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India’s textiles and apparel (T&A) sector is one of its oldest and most employment-intensive industries, contributing 2.3% to GDP and employing over 45 million people, making it the second-largest employer after agriculture. Despite this, India’s share in global apparel trade has remained stagnant at around 3% for two decades—far below its potential. With global apparel trade at $529.3 billion, India’s contribution stands at just $15.7 billion, and the ambitious target of $40 billion in exports by 2030 remains distant unless bold structural reforms are initiated.

Structural Challenges

The fragmentation of the industry is a major bottleneck. Over 80% of apparel units are MSMEs, operating with limited scale, informal labour, and poor integration. In contrast, countries like China, Vietnam, and Bangladesh have achieved scale by setting up large, export-oriented factories or coordinated "buying houses" to pool capacity.

India’s cost of capital (≈9%) also hampers competitiveness, compared to 3–4.5% in China and Vietnam. Further, rigid labour laws, such as mandatory 2x overtime pay, discourage formal employment. Supply chains are dispersed, increasing delivery timelines and logistics costs. These issues are compounded by low female labour force participation, despite women comprising 70% of the workforce in leading apparel hubs.

Success Story: Shahi Exports

The example of Shahi Exports illustrates what is achievable with scale, professionalism, and inclusive practices. From a 15-member unit in 1974, it has evolved into India’s largest apparel exporter, employing over 100,000 workers (70% women) across 50+ factories in 8 states, with over $1 billion in revenue. It shows that Indian firms can scale and compete globally, but organic growth alone is too slow to meet national export goals.

Policy Reforms: A Way Forward

To unlock the sector’s full potential, transformative policy measures are required:

• Capital Access for Scale: A 25–30% capital subsidy and a 5–7 year tax holiday for units with 1,000+ machines would help achieve viable scale. Linking incentives to size, as proposed under PLI 2.0, is essential.
• Flexible Labour Norms: Labour reforms, such as rationalising overtime pay to 1.25x (ILO standard), and easing compliance can encourage formal hiring. Linking MGNREGA funds (25–30%) to wage subsidies in garment units can promote productive, formal employment.
• Skilling for Demand: Schemes like SAMARTH should be expanded for short-cycle, demand-driven training, especially for women and youth, to bridge the skills gap in the sector.
• Cluster-Based Development: At least two PM MITRA Parks should be designated as garment hubs in labour-abundant, low-cost states like Uttar Pradesh and Madhya Pradesh to reduce migration, cut costs, and promote inclusive industrialisation.
• Export-Linked Incentives (ELI): Shift from production-linked to export-linked schemes that reward global competitiveness, not just output.

Conclusion

The apparel sector offers a rare opportunity to generate mass employment, promote inclusive growth, and boost exports. But without scale, reforms, and a strategic policy shift, the $40 billion export dream will remain elusive. India must act swiftly to replicate success stories like Shahi Exports, not over decades, but within years. The time for bold policy innovation is now.