India’s Denim Fabric & Garment Exports - 2022

During the past 2 decades, the capacity build-up in the Indian Denim Industry has been phenomenal. This has led to a situation of excess denim capacity. India’s installed capacity for manufacturing Denim Fabrics is estimated at 1.75 billion meters as of December 2022.

There is an increased demand for stretch fabrics, at the same time the fabrics have become lighter and denser. This requires inserting more ‘picks’ in the fabric, leading to loss in linear production length of the fabric. Assuming 14% reduction in output meters, the industry capacity of 1.75 billion standard meters gets reduced to roughly 1.50 billion actual meters per annum.

The Export of Denim fabrics from India is valued at roughly US$ 500 Million. Assuming an average price of $ 2.50 per meter, this would mean India exports approximately 200 million meters per annum.

Since there is no authentic / government data available for domestic sales in India, let try to derive the domestic sales for Denim.

Assuming a full capacity utilization and after deducting 200 million meters of exports, the industry should be selling domestically 1.30 billion meters per annum valued at roughly Rs. 25,000 crores. The industry experts say it is about 1 billion meters valued at Rs. 20,000 crores.

The below graph shows past 10 years (2013-22) trend for export of Denim Fabrics.

Due to the downtrend in the international market in 2022, the Denim fabric exports have shown a substantial decline of roughly US$ 85 Million (14%). However, despite this downfall, the industry has managed an export growth rate of 6% CAGR for the 10-year period. Ignoring the year 2022 as an outlier, the 9 Year CAGR growth works out to 9%.

Denim fabrics using polyester stretch yarn have become very popular all over the world. Such Poly Stretch Denim (HS 521142) have shown a good export growth of 19% CAGR during 2013-22. At the same time the growth of Cotton Denim Fabrics (HS 520942) has stagnated to a meagre 1% CAGR.

Bangladesh continues to be the most favored export destination for Indian Denim Fabrics. It has a major share of 39% followed by countries like Colombia (10%), Egypt (7%), Sri Lanka (6%) and Mexico (6%) in the top 5 destinations.

Below is the Pie chart showing the share of Denim Fabrics exports to the top 5 destinations from India in the year 2022.

Below table shows the 10-year data on Denim fabric exports from India to the top 10 destination countries, with growth rate in %CAGR.

From the above one can observe that the Exports to both Colombia and Mexico are growing at a very rapid pace, clocking a CAGR of 23% and 33% respectively.

An important aspect to note is that the growth of Denim exports to Bangladesh has substantially slowed down to 3% CAGR. This decline has been accelerated by the increased availability of Denim Fabrics locally in Bangladesh. Most of the Bangladeshi Garment manufacturers are backward integrating into Denim Fabric Manufacturing.

Denim Fabric Imports:

Denim Fabric imports into India is insignificant at US$ 18 Million in the year 2022. This works out to mere 3% of the export volumes. In fact, India has consistently seen a de-growth of Denim Fabric imports in the past 10 years at a CAGR of -7%.

Denim Garment Exports:

Unlike the Denim Fabrics, separate HS codes are not defined for Denim Jeans / Denim garments. Hence, we have chosen to analyze two HS codes 620342 and 620462 for TROUSERS BIB AND BRACE OVERALLS BREECHES AND SHORTS OF COTTON – MEN & WOMEN.

The past 10 Years’ data (2013-22) show that the growth in export of Denim Jeans & Cotton Trousers is stagnant at 0% CAGR.

India exported Denim Jeans & Cotton Trousers worth US$ 762 Million in the year 2022. The below graph shows the trend of Jeans & Cotton Trouser exports during the past 10 years.

The share of exports between Men & Women work out to roughly 65% and 35% respectively.

The main destinations for export of Denim Jeans & Cotton Trousers were USA (43%) followed by EU (27%). The below Pie chart shows the share of Denim Garments & Cotton Trousers exports to the top 5 destinations from India in the year 2022.

Share of exports to the other remaining countries is too small, none of which do not even exceed 5% share.

Below table shows the Denim Jeans & Cotton Trouser exports from India to the top 10 destination countries.

From the above analysis, it appears that India’s garment industry lacks competitiveness. Despite several export subsidies, incentives and Tax reimbursements given by GOI like RoSCTL, DBK and RoDTEP; the garment exports are not growing.

Denim Garment Imports:

The scene with garment imports into India is a cause of concern.

The past 10 Years’ data (2013-22) show that Imports of Denim Jeans & Cotton Trousers is growing at a rate of 14% CAGR. There has been an extraordinary jump of 62% imports in the year 2022 as compared to 2021.

The symptoms clearly indicate that all is not well at the Indian Denim Jeans Manufacturing Industry. The Denim Garment imports are increasing rapidly however its exports remain stagnant.

The below Pie chart shows the country wise share of Denim Garments & Cotton Trousers imports of the top 5 countries into India for the year 2022.

The import of Denim Jeans & Cotton Trousers mainly come from Bangladesh (70%) followed by EU (12%).

These imports from Bangladesh are the basic Jeans which are mainly imported by the large format stores who take advantage of duty-free imports and competitive pricing from Bangladesh. The ones being imported from EU are the high street fashion garments mainly sold by the leading international brands & retailers from their retail stores in India.

Below table shows the import of Denim Jeans & Cotton Trousers from top 10 countries.

Conclusion:

In my personal view the Denim Fabric industry continues to be competitive as it continues to grow both in local & export markets. The current excess capacity situation should get resolved in times to come as the Denim Fabric demand is growing consistently.

However, the Denim Garment Industry seems to be a cause of concern. According to my personal view it is basically uncompetitive. Its exports have stagnated and not grown over the past decade, despite several export subsidies, incentives and tax reimbursements given by GOI like RoSCTL, DBK and RoDTEP. Even the Domestic Indian retail is increasingly looking at imports from Bangladesh which offers excellent quality basic product at a very competitive price.

Without strengthening the Garment Sector, the Textile Industry cannot flourish and be profitable in the long term. If Policy initiatives are not taken at the government level, it will ultimately become a ‘sweat shop’. The entrepreneurs will leave and start investing in some other industries which offer a better return.

My views on the causes and solutions through government policy initiatives can be viewed in my earlier post. The link is given below:

Woes – Indian Apparel Industry – Labor Laws (astuteconsult.in)