India has a deep-rooted tradition in textiles and apparel (T&A). The sector employs 45 million people and contributes 2.3 per cent to overall GDP. But its share in global trade remains low at 4.2 per cent, a mere $37.8 billion out of $897.8 billion.
A closer look at the apparel segment alone (under HS codes 61 and 62) shows that India’s share in global trade is even lower, at 3 per cent — $15.7 billion out of $529.3 billion. More disturbing is the fact that this share has remained stagnant for the past two decades.
Despite these modest numbers, India has set a target of $40 billion in apparel exports by 2030. But in the last few years, apparel exports have declined at an AAGR of –2 per cent. If we had sustained the stronger AAGR of 8.5 per cent (2004-2017), we would reach $31 billion by 2030. And an AAGR of 8.5 per cent (2004-2023) suggests exports to reach $21 billion by 2030. These numbers make it clear that without a significant shift in policy and strategy, the $40-billion goal will remain a pipe dream.
Our research points to a fundamental constraint — India’s lack of scale. Put simply, we are too many, too small, and too dispersed. Over 80 per cent of India’s apparel units are Micro, Small and Medium Enterprises (MSMEs). China and Vietnam have built large-scale and export-oriented factories backed by integrated production systems. Even Bangladesh has found a way to either scale up or have single-window “buying houses” that take large orders and then get executed from various factories. The large scale helps them attract global buyers who demand volume. Scale also drives down unit costs, shortens delivery timelines, and generates mass formal employment. For a country like India with a young population, the garment industry offers a wonderful opportunity to expand employment and grab a larger share of the global market. A worker can be trained to operate a sewing machine in just 60 days.
While the overall garment manufacturing sector remains fragmented, there is a silver lining that shows what scale can achieve. In this context, the most powerful example is that of Shahi Exports. Founded by Sarla Ahuja in 1974, it began as a stitching unit with just a 15-women team, producing 200 pieces a day. But today, it is India’s largest apparel exporter, operating over 50 factories, and three processing mills across eight states, and employing more than 1,00,000 workers, 70 per cent of them women. With over a billion dollars in annual revenue, Shahi Exports is well known as “Sarla’s garment miracle”. What sets Shahi Exports apart is not just its scale, but how it got there: It evolved over 50 years, with a focus on professionalising operations, investing in vertical integration (with 80 per cent of the fabric produced in-house), and building an enterprise that treats profits and its people as complementary, emphasising women’s employment and environmental sustainability. It is living proof that Indian firms can scale up and succeed. But it was an organic evolution over 50 years. If we have to revolutionise this sector and create 10 more Shahi-type enterprises in the next 10 years, we need out-of-box policies. Only then we can hope to increase our market share in the global trade of apparel.
To translate ambition into reality, India needs bold reforms enabling scale.
First, capital must be made accessible and affordable for scale-focused investments. A structured capital subsidy of 25-30 per cent, linked to the size of the unit, can provide the initial push. This could be targeted at enterprises meeting a minimum threshold of, say, 1,000 machines (as per the draft PLI 2.0 scheme), to ensure viability and scale. A five to seven-year tax holiday for units would allow investments to mature and become globally competitive. India’s cost of capital remains high, averaging 9 per cent compared to 3-3.5 per cent in China and starting from 4.5 per cent in Vietnam. In a sector where margins are razor-thin (typically 4-5 per cent), such incentives are critical for gaining competitiveness.
Second, India’s 52 central labour laws have created rigidities, discouraging formal hiring and scale. They need flexibility. Overtime payments are mandated at two times the hourly wage, compared to the ILO standard of 1.25 times, adding to cost pressures. Labour accounts for around 30 per cent of garment production costs. A bold idea could be to link MGNREGA funds (say 25-30 per cent) to subsidise labour costs in garment units. This could make labour-intensive units more competitive while generating productive employment on a sustainable basis. Schemes like SAMARTH should be significantly scaled up to provide short-cycle, demand-linked skilling, especially for women. India’s low female labour force participation and high youth unemployment demand job creation, not just income transfers.
Third, at least two of the seven PM MITRA parks should be designated as garment-focused hubs, particularly in states like Uttar Pradesh and Madhya Pradesh, where labour costs are lower and worker migration to southern garment hubs is high. Bringing manufacturing closer to the workforce can reduce costs, boost underdeveloped regions, and build more inclusive industrialisation.
Finally, India must rethink its incentive architecture. What the garment sector needs is an Export-Linked Incentive (ELI) rather than just a Production-Linked Incentive (PLI). Schemes that reward firms not just for producing more, but for competing and winning in global markets.
The garment industry deserves focused policy attention because it sits at the intersection of mass employment and maximum value addition. Success in this segment doesn’t just lift export numbers, but it creates demand that pulls up the entire textile value chain, from cotton to logistics. However, to realise this potential, India must move beyond business as usual. The global marketplace will not wait for India to get its act together. If we are to build 10 Shahi Exports in the next 10 years, rather than waiting for 50 years, we need policies that are bold in design and swift in execution. We hope our policymakers can rise to this challenge.
Gulati is distinguished professor and Gupta is research associate at ICRIER. Views are personal
