02 October 2018

GARMENT SECTOR: INDIA

India is the 2nd largest producer of textiles and garments in the world, and has approx. 5% share in the global trade.

OVERVIEW OF THE GARMENT INDUSTRY:

India is the 2nd largest producer of textiles and garments in the world, and has approx. 5% share in the global trade. The Indian textile industry is estimated to be €53 billion in size with garments and apparels constituting a significant portion of the same. The garment industry accounts for 14% of industrial production, which is 4.6% of GDP and employs around 45 million people. India is witnessing a spurt in demand from the big foreign Fashion retailers for various apparels/garments. 

Ready-made garments (RMG) exports from India stood at €14.3 billion in FY2017-18. Some of the global fashion retailers present or sourcing from India are Carrefour, J C Penny, Auchan, Metro, GAP, Tommy Hilfiger, Marks&Spencer, Tesco, Nike, Reebok, Children’s Place, Sears Roebuck, Levi Strauss, Sara Lee, Otto, H&M, Banana Republic, Federated-Macy’s, Wal-Mart, IKEA, K-Mart, Target et al. 

 

 

HIGHLIGHTS:

Apparels account for 60% of the total exports.

Readymade garments are the largest contributor to total textile and apparel exports from India in FY15 the            segment had a share of 41%

India’s share in global trade: 4% in textiles and 2.8% in clothing

India’s rank in world trade: 7th in textiles and 6th in clothing

Share in the country’s total exports basket: 13%

Readymade garments share: nearly 45% of total textile exports

India’s textiles products are exported to over 100 countries

 

TOP 10 EXPORT DESTINATIONS FOR GARMENTS FROM INDIA:

Two-third of India’s textiles are exported to the US and EU.

 

 

COST & OTHER ADVANTAGES:

Low Labor cost along with abundant availability of raw materials such as cotton, wool, silk and jute have made the country a global sourcing hub. And in parallel the rising labor costs are prompting several global retailers to move part of their sourcing from China to India and other South Asian countries, like Sri Lanka, Bangladesh, Vietnam, Pakistan, Thailand and Indonesia.

 Source: PRI

 

Though workers safety issues in countries like Bangladesh have pushed global giants to rethink and improvise LCC sourcing network however India is considered relatively up in term process and systems.

 

MAJOR TEXTILE & APPAREL REGIONS OF INDIA:

 

SOURCING CHANNELS:

Till last few years many of the global players just had third-party buying offices in India but now they are setting up closely-held sourcing and buying offices. There are mainly three sourcing channels used by retailers for sourcing from India and neighboring countries:

-  Export Houses 

-  IPO (own purchasing offices) and 

-  Sourcing companies

  

COST DRIVERS:

The below calculations will give a rough idea about the “Value Chain analysis” on % basis: 

1.  Basic raw materials i.e. Grey Fabric ~ 20 to 40% (of sale price of products) 
2.  Labor cost ~ 5% to 15% 
3.  Processing charges (i.e. Bleach or dyeing or printing) ~ 10 to 15% 
4.  Cutting and fabrication ~10 to 15% 
5.  Fittings and Accessories ~ 10% to 15% 
6.  Finishing and Packaging ~ 5 % 
7.  Other Charges ~ 5 % 
8.  Gross Margin ~ 5 to 15% 
9.  Embroidery and Handwork (if needed) ~ 25% (extra on nominal sale price)

Source: Ayming Internal 

 

Net profit is lower after adjusting the expenses for establishment, electricity, transportation, depreciation etc.  And as per one study, the International brands on an average make ~ 43%  retail mark-up by sourcing from LCC like India and Bangladesh.

 

SWOT ANALYSIS OF THE INDIAN GARMENT SECTOR: