India is one of the largest consumer and producer of cotton with highest acreage of 126.14 Lakh hectares under cotton cultivation. The Domestic textile industry contributes 5% to India GDP; it is the second largest employment provider in India. Textile and garment exports shrank 8.6% this year to $33.7 billion in FY20 and saw a more dramatic, Covid-induced contraction of 10% last fiscal, worse than a 7% drop in overall merchandise exports. However, in the first four months of this fiscal, such exports have grown at a phenomenal pace of 106%, driven by an economic resurgence in advanced markets and aided partly by a conducive base.
As an aim to position India as a fully integrated, globally competitive manufacturing and exporting hub the Ministry of Textiles has proposed that it will develop seven Mega Integrated Textile Region and Apparel (MITRA) parks as part of a plan to double the industry size to $300 billion by 2025-26. The parks are said to have uninterrupted water and power supply, common utilities and research and development labs. Similar parks already exist in countries like China, Vietnam and Ethiopia where the entire textile value chain is covered.
How old schemes has stalled India’s chance to become an export hub?
India had already sanctioned to build 59 textile parks under the Scheme for Integrated Textile Parks (SITP) of which 22 has been completed, the SITP scheme which was launched in 2005 as a public private partnership model with government granting of 40% of the project cost with a ceiling of 40 Cr for each park. The slow progress of the scheme due to delays in obtaining land and other statutory clearances and the delayed fund mobilization has caused India’s textile and garment value chain to remain fragmented for decades which has resulted in our country losing valuable export market share to much smaller economies like Bangladesh and Vietnam.
Why is India losing to smaller economies when it comes to Textile exports?
The smaller economies like Bangladesh’s garment exports have been increasing due to the duty-free access to US and EU because of its status as a least developed country. Vietnam for example has a made a good use of its trade with large markets, free trade policies and massive Chinese investments. Even much smaller countries like Cambodia and Myanmar have increased their exports.
India was also losing due to some unfavorable policies like Small Scale Industries reservation between 2001 and 2005, allowing fixed-term employment in garments which was removed in 2016, an anti-dumping duty on a key input for polyster staple fibre which was scrapped in the Budget for FY21, these policies were the reason low-cost economies such as Bangladesh and Vietnam — in addition to dominant China — had consolidated their positions in the world market.
More about MITRA Parks
The parks will preferably be close to ports and host all kinds of textile and apparel businesses, including integrated facilities, to create a resilient ecosystem. The center is likely to deliver the incentives to investors in two installments, after roughly 60% and 100% of the work is completed. The MITRA parks will also complement the recently approved Rs 10,638 crore Production Linked Incentive (PLI) program for the synthetic fibers and technical textiles segments.
In addition to infrastructure construction, investors will manage maintenance and other related facilities. They are allowed to operate the park for 25 -30 years and can charge fees to companies located there. Even small businesses or fashion designers could quickly build a business thanks to plug-and-play capabilities. These mega-parks will be able to attract foreign buyers with a wide range of products and large orders due to the greater synergies between their resident units. In the first phase, seven mega-parks will be built. Such mega-parks will be able to attract foreign buyers by offering a wide range of products and accepting large orders as synergies between resident units.
Mega-parks are the latest in a series of government attempts to formalize and develop the labor-intensive sector, which has been hampered by millions of small units and supported by poor government policies for decades. As a result, an overwhelming percentage of companies with very limited financial and operational weight are scattered across the country handling large orders, hampering their ability to grow exports exponentially and to capture the space that China has vacated in this segment.
The Textile Minister anticipated this with a series of government initiatives in recent years, including the announcement of the PLI program, the introduction of export tax relief programs such as RoDTEP and RoSCTL, and simpler labor standards, and megaparks now, textiles and clothing from India. Industry well positioned to see impressive growth and regain lost heights.