Guest author: Geraldine Beatrice Gonfard  | Buying Agent for European brands in New-Delhi

Textiles and manufacturing have always been a tradition in India. The cotton trade with Western countries started centuries ago, and the Silk Road links Europe to North India and China. Today, India is the second largest textile manufacturer in the world – and the potential of growth is still huge.

In the last 50 years, the textiles industry has become one of the main economic foundations for the country and the market is currently estimated at US$108 billion, and expected to reach US$141 billion by 2021. The industry is also the second largest employer in the country (after agriculture) providing direct employment to over 45 million, and another 60 million people indirectly. The Indian Textile Industry contributes approximately 5% to GDP, and 14% to overall Index of Industrial Production (IIP).

The potential for growth is mainly supported by the domestic market. With economic growth of 7.5%, and a population of 1.21 billion people, India is one of the most attractive markets worldwide, with a very high demand for textile and apparel. In 2014, the domestic market represented US$68 billion while exports are only US$40 billion.

The strength of the industry comes from its strong production base that includes a wide range of fibres and yarns, and very high loom capacity (including handlooms). India is the 2nd largest cotton and cellulosic fibre producer in the world (and 2nd for organic cotton, after Turkey). It is also the 2nd largest producer of silk, contributing about 18% of the total world’s raw silk and the leading producer of natural jute. The country also has the 3rd largest sheep population in the world, and produces about 45 million kilograms of raw wool, India ranks 6th amongst clean wool producing countries, accounting for 3% of the total world wool production and the 4th largest in synthetic fibres/yarns globally (e.g. polyester, viscose, nylon and acrylic).

Due to the long tradition of the textile trade, Indian manufacturers can offer specific and heavily worked fabrics to the market, and another advantage is that hand work is still affordable in India as many families have specialized for generations – sometimes this is cheaper than machine work – so there are many possibilities other countries can’t offer anymore. Many Indian specialist fabrics are hand woven, like Ikat or Madras weaving, and traditional expertise in dying and printing techniques also offer a large range of possibilities. Overdying, cold hand dye techniques, tie and dye, block or screen printing are all done by hand, and India is still a world leader in hand embroidery for the fashion industry.

Competition with China, the number one producer in the world, has always been tight, but India is once again challenging this thanks to the strong traditions, the availability of raw materials, recent emphasis on improving quality, and the flexibility of the industry in terms of technique and quantities. Especially important is the increase of the average salary in China, which is making companies look to India to maintain competitive production prices. Recent government policy supports this by changing the rules and allowing 100% Foreign Direct Investment in the textile sector under the automatic route, and a special FDI cell has been created in the ministry of textile to facilitate the creation of joint venture in the country.

There are however local Asian newcomers to the market that challenge India’s rise: Pakistan, Bangladesh, Vietnam and Cambodia are all emerging markets with lower labor costs. Europe recently offered Pakistan 3 years of duty free market access on basic textile products, in order to encourage the industry. However, the textile industry in India benefits from its long experience, better materials and existing factory infrastructure following the European ISO standards. The diversification of its ancestral knowledge and an actively supportive government make India a promising country for foreign companies looking to expand and invest abroad.

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