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Could India be the New China for Textiles?

There has been much debate about China’s dominance in textiles and whether it will endure or dwindle, but in the interim, India is working to position itself as a possible successor to the Asian powerhouse.

At present, India’s textile mill consumption is just 23 percent of China’s, its manmade fiber production 13 percent and its own textile and apparel export activity in 2015 comes in at 14 percent that of China’s, according to a November report from PCI Fibres.

But the relative trajectory of these two textile economies could change in coming years.

China’s working age population, for one, has been contracting by 3 million a year since 2013 and analysts don’t expect the recent removal of its one child policy to suddenly move masses of Chinese women to forgo working in favor of motherhood.

India’s working population, on the other hand, is expected to increase 13 percent to 888 million by 2025.

“There are two routes for India to play catch-up with China—by increased net export activity and/or by increased domestic consumption,” the report noted.

China presently commands 35 percent of global textile and apparel export value, and though India comes in second with 5 percent share, the gap between the two is sizable.

“Despite the -20 percent devaluation of the rupee against the U.S. dollar since January 2013 (vs. China’s -2 percent), India’s net textile and apparel export volume growth has been disappointing at just 7 percent,” PCI noted. “And despite China’s higher average wage rates, customs data indicate that Indian exports of key apparel and household textile products to the U.S. remain 25-35 percent more expensive than China’s over the period 2013 to 2015, with no statistical evidence of any competitive re-positioning by India.”

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When it comes to capitalizing on domestic demand, India’s domestic fiber consumption is 5.9 kilograms per capita to China’s 14.6 kilograms per capita. China has increased its consumption by 6.3 kgs/capita in the last 15 years, while India only saw a 2.5 kg upturn. PCI expects both countries to double their GDP per capita before 2020, but China’s absolute increase will be more than double that of India’s.

India’s abundant anti-dumping duties (224 were in place from mid-2014 to mid-2015 compared to China’s 101) and its generally higher standard duties than China have also proved a hit to the country’s competitiveness.

“None of the above suggests any significant shift in competitive advantage in India’s favor. China is heavily reinforcing its manufacturing technology and is driving hard for added value,” the report noted, with researchers adding that, “India itself does not currently command the strength and depth of these integrated Chinese supply chains.”

If India is to realize its full potential, according to PCI, it will have to do three things: move beyond jobs-rich, small-scale enterprises, which has hindered large-scale manufacturing; address the shortage of managerial and technical know-how to run global scale, world-class production systems; and focus on manmade fiber development.

“India will achieve significant growth in textile production and fiber consumption and will become a larger presence on the global stage,” PCI noted in its report. “But predictions of India replacing China in the short-term are, in our view, a little premature.”