Global Fashion Business

Submitted by
Aarushi Jain

Under the supervision of

Suruchi Banerjee

Department of Fashion Communication

Submitted to

National Institute of Fashion Technology (NIFT)

Plot no. 15, Service Rd, Sector 4,
Kharghar, Navi Mumbai,
Maharashtra 410210
Tel:022 2774 7100
Web: https://www.nift.ac.in
 Declaration

I, Aarushi Jain, hereby declare that the project work on Global Fashion Business submitted
by me to the National Institute of Fashion Technology for the Masters in Fashion
Management is an original and authentic piece of work carried out by me under the guidance
of my Professor, Professor Suruchi Banerjee. All the information and data presented in this
project are based on my research, and I have duly acknowledged all the sources of
information in the bibliography.

I further declare that this project has not been submitted in part or full to any other institution
for any degree or diploma. Any similarities with other works are purely coincidental and
unintentional.
 Acknowledgement

I want to express my sincere gratitude to Professor Suruchi Banerjee of the Department of

Fashion Communication at NIFT Mumbai for her invaluable guidance and support during the
completion of the project Shifting Trends in Global Apparel Sourcing Base. Her expertise
and insights have been instrumental in shaping the direction of the work. I am grateful for the
time, encouragement, and knowledge she shared, which significantly contributed to the
success of this project.

Regards,

Aarushi Jain
 Table of Contents

Introduction 5
What is Global Apparel Sourcing? 6
Benefits of Global Apparel Sourcing 7
Shifting Dynamics in Global Apparel Sourcing Base 9
Emerging Trends in Global Apparel Sourcing 12
Why are Companies shifting from China as a global apparel sourcing base? 15
Consumer Perceptions of Chinese Products 18
Reasons for India's Rising Attractiveness in Global Manufacturing and Sourcing over
China: 20
Red Sea Crisis 22
Reasons for Manufacturing Shift from China to Vietnam: 29
Vietnam-India relations 32
Can India provide raw materials to Vietnam? 34
Textile & Apparel Trade of India 36
Current Landscape of India 38
Strategies for India 40
Strategic Initiatives to Enhance India's Competitiveness 46
Conclusion 50
References 51
 Introduction

The global apparel industry is experiencing a profound shift in its sourcing strategies, driven
by a convergence of economic pressures, technological advancements, and evolving
consumer expectations. Traditional manufacturing powerhouses like China, which have long
dominated the apparel production landscape, are facing rising labor costs and increased
scrutiny over environmental and labor practices. This has led brands and retailers to diversify
their sourcing bases to mitigate risks and optimize costs. Emerging markets in Southeast
Asia, Africa, and Latin America are gaining prominence as alternative sourcing destinations,
offering competitive labor costs, improving infrastructure, and favorable trade agreements.

Additionally, the push for sustainability is reshaping sourcing decisions. Consumers and
stakeholders are increasingly demanding transparency and ethical practices throughout the
supply chain. This has compelled companies to adopt more sustainable and socially
responsible sourcing strategies, often involving suppliers that prioritize eco-friendly materials
and fair labor practices. Technological advancements such as automation, AI, and blockchain
are also revolutionizing the apparel industry, enabling more efficient production processes,
enhanced supply chain visibility, and quicker response times to market changes.

Furthermore, geopolitical dynamics, such as trade wars, have highlighted the vulnerabilities
of relying heavily on a single sourcing region. Companies are now prioritizing supply chain
resilience, seeking to balance efficiency with flexibility. This has led to the rise of
nearshoring and reshoring trends, where production is moved closer to the consumer markets
in North America and Europe, reducing lead times and increasing agility.

In this rapidly evolving landscape, apparel brands and retailers must navigate a complex web
of considerations to remain competitive. The shift in global apparel sourcing is not merely a
strategic adjustment but a fundamental transformation that reflects broader changes in the
global economy, technology, and consumer values. Understanding these trends and their
implications is crucial for stakeholders aiming to thrive in the future of apparel production.
 What is Global Apparel Sourcing?

Global sourcing in the textile and apparel industry refers to the practice of procuring
materials, products, and services from different countries to meet the demands of the industry.
It has become a crucial function in the industry, with over 95% of textile and apparel products
being globally sourced.

Sourcing, a critical aspect of garment merchandising, encompasses the process of finding,

evaluating, and engaging suppliers to acquire materials essential for apparel production. It
involves determining the most suitable vendors who can provide the required materials at the
desired quality and the lowest cost. Essentially, sourcing determines the approach and
location for material procurement in garment manufacturing. It's about identifying and
selecting suppliers efficiently.

In today's global marketplace, the scope of sourcing extends worldwide, presenting both
opportunities and challenges for merchandisers. They must navigate the complexities of both
domestic and international sourcing. This responsibility can be fulfilled through direct
engagement with suppliers or by leveraging sourcing agents who facilitate the process.

Effective sourcing requires a deep understanding of materials, quality standards, costing, and
relevant import regulations, especially when dealing with international suppliers.
Merchandisers must also stay abreast of international business policies and legal procedures
related to material sourcing.

Identifying potential suppliers involves thorough research, including examining catalogs,

trade journals, websites, and sometimes relying on recommendations from trade
organizations or government bodies. Suppliers are assessed based on various factors such as
price, quality, capacity to fulfill orders, and punctuality in delivery.

The decisions made in sourcing have a significant impact on the reputation and success of the
apparel industry. Therefore, making the right sourcing decisions ensures efficiency and
flexibility in meeting the demands of the supply chain within the specified timeframe.
 Benefits of Global Apparel Sourcing

1. Cost Savings:

● Labor Cost Arbitrage: Labor-intensive processes, such as garment stitching, can

often be performed at lower costs in countries with abundant and affordable labor,
such as Bangladesh, Vietnam, or Ethiopia, compared to higher-wage regions like
North America or Europe.
● Economies of Scale: Global sourcing allows businesses to take advantage of
economies of scale by consolidating production in regions where large-scale
manufacturing is feasible. This can lead to significant cost reductions in terms of
per-unit production costs.
● Tax and Tariff Optimization: Sourcing from countries with preferential trade
agreements or low import duties can help mitigate taxes and tariffs, further reducing
overall production costs.
● Overhead Expenses: Different regions may offer lower overhead expenses, such as
rent, utilities, and regulatory compliance costs, contributing to overall cost savings for
businesses.

2. Access to Diverse Suppliers:

● Quality and Expertise: Global sourcing enables companies to access suppliers with
specialized expertise and experience in specific product categories or production
processes. For example, Italian suppliers are renowned for their expertise in luxury
textiles and craftsmanship.
● Innovation and Creativity: By collaborating with suppliers from diverse cultural
backgrounds and industrial landscapes, companies can tap into innovative ideas,
design aesthetics, and technological advancements, enriching their product offerings
and enhancing competitiveness.
● Supply Chain Redundancy: Working with multiple suppliers across different
regions provides built-in redundancy in the supply chain, reducing the risk of
disruptions due to factors such as natural disasters, geopolitical tensions, or supplier
bankruptcy.

3. Specialized Skills and Resources:

● Vertical Integration: Global sourcing allows companies to leverage the vertical

integration of supply chains in certain regions. For example, countries like Turkey
have vertically integrated textile clusters, encompassing spinning, weaving, dyeing,
and finishing processes, offering streamlined production capabilities.
 ● Technical Expertise: Some regions excel in specific technical skills or manufacturing
processes. For instance, Japan is known for its precision textile machinery and
innovative textile technologies.
● Raw Material Availability: Access to abundant and high-quality raw materials, such
as cotton in India or silk in China, can significantly impact production efficiency,
product quality, and cost-effectiveness.

4. Market Access and Demand Responsiveness:

● Localization: Global sourcing enables companies to localize production and adapt

products to meet the unique preferences and regulations of different markets. For
example, producing winter clothing in regions with colder climates or adhering to
specific sizing standards in different regions.
● Quick Response Manufacturing: By strategically distributing production across
multiple regions, companies can implement quick response manufacturing strategies
to minimize lead times, reduce inventory levels, and respond rapidly to changes in
consumer demand or fashion trends.
● Market Expansion: Sourcing globally allows companies to expand their market
reach by entering new geographical regions or demographic segments, capitalizing on
emerging market opportunities and diversifying revenue streams.

5. Innovation and Collaboration:

● Research and Development: Collaborating with suppliers and industry partners from
different regions fosters cross-pollination of ideas, leading to innovations in product
design, material technologies, sustainability practices, and production processes.
● Sustainability Initiatives: Global sourcing facilitates the adoption of sustainable
practices across the supply chain by leveraging best practices, certifications, and
renewable resources available in different regions. For example, sourcing organic
cotton from India or eco-friendly dyes from Europe.
● Supplier Development: Establishing long-term relationships with suppliers through
global sourcing encourages capacity building, skill development, and continuous
improvement initiatives, driving overall industry competitiveness and sustainability.
 Shifting Dynamics in Global Apparel Sourcing Base

1. Dominance of the Asia Pacific Region:

● For years, the Asia Pacific region has served as the epicenter of textiles and apparel
sourcing, accounting for a significant portion of global production and exports.
● Countries like China, Bangladesh, Vietnam, India, and others have established
themselves as key players in the global T&A supply chain due to various factors such
as abundant labor, favorable trade policies, infrastructure development, and industrial
capabilities.
● China, in particular, has historically been the primary destination for apparel sourcing
due to its scale, efficiency, and manufacturing prowess. However, rising labor costs,
trade tensions, and evolving consumer preferences have prompted a shift in sourcing
strategies within the region.

2. Shifting Dynamics within the Asia Pacific Region:

● As manufacturing costs rise in China, brands and retailers are diversifying their
sourcing base to other countries within the Asia Pacific region to maintain cost
competitiveness.
● Bangladesh has emerged as a major sourcing destination, especially for basic apparel
items, owing to its low labor costs and preferential trade agreements. However,
challenges related to worker safety, infrastructure, and political stability remain areas
of concern.
● Vietnam has witnessed significant growth in apparel exports, fueled by its competitive
labor costs, improving infrastructure, and favourable trade agreements such as the
EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP).
● India, with its skilled workforce, diverse textile ecosystem, and government initiatives
like the "Make in India" campaign, is increasingly positioning itself as an attractive
destination for apparel sourcing. However, infrastructure bottlenecks, regulatory
complexities, and bureaucratic hurdles present challenges to its growth trajectory.

3. Emergence of New Players and Markets:

● Beyond the traditional sourcing hubs, emerging economies such as Ethiopia,

Cambodia, Myanmar, and Indonesia are gaining traction as viable sourcing
destinations due to their competitive labor costs, preferential trade agreements, and
investment in industrial infrastructure.
● Africa, in particular, is garnering attention from international brands and retailers
seeking alternative sourcing options. The African Continental Free Trade Area
(AfCFTA) agreement presents opportunities for intra-regional trade and investment in
the T&A sector.
4. Focus on Sustainability and Ethical Sourcing:

● With growing consumer awareness and regulatory pressures, sustainability and ethical
sourcing have become paramount concerns for T&A businesses.
● Brands and retailers are increasingly scrutinizing their supply chains, seeking
transparency, traceability, and compliance with environmental and social standards.
● Countries that can demonstrate commitment to sustainable practices, such as organic
cotton farming, eco-friendly manufacturing processes, and fair labor practices, stand
to gain a competitive edge in the global sourcing landscape.

5. Impact of Technology and Digitalization:

● Technological advancements, including automation, artificial intelligence, 3D

printing, blockchain, and digital supply chain platforms, are reshaping the T&A
industry's sourcing and manufacturing processes.
● Automation is enabling efficiency improvements, cost savings, and faster production
cycles, while digital platforms facilitate real-time collaboration, inventory
management, and demand forecasting across the supply chain.
● Companies that embrace digitalization and invest in technology-driven solutions are
better positioned to enhance agility, responsiveness, and competitiveness in the
rapidly evolving marketplace.

6. Geopolitics of Apparel Sourcing:

● Geopolitical tensions between the United States and China, exacerbated by policies
against forced labor, have disrupted the apparel sourcing landscape. Concerns over
human rights violations in Xinjiang have led to increased scrutiny and potential
sanctions on Chinese goods.
● Tighter border protection laws and disruptions by the Chinese government, such as
labor shortages and factory closures, have raised concerns among Western brands
about the reliability and stability of their supply chains. As a result, companies are
exploring alternative sourcing methods to mitigate risks and ensure continuity of
supply.

7. Diversification of Global Apparel Sourcing:

● There is a growing trend towards diversification of sourcing regions, driven by the

desire to reduce reliance on specific countries and mitigate geopolitical risks.
Countries in the European Union, the United States, and Japan are implementing
policies to incentivize reshoring and regional sourcing, promoting supply chain
resilience and innovation.
 ● Diversification helps prevent market monopolies by spreading sourcing activities
across multiple regions, fostering healthy competition and encouraging innovative
business practices among suppliers.

8. Strengthening Relations with Super Vendors:

● Fashion brands are increasingly focusing on building stronger relationships with super
vendors, which are companies that have extensive networks and capabilities to source
materials from multiple regions globally.
● These relationships provide flexibility in sourcing materials, enabling brands to adapt
quickly to changing market conditions, mitigate risks, and maintain a global presence
while ensuring compliance with ethical and sustainability standards.

9. Sourcing of Raw Materials for Apparel:

● Fashion companies are becoming more conscious of ethical concerns related to

sourcing raw materials, particularly from countries accused of relying on forced labor
and unethical practices.
● There is a growing recognition of the need for stricter policies and controls over the
supply chain to address these concerns, including increased transparency, traceability,
and due diligence measures to ensure compliance with ethical and sustainability
standards.

10. Free Trade Agreements to Procure Apparel Sourcing:

● Free trade agreements, such as the Regional Comprehensive Economic Partnership

(RCEP), are playing a significant role in diversifying and strengthening the apparel
sourcing market.
● These agreements aim to counteract China's dominance in the supply chain market by
providing opportunities for emerging suppliers in the Indo-Pacific region. By
promoting trade liberalization and reducing trade barriers, free trade agreements
facilitate access to new markets and foster competition, driving innovation and
efficiency in the apparel sourcing landscape.
 Emerging Trends in Global Apparel Sourcing

1. Global T&A Trade Landscape:

● The global T&A trade experienced robust economic activity, with a cumulative value
of USD 763.5 billion from January to November 2023.
● Apparel emerged as the dominant category, commanding the largest share at 59%,
indicating strong demand for finished clothing products in the international market.
● Raw textiles accounted for 30.5% of the trade value, highlighting the substantial
exchange of materials crucial for textile manufacturing.
● Home textiles, while holding a smaller share at 10.5%, signify a discernible market
for household textile products in the global trade landscape.

2. Significance of Different T&A Segments:

● The dominance of the apparel category underscores the dynamism of the fashion
industry and the consumer demand for finished clothing items worldwide.
● Raw textiles' significant contribution emphasizes the importance of the global supply
chain in sourcing essential materials for textile manufacturing, reflecting the
interconnected nature of the industry.
● The presence of home textiles in the trade landscape highlights the market for
household textile goods, indicating consumer demand for products such as bedding,
towels, and curtains.

3. Asia Pacific Trade Dynamics:

● The Asia Pacific region mirrors the global trade pattern, with a parallel distribution in
trade contributions across apparel, raw textiles, and home textiles categories.
● Apparels stand out as the primary driver in the Asia Pacific trade landscape,
reinforcing the region's role as a manufacturing and exporting hub for finished
clothing items globally.
● The substantial share of raw textiles in Asia Pacific trade underscores the region's
influence on the global supply chain, as it serves as a major source of essential textile
materials for manufacturing.
● While home textiles contribute proportionally less, their presence signifies the Asia
Pacific region's involvement in the trade of household textile goods, catering to
consumer preferences in this segment.
● Asia, particularly countries like China, Bangladesh, Vietnam, and India, has been a
major hub for apparel sourcing. However, there has been a gradual shift in recent
years due to rising labour costs in China and geopolitical considerations. Some
companies have been diversifying their sourcing to other Asian countries to manage
the risks and costs of production.
● The segmented analysis of global trade data underscores the Asia-Pacific region as a
paramount contributor to the supply of textile and apparel-based goods. Beyond being
a leading supplier, it also stands as one of the most significant markets for such
commodities, ranking second only to Europe. This region commands a substantial
share of 60.7 per cent in the overall textile and apparel segment, with a specific
breakdown showcasing its dominance at 60.1 per cent in the apparel segment, 60.5
per cent in the Home Textile segment, and a remarkable 62 per cent in the global
exports of raw textile materials.
● The Asian countries no doubt dominate the textile export market and the other nations
in Africa, the Middle East, North America, and Europe are the consumers or the
markets for these textile exports.
● Asian countries are largely dependent on the European and American markets for
their exports, but these countries also have their intra-continent trade. Countries like
China, Bangladesh, and Vietnam export apparel to the countries within Asia and
export to the other major markets. Thus, the suppliers are in a much need to diversify
by expanding the trade within the Asian continent and exploring countries in the
African region.
● From a market perspective, the Asia-Pacific region accounts for 35.3 per cent of
global textile and apparel imports. A more granular examination reveals that raw
textile imports constitute 46 per cent, while apparel imports and Home Textiles cover
33 per cent and 18 per cent, respectively.
● This comprehensive analysis highlights the pivotal role played by the Asia-Pacific
region in the global textile and apparel industry, both as a major supplier and a
substantial market force.
●
Why are Companies shifting from China as a global apparel sourcing base?

After the pandemic revealed the limits and risks of global fashion supply chains with an
overreliance on China, the all-time high inflation seen since 2022 has worsened the situation.
Not only have brands and retailers felt the pressure of the increasing cost of goods sold
(COGS), but they have also refrained from passing all these costs to consumers whose
budgets are being squeezed. Even if the COGS somewhat normalised in the last quarter of
2023, the security crisis in the Red Sea is further disrupting supply chains and inflation as the
costs of international shipments rise.

In the short term, this poses another pricing conundrum for fashion players, which have
already had to contend with costs rising much quicker than the amount they can pass on
within consumer pricing. In the longer term, geopolitical tensions will further drive supply
chain shifts, which have accelerated since the pandemic.

Ralph Lauren says, “In Fiscal 2022, approximately 97% of our products (by dollar value)
were produced outside of the US, primarily in Asia, Europe, and Latin America, with
approximately 19% of our products sourced from China and another 19% from Vietnam.

However, many fashion companies have significantly cut their apparel sourcing volume from
China. More often, China is no longer the No.1 apparel sourcing destination, overtaken by
China’s competitors in Asia, such as Vietnam.

1. Shift Away from China as the Primary Sourcing Destination:

The diversification of apparel sourcing away from China is driven by several factors:
● Rising Labor Costs: China's labor costs have been steadily increasing, prompting
fashion companies to seek alternatives in countries with lower labor costs like
Vietnam, Cambodia, and Bangladesh.
● Trade Tensions: Escalating trade tensions between the US and China have led to
uncertainties and concerns about tariffs and trade policies, incentivizing companies to
reduce reliance on China.
● Supply Chain Resilience: The disruptions caused by the COVID-19 pandemic
highlighted vulnerabilities in global supply chains, prompting companies to reassess
their sourcing strategies and prioritize resilience.

➔ According to Lululemon, “During 2021, approximately 40% of our products were

manufactured in Vietnam, 17% in Cambodia, 11% in Sri Lanka, 7% in China (PRC),
including 2% in Taiwan, and the remainder in other regions… From a sourcing
 perspective, when looking at finished goods for the upcoming 2022 fall season,
Mainland China represents only 4% to 6% of our total unit volume.”
➔ Levi’s says, “The good thing about our supply chain is we’ve got truly a global
footprint. We don’t manufacture a whole lot in China anymore. We’ve been slowly
divesting manufacturing out of China, if you will, and kind of playing our chips
elsewhere on the global map… Less than 1% of what we’re bringing into this country,
into the US, less than 1% of it is coming from China.”
➔ Adidas says, “In 2021, we sourced 91% of the total apparel volume from Asia (2020:
93%). Cambodia is the largest sourcing country, representing 21% of the produced
volume (2020: 22%), followed by China with 20% (2020: 20%) and Vietnam with
15% (2020: 21%).”
➔ Victoria’s Secret says, “ China is a single-digit percentage of our total inflow of
merchandise. We’re not particularly dependent on China at all.”
➔ Nike: “As of May 31, 2022, we were supplied by 279 finished goods apparel contract
factories located in 33 countries. For fiscal 2022, contract factories in Vietnam, China
and Cambodia manufactured approximately 26%, 20% and 16% of total NIKE Brand
apparel, respectively“

2. Impact of COVID-19 on Sourcing Strategies:

● The COVID-19 pandemic has had profound effects on the fashion industry, including
disruptions to supply chains, changes in consumer behavior, and shifts in sourcing
strategies.
● China's stringent "zero-COVID" policy and lockdown measures have led to
disruptions in production and logistics, impacting fashion companies' operations and
sales in the region.
● Companies have responded by diversifying their sourcing base, reducing dependence
on China, and enhancing supply chain agility to mitigate future risks.

3. Geopolitical Tensions and Trade Uncertainties:

● Geopolitical tensions, particularly between the US and China, have created

uncertainties for fashion companies, affecting trade policies, tariffs, and market
access.
● Companies are closely monitoring developments and adjusting their sourcing
strategies in response to changing geopolitical dynamics and trade regulations.
● While concerns about trade tensions persist, there is a recognition among fashion
companies of the importance of maintaining a presence in the Chinese market, given
its size, growth potential, and consumer demand.

➔ Macy’s adds, “At this time, it is unknown how long US tariffs on Chinese goods will
remain in effect or whether additional tariffs will be imposed. Depending upon their
duration and implementation, as well as our ability to mitigate their impact, these
 changes in foreign trade policy and any recently enacted, proposed and future tariffs
on products imported by us from China could negatively impact our business,
results of operations and liquidity if they seriously disrupt the movement of products
through our supply chain or increase their cost.”
➔ Gap Inc. says, “Trade matters may disrupt our supply chain. For example, the current
political landscape, including with respect to U.S.-China relations, and recent tariffs
and bans imposed by the United States and other countries (such as the Uyghur
Forced Labor Prevention Act) has introduced greater uncertainty with respect to
future tax and trade regulations.”
➔ QVC says, “The imposition of any new US tariffs or other restrictions on Chinese
imports or the taking of other actions against China in the future, and any responses
by China, could impair our ability to meet customer demand and could result in lost
sales or an increase in our cost of merchandise, which would have a material adverse
impact on our business and results of operations.”
➔ Express says, “recent geopolitical conditions, including impacts from the ongoing
conflict between Russia and Ukraine and increased tensions between China and
Taiwan, have all contributed to disruptions and rising costs to global supply chains.”
➔ When assessing the market risk factors, Chico’s FAS says, “our reliance on sourcing
from foreign suppliers and significant adverse economic, labor, political or other
shifts (including adverse changes in tariffs, taxes or other import regulations,
particularly with respect to China, or legislation prohibiting certain imports from
China)”

4. Localization Strategies and Focus on Chinese Consumers:

● To navigate market uncertainties and cater to the specific preferences of Chinese

consumers, Western fashion companies are adopting localization strategies.
● The "Made in China for China" approach involves producing goods locally to meet
the unique needs of Chinese consumers, including design preferences, sizing, and
cultural considerations.
 Consumer Perceptions of Chinese Products

Historical Perception
1. Low Costs and Counterfeits: Chinese products historically gained a reputation for
being low quality due to their often lower prices and the significant presence of
counterfeit goods in the market. This has led consumers worldwide to associate
"Made in China" with products that are cheap, flimsy, and unreliable.

Country of Origin vs. Place of Production

2. Distinction: There is an important distinction between where a product is made
(place of production) and the origin of the brand (country of origin). For instance,
many global brands manufacture their products in China due to cost efficiency and
production capabilities, but the brand itself might be from a different country, which
often carries a higher quality perception.

3. Example - iPhone: A prime example is Apple's iPhone, which is designed in

California (USA) but assembled in China. The brand's strong reputation for high
quality means consumers do not associate iPhones with the negative connotations of
Chinese manufacturing.

Brand Influence
4. Brand Value: The perceived quality and trust in a brand can significantly diminish
the negative impact of the "Made in China" label. High brand value and strong
consumer trust in brands like Apple, Nike, or Samsung can override concerns about
Chinese manufacturing.

5. Italian Furniture Example: An Italian furniture company that shifted production

to China suffered losses because consumers began to perceive their products as being
of Chinese origin rather than Italian, which negatively impacted their perceived
quality and value.

Consumer Studies and Perceptions

6. Research indicates that consumers often view Chinese products as inferior, with an
average quality score of 2 out of 10. The low interest in Chinese imports in the US,
with only 17% of consumers expressing interest, highlights the widespread perception
of low quality.

7. European consumers tend to value brand names more than the "Made in China"
label when assessing product quality. This suggests that well-known brands can
mitigate some of the negative perceptions associated with Chinese manufacturing.
 8. In the US, 65% of consumers are less likely to purchase Chinese products, and 12%
have never bought any, indicating a strong bias against products labeled "Made in
China" due to perceived quality issues.

Market Penetration in Turkey

9. Significant Market Presence: Chinese products have a substantial market
presence in Turkey, with a high percentage of technological goods, toys, medical
equipment, and other items being imported from China. This penetration is growing,
suggesting a robust supply chain and cost advantages.

10. Perception of Quality: Turkish importers often select the cheapest Chinese
products, which are then perceived as low quality by Turkish consumers. This
strategy of maximizing profit margins by importing lower-end products contributes to
the negative perception of Chinese goods in Turkey.
Reasons for India's Rising Attractiveness in Global Manufacturing and
Sourcing over China:

1. Shift in Global Manufacturing Trends

● Disruptions in China: Over the past half-decade, several disruptions such as
trade wars, the pandemic, natural disasters, severe supply bottlenecks, Brexit,
the war in Ukraine, and increasingly assertive industrial policies have
significantly affected China's manufacturing sector. These disruptions have
prompted global businesses to reassess and diversify their supply chains.
● Decline in US Imports from China: From 2018 through 2022, US goods
imports from China declined by 10% in inflation-adjusted terms. This decline
reflects the impact of the aforementioned disruptions and a growing desire
among businesses to reduce dependency on China.

2. Rising US Imports from India

● Significant Increase in Exports: During the same period (2018-2022), India's
exports to the US surged by $23 billion, marking a 44% increase. This
substantial growth highlights India's emerging role as a key supplier to the US
market.
● Sector-Specific Growth: In the mechanical machinery sector, for instance,
US imports from China shrank by 28%, while imports from India increased by
70%. This sector-specific data underscores India's growing competitiveness
and capability in high-value manufacturing.

3. Increased Visibility of Indian Products

● Walmart's Sourcing from India: Walmart, the largest retailer in the US, is
significantly increasing its sourcing from India. This move is part of Walmart's
strategy to diversify its supply chain and reduce dependency on a single
country.
● Diverse Product Categories: Walmart sources a wide range of products from
India, including food, consumables, health and wellness, general merchandise,
apparel, shoes, home textiles, and toys. This diversity in product categories
shows the breadth of India's manufacturing capabilities.

4. Competitive Manufacturing Costs

● Lower Landed Costs: According to Boston Consulting Group (BCG), the
average landed cost of Indian-made goods imported into the US, which
includes factory wages adjusted for productivity, logistics, tariffs, and energy
costs, is 15% lower than if the goods were made in the US. This cost
advantage makes India a more attractive sourcing destination.
● Cost Comparison with China: By contrast, the average US landed cost from
China is only 4% lower than US costs and 21% higher for goods subject to US
 tariffs related to the trade war. This makes Indian goods relatively more
competitive.

5. Wage and Productivity Trends

● Labor Cost Advantage: Wage inflation has outpaced productivity gains in
most regions, but India enjoys an edge on this count. From 2018 through
2022, productivity-adjusted labor costs in India rose by only 18%, compared
to 24% in China.
● Cost-Competitiveness: Despite wage increases, India remains among the
most cost-competitive sources of manufacturing globally. This cost advantage
is critical for businesses looking to optimize their supply chains.

6. Strong Supplier Market Presence

● The 2023 QIMA survey highlights a growing preference for sourcing from
India among American and European businesses. According to the survey,
42% of US- and EU-based respondents named South Asia (including India)
among their top three sourcing partners. India and Vietnam are now viewed as
equally important sourcing partners, with over a quarter of US and EU
respondents naming them among their top three sourcing geographies.

7. Diverse Sector Appeal

● Beyond Textiles: India's appeal as a sourcing partner extends beyond textiles
to sectors like Accessories, Jewelry, and Eyewear, where 45% of businesses
named India among their top three suppliers.
● Other Sectors: India is also a key sourcing destination for Promotional
Products (44%) and Textile and Apparel (40%). This diversification in sector
appeal underscores India's broad manufacturing capabilities.

8. Decreasing Reliance on China

● Long-Term Trend: Western buyers are increasingly decreasing their reliance
on China. The QIMA survey indicates that fewer respondents are naming
China among their top three sourcing partners, reflecting a significant shift in
procurement strategies.
● Procurement Volume Shift: A significant percentage of US (61%) and EU
(58%) respondents reported buying less from China in Q1 2023 compared to
12 months ago. This trend highlights the growing preference for alternative
sourcing destinations like India.
 Red Sea Crisis

In the past few months, global trade has been held back by disruptions at two critical shipping
routes. Attacks on vessels in the Red Sea area reduced traffic through the Suez Canal, the
shortest maritime route between Asia and Europe, through which about 15 percent of global
maritime trade volume normally passes. Instead, several shipping companies diverted their
ships around the Cape of Good Hope. This increased delivery times by 10 days or more on
average, hurting companies with limited inventories.

Before the crisis involving the Red Sea, which connects Asia to Europe via the Suez Canal,
emerged as the heart of global tension, 30 days were usually needed to ship goods from
Chattogram to ports in Europe.

The tension has forced carriers to reroute ships around the Cape of Good Hope in South
Africa, resulting in delays of up to three weeks since they would have to travel an additional
3,500 kilometres, raising operational expenses.

The attacks by the Iran-backed Houthi rebels in Yemen in the Red Sea have diverted much of
the international community’s attention away from preventing piracy, experts say, which has
re-emerged in the region for the first time in almost a decade.
Indian authorities captured 35 Somali pirates from the ship Ruen last week, three months
after it was hijacked off the coast of the East African country. Such piracy incidents have shot
up since November, when the militia in Yemen started increasing attacks on vessels in what
they say was a response to the war in Gaza, with more than 20 pirate hijackings reported in
the Gulf of Aden and Somali Basin over the past five months.
On the other side of the world, a severe drought at the Panama Canal has forced authorities to
impose restrictions that have substantially reduced daily ship crossings since last October,
slowing down maritime trade through another key chokepoint that usually accounts for about
5 percent of global maritime trade.

In recent months, trade has been diverted from the Suez Canal to the Cape of Good Hope,
while less trade has passed through the Panama Canal.
Trade disruption in Europe and Africa

As a result of the Red Sea crisis, countries around the world, including those in Europe, Asia,
and the Americas, are also seeing price increases in a variety of products, from food to
electronics, which ultimately contributes to inflation and impacts consumer spending power.

European Countries: European countries, heavily reliant on the Suez Canal for Asian
imports, are grappling with higher shipping costs and potential goods reception delays,
impacting a broad spectrum of industries from food to manufactured items. Countries in
Northern Europe like Germany, the Netherlands, the UK, Belgium, and France are
particularly vulnerable to these delays and cost increases.

Africa and the Middle East (including Egypt, Sudan, Yemen): These regions are
particularly vulnerable due to their reliance on grain imports of wheat, corn, and rice through
the Red Sea. Countries like Egypt, Sudan, and Yemen, already facing food insecurity, could
see worsening conditions if grain shipments are delayed or become more expensive.

Russia: Crude oil exports to India, transiting through the Suez Canal, are impacted by the
need for longer transit routes, affecting supply dynamics, costs and decreasing trade volumes.
Impact on India:
The ongoing crisis, particularly the disruption in major shipping routes like the Suez Canal,
has had a profound impact on Indian trade, especially with regions like the Middle East,
Africa, and Europe.

1. Dependency on Suez Canal for Trade Routes:

● India's trade, particularly in terms of crude oil imports and overall merchandise trade
with Europe and North Africa, heavily relies on the Suez Canal route.
● Approximately 65% of India's crude oil imports, valued at $105 billion in FY2023,
pass through the Suez Canal, originating from countries like Iraq, Saudi Arabia, and
others.
● For overall merchandise trade with Europe and North Africa, about 50% of imports
and 60% of exports, totaling $113 billion, might have used this route.

2. Impact on Shipping Costs and Delays:

● The crisis has led to increased shipping costs, with estimates ranging from 40% to
60%, due to the need for rerouting cargo through alternative routes.
● Rerouting cargo can result in delays of up to 20 days or more, affecting the timeliness
of deliveries and disrupting supply chains.
 ● Higher shipping costs and delays put additional financial strain on businesses
involved in trade, affecting their profitability and operational efficiency.
● Meeting delivery commitments becomes increasingly challenging, leading to strained
relationships with international buyers who rely on timely deliveries to meet their own
production schedules and customer demands.
● The unpredictability of the supply chain adds uncertainty and risk to the export
process, making it difficult for exporters to plan effectively and allocate resources
efficiently.

3. Higher Insurance Premiums and Security Concerns:

● The crisis has also resulted in higher insurance premiums for shipping cargo through
alternative routes, with increases of 15% to 20% reported.
● Security concerns such as piracy and attacks in alternative shipping routes add to the
risks and costs associated with transporting goods, further impacting trade operations.

4. Impact on Industries with Thin Margins:

● Industries such as textiles and leather, which operate on thin profit margins, are
particularly vulnerable to increased shipping costs.
● The need to renegotiate shipping costs with buyers puts additional pressure on these
industries, impacting their earnings and overall competitiveness in the market.

5. Strain on Working Capital and Bargaining Power:

● The disruptions in shipping schedules and delays in receiving payments from overseas
buyers create a cash flow crunch for exporters, particularly small and medium-sized
enterprises (SMEs).
● SMEs, lacking the financial reserves of larger companies, are forced to explore more
expensive shipping options like air freight to ensure timely delivery of goods, further
straining their working capital.
● Delayed payments exacerbate the cash flow strain, as SMEs may need to cover
operational expenses while awaiting payment from buyers.
● With limited bargaining power, SMEs are often compelled to accept extended
payment terms or offer concessions to maintain relationships with international
buyers, putting additional pressure on their financial resources and profitability.
6. Limited Access to Global Logistics Networks and Supply Chain Transparency:
● SME exporters in India face challenges in accessing alternative shipping routes and
logistics networks, particularly during disruptions in major shipping lanes.
● Limited access to alternative routes and logistics options puts SMEs at a disadvantage
compared to larger exporters, who may have established relationships with multiple
logistics providers and greater flexibility in rerouting cargo.
● The lack of supply chain transparency complicates risk management for SMEs, as
they may struggle to track the movement of goods and anticipate potential disruptions
or delays.
● Without access to real-time information and visibility into the supply chain, SMEs
may find it difficult to proactively address issues and adapt to changing market
conditions, increasing their vulnerability during crises such as the closure of key
shipping lanes.

Solutions for Red Sea Crisis:

1. Technology Solutions for SMEs:

● Insight-based supply chain finance platforms offer innovative solutions to address the
working capital needs of SME exporters.
● These platforms leverage data analytics and risk assessment tools to provide SMEs
with access to working capital support tailored to their specific needs and risk
profiles.
● By gaining insights into the risk profiles of their international buyers, SMEs can make
more informed decisions about extending credit terms and managing cash flow
effectively.
● Furthermore, these platforms facilitate the profiling of Indian exporters, particularly
SMEs, in front of major brands and retailers in key markets like the US and Europe,
creating incremental opportunities for business growth and expansion.

2. Government Support Measures:

● The Indian government has proactively responded to the challenges faced by
exporters during the Red Sea crisis by implementing supportive measures.
● The establishment of a dedicated task force under the Department of Commerce
demonstrates the government's commitment to identifying and resolving non-tariff
barriers that hinder export activities.
 ● By categorizing and developing tailored strategies to address these barriers, the
government aims to streamline export processes and facilitate smoother trade
operations for exporters.
● Financial assistance is being provided through schemes like the Export Credit
Guarantee Corporation (ECGC), which offers insurance coverage against export risks
such as non-payment by overseas buyers or political instability in export markets.
● Collaborative efforts with international partners are underway to address security
concerns in the Red Sea region and encourage shipping companies to resume normal
operations, thereby restoring stability to the global shipping network and reducing
disruptions for Indian exporters.

3. Diversification of Trade Routes:

● Indian firms are exploring alternative ports outside conflict zones, such as Oman and
Djibouti, for transshipment and regional trade. Diversifying trade routes reduces
reliance on vulnerable routes like the Suez Canal and mitigates the risk of disruptions.

4. Government Support and Insurance Schemes:

● The Indian government can offer financial support and insurance schemes to
companies affected by trade disruptions. These measures can help businesses manage
increased costs and mitigate financial losses resulting from delays or security risks.
● Strengthening partnerships with regional players like Saudi Arabia and the UAE can
foster economic cooperation and stability, providing additional support for Indian
firms navigating trade challenges.

5. Negotiation and Adaptation by Indian Firms:

● Indian firms are actively negotiating costs with logistics providers and insurance
companies to minimise the impact of increased shipping costs and insurance
premiums.
● They are also considering alternative ports and routes to ensure the timely delivery of
goods, avoiding disruptions caused by attacks in the Red Sea region.

6. Supply Chain Resilience Strategies:

● To maintain supply continuity and cost efficiency, firms are adopting strategies like
multiple sourcing for less complex components.
● For more complex and critical products, companies are exploring strategic sourcing
options including onshoring (bringing production back to India), nearshoring
 (sourcing from nearby countries), and friendshoring (sourcing from politically stable
and friendly nations). These strategies aim to reduce geopolitical risks and ensure
supply chain resilience in the face of trade disruptions and security threats.

7. IMEC, a key alternative to Suez route to export to Europe:

● India has proposed the development of the India-Middle East-Europe Economic
Corridor (IMEC) and it is facing delays due to the 2023 Israel-Hamas war. Launched
in September 2023, the IMEC was announced at the G20 Summit in New Delhi with
backing from the US, India, European Union, and several Middle Eastern countries. It
comprises rail, road, and sea routes across two main corridors: The East Corridor
links India to the Arabian Gulf. The Northern Corridor connects the Gulf to Europe.
Despite the delays, the IMEC is seen as an initiative that could significantly boost
trade and economic development across three continents when realised.
 Reasons for Manufacturing Shift from China to Vietnam:

1. Vietnam’s Explosive Growth:

● Significant Import Surge: In the past year, U.S. manufacturing imports from
Vietnam have surged, contrasting with a plateau in imports from China. This
shift underscores Vietnam's growing role as a major supplier in the global
supply chain.
● Steady GDP Growth: Vietnam’s GDP has been on a steady upward trajectory
since 2013, indicating robust economic health and an attractive environment
for business investments.
● Export Volume Leadership: Among the top ten Asian exporters, Vietnam
has shown the highest export volume growth since 2015, increasing by 96.4%.
This rapid growth reflects international confidence in Vietnam's ability to meet
high demands.
● "Right-shoring" Trend: The term "right-shoring" refers to businesses
relocating their manufacturing operations to countries that offer the best mix
of cost efficiency and operational effectiveness. Vietnam has become a prime
destination due to its competitive advantages.
● Export Rank: Vietnam ranked as the eighth largest exporter in Asia, with an
impressive $318 billion in export volumes in 2019. This ranking highlights
Vietnam’s significant role in global trade.

2. Lower Cost of Labor:

● Significant Wage Difference: Factory workers in Vietnam earned $2.99 per
hour in 2020, significantly lower than the $6.50 per hour earned by their
counterparts in China. This substantial wage gap makes Vietnam an attractive
alternative for cost-conscious manufacturers.
● Slower Wage Increase: Since 2016, the annual increase in hourly wages has
been more pronounced in China than in Vietnam, further enhancing Vietnam's
appeal for long-term cost savings.
● Cost Savings Impact: While labor costs might constitute around 20% of the
final unit price, the overall cost of manufacturing can be significantly reduced
for products that require high material costs. Savings on labor costs can
accumulate over time, making Vietnam a better investment for manufacturing.

3. Quality Infrastructure

● Heavy National Investment: Vietnam has made substantial investments in

infrastructure to support its growing manufacturing and export sectors, enhancing the
country’s logistics capabilities.
● Major Ports and Airports: The country boasts three major ports in Saigon, Ho Chi
Minh City, and the SSA International Terminal at Cia Mep. Additionally, Vietnam has
four major airports and numerous smaller facilities, ensuring efficient handling of
 both sea and air shipments. This comprehensive infrastructure supports reliable and
timely distribution of goods.

4. Stable Political System

● Significant FDI Attraction: Over the past decade, Vietnam has attracted $143 billion
in foreign direct investment (FDI), with 59% of this investment channeled into the
manufacturing sector, bolstering its economic growth and industrial capacity.
● Economic Reform and Trade Agreements: Vietnam’s commitment to ongoing
economic reforms and the establishment of new free trade agreements has made the
country more attractive to foreign investors and manufacturers.
● Political Stability: Unlike China, which faces political and trade tensions with
various countries, Vietnam offers a stable political environment. This stability is
crucial for businesses looking for long-term, reliable partnerships.

5. Dynamic Workforce
● Young Labor Force: Vietnam’s workforce is notably younger than China’s, with the
median age of workers being seven years younger. This younger demographic is
advantageous for manufacturers looking for a vibrant and adaptable labor force.
● Strong Work Ethic: The Vietnamese labor force is recognized for its strong work
ethic and commitment to quality. This makes them well-suited for high-level technical
assembly tasks, including automotive parts and smart devices.
● Labor Force Size: With 54 million out of 90 million citizens being of working age
(18-60), Vietnam has a substantial and capable labor pool to support diverse
manufacturing needs.

6. Free-Trade Agreements
● Global Trade Participation: Vietnam has actively pursued and signed numerous
bilateral trade agreements, expanding its trade relations beyond the Association of
Southeast Asian Nations (ASEAN) to foster economic growth and integration into the
global economy.

7. Strategic Location
● Geographical Advantage: Vietnam’s location in Southeast Asia provides easy access
to major markets such as China, Japan, South Korea, the European Union, and the
United States.
● Facilitates Trade: This strategic positioning enhances the efficiency of imports and
exports, reducing transit times and costs compared to other countries.
● Competitive Logistics: Proximity to key markets means more cost-effective and
streamlined logistics and supply chain management, crucial for the fast-paced textile
and apparel industry.
● Economic Development: These free trade agreements have played a crucial role in
Vietnam’s economic development, enabling the country to transition from exporting
low-tech manufacturing products to more complex, high-tech goods such as
 electronics, machinery, medical devices, and vehicles. This shift offers international
partners access to a highly skilled yet cost-effective labor force, enhancing Vietnam's
attractiveness as a manufacturing hub.

8. Supportive Manufacturing Environment

● Local Supplier Network: The growth of local suppliers means manufacturers can
source materials and facilities within Vietnam, reducing dependency on imports and
shortening lead times.
● Integrated Supply Chain: The presence of comprehensive logistics and shipping
services helps integrate the supply chain, from raw material sourcing to finished
product distribution, ensuring smooth operations and cost efficiency.
 Vietnam-India relations

India and Vietnam have long standing trade and economic relations which have steadily grown
over a period of time. From a meagre USD 200 million in the year 2000, bilateral trade grew to
USD 15 billion in 2022. According to Indian data during 2022-2023, bilateral trade reached USD
14.70 billion, registering an increase of 3.98%. India exports to Vietnam reached USD 5.91
billion while Indian imports from Vietnam amounted to USD 8.79 billion. According to the
General Department of Vietnam Customs, bilateral trade between India and Vietnam reached
USD 15.04 billion registering an increase of 13.92% in 2022. Exports by India reached USD 7.08
billion growing by 1.95% while imports by India amounted to USD 7.96 billion increasing by
27.20%.

India has a long-standing development partnership with Vietnam that has made positive
contributions towards capacity building and socio-economic development of Vietnam. India has
also been providing assistance to Vietnam within the ASEAN framework. Under the Mekong
Ganga Cooperation (MGC) framework, India has been taking up Quick Impact Projects (QIPs),
each valued at USD 50,000, in different provinces of Vietnam for development of community
infrastructure. With their short gestation period, the QIPs bring direct benefits to communities at
the grassroots level. During the virtual summit between the Prime Minister of India and Vietnam
on 21 December 2020, the number of QIPs projects was increased from 05 to 10 per year to be
implemented annually in Vietnam. So far, since 2017, 46 projects have been sanctioned in 39
provinces of Vietnam out of which 37 have already been completed and 9 are under
implementation.

According to Ashok Juneja, President of the Textile Association (India), garments and
textiles are a key export sector of Vietnam with revenue of up to US$36 billion, nearly
equalling India’s US$38 billion value. However, regarding the export structure, he noted that
India exports US$16 billion of garments and US$22 billion of textile products, while Vietnam
exports up to US$31 billion of garments and only US$5billion of textile items. Therefore, the
two countries have ample space to boost cooperation in this area.

Juneja added that India has a long-standing textile industry, with its strength based on
production from natural fibers such as cotton, jute, silk and wool, to synthetic fibers such as
polyster and nylon. This advantage will be a valuable complement to Vietnam, which heavily
depends on imported raw materials for its garment and textile industry.

When looking at the diplomatic journey of the past two decades, the bilateral trade
relationship between India and Vietnam has grown steadily from US$200 million in 2000 to
US$12.3 billion in the financial year 2019-2020.
 Can India provide raw materials to Vietnam?

India is the 8th largest supplier of T&A products to Vietnam with just a 2% market share. India
exported around US$ 0.36 bn worth of T&A to Vietnam, with a y-o-y decline of around 43% in
2019. Considering the fact that Vietnam imports a significant amount of textile raw material,
India as a large manufacturing base should try to increase its share. India is the largest producer
of cotton in the world, the single largest commodity that Vietnam imports. Additionally, India is
also a large producer of polyester staple fibre, another product that features in Vietnam’s top ten
imports.

Apparel represents approx. 75% of the total exports by Vietnam. It imports most of the cotton
and polyester fibres (raw material for fabric and apparel production) from other countries i.e.,
China, South Korea, Taiwan, Japan and India. Woven fabrics derived from high tenacity
nylon, polyester and other polyamides are also one of the most demanded categories in
Vietnam. India can target these as well.

Vietnam has recently signed a free trade agreement with the EU. The provision of this FTA
along with the low manufacturing costs make Vietnam a cost-effective supplier to the EU.
India can become an important partner to Vietnam by providing essential raw materials for
manufacturing apparel for Europe. Additionally, the recent Xinjiang cotton controversy
enables India to become the largest supplier of cotton to Vietnam.
 Textile & Apparel Trade of India

Reasons for the Downfall in India's Textile Exports

1. Geopolitical Tensions and Economic Uncertainty: Geopolitical tensions, particularly in

regions like the Middle East and Eastern Europe, have created an atmosphere of economic
uncertainty globally. These tensions have a ripple effect on the global economy, impacting
consumer confidence and business sentiment. The resulting cautious approach by consumers
and businesses has led to a decrease in demand for textiles and apparel, ultimately affecting
India's export volumes.

2. Impact of COVID-19 Pandemic: The lingering effects of the COVID-19 pandemic

continue to disrupt global trade patterns and supply chains. While the report does not
explicitly mention the pandemic, its impact cannot be ignored. Lockdowns, restrictions, and
disruptions in manufacturing and logistics have affected the production and export of textiles
from India. Fluctuating demand patterns, changing consumer behavior, and supply chain
bottlenecks have further exacerbated the challenges faced by exporters.

3. Rising Freight Costs: The persisting Red Sea crisis, along with other geopolitical
tensions, has led to a significant increase in freight costs. Sea freight costs have surged by
about 100%, while air freight costs have escalated by up to 200%. These steep increases in
transportation costs have added to the overall expenses of exporting textiles from India.
Higher transportation costs make Indian products less competitive in the global market,
impacting export volumes and profitability.
4. Economic Slowdown in Western Economies: Recessionary trends in some Western
economies, such as parts of Europe and North America, have contributed to a decline in
consumer spending. As consumers prioritize essential purchases over discretionary spending,
demand for textiles and apparel has dwindled. Reduced consumer confidence and economic
uncertainty have dampened import demand for Indian textiles, particularly value-added
garments, leading to a decrease in export volumes.

5. Reduced Demand for Value-added Garments: The textile sector, particularly the
segment encompassing value-added garments, has witnessed a decline in demand from key
markets such as the US and Europe. Customers in these regions are prioritizing basic
necessities over luxury and fashion items. As a result, the demand for high-end and
value-added garments has dwindled, impacting India's export volumes and revenue from the
textile sector.

Data Insights:

● Export Decline: In the fiscal year 2023-24, India's textile exports amounted to $34.4
billion, marking a decline of over $1 billion (3%) compared to the previous fiscal
year. Furthermore, exports witnessed a significant drop of 16.3% compared to the
fiscal year 2021-22, when the country reported exports worth $41 billion.
● Export Composition: Within the textile sector, the segment encompassing cotton
yarn, fabrics, made-ups, and handloom products witnessed a notable year-on-year
increase in exports by $740 million in 2023-24 over the previous year. This increase
was attributed to a surge in cotton yarn exports.
● Export Destinations: North America led total textile exports at $11 billion, followed
by Europe at $10 billion, and West Asia and North African countries at $4 billion.
These regions are key export destinations for Indian textiles and apparel products.
● Sector-specific Decline: In the segment of readymade garments, which accounts for
42% of combined textile exports, there was a 10% decrease in fiscal year 2023-24
compared to the previous year.
● Regional Impact: The textile hub of Tirupur, known for its knitwear, faced a notable
decline in exports from $4 billion in fiscal year 2021-22 to $3 billion in fiscal year
2023-24. Reduced demand for value-added garments in the US and Europe was cited
as a primary reason for this decline.
 Current Landscape of India

1. Large Domestic Market and Wide Range of Consumers

● Market Size: With a population of over 1.4 billion, India offers a vast and diverse
consumer base. This large domestic market provides significant opportunities for
businesses to cater to varied consumer preferences and needs.
● Growing Middle Class: The expanding middle class, projected to reach 580 million
by 2025, increases domestic consumption and drives demand for a wide range of
goods and services.
● Urbanization: Rapid urbanization is creating new markets and increasing the
purchasing power of urban consumers. By 2030, it is expected that 40% of India's
population will live in urban areas, further boosting domestic demand.

2. Abundant, Low-Cost Workforce

● Skilled Labor: India has a substantial pool of skilled labor available at competitive
wages, making it an attractive destination for labor-intensive industries. According to
the Ministry of Skill Development and Entrepreneurship, over 10 million individuals
are trained annually through various skill development programs.
● Lower Unemployment Rate: Compared to Vietnam, India has a lower
unemployment rate, which stands at around 7.8% as of early 2024, according to the
Centre for Monitoring Indian Economy (CMIE). This means that a stable and
available workforce can support industrial growth.
● Young Population: With a median age of 28.4 years, India has one of the youngest
populations globally, ensuring a long-term supply of workforce for its growing
industries.

4. Post-COVID Economic Resilience

● GDP Growth: Post-COVID, India's GDP growth rate has rebounded to around 8%,
one of the highest among major economies, as reported by BBC. This growth reflects
the resilience and recovery of the Indian economy.
● Merchandise Exports: India's merchandise exports have surpassed $400 billion,
driven by strong performance in sectors such as engineering goods, petroleum
products, and chemicals. This achievement underscores India's growing role in global
trade.

Strategies for India

Government Initiatives Boosting the Indian Textile Industry

1. PM MITRA: Pradhan Mantri Mega Integrated Textile Region and Apparel

The PM MITRA scheme is a government initiative dedicated to establishing Mega

Integrated Textile Regions and Apparel Parks across India. Its core focus is to drive
investment, encourage innovation, and catalyze growth within the textile and apparel
industry.

● A distinctive feature of PM MITRA Parks is the collaborative effort between the

Centre and state governments. Together, they strive to create top-notch industrial
infrastructure, fostering sustainable industrialization and innovation.
● Inspired by the Hon'ble Prime Minister's 5F vision – "Farm to Fibre to Factory to
Fashion to Foreign" the scheme expects a comprehensive approach to the entire
textile value chain. The Ministry of Textiles oversees project execution, ensuring
alignment with the 5F framework.
● Each PM MITRA Park is managed by a Special Purpose Vehicle (SPV) jointly
owned by the Centre and State Government. The Ministry of Textiles extends
financial support to the Park SPV and its units through development capital and
competitive incentive support.
● The overarching goal of PM MITRA Parks is to create an integrated textile value
chain. The scheme aims to reduce logistics costs and generate significant direct and
indirect employment opportunities.
● The selection of sites for PM MITRA Parks follows a transparent procedure, with
numerous states expressing interest in hosting these transformative industrial hubs.
● Aligned with the government's initiatives for free trade agreements, PM MITRA
Parks aims to position India as a hard player in the global textile market.
● The scheme is strategically designed to contribute to the United Nations Sustainable
Development Goal 9 by focusing on resilient infrastructure, sustainable
industrialization, and creation.
● With a total outlay of Rs. 4,445 crore, PM MITRA Parks are anticipated to be
established by 2026–27, marking a crucial milestone in India's textile industry
development.

2. Production-Linked Incentive Scheme

The Production-Linked Incentive (PLI) Scheme, a strategic government initiative, aims to

support domestic manufacturing and shorten imports across various sectors, focusing on the
textile industry. Its primary mechanism involves incentivizing companies based on
cumulative sales of domestically manufactured goods.
 ● The textile sector stands to earn greatly from the PLI Scheme, specifically stressing
man-made fiber (MMF) apparel, MMF fabrics, and products within the technical
textiles domain. The overarching goal is to boost India's manufacturing capacity and
support exports.
● The PLI Scheme for Textiles is bifurcated into two parts. Part 1 entails a minimum
investment of INR 3 billion and a minimum turnover requirement of INR 6 billion.
Part 2, on the other hand, involves a minimum investment of INR 1 billion and a
minimum turnover prerequisite of INR 2 billion. This dual-part structure caters to
diverse industry players.
● Sixty-four textile investors have been identified as eligible under the PLI scheme,
each set to receive incentives over five years. This strategic selection aims to promote
upgraded production capacity among textile companies.
● The PLI scheme's core objective is to inspire companies to increase their production
capacities, leading to increased work and expanded employment opportunities within
the dynamic textile sector.
● An approved outlay of INR 10,683 Cr to promote production of MMF Apparel, MMF
Fabrics and Products of Technical Textiles in the country to enable Textiles Industry
to achieve size and scale and to become competitive. Centre has approved 64
applications under the Production Linked Incentive scheme for Textiles. In the
approved 64 applications, the proposed total investment is INR19,798 Cr and
projected turnover of INR 1,93,926 Cr with a proposed employment of 2,45,362. A
total of 12 companies have proposed to set-up projects under the said Scheme in
Madhya Pradesh, 7 companies in Uttar Pradesh and 4 companies in Rajasthan.

3. Samarth Initiative

The Samarth initiative, led by the Ministry of Textiles, Government of India, is a key skill
development program for the textile sector. It serves as a flagship initiative aimed at
enhancing industry skills.

● This scheme, both demand-driven and placement-oriented, covers the entire textile
value chain, excluding spinning and weaving. Its primary goal was to train 10 lakh
individuals skillfully from 2017 to 2020.
● With a significant impact on the textiles and garments industry, employing 45 million
people, Samarth plays an important role in supporting this labor-intensive sector in
India.
● Samarth adopts an all-around approach, targeting both the organized and traditional
sectors. It includes special requirements for upskilling and re-skilling programs and
handling diverse skill development needs.
● The scheme is especially dedicated to uplifting women, with over 85% of its
beneficiaries being women. This focus on gender inclusivity aligns with broader
societal goals.
 ● A remarkable achievement lies in the scheme's organized-sector courses, which boast
a placement rate of over 70%. Underscoring its effectiveness in translating training
into meaningful employment opportunities.
● Implemented through Implementing Partners (IPs), the scheme works with a strategic
vision, aiming to create a skilled workforce, improve job creation, and promote the
overall growth and competitiveness of the Indian textile industry.
● Samarth is operational until March 2024, marking a notable stride towards capacity
building and skill development in the textile sector. Its enduring impact extends
beyond mere training, contributing to the industry's sustainable growth.

4. National Technical Textiles Mission (NTTM)

Created in 2020, the National Technical Textiles Mission (NTTM) unfolds over four years,
focusing on improving technical education, promoting research and innovation, promoting
market growth, and simplifying objectives.

● Prioritizing technical education at engineering and technology levels, the mission

aims to build expertise in technical textiles and their applications.
● Dedicated to groundbreaking research on fibers and applications, including geo, agro,
medical, sports, and mobile textiles. Additionally, it highlights the development of
biodegradable technical textiles and indigenous machinery.
● Focused on expanding the global market for Indian technical textiles and handling the
domestic market's low penetration rate (5–10%). A key aspect is the promotion of
exports to improve India's global market share.
● Simplifying mission goals into four components provides a clear and focused
approach, aiming for effective implementation and impact.

5. PM Gati Shakti Initiative

● Launched with a $1.2 trillion investment, this mega-infrastructure project aims to

improve multi-modal connectivity and logistics efficiency across the country. The
initiative focuses on integrating various modes of transport, including roads, railways,
ports, and airports, to streamline supply chains and reduce logistics costs.
● By enhancing infrastructure, the PM Gati Shakti initiative aims to attract
manufacturing units from China, positioning India as a competitive alternative for
global manufacturing. This aligns with the government's goal to increase the
manufacturing sector's contribution to GDP from 17% to 25% by 2025.

6. IndiaTex

● The IndiaTex project, a four-year initiative by the United Nations Environment

Programme (UNEP), aims to revolutionize the Indian textile sector by promoting
circular and sustainable business practices. The project focuses on transforming
 traditional linear production methods into circular models that prioritize resource
efficiency and waste minimization.
● Key objectives include introducing innovative business practices, developing
economic models for sustainability, building capacity among stakeholders, advocating
for supportive policies, leveraging advanced technologies, and raising consumer
awareness. Through these efforts, IndiaTex seeks to address environmental and
socio-economic challenges, fostering a resilient and adaptable textile industry in
India.

Trade Agreements:

ASEAN-India Free Trade Area (AIFTA)

The ASEAN-India Free Trade Area (AIFTA) has significantly benefited India since its
establishment in 2009. By reducing tariffs and trade barriers, AIFTA has boosted India's
exports, particularly in pharmaceuticals, textiles, machinery, and IT services, while also
providing access to competitively priced imports from ASEAN countries. This has diversified
India's trade portfolio and reduced production costs for manufacturers. Increased foreign
direct investment (FDI) from ASEAN has spurred economic growth, job creation, and
technology transfer, enhancing India's industrial productivity and workforce skills. The
agreement has also strengthened India's regional ties and strategic positioning, supporting its
"Act East" policy. Overall, AIFTA has improved India's competitiveness, economic
resilience, and consumer choice, contributing to a more robust and diversified economy.

Asia Pacific Trade Agreement (APTA)

The Asia Pacific Trade Agreement (APTA), also known as the Bangkok Agreement, includes
Bangladesh, India, Laos, China, Mongolia, South Korea, and Sri Lanka. Established with the
key objective of hastening economic development among participating countries, APTA
focuses on trade and investment liberalization covering merchandise goods and services. The
agreement aims to boost intra-regional trade and strengthen economic ties by reducing tariffs
and other barriers, thereby promoting greater economic integration and cooperation among
member countries.

India-Japan Comprehensive Economic Partnership Agreement (CEPA)

The India-Japan Comprehensive Economic Partnership Agreement (CEPA) is designed to

remove duties on nearly 90 percent of products traded between the two countries. Sectors that
have particularly benefited from this reduction in duties include textiles, pharmaceuticals,
agricultural products, tea, petrochemical and chemical products, cement, and jewelry. This
agreement not only enhances trade volumes but also deepens economic ties by facilitating
greater market access and fostering economic cooperation in various sectors.

India-Republic of Korea Comprehensive Economic Partnership Agreement

The India-Republic of Korea Comprehensive Economic Partnership Agreement reduces

tariffs on 17 Indian products exported to South Korea and 11 South Korean items imported
into India. Additionally, it eases restrictions on foreign direct investments, providing
improved access for Indian service industries such as IT, engineering, and finance in the
South Korean market. This agreement fosters closer economic collaboration and enhances
bilateral trade and investment flows.

India-Singapore Comprehensive Economic Partnership Agreement

Under the India-Singapore Comprehensive Economic Partnership Agreement, both countries

have significantly reduced or eliminated tariffs on a variety of items. The agreement also
addresses non-tariff barriers, double taxation, and duplicate regulatory processes, ensuring
smoother trade operations and greater market access. It enhances collaboration between
financial institutions of Singapore and India, promoting seamless trade and investment
activities between the two nations.

South Asian Free Trade Area (SAFTA)

The South Asian Free Trade Area (SAFTA) aims to reduce customs duties on all traded
goods to zero, promoting economic integration among South Asian countries. SAFTA
categorizes Bangladesh, Bhutan, Maldives, and Nepal as Least Developed Contracting States
(LDCs) and India, Pakistan, and Sri Lanka as Non-Least Developed Contracting States
(NLDCs). The agreement outlines a phased tariff liberalization program, under which
NLDCs will reduce tariffs to 20% in two years and further to 0-5% in five years, while LDCs
will reduce tariffs to 30% in two years and to 0-5% in eight years. This phased approach aims
to accommodate the economic capacities of different member states, fostering regional trade
growth.

India-UAE Comprehensive Economic Partnership Agreement (CEPA)

The India-UAE Comprehensive Economic Partnership Agreement (CEPA) is expected to

benefit about US$26 billion worth of Indian products that previously faced a 5% import duty
in the UAE. The UAE offers to eliminate duties on 97% of its tariff lines, covering 99% of
imports from India. This agreement is particularly advantageous for labor-intensive sectors
such as gems and jewelry, textiles, leather, footwear, sports goods, plastics, furniture,
agricultural and wood products, engineering products, pharmaceuticals, medical devices, and
automobiles. Additionally, the UAE can serve as a hub for sourcing Indian capital goods and
intermediates for value-added exports to Africa and Europe. The CEPA also includes a
unique annex on pharmaceuticals, ensuring expedited registration and marketing
authorization for Indian pharmaceutical products.

India-Australia CEPA

The India-Australia Economic Cooperation and Trade Agreement (ECTA), ratified by

Australia’s parliament, eliminates duties on 100% of Australian tariff lines, covering sectors
like meat, wool, cotton, seafood, nuts, and avocados. India will remove tariffs on 90% of
Australian goods exports, facilitating trade in various sectors. The agreement is expected to
create around one million jobs in India, boosting industries such as textiles, apparel, select
agricultural and fish products, leather, footwear, furniture, sports goods, jewelry, machinery,
electrical goods, and railway wagons. Enhanced trade liberalization and market access are set
to benefit exporters, businesses, workers, and consumers in both countries.
 Strategic Initiatives to Enhance India's Competitiveness

1. Diversification of Export Markets

- Target Emerging Markets: Beyond the USA and EU, India should focus on
expanding into emerging markets in Africa, Latin America, and the Middle East.
These regions are experiencing economic growth and increased consumer spending
on apparel. According to the World Bank, Sub-Saharan Africa's GDP is projected to
grow at 3.3% in 2024, indicating increasing purchasing power.
- Strategic Trade Agreements: Leverage existing and future trade agreements with
countries like the UAE and Australia to gain preferential access and reduce tariffs. For
instance, the Comprehensive Economic Partnership Agreement (CEPA) between India
and the UAE, signed in 2022, aims to boost bilateral trade to $100 billion within five
years.
- Market Research and Development: Invest in market research to understand the
unique preferences and trends in various markets. Tailor marketing strategies and
product lines to suit regional demands. For example, focusing on lightweight and
breathable fabrics for tropical climates.

2. Strengthening Infrastructure and Technology

- Modernize Production Facilities: Invest in state-of-the-art manufacturing facilities

with advanced technologies such as automation, robotics, and digital textile printing.
A report by McKinsey estimates that digital technologies can reduce production costs
by up to 20% and increase productivity by 30-40%.
 - Quality Control Labs: Establish world-class quality control labs across key garment
clusters. These labs should offer comprehensive testing services to ensure compliance
with international standards, thereby enhancing the reputation of Indian apparel. The
Apparel Export Promotion Council (AEPC) can play a key role in setting up these
facilities.
- Sustainable Practices: Develop infrastructure that supports sustainable
manufacturing practices. This includes waste management systems, energy-efficient
processes, and water conservation technologies. According to the International
Labour Organization (ILO), sustainable practices can lead to cost savings of up to
20%.

3. Enhancing the Man-made Fibre (MMF) Sector

- Boost MMF Production: Implement policies and incentives to increase the

production of MMF. This includes tax benefits, subsidies for setting up MMF plants,
and support for R&D in MMF technologies. The global MMF market is expected to
reach $146.5 billion by 2026, growing at a CAGR of 5.5%.
- Product Linked Incentive (PLI) Scheme: Expand the PLI scheme to include
incentives specifically for MMF-based apparel production. This will encourage
manufacturers to diversify their product lines and meet the global demand for
synthetic garments. The PLI scheme for textiles, announced in 2021, has already
allocated $1.42 billion to boost MMF and technical textiles.
- Collaboration with Global Brands: Partner with international brands and designers
to develop and market high-quality MMF apparel. These collaborations can help in
understanding global trends and requirements better.

4. Improving the Weaving and Processing Sectors

- Scale and Modernize Units: Encourage the establishment of large-scale weaving and
processing units equipped with the latest technology. This can be facilitated through
financial incentives, low-interest loans, and public-private partnerships. China's textile
industry, which heavily invests in technology, processed over 90 billion meters of
cloth in 2021, highlighting the importance of scale.
- Training and Skill Development: Invest in training programs for workers in
weaving and processing to enhance their skills and productivity. This includes
technical training, quality management, and modern production techniques. The
National Skill Development Corporation (NSDC) can facilitate these programs.
- Zero-Liquid Discharge (ZLD) Compliance: Provide financial and technical support
to smaller units to help them comply with environmental standards like ZLD. This
will improve the overall environmental footprint of the industry and enhance global
competitiveness.

5. Adopting Fast Fashion Industry (FFI) Practices

 - Increase FFI Compliant Units: Support the expansion of FFI-compliant factories.
This involves upgrading existing units with modern machinery, enhancing workforce
skills, and ensuring compliance with international labor and production standards. FFI
giants like Zara and H&M source from countries that can meet rapid turnaround
times.
- Efficiency Metrics: Implement industry-wide standards such as Standard Allowed
Minute (SAM) to measure and improve production efficiency. Provide training and
tools to manufacturers to meet these benchmarks. Factories meeting SAM
requirements can reduce production time by 20-30%.
- Speed to Market: Develop a robust logistics network to ensure quick turnaround
times from order to delivery. This includes improving transportation infrastructure,
streamlining customs processes, and adopting digital supply chain management
systems.

6. Simplifying Fabric Supplies and Imports:

- Facilitate Import of Synthetic Fabrics: Simplify customs procedures and reduce

import duties on synthetic fabrics and fibers. This will ensure a steady supply of raw
materials necessary for the production of synthetic garments. For instance, reducing
import duties from the current average of 10% to 5% could make sourcing more
cost-effective.
- Promote Domestic Production: Invest in the domestic production of high-quality
synthetic fabrics. This involves setting up new manufacturing units and upgrading
existing ones to meet global standards. India's synthetic fiber production stood at 6.2
million tons in 2020, which can be significantly increased.

8. Improving Contract Enforcement

- Strengthen Legal Framework: Enhance the legal framework to ensure swift and fair
enforcement of contracts. This includes setting up specialized fast-track courts for
commercial disputes and improving the arbitration process. According to the World
Bank, improving contract enforcement can increase investment by up to 14%.
- Build Trust in Local Markets: Develop a robust system of intermediaries such as
buying and sourcing agents who can bridge the gap between international buyers and
local manufacturers. This system should be backed by strong legal protections and
dispute resolution mechanisms.

9. Emphasizing Sustainable and Ethical Production

- Sustainability Initiatives: Encourage manufacturers to adopt sustainable practices,

such as using eco-friendly materials, reducing carbon footprints, and implementing
fair labor practices. This can be supported through certification programs and
government incentives. The global market for sustainable apparel is expected to grow
at a CAGR of 9.7% from 2021 to 2026.
 - Consumer Awareness Campaigns: Launch campaigns to raise awareness among
consumers about the benefits of sustainable and ethically produced apparel. This can
help build a market for high-quality Indian garments.

10. Promoting Innovation and Design

- Design Innovation Hubs: Establish innovation hubs that focus on the latest trends in
fashion, design, and technology. These hubs can collaborate with fashion institutes,
designers, and tech companies to drive innovation. The Fashion Design Council of
India (FDCI) can play a pivotal role in this.
- Support for Startups: Provide funding and incubation support for startups in the
apparel sector that are working on innovative products and processes. This will foster
a culture of innovation and entrepreneurship. Government schemes like Startup India
can be leveraged to support these initiatives.

Data Insights

- Global Market Trends: According to the World Trade Organization (WTO), the
global textiles and apparel trade was valued at $871 billion in 2021, with apparel
accounting for over 60% of the trade. India's share was approximately 4%,
highlighting the potential for growth.
- Export Growth Potential: The global apparel market is expected to grow at a CAGR
of 5.1% from 2021 to 2026, reaching a value of $1.8 trillion by 2026. India can
capitalize on this growth by enhancing its production capabilities and market reach.
- Cost Competitiveness: Boston Consulting Group (BCG) reports that the average
landed cost of Indian-made goods imported into the US is 15% lower than US-made
goods. This cost advantage can be leveraged to increase market share in
price-sensitive segments.
 Conclusion
In summary, the global apparel sourcing landscape is experiencing notable transformations
driven by various factors such as rising labor costs, geopolitical tensions, and evolving
consumer preferences. While the Asia Pacific region remains central to textile and apparel
production, there's a discernible shift towards diversification in the sourcing base, with
countries like Bangladesh, Vietnam, and India gaining prominence alongside traditional
leaders like China. Additionally, emerging markets in Africa and Southeast Asia are
attracting attention as viable sourcing destinations. Sustainability and ethical sourcing have
become critical considerations, influencing sourcing decisions and supply chain practices.
Geopolitical tensions, particularly between the US and China, are prompting companies to
explore alternative markets and diversify supply chains.

Major fashion brands are diversifying their sourcing strategies to mitigate risks and enhance
resilience, with India emerging as a key beneficiary due to its competitive manufacturing
costs and diverse sector appeal. Geopolitical uncertainties and trade dynamics continue to
shape sourcing decisions, prompting companies to explore alternative markets. India's
growing prominence underscores the need for agility and strategic partnerships in navigating
the evolving global sourcing landscape.

India's competitiveness in the global apparel market can be significantly enhanced through a
comprehensive strategy encompassing various strategic initiatives. Diversifying export
markets to emerging regions like Africa and Latin America, leveraging strategic trade
agreements, and tailoring products to regional preferences are crucial steps. Strengthening
infrastructure and technology, particularly through modernizing production facilities,
establishing quality control labs, and adopting sustainable practices, will improve efficiency
and compliance with international standards. Furthermore, boosting the man-made fibre
(MMF) sector, enhancing weaving and processing capabilities, and adopting fast fashion
industry practices will enable India to meet global demands effectively. Simplifying fabric
supplies, promoting sustainable and ethical production, and fostering innovation and design
will further solidify India's position as a key player in the global apparel industry. By
implementing these initiatives, India can not only increase its market share but also contribute
to sustainable economic growth and development.
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