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Growing global competition affecting India’s textiles exports

India’s textile and clothing industry has entered a phase of stress and duress with increasing global competition from peer countries such as Vietnam, Bangladesh, China and Pakistan. India’s export competitiveness has been further eroded by increasing cotton prices and a free fall in the currencies of Turkey and Pakistan versus the dollar.

Countries like Cambodia, Myanmar, Ethiopia and Kenya export apparels to the US and EU riding on benefits like lower industrial wages and nil duty under GSP or AGOA agreements. With no concessions over duty on imports of apparel, India is facing a double whammy, with increasing cotton prices, and thus yarn/fabric costs, which make India’s exports uncompetitive for most international buyers.

The response, increasing the minimum support price for cotton by almost 30 per cent to 35 per cent, made the cost of essential textile inputs such as yarns and fabrics more expensive pro rata. The current slowdown started nearly a year and a half back, with a decline in the productivity of India’s textile and clothing sector.

Demonetisation had far-reaching consequences. The move impacted the already tight cash flow of the textile and clothing industry, especially small and medium units. GST disrupted sectoral balances and made Indian yarn and fabric products uncompetitive with the imports, especially fabrics from China and garments from Sri Lanka and Bangladesh.