, employment of workers in Apparel Manufacturing will be on fixed term basis, regardless of the seasonal nature of the sector. This includes the assurance of working environment for the workers, wages and other benefits of permanent employees. It will benefit both, the employer and the employee as well and also provides flexibility for employing workers as per the demand of the market.
Attractive policies and encouraging regimes for manufacturers and retailers are the main reasons to invest in this sector. Also a change of lifestyle and an increasing demand for quality products and international brands support the advancements in the Apparel Industry that currently accounts for 60-65% of the Indian textile and clothing industry.
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