Indian Exports in Textile and Apparel:

An Analysis for the Period 2005-2020

Aakriti Ahuja
MSc. Economics
TERI University
Vasant Kunj, New Delhi

Supervisor: Dr. PK Anand

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 • List of Abbreviations
ATC Agreement on Textiles and Clothing
ATUFS Amended Technology Upgradation Fund Scheme
AI Artificial Intelligence
DGCI&S The Directorate General of Commercial Intelligence
and Statistics
DGFT Directorate General of Foreign Trade
ECGC Export Credit Guarantee Corporation of India
FTA Free trade Agreement
MFA Multifibre Arrangement
MITRA Mega investment Textile Parks Scheme
MMF Man-made fibres
PLI Production Linked Incentive
PMCS Pradhan Mantri Credit Scheme
PTA Purified Terephthalic Acid
RoDTEP Remission of Duties and Taxes on Exported
Products
RoSCTL Rebates of State and Central Taxes and Levies
SCBTS Scheme for Capacity Building in the Textile Sector
SEC Solar Energy Scheme
TTM Technical Textiles Mission
T&A Textile and Apparel
Texprocil Textile Export Promotion Council
ZLD Zero Liquid Discharge

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ABSTRACT
The textile industry in India holds a significant place as it provides one of the most
fundamental clothing needs of the people. It is also considered as the second largest
ecosystem for global retailers to strengthen their productive capacities, after China. It plays
an important role in developmental process along with encouraging trade integration among
countries worldwide. India has been conventionally a major producer for textiles, with its
ever increasing demand in both domestic and foreign markets. After the year 2005, the
burden of quotas in the textiles and clothing sector had minimised, due to which a smooth
path for the Indian economy to flourish and achieve rapid growth had opened up.
The ongoing pandemic has shifted the focus of the consumers from shopping in markets to
shopping online and industry has been observing a paradigm shift in the socio-economic
structures along with technological advancement. The industry had been showing an increase
in its production activities and exports for a few years, however it has been one of the worst
hit sectors due to the Covid-19 pandemic.
This Report has eight sections. Section I gives an introduction of the textile industry in India,
followed by section II that provides the background for the sector and its evolution over the
time. Section III provides a literature review, followed by section IV giving a brief account of
the Indian textile and apparel industry. Section V explains the impact of COVID-19
pandemic on the textile and apparel industry. The section VI discusses the role of
Government of India in this sector. The last section VII gives Conclusions and way forward.

Keywords: international trade, foreign investments, employment, textiles and

apparel, production

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RESEARCH OBJECTIVE

The primary objective of the study is to explain the exports in Indian textile and apparel
sector in the temporal boundary. The analysis has been done for the period 2005-2020,
understanding the trend for textile, apparel and textiles and apparel exports in India.

1. INTRODUCTION
Textile and Apparel (T&A) industry is a very diverse industry, with its products used by
almost everyone. It has been significantly contributing to the output, employment, exports
and foreign earnings. It is substantially dependent upon agriculture in obtaining raw
materials, also knowns as agro-based industry and also directly links to the rural sector with
the craftsperson and farmers deployed to produce cotton, wool, silk and handicrafts, thereby
providing employment and livelihoods to a large number of people. The industry
encompasses abundance of raw materials and cheap skilled labour that provide a competitive
advantage and minimises the time taken for production. Being the world’s second largest
exporter of textiles and apparel, with extensive amount of raw material and manufacturing
base, the industry has immense potential. Its production structure comprises of large spinning
mills along with small-scale weaving, finishing and apparel producing firms. Of late the,
textile and apparel sector is known by the shift in markets, evolution of supply chains and
moving towards the sustainable manufacturing scenario. India is the largest producer of
cotton along with second largest producer of silk and polyester in the world, thereby marking
its presence in traditional textiles and natural fibres.
Looking at some basic statistics, India’s trade for Textiles and Apparel (T&A) having a share
of 5.38 per cent in India’s total trade, with its exports worth during the year 2019-20
(Ministry of Commerce and Industry). The industry also contributed a share of Textiles and
Apparel in the overall exports at 11.34 per cent in the year 2019-20.

2. BACKGROUND
The history of textile industry in India has been as old as human civilization, as the time
passed from several years, the industry has flourished. The Indian textile has been enjoying
rich heritage with origin of textiles to the Indus valley Civilization where people used
homespun cotton for weaving their clothes. Indian textile industry has been governed by
a series of trade restrictions since 1960. The most important development in the
history of Indian textile trade was the removal of the Multi-Fibre Agreement (MFA), a
framework for both unilateral and bilateral trade limitations using quota restrictions on
imported commodities which governed the textile trade since 1974. MFA was the
framework under which the developed countries imposed trade restrictions on the exports
of textiles and clothing from the developing economies through the system of quotas,
providing breathing space for the domestic textile industries of the developed
countries to adjust to competition from new sources of supplies. A decision was taken
in the Uruguay Round of trade negotiations to phase out MFA in different stages
through the implementation of the Agreement on Textiles and Clothing (ATC) in
four stages during the transitional period which ended in 2005. From 1 January 2005
onwards textile trade become quota free and has been completely integrated into the
GATT system.

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With the termination of ATC in 2005, India had high hopes for rapid growth in textiles and
clothing exports due to vanishing of quotas, to have growth prospects in the global market as
well. The quotas were abolished and there were no quantitative restrictions over trading
activities. The trade became more liberal with the introduction of ‘no quotas policy’, but it
increased other trade restrictions, like non-tariff barriers. The changed policy provided path to
the Indian textile industry for rapid growth and development. It is also backed by literature
also that the global exports have increased substantially after the abolition of the agreement
and removal of various restrictions, which further led to increase in the output and economic
growth.

3. LITERATURE REVIEW
Kanupriya (2021) carries out the theoretical analysis of the implications of the COVID-19
pandemic on the Indian textiles sector. The paper consists of the combined impact of the
demand side factors like the social distancing, exports and consumer demand with the supply
side factors like the production, employment, supply chains and prices of raw materials. The
study also talks about some strategies to be adopted to provide the labour with apt social
security. The pre-existent negative implications like technological backwardness, low
demand magnified with the advent of the pandemic in the textiles industry.

Gaurav Bhambri (2021) examines various initiatives and policies implemented by the
government to facilitate the textile and clothing sector and exports in the global market. The
study also explains the impact of the policies on the export of textile and clothing
commodities in Haryana. Since the industry is labour intensive, it requires high amount of
low skilled labour which helps the state to generate income.

Panigarhi and Ashutosh (2020) the international trade, employment generation and share in
the income of the textile industry. The paper primarily talks about the disruptions in
international trade like the imports and exports and the challenges faced by the economy.,
Another issue of supply chains being disrupted impacted the imports and exports. The vision
for textiles and clothing sector in India results in economic crisis with reduced exports and
earnings. In order to combat these shortcomings, paper suggests some suggestions like
providing GST discount in the instalments and so on.

A paper by Gautam et al in 2020 Investigates the trade performance and competitiveness of

Indian textile industry with China and Vietnam by using revealed comparative advantage by
Balassa. The data for 11 products with HS50-HS60 has been collated for the period 1988-
2016. India attained comparative advantage in only 8 Products as compared to Vietnam
showing drastic improvement in textile industry. Moreover, China has shown tremendous
improvement in its comparative advantage from 9 products to all products. Therefore, scope
for Indian economy to have serious policy reforms in the sector.

In another study by Ashutosh et al in 2020, primarily talks about how the textile and apparel
industry has been affected during pandemic. The situation affected the apparel exports due to
cancellation of orders leading to inventory. Some policy suggestions like pay backing (where
the labour is given some financial relief every month), proposing for GST discounts and
reduced rates.

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In addition to the above too, Sahoo et al in 2021 discusses the impacts of Covid-19 on Indian
trade and manufacturing (textiles). The paper is more of a forward looking paper, allowing
the economy to adopt for counter cyclical fiscal measures to stop things from going bad to
worse. There is thus a need to have firms not only be dependent upon the domestic economy
but also on international trade. Thereby calling for the role of government to provide with
some policy measures for some of the worst affected manufacturing sectors in textiles.

4. INDIAN TEXTILE and APPAREL (T&A) INDUSTRY

Indian textile and apparel industry is one of the oldest industries in the country dating back
several centuries, heavily dependent on agriculture for raw materials with a significant
contribution to employment, 6 per cent of output, 15 % exports earnings (source: Ministry of
Textiles). The industry has two broad sectors, (a) unorganized sector, consisting of handloom,
handicrafts and sericulture operating on a small scale and (b) the organized sector consists of
spinning, garments and apparels which requires modern machinery and techniques. The
economy also contributes to about 7 per cent of its industrial production to the textile sector.
The hand spun textiles for labour intensive and sophisticated mills for capital intensive are
the two fields employing more than a million people.

The globalization and liberalization policies in India since 1980s have contributed to increase
the trade flow in textile and apparel industry also, helping the capacity building. Therefore,
textile industry is known to be more modern and globalised today. The textile industry in
India holds a significant place as it provides one of the most fundamental needs of the people
and is considered to be the second largest place for global retailers to strengthen their
productive capacities, after China. The industry marks its significant role in the economy
being one of the largest sectors in terms of production, employment generation (both rural
and urban class) and foreign exchange earnings being crucial both in terms of domestic and
global share in the world, transforming the industry into an important contributor in economic
growth and development. The huge textile and apparel industry is largely driven by the
abundance of raw materials and labour force. The sector produces a large variety of products
for both domestic and global markets. It is one of the critical sectors of the Indian economy,
playing a significant role in creating investment along with organizing the export as well as
the international markets and is spread to a variety of products to be produced like sports,
agriculture, healthcare and manufacturing using both labour intensive like hand woven and
spun textiles and capital intensive like spinning and weaving mills’ capacities.

4.1 TEXTILES AND APPAREL (T&A) INDUSTRY IN NUMBERS

The textile industry, apart from creating job opportunities, contributes shares a major portion
of exports too. The growing demand for domestic and exports of textiles and clothing keeps
on increasing due higher population, incomes and change in preferences of the consumers
worldwide. The market size for Indian textile and apparel has been rising since 2005-06
because of the removal of restrictions as a freer trade could come up. In the year 2019-20, the
market size stood at $106 billion.
India’s textiles exports are widely spread across many countries, USA and EU contributing
the highest, 53% and 24% respectively. As per 2019-20, top 5 economies for textile and
clothing exports for India are like USA, UAE, Bangladesh, UK and Germany (source:
Ministry of Commerce and Industry). India has traditionally been enjoying a comparative
advantage in the textile sector and constitute a major chunk of India's export basket.

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International trade between countries encourages the development processes and integration
among countries. India was the fifth largest exporter of Textiles and Apparel worth $36.4
billion after China, Vietnam, Bangladesh and Germany globally in 2019-20 (WITS). The
total textile trade stood at $44.89 in the year 2018-19, increasing to $42.36 billion in the year
2019-20, out of which $34.21 billion accounts for textile exports. A visible decrease in textile
exports can be seen after 2018-19 due to the pandemic hit in the country and the world
overall. It is interesting to know that, in production of PPE kits, India has surpassed China
and become the world’s second largest producer in the manufacture of such protective
equipment with global market size of more than $92.5 billion by the year 2025, up from
$52.7 billion in the year 2019.

4.2 LONG TERM INVESTMENTS IN TEXTILE AND APPAREL

SECTOR

Due to its consistent increase in performance and reasonably-priced skilled manpower, there
are various possibilities both for home and overseas investors to make investments in textile
ecosystem in India. In this process, large scale investments are required to be able to sustain
the global competition. The industry attracts FDI with the benefit of a reformed foreign direct
investment policy. Government has supported the industry with basic policy and programmes
which have facilitated the growth of the industry, along with allowing 100 per cent FDI via
automatic route. Therefore, increase in investments can give a boost to the economic
framework of the concerned industry. India possesses one of the most liberal policies for
foreign investments in textile and apparel sector, allowing 100% FDI via automatic route.
The following Figure 1 shows the trend of FDI for Indian Textile Sector. There is a visible
peak in the year 2016-17 at around US $619 million, compared to the previous fiscal year
2015-16 having US $230 million. The inflows of foreign capital were evidently lower in the
pandemic times thus affecting the market for textile and apparels. In the midst of the havoc,
the inflows increased to US $188.67 million (Source: DIPP). This shows that the textile and
apparel industry has been resilient amidst pandemic and demand for clothing and textile has
remained increasing.

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 FDI in TEXTILES SECTOR (in US$ BILLION)
Source: Author’s own creation

4.3 INNOVATIONS AND TECHNOLOGICAL CHANGES

With the advent of technological upgradation, the industry has been changing from being a
labour intensive one to capital intensive one. The emerging concept of technical textiles is
such segment of the textile and apparel industry that has a higher degree of industrialisation
and developmental scope. These textiles are designed with their specific functionality and use
natural and man-made fibres in their production to achieve a considerable position in the
market with cost-effectiveness, durability, high strength, light weight and safety
requirements. It has been accounted for a fast-growing segment of the industry with its scope
to enter the agriculture, sports, healthcare and so on, for the end use application of the
products like cotton, mand made fibres. With the steady transition of usage of traditional or
conventional textiles in either clothing or furnishing, the market size has increased to reach
the competitiveness and diversification of products with a wide variety of options in their
application purposes. The main producers in India have started to develop and manufacture
technical textiles providing better profit margins compared to conventional textiles. The
technical textile exports stood at worth $2,423 million in the year 2019-20, increasing from
the value $1,978 million in the preceding year (Source: DGCI&S). The technical textiles are
predicted to grow at 18 per cent CAGR during the period of 2018-2025. However, a
challenge for technical textiles in India is that it is import dependent for products like fibres,
medical implants, protective textiles used in seat belts. Nowadays, textile and apparel sector

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is known by the shift in markets, evolution of supply chains and moving towards the
sustainable manufacturing scenario.

The line plots of natural log of textile exports (lntex) and natural log of apparel exports
(lnaex) are shown below in figures 2(a) and 2(b) respectively.

Figure 2(a): Line graph of lntex

Source: Author’s own creation

There is a visible trend shown in figure 2(a) where we observe the lntex gross exports value
to keep on increasing with time. The peak is seen in the year 2013 with the highest exports
corresponding to US $19.776 billion, but a reduction in exports value till the year 2018. In
the year 2018, there is again a smaller peak observed, in the year prior to the pandemic with
exports corresponding to US $16.17 billion The year 2019-2020 observed a relatively lower
values of textile exports from India which is due to the still persisting pandemic. The textile
exports shows a satisfactorily increasing trend starting from 2005, with exports being the
highest in 2013 worth $30.37 billion, previously at $26.36 billion.

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 Figure 2(b): Line graph of lnaex
Source: Author’s own creation

There is also an observable trend in natural log of apparel exports (lnaex) shown in figure
2(b) with increased amount of apparel exports value till 2015 post which there is seen a sharp
decline in the values. A sudden rise is observed thereafter. The apparel sector exports,
showing a typical form of growth where there is a consistent increase till 2015, post which
we observe a sharp decline in 2016-17 because due to the introduction of GST has resulted in
non-refund of several embedded taxes resulted in blockage of funds for the export
community. Thus, in the post-GST era, incentive under the Merchandise Exports from India
Scheme (MEIS) was increased from 2 to 4%.

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 Figure 2(c): Line graph of lntaex
Source: Author’s own creation

Line plot for ln natural log of (textile and apparel gross exports value) (lntaex) in figure 2(c)
shows an increasing trend from the year 2005 due to the removal of restrictions and achieves
a peak in the year 2013 and then further decreases in the year 2016-17 and decline further in
the year 2020 due to pandemic. The textile and apparel exports collectively appear to have a
remarkably increased growth with a peak in 2013, crossing $39 bn. In 2011-12 exports
touched $33.31 bn, however declined by 9.7% in 2020-21, hoping for the economy to revive
at the earliest.
With all the schemes and policies put into practice, the future of Indian textile industry looks
promising, combined by both strong domestic consumption as well as export demand.

5. IMPACT OF COVID-19 ON INDIAN TEXTILE and APPAREL

EXPORTS

5.1 DISRUPTIONS IN DEMAND AND SUPPLY SCENARIO

The pandemic has impacted almost all the sections of the Indian textiles and apparel industry
and one of the worst hit sectors due to the Covid-19 pandemic and threatened the world
economy. The prime objective of the study was to analyse the COVID-19 impact on textile
and apparel sectors. The sector has been one of the worst hit sectors giving a passive reaction
to the economic imbalance in terms of trade, specially exports showing a decline by 9.7% in
2020-21 compared to the previous year, which can be accounted to the pandemic situation.

The impact of the virus has been observed upon global exports and is segregated into two
streams from both the demand as well as supply side, thus reducing the global trade.
Consumer demand along with the social distancing policy in the lockdown has put a break in
the demand for the textiles and clothing. The markets were closed which resulted in reduced
interest of consumers to buy new clothes. Whereas, supply side suffered from interruptions in

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production activities due to mandatory shutdowns of the markets and migration of the
workers to their hometowns. The industry was partly shut down for a few months, opened
back to produce PPE kits and face masks as a form of medical equipment with respect to the
urgency. Therefore, the combined impact of demand and supply factors has resulted to reduce
imports and exports, thereby global trade activities have been affected. Due to the fall in
production activities, there were setbacks in employment and wage sector under the textiles
sector. The closure and temporary shutdown of factories and shops has proved to be the
biggest threat to the socio-economic well-being of the textile and apparel workers both
directly and indirectly engaged. These were some of the problems faced by the economy
during the pandemic.

These activities have built up the negative impact of Covid-19 even more, leading to
reduction in its national and global earnings and lack of clarity for future trade. The pre-
existing challenges in front of the industry like technological backwardness, low demand
from exporters and tough competition, were magnified due to the impact of Covid-19 on the
textile industry. Thus, to reduce such effects, there is need to place a suitable policy
framework by the Government of India to handle the crisis period.

5.2 STAGNANT GLOBAL MARKETS

The global economy is depressed with the low consumer demands along with the disrupted
supply chains. Not only India, but China, Bangladesh and Vietnam are other countries facing
adverse effects of the disrupted supply chains and manufacturing activities along with
difficulty in procuring raw materials. Even though input supply from China may improve
over the medium term, India’s major export destinations like the USA and the EU, are also
engulfed in the crisis. This has adversely affected demand orders for textiles and apparels,
most notably from major global exporters like India (ILO, 2020). The crisis has severely
disrupted the international trade, generating lower revenues and even cancellation of many
orders worldwide. One of the factors that kept the industry alive amid the
pandemic was the export of textile products to the US.

5.3 TRANSFORMING THE INDUSTRY

Being largely a consumer driven industry, textile and apparel sector’s

growth and performance is largely dependent on growing economies. The
sector did face a lot of setbacks due to the lockdown days, despite such
issues; the industry has been pulling on. With the halt in international
trade, India produced a large number of masks and medical equipment
like PPE kits with its own material, manpower, machinery and other
resources, becoming the second largest producer after China in just 2-
month period.

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6. FISCAL INITIATIVES BY THE GOVERNMENT

6.1 UNION BUDGET 2020-21 HIGHLIGHTS

Union Budget 2020-21 highlighted the activities in the textile industry and announced a
budget of Rs. 3,300 crore for the textile industry. The government has adopted a holistic
development model supported by infrastructural development, technical textile mission and
performance based linked incentives to restore India’s pride in the global textile market.

There were also some initiatives taken by the government in order to increase the domestic
and international trade. These include the removal of anti-dumping duty on Purified
Terephthalic Acid (PTA), set up of Technical Textiles Mission (TTM), review of Rules of
Origin under Free Trade Agreements (FTAs), correction of inverted structure in GST and the
launch of NIRVIK scheme had been welcomed by the budget.

‹ Removal of Anti-Dumping Duty on Purified Terephthalic Acid

The anti-dumping duty on Purified Terephthalic Acid (PTA), a critical input used in
the production of MMF items was a major step taken by the government. This aimed
at showcasing the competitive nature for MMF garments, benefit the synthetic yarn
spinners and furnishing fabric manufacturers. Since PTA is an important raw material
in producing MMF items, it becomes necessary to provide the raw materials at
globally competitive prices.

‹ Revisiting the Rules of Origin under Free Trade Agreements

In order to review the rules in FTAs, it is a good step towards the imports and can
prove to be a threat to the domestic industry. This mainly aims to align the FTAs with
the rules and ensure proper direction of the policy, thereby reducing imports and
improve the trade balance.

‹ Setting up of Technical Textiles Mission

The National Technical Textiles Mission, approved by Cabinet Committee on Economic
Affairs (CCEA) with an outlay of ₹1,480 Crore in 2020. The mission is implemented for four
years (2020-21 to 2023-24), with an aim to focus on using technical textiles. The scheme was
implemented to provide impetus to the production of various types of textiles used in
automobiles, healthcare and agriculture with an aim to move towards economically
sustainable production and better adoption of waste management techniques. The Technical
Textiles segment is a new age textile, whose application is in several sectors of economy,
including infrastructure, water, health and hygiene, defense, security, automobiles, aviation,
etc. will improve the efficiencies in those sectors of economy for their technical performance
Removal of Anti-dumping Duty on PTA (Source: Ministry of textiles, 13
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1606085); National Technical
Textiles Mission (Source: Ministry of textiles,
https://pib.gov.in/PressReleasePage.aspx?PRID=1656237); ATUFS
(https://pib.gov.in/PressReleseDetail.aspx?PRID=1606086);SAMARTH scheme
(https://pib.gov.in/PressReleasePage.aspx?PRID=1656230); NIRVIK Scheme
(https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1601493)

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and functional properties. It has massive scope for capacity building, employment generation,
increasing level of investments and overall growth in technical textiles.

‹ NIRVIK for increasing exports

NIRVIK Scheme is an export scheme specifically for the textile industry launched by
the Export Credit Guarantee Corporation of India (ECGC) for the MSMEs in 2020
with a budget outlay worth Rs 27,300 crore. To provide enhanced insurance cover ,
reduce premium for small exporters and ease the lending process. Under the scheme,
also called the Export Credit Insurance Scheme (ECIS), the insurance guaranteed
could cover up to 90 per cent of the principal and interest. The Government of India
announced a special package under the Atma Nirbhar Bharat Scheme to boost the
country’s exports and become self-reliant on side-lines, benefitting weavers and
artisans.

‹ Rebate Relief on Exported Products

The government has also initiated the Rebate of State and Central Taxes and Levies
(RoSCTL) merged with Remission of Duties and Taxes on Exported Products
(RoDTEP) to provide rebate on all taxes to better compete in the global markets with
Rs. 7,398 crore in the year 2020-21.

‹ Amended Technology Upgradation Funds Scheme

The Ministry of Textiles has also launched an Amended Technology Upgradation
Funds Scheme (ATUFS) in the pandemic period to provide advance subsidy against
bank guarantee being met from the funds being allocated in the budget. It is notified
by the DGFT and implemented by Ministry of Commerce and Industry. The scheme
aims to create competitive atmosphere for the Indian exports. Earlier five different
schemes covered the manufacturing of merchandise and their exports with different
kinds of duty scripts which have now been merged into one scheme that is MEIS.
The rewards are given by way of duty credit scrips to exporters.

‹ SAMARTH for including skilled workforce

The Ministry of Textiles had also launched the Samarth Scheme, also known as the Scheme
for Capacity Building in the Textile Sector (SCBTS) with an outlay of Rs. 1300 crore by the
Ministry of Textiles, approved by Cabinet Committee on Economic Affairs (CCEA) in the
year 2017 for three years (2017-2020) in order to ensure skilled labour force in textile
industry. The scheme aims to promote employment opportunities and capacity building to the
training sector for a sustainable employment in the textile sector. The target aimed to skill the
youth In Andhra Pradesh so far, 293 beneficiaries completed training, of which 85 have been
provided placement. (source: Ministry of Textiles) however, all training centres had to be
cancelled due to COVID-19 pandemic and restrictions were imposed. The online programme
has been started too, with more than 500 certified trainers.

Removal of Anti-dumping Duty on PTA (Source: Ministry of textiles, 14

https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1606085); National Technical
Textiles Mission (Source: Ministry of textiles,
https://pib.gov.in/PressReleasePage.aspx?PRID=1656237); ATUFS
(https://pib.gov.in/PressReleseDetail.aspx?PRID=1606086);SAMARTH scheme
(https://pib.gov.in/PressReleasePage.aspx?PRID=1656230); NIRVIK Scheme
(https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1601493)

Electronic copy available at: https://ssrn.com/abstract=3990621

 ‹ PowerTex India

PowerTex scheme was launched in 2017 for a period of three years for Powerloom Sector
Development by Ministry of Textiles aiming to boost common infrastructure and
modernisation of the powerloom sector in the country. The scheme had been re-launched in
2020, with an aim of the scheme is to boost country’s powerloom sector by providing
financial support to powerloom weavers. The scheme for up-scaling the power loom sector
implemented by the government to install modern looms providing economies of scale and
improve the work efficiency of the workers, known as the PowerTex India. It consists of two
schemes (a) Pradhan Mantri Credit Scheme (PMCS) for power loom weavers providing
financial help to the decentralised power looms unit and, (b) Solar energy scheme (SEC) for
Powerlooms contains subsidy for installation of solar plants to challenge with the issues of
power cuts. The scheme embraces branding, subsidies, new markets, new research &
development in power loom textiles, and welfare schemes for the powerloom workers.

‹ Merchandise Export from India Scheme (MEIS)

Merchandise Export from India Scheme (MEIS) was in operation from 2015-2020 for exports
including textiles products with an objective to offset infrastructural inefficiencies and
associated costs involved in exporting goods which were produced in India.

Removal of Anti-dumping Duty on PTA (Source: Ministry of textiles, 15

https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1606085); National Technical
Textiles Mission (Source: Ministry of textiles,
https://pib.gov.in/PressReleasePage.aspx?PRID=1656237); ATUFS
(https://pib.gov.in/PressReleseDetail.aspx?PRID=1606086);SAMARTH scheme
(https://pib.gov.in/PressReleasePage.aspx?PRID=1656230); NIRVIK Scheme
(https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1601493)

Electronic copy available at: https://ssrn.com/abstract=3990621

6.2 UNION BUDGET 2021-22 HIGHLIGHTS

Now, we have a closer look at the budget 2021-22 and the inputs in the textile industry of
India. Union Budget 2021-22 announces the increased budget in textile industry to
Rs.3631.64 crore, against Rs. 3,300 crore in the last financial year.

‹ MITRA scheme
MITRA scheme was implemented by Ministry of Textiles, outlay of Rs 4,445 crore to
enhance the self-reliance motive for the Indian economy, attracting large investments, to
boost employment generation and exports. The main highlight of the scheme was to establish
7 mega textile parks over the next three years and create a powerful infrastructure. The parks
will offer an opportunity to create an integrated textiles value chain right from spinning,
weaving, processing/dyeing and printing to garment manufacturing at a single location. It
mainly highlights the set-up of 7 major textile parks under the Mega Investment Textile Parks
scheme (MITRA) Scheme in the next three years which will directly impact the textile
industry. These parks were to be built under zero liquid discharge (ZLD) scheme however, no
further information over the same.

‹ PLI scheme for Textile and Apparel Sector

Another crucial step is the introduction of Production Linked Incentive (PLI)
scheme with the budget of Rs. 10,683 crore helping the textile markets to be
globally competitive, attracting large investments and boost the employment
sector. The focus remains on the MMF items and technical textiles which will
accelerate the growth and provide global competition. Since the predicted target
of $350 billion to be achieved by 2025, current $167 needs to have boosting
growth in the manufacturing sector. The sector aims to develop and reach $300
billion by the year 2025-26, along with the PLI scheme by the government
worth $1.42 billion aims to establish seven mega textile parks and increase the
exports of man-made fibres. The scheme also predicts to achieve the target of
$300 billions of total exports by the year 2024-25. Government of India has also
launched various initiatives in this regard like Make in India, Women
empowerment and Rural Youth Employment. It includes production of 64 select
products, with 40 in man-made fibre apparel, 14 in man-made fibre fabrics, and
10 technical textile. It will help further, in attracting investment in this segment.

‹ Amended Technology Up-gradation Fund Scheme (ATUFS)

The scheme was launched in January 2016 with an outlay of Rs 17822 Crores for technology
upgradation of textiles industry with one time capital subsidy for eligible machinery. The main aim
is to mobilize new investment of about Rs 95 000 crore and employment for 35 lakh persons
by the year 2022.
MITRA Scheme (Union Budget 2021-22, page 8, point 41) 16
Interest Equalization Scheme for exporters (RBI,
https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12124&Mode=0); PLI Scheme for
textiles (September’21 source: Ministry of Textiles); PowerTex for India (Feb’21, Ministry of
Textiles)

Electronic copy available at: https://ssrn.com/abstract=3990621

 ‹ Raising Foreign Capital in the country in Textile and Apparel Sector

The step towards allowing 100 per cent FDI in the sector is an attempt to attract foreign
investors from the other countries of the world, without any requirement of government
approval. Further, various schemes have been introduced by the government in order to keep
the industry growing like building up of industrial parks, skill development programmes and
PLI scheme, specifically in the textile sector. The sector is dominantly diversified by
production of traditional handlooms to the modern products like man-made fibres and yarns
and technical textiles. The sub-section of the industry involved in spinning, weaving,
processing and manufacturing garments uses capital intensive technological equipment which
helps the industry to grow. India is also the largest producer of cotton and jute in the world.
In addition to it, Government of India has launched some measures like $39.7 billion
collateral free loans including MSMEs with injecting more liquidity in the banking and non-
banking institutions.

The schemes are expected to be a game changer for transforming the Indian textile industry,
welcoming fresh investments and expanding manufacturing capacities.

MITRA Scheme (Union Budget 2021-22, page 8, point 41) 17

Interest Equalization Scheme for exporters (RBI,
https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12124&Mode=0); PLI Scheme for
textiles (September’21 source: Ministry of Textiles); PowerTex for India (Feb’21, Ministry of
Textiles)

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 7. ROLE OF WOMEN

India has emerged as one of the most apparel producing and exporting economies in the
world. The apparel and apparel products are highly labour intensive industries constituting
major employability for women. Since the industry involves activities like weaving, knitting,
spinning, requiring hands and efficiency, the major share of women in the workforce is there.
According to CMIE, millions of people are employed in the industry, within which 60% are
women.

Since 1960s, developing countries like India are highly labour intensive with women being
the major share of the production capacities. The women are preferred in the sector more
than men due to their work discipline, less likely to join the trade unions and responsible for
taking tedious hand woven and spun activities, making them more productive as compared to
men.

To increase the participation of women, there’s a need to address the lack of support in
management and training of female workforce. There is a need to look at women as leaders
which will positively affect their abilities and beliefs in the society, promotion to managerial
positions will skill them with the decision-making.
The textile and apparel industry at present consist of around 1.5 crore people who are
working in the various activities, expected to increase to 2.14 crore by 2022. Moreover, India
has high rates of informal and home-based work, particularly among women, so the number
of women contributing to the global apparel sector is likely much larger. India will not be
able to achieve its economic potential without increasing women participation in the formal
workforce
The government, for example has launched programs in order to bring trainees from both
rural and urban centres like Bangalore to facilitate work in apparel sector factories, trainees
often being unmarried women likely being the formal employment opportunities.
Apart from encouraging women employment there is a skill gap of 60 lakhs which needs to
be urgently met. Various departments of the government of India are trying to reduce this
skill gap. The major role is being played by the Apparel Made-Ups Home Furnishing Sector
Skill Council in reducing this skill gap.

8. CONCLUSIONS

This study mainly consists of an analysis of the Indian Textile and Apparel (T&A) Industry
from the year 2005 till 2020. Textiles and Apparel industry plays an important role in the
India’s exports, output, investments and economic growth. India being the world’s third
largest producer of cotton, manifests its core segmental strength. The industry is a major
foreign export earner after agriculture, and creating employment up to 45 million people. The
sector is diverse with abundance of availability of raw materials and skilled workforce, being
the second largest generator of employment opportunities to both skilled and unskilled
workforce. The industry is mainly responsible for providing people with one of their basic
necessities and holds great importance for sustained and improved growth in the country. It is
one of the oldest industries in the economic framework, accounting for 7 per cent of total
industrial production, 15 per cent of total exports adding up to 2 per cent to India’s GDP.
There are a number of initiatives taken by the government to maintain the stability in the
sector. MITRA scheme creates certain number of textile parks over the country, along with
PLI scheme mainly for man-made fibres and technical textiles for enhancing global

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competition. In the advent of pandemic post 2019-20, the Government of India has come up
with some new schemes to provide an impetus to the textile and apparel sector. These steps
are taken in terms of increasing export competitiveness and building skilled workforce to
have greater portion of the market in the country. As the global markets are adopting better
technologies for better capacity utilisation, Indian textile and apparel sector has been suitably
adopting in order to have higher production levels. There is a broader view of the sector and
how it got impacted during the COVID-19 pandemic, with its supply and demand side
distractions along with a great number of jobs lost by the workers. There is a need to focus on
the policies and programmes by the government and private entities, in order to have a
vibrant industry with its increasing global market share.
The study wraps up into observing a decline in textile and apparel exports due to the COVID-
19 PANDEMIC and has provided a decline by 9.7% share in total exports in 2020-21.
However, it also stood as the second largest producer of mask and medical equipment, after
China. This shows exemplary capacity of the economy, along with various initiatives taken
by the government in textile and apparel industry shall result in flourishing the sector along
with raised exports. The availability of raw material i.e., labour is a major benefit along with
the skilled workforce. The technical textiles mission is one such mission which will boost the
skills of the workers and give an impetus to the sector and overall trade scenario. The sector
was one of the worst hit sectors but has full potential to revive its growth back and improve
its share in the world economy.

A recent article by RBI published expressing the need for India to have FTAs with EU and
the USA to push THE apparel shipments in the middle of increasing competition from
Bangladesh and Cambodia that enjoy tariff concessions. India's apparel exports to the EU, is
the largest market for apparel exports, have stagnated in the last decade while other countries
like Bangladesh, Vietnam and Cambodia have witnessed robust growth. The tariff treatments
like EBA (Everything But Arms) have been a major contributory factor for the rapid growth
of apparel exports from Bangladesh and Cambodia, especially after the relaxation of input
sourcing norms in 2011. Everything But Arms introduced in 2001 under the EU, grants to
LDCs were provided duty-and quota-free access for almost all products.

The textile and apparel trade in the world overall faced many challenges due to the COVI9-
19 pandemic. The Indian economy also faced unprecedented crisis due to cancelation of
orders, high cost of inventory and so on. The union government has raised the MSP for cotton
by 25%, thus creating problems for millers to buy cotton at a much higher price. In addition
to this, there are certain gaps in the weaving and embroidery along with knitting, technical
textiles and apparels. There are some issues in the production due to lack of technology and
finance, thus not being able to match up to the costs and expenses and the scale of mass
production in other countries. There are some issues like high transportation cost owing to
wider geographical spread, therefore, in this regard is essential because high transportation
cost unsettled with major production areas put up with higher cost of Indian apparel exports.
The country is also in need for developing the production capabilities in other fibres as well,
apart from cotton, allowing the economy to initiate growth in other segments like wearable
electronics and embedded sensor apparels. The productivity levels in China and Vietnam are
around 40% higher than that in India. The Indian exporters for textile and apparel industry are
fragmented and in very small per cent. There is a need for creating economies of scale with
proper infrastructure.

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9. RECOMMENDATIONS AND WAY FORWARD
The textile and apparel sector has been one of the biggest sectors of the Indian economy,
serving the basic needs of its large population and also exporting substantially. The industry,
also generates a sizeable direct and indirect employment, next only to the agriculture sector.
This study also enables to view the textile and apparel specific exports from India to the rest
of the world. No doubt, though India has been flourishing in terms of the textile and apparel,
it needs to observe its competitors critically. The production activities can have larger profit
margins with the adoption of cost effective methodologies. The countries like Vietnam,
Bangladesh can prove to be a threat to the India’s textile and apparel export competitiveness
in the global scenario. India’s comparative advantage needs to be assessed against that of
Bangladesh and Vietnam, as a group under developing countries. As compared to India, there
are other countries like China offering lower labour cost, creating larger revenues and thus,
higher exports. Therefore, India has to be observant enough for such market threats and be
ready for their further necessary steps. The global demand for man-made fibres and fabrics
has been consistently increasing as compared to the natural fibres, in which India hold a
comparative advantage. Thus, India is required to also improve its technological
developments in man-made fibres and fabrics, which will give benefits to this industry and
beyond According to some plans the country aims to achieve a target of $300 billion market
size by the end of year 2024-25. It is only possible with some matching steps taken to benefit
of the textile and apparel sector.

The country should aim to undergo a structural transformation where the growth rates of
exports in fibre and yarn to decline and instead that of value-added finished goods, technical
textiles to rise rapidly. This will help in enhancement of productive capacities and generate a
large number of employment opportunities, both skilled and unskilled. Thus, there is need to
up-scale the industry for global competitiveness, to successfully harness vast potential.
There is also a need to invite more investment opportunities for achieving higher productive
capacities. The government has already allowed 100 per cent FDI inflows in the textile sector
that is helping in this endeavour.
The ability to stand against global competition, the country needs to lower its raw material
costs, as the reduction in costs of production should be a priority for the sector. Supplemented
with economical skilled workforce it is beneficial both in present and future, looking at the
future prospects of the textile and apparel industry.
Towards realisation of full potential of the productive capacities and manufacturing levels,
there is a need for collaboration between state and central government. The initiatives of the
state and central government need to complement each other for achieving the common
objective for the nation.
India also has full potential to achieve the target for employment generation opportunities up
to 66 million by the end of the year 2022, currently 45 million workers in textile and apparel
sector.

Most importantly, India needs to look into any offers of FTAs/ PTAs, by critically analyzing
impact of existing PTAs.

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