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China’s grip on the textile market is slipping. Can India pocket a sizeable chunk of $1-trillion?

India’s textile exporters should cotton on to the fact that China’s pain could be their gain. They can be optimistic as reports come in of trouble brewing in the East Asian economy, which is reportedly losing share in textile exports to countries such as Vietnam and India.

The increase in raw material prices, the impact of Covid-19 and a growing US-led boycott of cotton — a major input in textiles — from China have led to a noticeable fall in demand for the fibre. Quoting consulting firm Beijing Cotton Outlook, the South China Morning Post reported in June 2022 that some Chinese companies have lost up to 30% of their orders. It also said that the China National Cotton Information Centre reported in early June that the rate of machines that were turned on at textile factories across the country was 13.3 percentage points down year-on-year, at 79.7%. Many analysts claim it could get worse as more countries stop buying cotton from the East Asian nation.

What does this mean for India, where the textiles sector has been facing its own challenges? “A good opportunity,” say experts.

KK Lalpuria, Executive Director and CEO, Indo Count Industries, a Kolhapur-based maker of cotton yarn and knitted products, says India should play on its advantages to increase its textiles exports now. “We have the potential to grab the downtrend that China is seeing in terms of textiles exports. The only country that can have more market share is the country that can ensure the raw material in the supply chain,” he says, referring to India’s cotton growing capabilities.

China, he adds, is also facing issues related to cost inefficiencies like labour cost. Manufacturers have realised that they can tap more value in the domestic market and so they are focussing less on exports.

Grab that space

Though China has the biggest share of the textiles market, at 35%, it is now seeing a slowdown due to the global demand getting impacted. India’s share is about 6%.

In this context, the Indian government’s goal to scale up textile exports fits the picture. Commerce and Industry Minister Piyush Goyal had said in April that the idea was to increase textile exports from the current $44 billion to $100 billion by 2030.

However, despite the opportunity in cotton exports, Indian exporters would have to deal with some massive challenges to achieve the export target. The woes include geopolitical tensions, tough competition from international players and supply chain upheavals. To add to the pressure, cotton prices have more than doubled year-on-year in May to Rs 100,000 per candy, according to a

CRISIL Ratings report. It added that exports have become less competitive because of domestic cotton prices soaring past international levels.

Gautam Shahi, Director, CRISIL Ratings, attributes this to two major factors. “First, there has been inflation in the price of raw materials such as cotton due to the issues faced by the largest producer, which is China. Second, there has been some moderation in key markets in demand, like the USA, due to inflationary pressures. Interest rate hikes in these countries, coupled with high inflation, is now impacting demand.”

These are the reasons why the government should step in to steer the players in the sector towards achieving sustained growth, say industry experts. Policies that encourage diversification of the textiles portfolios, capacity building and competitiveness need to be accorded top priority. Besides, new foreign trade agreements (FTAs) should also focus on textiles.


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