Dr. Ajay Sahai
Director General & CEO Federation of Indian Export Organisations
Exports of $100 billion in textiles sector in next 5 years is achievable
Set up in 1965 by Ministry of Commerce, Government of India to focus the efforts of all stakeholders engaged in promotion of trade from the country, the Federation of Indian Export Organisations (FIEO) is the apex body of the government recognised Export Promotion Councils, Commodity Boards and Export Development Authorities in India. FIEO Director General & CEO Dr. Ajay Sahai tells Fibre2Fashion as to how the textiles industry is likely to perform in 2022.
What are your key takeaways from the textile and apparel industry developments in 2021?
2021, despite disruptions caused by the pandemic, was a watershed year for the textiles industry. Its importance for supporting the domestic economy, job creation and exports was very well recognised. The huge potential of the sector was tapped through various initiatives of the government:
The PLI scheme was introduced for man-made fibre and technical textiles sector to boost manufacturing, augment exports, and attract FDI in such sectors.
7 Mega Textiles Parks were notified to provide state-of-the-art facility under one roof for textiles manufacturing.
Rationalisation of GST rates for man-made filament, yarn, fabrics, and garment was attempted to address inverted duty structure and encourage value addition.
RoSCTL scheme was notified for apparel and made-ups sectors to provide complete zero rating to such exports providing a level playing field to Indian exporters.
Government engaged with the UK, UAE, and Australia to finalise free trade agreements and also opened dialogue with the EU, GCC, SACU and some other regional blocks to help the textiles sector to get better market access for exports.
On the demand side, do you expect a significant pick-up beyond pent-up consumption in 2022, without government support?
The future for the Indian textiles industry looks promising, buoyed by strong domestic consumption as well as export demand. Also, the gradual economic growth/new normal amid the pandemic has given rise to higher disposable incomes, further leading to the surge in demand for products, thereby creating a bigger export market. Therefore, there will be consumption beyond pent-up demand despite not much support from the government.
Following the recent COP26 meeting and given the textile industry’s influential role in climate change, what major developments do you expect in 2022?
For the sustainable textiles industry, it is imperative that we use eco-friendly materials for garment production, reduce the use of fossil fuels for energy generation and adopt the use of renewable energy instead. Any product, manufactured, used, or disposed of in a manner that reduces damage to the environment should be preferred. Apart from helping to reduce the impact of textile manufacturing on the environment and making our world a better place to live in, the use of such materials will also prevent the adverse effects of harmful chemicals (pesticides, herbicides, etc) on human health. Cost is one of the key barriers faced by companies looking to shift their supply chain towards environmentally preferred materials. But by mitigating or narrowing price premiums, trade mechanisms can be used to incentivise the increased production and adoption of these fibres, making them more favourable than, or at least equal to, their conventional counterparts.
Does 2022 seem to be as uncertain as 2021? Which factors would you rank as of topmost concern?
The global trade is expected to reach $28 trillion in 2021, showing a growth of 23 per cent over 2020. Such a growth has come with relaxation on movement, economic stimulus provided by economies, and hike in prices of commodities and metals. The uncertainties witnessed during 2021 are likely to continue in 2022 albeit with less impact. Backlog across major supply hubs that characterised 2021 could continue in 2022 as well. The logistics challenges are likely to remain unabated. Our topmost concern would be the trend in consumption pattern in 2022. We all know that consumption has shifted from services to goods in 2021 as many economies were in lockdown. With gradual opening of economies, the shift may be back to services which may affect the growth in global trade.
By when do you expect the challenges of shipping industry to ease?
The challenges in shipping sector are likely to continue at least till the second quarter of 2022 as the new ships and containers may be added to the supply side thereafter to soften the hike in freight and shortage of containers. The little easing out at this point of time is primarily due to the fact that supplies for Christmas, New Year and Chinese New Year have been front loaded and were completed by October.
Related to this, would you say brands will increasingly start focusing on sourcing with sustainability/ethics as a factor?
Brands have already made it clear when at COP26 over 50 fashion and textile companies backed Textile Exchange’s request for policy to incentivise the use of environmentally preferred materials. Top brands are attaining sustainability in their products by sourcing or manufacturing textiles that use natural recyclable materials. Preferential tariffs on materials like organic cotton and recycled fibres should be encouraged by countries to support such move.
Will we see greater technology adoptions in 2022 to solve transparency and traceability issues in the supply chain?
Technology has reshaped and prompted the textiles industry to meet the rising demands and trends by providing data-driven customer operations. The sector itself is facing a wave of innovation with automation and artificial intelligence. These developments have allowed textile companies to work remotely and monitor their machinery and data collection and analytics to march towards further improvement. These trends are likely to be accentuated further in 2022 to address traceability and ensure transparency.
How pressing could be the labour issues for the textile and apparel industry?
Labour issue is quite critical to the apparel and textiles sectors. Over the years, export related jobs have grown at a much faster rate than overall employment. While a chunk of these jobs has gone to persons with below secondary education, the rate of growth of these low-skilled jobs has declined. Recent estimates show that the share of unskilled jobs tied to textile and allied exports declined from 29.64 per cent in 2003-04 to 23.67 per cent in 2013-14. The share of high-skilled jobs increased from 20.91 per cent to 26.15 per cent during the same period. With the skill composition of export related jobs shifting towards high skill, we require greater investment in skill development to make sure that we do not expose the less skilled workers to the risk of offshoring.
Do you expect any significant movement in textile and apparel supply chains in 2022 due to the geo-political scenario, particularly the US-China tension?
Global companies are looking for China Plus One model and India is definitely on the radar of all such companies. The tension between China and the US is forcing many companies, who were looking for expansion or set up in China, to move to India. QUAD in the West with US, Israel, and UAE and in the East with US, Japan and Australia will also push trade amongst partners. US ban on products from Xinjiang which produces 86 per cent of China’s cotton, 70 per cent of cotton yarn and 75 per cent of cotton fabric, will further push India’s apparel and textiles exports. In fact, it may compound the problem of apparel exporters as many major exporting countries dependent on supply from China are increasingly moving to India for procuring inputs thereby pushing the prices in the domestic market.
Energy prices are currently a major concern across the world. How do you see them continuing and what business strategies can we expect to cope with them?
With Organization of the Petroleum Exporting Countries (OPEC) agreeing to increase production and the US and Russia also becoming major players in fossil fuel supply, we expect the global energy prices to remain moderate in 2022. China’s slowing down in the third quarter (of 2021) will also ease the energy prices. However, the industry should look for non-conventional energy and focus on solar, wind and tidal energies to address the cost and more importantly to reduce pollution.
Lastly, any changes in the textile and apparel business model that you expect?
We expect integrated chains to be established in the country so that companies are in the entire value chain starting from fibre to yarn to fabric to garment so that not only cost is managed at every process but also the quality parameters are strictly adhered to. We expect large companies to avail PLI scheme to set up their base in India and SMEs evolve around them in a hub and spoke model as their ancillaries. We are looking towards exports of $100 billion in the textiles sector in the next 5 years which is easily achievable, particularly as an enabling and supportive eco-system has been provided for the growth of textiles sector in India.
Published on: 19/01/2022
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.
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