In this article, we will discuss Textile Sector in South Asia. So, let’s get started.
Textile Sector in South Asia
Growth Story in South Asia
- Lower production costs and free trade agreements with western buyers are what favour Bangladesh, which falls third in the line as a global exporter.
- The progress of India and Pakistan in readymade garments is recent when compared to their established presence in textiles. India holds a 4% share of the U.S. $840 billion global textile and apparel market, and is in fifth position.
- India’s exports later witnessed a larger volume of business, following a 0.8% dip in 2019. Pakistan saw a 24.73% rise in textile exports (2021-22), bagging an amount of U.S.$10.933 billion.
- India has been successful in developing backward links, with the aid of the Amended Technical Upgradation Fund Scheme (TUFS), in the cotton and technical textiles’ industry. However, India is yet to move into man-made fibres as factories still operate in a seasonal fashion.
- Pakistan remains very focused on cotton products; it falls behind due to skilling and policy implementation issues. Bangladesh has been ahead of time in adopting technology. Bangladesh also concentrates on cotton products, specialising in the low-value and mid-market price segment. The country faces the challenge of high attrition and skilling which results in higher costs.
- Sri Lanka attained the most progress in ascending the value chain. Progress in training, quality control, product development and merchandising are attracting international brands to Sri Lanka.
Amended Technology Upgradation Fund Scheme (ATUFS)
- The Technology Upgradation Fund Scheme was introduced by the Government in 1999 to facilitate new and appropriate technology for making the textile industry globally competitive and to reduce the capital cost for the textile industry.
- In 2015, the government approved “Amended Technology Upgradation Fund Scheme (ATUFS)” for technology upgradation of the textiles industry.
Significance of the Textiles Sector for India
- Textiles & garments industry is a labour intensive sector that employs 45 million people in India, second only to the agriculture sector in terms of employment.
- India’s textiles sector is one of the oldest industries in the Indian economy, and is a storehouse and carrier of traditional skills, heritage and culture.
- It contributes 2.3% to Indian Gross Domestic Product, 7% of Industrial Output, 12% to the export earnings of India and employs more than 21% of total employment.
- India is the 6th largest producer of Technical Textiles with 6% Global Share, the largest producer of cotton & jute in the world.
- India is also the second largest producer of silk in the world, and 95% of the world’s hand woven fabric comes from India.
Challenges of the Textiles Sector in India and South Asia
- Highly fragmented: The Indian textile industry is highly fragmented and is being dominated by the unorganised sector and small and medium industries.
- Outdated Technology: The Indian textile industry has its limitations of access to the latest technology (especially in small-scale industries) and failures to meet global standards in the highly competitive market.
- Tax Structure Issues: The tax structure GST (Goods and Service Tax) makes the garments expensive and uncompetitive in domestic as well as international markets. Another threat is rising labour wages and workers’ salaries.
- Stagnant Exports: The export from the sector has been stagnating and remained at the USD 40-billion level for the last six years.
- Lack of Scale: The apparel units in India have an average size of 100 machines, which is very less in comparison with Bangladesh, which has on an average of at least 500 machines per factory.
- Lack of Foreign Investment: Due to challenges given above, the foreign investors are not very enthusiastic about investing in the textile sector which is also one of the areas of concern.
- Though the sector has witnessed a spurt in investment during the last five years, the industry attracted Foreign Direct Investment (FDI) of only USD 3.41 billion from April 2000 to December 2019.
- Competition Within the Region: Due to similar history, technology and labour force, there is competition within the region rather than supplementary nature