India's textile exports see muted growth, need more FDI: RBI article

India’s textile and apparel exports have witnessed muted growth in recent years and there is a need to improve transportation infrastructure, further encourage foreign direct investment (FDI) in the sector and promote a cluster-based approach as aimed under the Comprehensive Powerloom Cluster Development Scheme, according to an article in the Reserve Bank of India Bulletin for December.

More FDI would provide the necessary resources to upgrade equipment and help integrate the sector into global value chains.

Investment in transportation infrastructure is required as high transportation cost owing to wider geographical spread, high inland transportation cost and major production areas situated inland contribute to higher cost of Indian apparel exports compared to competitors, the article in the monthly bulletin said.

The country needs to actively pursue free trade agreements with its major export destinations—the European Union, and the United States—to prevent competitive disadvantage it currently faces due to tariff free access to its competitors, it said.

The Indian apparel industry is dominated by cotton, with cotton apparels contributing to more than 70 per cent of the apparel exports. However, the global apparel consumption is well diversified across fibres.

Therefore, there is a need for India to develop design and production capabilities in other fibres as well, it said. This would allow India to establish itself in growing niche segments like wearable electronics and embedded sensor apparels, the article added.