Will India's Textile Industry Weave Its Way to Global Dominance?

Will India's Textile Industry Weave Its Way to Global Dominance?

Growing up in a family deeply rooted in the textile business, I was always fascinated by how this industry operated. It was a symphony of processes, from spinning the common fiber into yarn, dying it into vivid colors, weaving it into fabric, and then turning it into finished clothing. It was more than just making clothes. Every stage was a different universe, full of possibilities and difficulties.

As a child, I would watch the rhythmic hum of machines in our family’s factory and marvel at the sheer scale of what we were a part of. Yet, what intrigued me the most was how vast and diverse the textile industry is. Every stage of this journey—whether spinning yarn or designing finished garments—represents a unique business opportunity. Over time, I realized that India, with its rich textile heritage and growing global footprint, is at the cusp of unparalleled growth in this sector.

Let’s explore the entire value chain, the ongoing changes, and what the future holds 

The textile industry has long been a cornerstone of global commerce, weaving together a diverse array of raw materials, manufacturing processes, and consumer demands. In recent years, this industry has experienced significant transformation, driven by evolving consumer preferences, technological advancements, and global economic trends. 

Globally, fiscal year 2024 began with serious worries about a number of issues, such as war, inflation, recession, supply chains, and labor markets; however, the year has had far less of an impact than anticipated. Most major economies saw a decrease in inflation, a largely averted recession, a significant reduction in supply chain disruption, and historically tight labor markets.

The Textile Value Chain: From Fiber to Fashion

The textile industry comprises a comprehensive value chain that transforms raw fibers into finished products.

a. Raw Materials

• Natural Fibers: Cotton, wool, silk, and jute.
• Man-Made Fibers (MMF): Polyester, nylon, and acrylic are gaining traction due to their durability and cost-effectiveness. India’s MMF consumption stands at 56%, significantly lower than the global average of 69%, indicating room for growth.

b. Yarn Production

• Key hubs like Surat and Tirupur are witnessing resurgence, with capacity utilizations reaching over 90%.
• Quality Control Orders (QCO) in India have reduced substandard imports, fostering a shift towards higher-quality production.

c. Fabric Production

• Divided into woven and knitted fabrics.
• Knitted fabrics are growing faster due to their application in leisurewear and sportswear.

d. Finished Goods

• Includes garments (apparel), home textiles (bedding and towels), and industrial textiles.
• Advanced segments like technical textiles and sustainable fibers are emerging as growth drivers.

e. Distribution

• Global supply chains distribute products across retail and e-commerce platforms. Nearshoring trends, such as the US-Mexico-Canada Agreement (USMCA), highlight shifting sourcing preferences.

Key Drivers of Transformation: 

a. Sustainability

Major brands are shifting towards eco-friendly practices. Polyester, accounting for 53% of global fiber consumption, is being transformed into recyclable and sustainable variants, driven by commitments from brands like Nike and Adidas.

b. Government Policies

India’s “5Fs” strategy—Farmer, Fiber, Fabric, Fashion, and Foreign Markets—supports the textile ecosystem. Incentives like the PLI scheme and upcoming Free Trade Agreements (FTAs) with the UK and Europe aim to enhance global competitiveness.

c. Geopolitical Dynamics

The "Bangladesh+1" strategy is redirecting orders from politically unstable regions to India. However, India faces challenges like Bangladesh's preferential tariff advantages in EU markets.

d. Technological Innovation

• Automation in spinning and garmenting is improving productivity.
• Platforms like The Yarn Bazaar are digitizing the yarn-sourcing process, boosting transparency and efficiency.

Emerging Trends: 

a. Rise of MMF

Man-made fibers like polyester and viscose are outpacing natural fibers due to their sustainability and versatility.

b. Technical Textiles

Applications in automotive, healthcare, and defense are driving demand. Companies like Arvind Ltd are making significant strides in this segment.

c. Home Textiles

India commands 52% of the US home textiles market, with companies like Welspun Living and Indo Count Industries scaling their capacities.

d. Digital Platforms

B2B platforms are enabling smaller players to access global markets, further democratizing the industry.

Challenges: 

1. Infrastructure: India lags behind competitors like Vietnam and Bangladesh in infrastructure readiness.
2. Cost Competitiveness: High labor costs and limited access to affordable polyester hinder growth.
3. Sustainability Compliance: Adopting international standards is crucial for accessing premium markets.

The Future Outlook: 

The industrial textiles market is likely to increase at an 8% CAGR from US$ 2 billion in 2020 to US$ 3.3 billion in 2027. The overall Indian textiles market is expected to be worth more than US$ 209 billion by 2029.

a. Growth Opportunity

India’s textile and apparel industry is expected to grow at 9% CAGR, reaching $350 billion by FY30, with exports clocking a 16% CAGR to $100 billion. The market for Indian textiles and apparel is projected to grow at a 10% CAGR to reach US$ 350 billion by 2030. Moreover, India is the world's 3rd largest exporter of Textiles and Apparel. India ranks among the top five global exporters in several textile categories, with exports expected to reach US$100 billion.

The textiles and apparel industry contributes 2.3% to the country’s GDP, 13% to industrial production and 12% to exports. The textile industry in India is predicted to double its contribution to the GDP, rising from 2.3% to approximately 5% by the end of this decade.

b. Focus Areas

• Expanding knitting hubs to cater to global demand.
• Accelerating automation and adopting renewable energy.
• Strengthening the domestic value chain through policy support.

c. Long-Term Vision

India’s shift towards MMF and value-added products (VAP) is pivotal. By leveraging technology, sustainability, and geopolitical shifts, the industry is poised for robust growth.

The global cotton yarn market is slated to post ~4% CAGR from USD 86.11bn in 2024 to USD 117.79 bn by 2032 (according to Fortune Business Insights). The demand for cotton yarn is expected to rise by 12-14% in volume terms in India. 

Typically, India exports 25-35% of its cotton yarn production and consumes the remaining domestically. Even though India cultivates ~39% of the world's cotton area, with ~31.9mn hectares of land under cotton production, the country lags in yield and ranks 33rd globally, producing 441 kg/hectare of cotton. 

This is far lower than the global average of 769 kg/hectare and lags leading producers such as China (1,950 kg/ha) and Brazil (1,845 kg/ha). China aces globally in cotton production at ~5.6mn tonnes, with India at a close ~5.5mn tonnes. Together, China and India are the world’s largest cotton consumers at ~7.8mn tonnes and ~5.39mn tonnes, respectively. India's cotton to non-cotton fiber mix stands at 60:40, compared with the rest of the world at 30:70; this highlights huge growth potential in the non-cotton fiber space. 

The US and Brazil lead cotton exports at ~2.68mn tonnes and ~2.48mn tonnes, respectively. China and Bangladesh are the largest buyers of cotton at ~2.4mn tonnes and ~1.71mn tonnes, respectively.

Understanding the Different Types of Players in the Textile Industry

The textile industry encompasses a broad range of players, each occupying distinct segments of the value chain. These companies operate in different capacities, focusing on specific parts of the production and distribution process. Let’s break down the types of players and analyze the economics of each segment.

1. Yarn/Fabric Manufacturers: 

These businesses operate at the very start of the value chain and are cyclical. The production of yarn spreads and cotton are the main activities. Global demand-supply dynamics and the cost of raw materials have a significant impact on this segment's operations.

Nature of Business:

• Operate at the initial stage of the value chain, focusing on spinning yarn and weaving fabrics.
• Highly cyclical, as profitability is closely tied to cotton and yarn spreads.

Key Characteristics:

• Cyclicality: Demand-supply dynamics of raw materials (e.g., cotton) significantly impact margins.
• Dependent on Global Trends: Fluctuations in raw material costs, especially cotton prices, influence profitability.
• Export-Oriented: A large portion of production caters to global markets.

Examples:

Economics:

• ROCE: Fluctuates between 12-30% depending on the cotton and yarn spread cycle.
• Asset Intensity: High due to the capital-intensive nature of spinning and weaving.

2. Textile Sourcing Companies 

Textiles are sourced by this segment for major international brands. It is an asset-light model with high ROCE, making it a lucrative business.

Nature of Business:

• Act as intermediaries, sourcing textiles for major global brands.
• Asset-light model focusing on connecting manufacturers with global retailers.

Key Characteristics:

• High ROCE: Excellent returns due to low capital investment.
• Scalable: Easy to expand operations without significant additional capex.
• Customer-Centric: Depend on relationships with global brands like Zara, H&M, and Walmart.

Examples: 

Economics:

• ROCE: 30-40%+
• Asset Light: Leverages its network and expertise rather than owning large manufacturing facilities.

3. Companies Focused on Garmenting

Manufacturing clothing and accessories for international brands, businesses in this sector concentrate on the forward portion of the textile value chain. These companies serve both export and domestic markets, especially major international retailers.

This is an Integrated Value Chain

Nature of Business:

• Operates in the forward part of the value chain, manufacturing garments and apparel.
• Focus on producing finished products for global brands.

Key Characteristics:

• Labor Intensive: Relies heavily on manual processes.
• Export-Driven: Major markets include Europe and the US.
• Moderate Returns: Low asset turnover keeps ROCE in check.

Examples: 

Economics:

• ROCE: ~15%
• Challenges: High competition and dependency on end-customer demand.

4. Infant Wear Manufacturers

The production of infant wear is a specialized but highly competitive industry because of the stringent regulatory approvals needed, particularly in the US and European markets. Businesses in this sector gain from a devoted clientele and expanding markets.

Complete Integration enables Quality Consistency and Timely Delivery (e.g. SP Apparels)

Nature of Business:

• Focus on producing infant and toddler apparel.
• High entry barriers due to stringent quality and safety approvals.

Key Characteristics:

• Regulatory Oversight: Requires compliance with strict standards for safety and quality.
• Specialized Market: Serves a niche segment with steady demand.

Example:

Economics:

• ROCE: ~15%
• Key Markets: US and Europe dominate as end markets.

5. Integrated Players

At every stage of the textile value chain, integrated players hold a dominant position. Through their spinning, weaving, and processing activities, they maintain efficiency and quality control.

Nature of Business:

• Vertically integrated companies handle spinning, weaving, and garmenting in-house.
• Focus on maintaining control over the entire value chain.

Key Characteristics:

• Economies of Scale: Integrated operations lead to cost savings and efficiency.
• High Barriers to Entry: Requires significant capex and years to establish.
• Margin Advantage: Higher margins due to in-house control.

Economics:

• ROCE: Highest among all segments.
• Time to Establish: Takes years of investment and operational ramp-up to achieve integration.

6. Technical Textiles

Technical textiles represent a growing, non-traditional segment within the textile industry. These products include items like army uniforms, geotextiles, fishing nets, and synthetic fabrics. It is an entry barrier-rich segment with high growth potential.

The Indian Technical Textile market has a huge potential of a 10% growth rate, increased penetration level of 9-10% and is the 5th largest technical textiles market in the world. India’s sportech industry is estimated around US$ 1.17 million in 2022-23.

Nature of Business:

• Produce specialized textiles like geosynthetics, army uniforms, and fishing nets.
• High value-add segment with applications in industrial and niche markets.

Key Characteristics:

• Innovation-Driven: Continuous product development to meet specialized needs.
• High Entry Barriers: Requires technical expertise and certifications.
• Non-Cyclical: Demand remains steady regardless of market cycles.

Examples:

• Garware Technical Textiles
• Precot
• Arvind Advanced Textiles

Economics:

• ROCE: High due to niche positioning and premium pricing.
• Margins: Superior compared to conventional textiles.

7. Home Textiles

Products like pillowcases, towels, and bed linens are the main focus of this subsegment. Due to cost advantages and international quality standards, Indian businesses in this sector are overtaking their Chinese rivals for market share.

India’s home textile industry is expected to expand at a CAGR of 8.9% during 2023-32 and reach US$ 23.32 billion in 2032 from US$ 10.78 billion in 2023.

Nature of Business:

• Focus on bedding, towels, pillow covers, and other home textiles.
• Rapidly gaining global market share, especially from China.

Key Characteristics:

• Export-Oriented: The US is a major market.
• Inventory Challenges: Cyclical due to inventory build-up at the retailer level.
• Shift to Value-Added Products: Companies are moving up the value chain to capture higher margins.

Examples: 

Economics:

• ROCE: 14-18%
• Cyclicality: Influenced by global demand and inventory cycles.

Why India? What are the Growth Opportunities?

India’s textile industry is poised for incredible growth, thanks to several factors:

1. A Legacy of Excellence: India has been a global leader in textiles for centuries, with skilled labor and diverse raw materials forming the backbone of the industry.
2. Rising Exports: As global buyers diversify their supply chains, India has emerged as a preferred sourcing destination. Segments like home textiles and technical textiles are seeing a surge in demand.
3. Government Support: Initiatives like the Production Linked Incentive (PLI) scheme and the development of textile parks aim to boost manufacturing and exports.
4. Sustainability Trends: Indian manufacturers are adopting eco-friendly practices, such as organic cotton farming and waterless dyeing, to cater to conscious consumers worldwide.
5. Digital Transformation: From e-commerce platforms to AI-driven production planning, technology is revolutionizing how the textile industry operates, offering immense scalability.

Investment Trends

1. FDI Inflows: Total FDI in the textile sector reached $4.47 billion between April 2000 and March 2024.
2. Recent Investments: Significant growth in investment has been observed over the last five years.

Key Developments in the Sector 

PM MITRA Parks

• Objective: To establish integrated textile parks with world-class infrastructure.
• Details:
  
  • Total Approved Investment: ₹4,445 crore ($535 million) up to FY 2027-28.
  • Expected Outcomes: Attract ₹10,000 crore ($1.2 billion) in Amravati with 300,000 jobs and ₹6,850 crore ($824 million) in Madhya Pradesh.

Industry Initiatives and Expansions

• Bharat Tex 2024: A global textiles event scheduled for February 2024 in New Delhi.
• Private Sector Expansion:
  
  • Grasim Industries plans 120 retail stores in smaller cities over two years.
  • Reliance Retail acquired stakes in Ed-a-Mamma (September 2023) and launched a handicrafts store in Hyderabad.
  • Vardhman has expanded yarn production and established a cotton recycling facility.

Sustainability and Technology

• Sustainable Practices:
  
  • Arvind Limited and PurFi Global JV to reduce textile waste.
  • Welspun India’s traceability technology (Wel-Trak 2.0).
• Technical Textiles:
  
  • 19 research projects under the National Technical Textiles Mission sanctioned ₹21 crore ($2.52 million).
  • 26 engineering institutions approved for technical textiles.

Corporate and Government Collaboration 

• SAMARTH Scheme:
  
  • Training initiatives benefited 1,83,844 individuals across 1,880 centers.
  • Empanelled 43 new partners in 2023 with a target to train 75,000 beneficiaries.
• PLI Scheme: 61 companies selected, pledging $2.32 billion in investments, aiming for $22.55 billion in turnover.

Major Acquisitions

• Aditya Birla Fashion: Acquired TCNS Clothing ($198.54 million).
• Reliance Retail: Invested in Purple Panda Fashions ($115.8 million).

Upcoming Projects

• New Facilities: Sutlej Textiles plans a greenfield project for mélange and PC yarn in Jammu & Kashmir, costing $111.41 million.
• Textile Parks: Tamil Nadu announced a 1,500-acre textile park in Virudhunagar.

Government Support and Policy 

1. Export Promotion: Policies include 100% FDI under the automatic route.
2. Budget Allocation: ₹4,389.24 crore ($536.4 million) in FY 2023-24, supporting schemes like ATUFS and NTTM.
3. R&D Focus: $7.4 million approved for textile R&D in June 2023.
4. Global Engagement: Hosting the International Cotton Advisory Committee meeting in December 2023.

The future of the Indian textiles industry appears promising, driven by strong domestic consumption and export demand. India is implementing several major initiatives to enhance its technical textile sector. Increased demand for technical textiles, particularly in the form of PPE suits and equipment due to the pandemic, has further bolstered this growth. The government is actively supporting the industry through funding and machinery sponsorship.

Leading players in the sector are focusing on sustainability by manufacturing textiles made from natural, recyclable materials. As consumerism and disposable incomes rise, the retail sector has experienced rapid growth over the past decade, bolstered by the entry of several international brands such as Marks & Spencer, Guess, and Next into the Indian market. The growth of the textiles sector will be fueled by increasing household income, a growing population, and rising demand from industries such as housing, hospitality, and healthcare.

The technical textiles market for automotive applications is projected to grow from $2.4 billion in 2020 to $3.7 billion by 2027. The textile industry is diverse, with each segment presenting unique dynamics and return profiles. 

Companies must navigate cyclical challenges, leverage their strengths, and adapt to changing market demands to succeed. Among these segments, integrated players and technical textiles stand out due to their high margins and return on capital employed (ROCE), while sourcing companies demonstrate how asset-light models can yield impressive returns.

As the industry evolves, the focus on sustainability, innovation, and value-added products will shape its future trajectory. The textile industry is at a transformative crossroads. With the right combination of innovation, sustainability, and strategic investments, it has the potential to reclaim its position as a global leader. As India addresses challenges and seizes opportunities—such as the Bangladesh+1 strategy—it is poised to create a brighter future for this longstanding industry.

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