The textile and garment sector is one of the pillars of the Indian economy. The sector accounts for 14% of industrial production and 4% of GDP. Besides, the sector also employs close to 45mn people and is the second largest employer after agriculture. It is a diversified sector comprising of many industries including cotton textiles industry, jute industry, silk textiles industry, woolen textiles industry, apparel industry, fibre industry, handicrafts as well as handlooms.

FY13 was a difficult year for the Indian textile industry. Eurozone sovereign debt crisis led to a slowdown in demand for Indian textiles. This had a considerable impact on the export earnings of the Indian textile sector. The depreciation of rupee brought some respite for the apparel exporters in INR terms but decline was clearly visible in USD terms. Domestic market showed some resilience especially in the festive season which reduced the impact of export decline to a certain extent.

Despite a tough year, the demographic dividend and comparatively lower cost of manufacturing bodes well for the textile and garment sector in longer term. Exchange rate fluctuations and costly working capital loans are the biggest challenges for the sector.

Key Points:

• The sector accounted for 10.4% of the country’s total exports during FY13. It acted as one of the major foreign exchange earners for the country. During 2008-2012, the export earnings from the sector grew at a CAGR of 13.7%.

• As of 9MFY13, ready-made garments were the largest segment in terms of export contribution accounting for 39% of the total export earnings. Cotton textiles were next with a contribution of 33%. Manmade textiles were the third largest segment with a contribution of 17%.

• The United States was the largest market for Indian textile exports accounting for around 18% of the total export earnings. It was followed by China and UAE which accounted for 10% and 7%, respectively.

• In FY13, the export earnings from textile sector grew by 8% year on year in INR terms. However, in USD terms it recorded a year on year decline of 4.1%. The on-going financial crisis in the Eurozone countries had a considerable impact on the export earnings of the Indian textile sector in 9MFY13.