China's declining competitiveness in the global market set to boost India's apparel sector

Indian retail market poised for double growth to $1 trillion by 2020.

The export demand for Indian apparel is expected to moderate amidst domestic and global uncertainties, but given the continuous efforts by the Government of India in response to the increasing competition from Vietnam and Bangladesh, India is in a sweet spot to increase its market share in world apparel trade, said CARE Ratings.

The positive outlook is also bolstered by the apparent declining competitiveness of China which is the largest apparel exporter in the world.

Here's more from CARE Ratings:

During recent years, China has seen a sustained rise in its wage costs, which may lead to potential increase in its apparel prices. As a result, China is shifting its production base to higher value-added industries like electronics and curtailing low value-added production like textile and apparel. This presents a huge opportunity for south Asian countries including India to increase their share of exports.

As per the recent study conducted by World bank, a 10% increase in Chinese export prices would result in the United States increasing its imports from India by 14.62% and from Bangladesh by 13.58%.  Countries such as Vietnam and Cambodia would benefit even more where exports would increase by 37.71% and 51.25%, respectively.

With expected reduction in China’s cost competitiveness and reduced focus on textiles, India has the chance of increasing its share in global apparel exports. Although India is expected to gain market share, Southeast Asian countries like Cambodia, Indonesia and Vietnam are expected to benefit more in overall export performance.

Traditionally, India is a net exporter of cotton yarn accounting for 30-35% of the production, which can be diverted for the production of cotton-based apparels leading to more value creation within the country.

With Government’s continued thrust on export of value-added products like garments, it provides an opportunity for Indian textile industry to increase its share of garment exports. This would also provide higher foreign exchange earnings and create higher employment

The growth in the organized retail market in India has led to increase in the sale of Branded apparel in the domestic market. The organized retail apparel market is growing rapidly due to increased consumer spending, high brand consciousness, rising income and purchasing power, increasing number of dual income nuclear families, changing lifestyle and consumer behavior. Organized retail in India is the most dynamic industry and represents a huge opportunity for domestic markets.

As per the report published by the World Bank, the apparel produced domestically is sizeable and growing, particularly for large Asian economies such as China and India. Bangladesh and Vietnam are strong performers in terms of export growth, yet neither has a formal retail apparel industry. As per the data published by World Bank in its report, ‘Stitches to Riches’ in March 2016, the apparel retail market in these two countries combined is less than $3 billion, whereas India’s market is valued at $40 billion, which is almost entirely produced within the country. If production for the domestic and export markets are combined, India’s value jumps to $57 billion, compared with $24 and $20 billion in Bangladesh and Vietnam, respectively.