India's textile industry faces tough times as consumers cut spending

Textile exports fall for five months in row

India's $200 billion textile and apparel industry is facing a crisis as consumers in the United States, Europe and other big markets have cut spending on clothing following a surge in inflation after the war in Ukraine, industry officials said.

While the overall economy is relatively strong and is outperforming major economies, the textile sector is a notable exception and orders suggest the downturn will continue well into 2023, raising the risk of layoffs in an industry that employs more than 45 million people.

Exports, which constitute about 22% of the industry, have fallen for five months in a row - declining over 15% year-on-year in November to $3.1 billion. Domestic sales are sluggish despite strong growth in the overall economy because of high costs and cheap imported garments, manufacturers said.

After bumper sales earlier this year, local textile factories are now cutting production - contributing to a 4.3% contraction in manufacturing output in the July-September quarter that has raised concerns among policymakers.

The shock comes as Prime Minister Narendra Modi's government struggles to create employment for millions of youngsters entering the job market each year.

After 18 months of robust growth through mid-2022, global retail sales of clothing have been dragged down by high inflation and depressed consumer sentiment, and prospects for 2023 look gloomy, a McKinsey report said last month.

In India, the manufacturing sector, contributing 16% of GDP, has been hit by rising raw material costs and weak demand, despite bright growth elsewhere. Manufacturing showed no signs of growth in the first half of the current April-March fiscal year while the overall economy, helped by agriculture and services, expanded 6.3%.