Enhancing India's Share in Global Textile and Apparel Trade Strategy

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The presentation discusses India's goal of increasing its textile and apparel trade share from 5% in 2014 to 10% by 2025. It covers the current status of the sector, emerging trends, strategies to tap the opportunity, market size, growth patterns, challenges in the manufacturing value chain, and issues eroding India's global competitiveness. Key points include the unbalanced manufacturing value chain, challenges at industry and government levels, and the need for supporting the growth of the textile sector for employment generation and women empowerment.

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5% in 2014 to 10% by 2025 Strategy for Enhancing India s Share in Global Textile and Apparel Trade Prashant Agarwal Co-founder and Partner, Wazir Advisors 7thApril 2015

Presentation Structure 1. Current Status of the Sector 2. Emerging Trends 3. Strategy to Tap the Opportunity 2

Presentation Structure 1. Current Status of the Sector 2. Emerging Trends 3. Strategy to Tap the Opportunity 3

Indian Textile & Apparel Market is large and growing Total market size US$ 108 billion Domestic consumption Exports US$ 68 bn. US$ 40 bn. Apparel Textiles Apparel Home textiles Tech. textiles US$ 5 bn. US$ 13 bn. US$ 50 bn. US$ 24 bn. US$ 16 bn. Growth pattern of domestic market Growth pattern of Indian T&A exports 68 US$ bn US$ bn. 12% 63 40 57 15% 13 50 14 32 30 44 5 13 27 39 4 11 4 24 21 20 10 4 18 9 17 3 15 3 50 10 9 45 40 35 31 27 16 14 13 12 11 11 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Apparel Textiles Total Technical Textiles Home Textiles Apparel Total 4

But the Manufacturing Value Chain is unbalanced Fibre Yarn Fabric Garments Spun Yarn- 5.3 bn. kg MMF Yarn- 1.1 bn. kg Cotton fibre - 6.8 bn. Kg 64 bn. sqm 14.4 bn. pcs PET fibre - 850 mn. Kg Spindles- 50 mn. Leading spun yarn producer in the world Most cost competitive producer 2nd largest no. of looms globally Organized mill sector contributes only 5% Low-tech looms Outdated processing machinery 7th largest apparel exporter in the world with a share of 3.7% of the total apparel trade Largest producer of cotton globally 26% share 2nd largest producer of man- made staple fibre 5

Issues Eroding Indias Global Competitiveness Industry Level Government Level Stringent labour laws Lack of scale Lengthy approvals and procedures Low productivity levels Lack of level playing field in major Poor delivery and service levels markets Need for technology upgradation, High duties on synthetic textiles specifically in weaving Weak processing segment 6

As a country India needs to Support growth of Textile Sector High employment potential Maximum employment generation potential Rs. 1 crore investment in garment industry generates direct employment of 50 workers. Provides employment to economically weaker and lesser educated strata of the society Women empowerment The sector opens up some of the biggest job opportunities for the women sector. 80% of people employed in the Indian garment Industry are women. Shorter Training Cycle for Employability Short term training programs is sufficient to train the unskilled workers High Export potential 7

Benefits of Value Addition in Exports Additional investment, production required and benefits obtained by converting raw material exports into finished product export Present Level of Export Fiber Yarn Fabric 1,500 mn m 2,900 mn kg 2,250 mn kg Yarn 2,760 mn kg Scope of Value Addition Fabric 8,740 mn m Fabric 7,140 mn m Garment 5,200 mn kg Garment 4,280 mn kg Garment 900 mn pcs Employment generation approx. 8 million Investment required US$ 60 billion Net margin gain US$ 3.5 billion 8

Presentation Structure 1. Current Status of the Sector 2. Emerging Trends 3. Strategy to Tap the Opportunity 9

Global apparel consumption will cross US$ 2 trillion mark in 2025 Apparel market size projections Currently USA & EU are the largest apparel markets but it is expected that per capita apparel spend will grow at a faster rate in developing countries of BRIC, than their respective economies, whereas in developed countries it will be slower. In US$ billion Region 2013 2025 CAGR 450 EU 27 355 2% 643 China 165 12% 413 USA 230 5% 140 Japan 110 2% Projected change in per Capita spend on Apparel 179 India 46 12% 1,643 2013 141 Russia 45 10% 2025 1,221 1,087 86 1,080 Brazil 60 3% 856 831 804 781 740 38 Canada 30 2% 693 673 454 377 36 Australia 25 3% 294 284 138 120 40 114 RoW 80 3% Australia Canada Japan EU 27 United States Russia Brazil China India 2,058 Global 1,146 5% 10

Low Growth of Chinas Exports will Create a Huge Trade Gap Global textile and apparel trade projections China today is the world s 2nd largest economy with a GDP of ~USD 7 trillion. Projections indicate US$ 1700 bn. continuation of high growth over next few decades. China Basic textiles and apparel industry will no longer be the 600 Other exporters prime focus of Government as it used to be since 1990 s for enhancing exports and generating employment. US$ 760 bn. In addition, China s domestic apparel requirement will 305 1,100 also become very high further putting pressure on the exports. 455 The share of Chinese exports in global trade is expected to reduce from 40% at present to around 2013 2025 (P) 35% by 2025. China s share 40% 35% 11

Globally consumption of polyester will increase further Till 2000, fibre consumption at global level was majorly cotton focussed. By 2030, it is expected that consumption of polyester will be more than double to that of the cotton fibre. Global Fibre Consumption Trend 59% Cotton Polyester Others 52% 50% Widening gap between Polyester and Cotton fibre consumption 50% 48% 46% 44% 43% 37% 36% 36% 36% 35% 33% 31% 31% 30% 27% 27% 21% 20% 19% 18% 18% 19% 19% 14% 2000 2007 2008 2009 2010 2011 2012 2020 (P) 2030 (P) Date Source: PCI Fibres 12

Global Developments that Could Challenge Indias Growth Trans Pacific Partnership (TPP) Yarn Forward Rule Ever increasing Trade barriers: Tariff Protections Non Tariff Barriers (NTBs) Environment and Labour Standard Need to Phase out export subsidy in line with WTO requirements 13

Presentation Structure 1. Current Status of the Sector 2. Emerging Trends 3. Strategy to Tap the Opportunity 14

Investment Required Target Market Growth 2013 2025 CAGR 68 230 Domestic 12% Investment required ~US$ 125 bn. 40 180 Exports 15% 108 410 Total 13% Probable sources of investment Investment by Indian entrepreneurs US$ 110 bn International investment (FDI) US$ 15 bn. 15

Strategic Action Plan Production with good quality at competitive price with Zero defect which will come through skilled manpower, technology and right supervision 16

A. Achieving Zero Defect ISDS to be reoriented in line with industry needs to make it more effective. Textile Research Association s (TRAs) role to be strengthened 17

B. Strengthening and building complete manmade textiles value chain Countries like China, Pakistan, Sri Lanka, Indonesia and Thailand follow fibre neutral policy. Globally MMF textiles constitute 66% of total production. However, in India it is only 34%; whereas cotton constitutes 66%. India also does not have complete value chain in MMF i.e. fabric, processing and apparel making. Historically, lower excise on manmade fibres have triggered higher growth levels: Excise Duty Growth registered 2006-07: 08% 05% 2008-09: 04% 11% 2009-10: 08% 10% 2010-11: 10% 04% 2011-12: 12% 04% Since 2012-13 industry is continuously under contraction. Achieving fibre neutrality under GST regime will be very important 18

C. Strengthening of Existing Initiatives and Export Benefits ISDS Mega Textile Parks FTAs with major markets Non Tariff Barriers Attracting FDI Export incentives Addressing the gaps in new Foreign Trade Policy 19

D. Make In India Partnering with States: Making Land available Fast tracking approvals and clearances Addressing issues related to TUFS 20

E. Enhancing Ease of Doing Business Simplify advance authorization scheme Dispense the requirement of average performance under the EPGC scheme Exempt capital goods supplied indigenously under EPGC scheme Simplify procedure for fixation of input output norms for developing new products Actual implementation of 24 x 7 clearance at ports Allowing 5% tolerance on cotton yarn export Online Verification of duty credit scrips Labour laws simplification Extension in submission time period of export performance certificate Allow credit card as export payment mode Allow bringing bag of samples of Indian Origin as part of passenger baggage 21