Few industries have shaped India’s civilisation as profoundly as textiles. Long before modern concepts of global value chains emerged, textiles were already woven into India’s economic, cultural and commercial fabric. Archaeological excavations at Harappa and Mohenjodaro (dating back 4,500 years) have uncovered spindle whorls, needles and dyeing artefacts, among the earliest evidence of textiles. What began in the Indus valley was sustained through centuries of trade, innovation and craftsmanship.
For nearly two millennia, Indian fabrics clothed consumers across Asia and Europe. During the Mughal period, Bengal became the world’s premier centre for cotton textiles. Dhaka produced the legendary muslin prized by royalty across continents, while Murshidabad, famous for its silk and muslin, emerged as one of the 18th century’s wealthiest commercial centres. The economic significance of all this was immense. India accounted for one-fourth of global economic output in 1700, according to Angus Maddison. Then the Industrial Revolution happened, powered by James Hargreaves’ spinning jenny and other mechanised weaving technologies. These disruptive technologies changed the rules of the game, in this case competitiveness. Competitive advantage stopped being about artisanal skill and became about technology, productivity and economies of scale. India increasingly became a supplier of cotton to Lancashire mills and a market for manufactured textiles.
Independent India’s textile journey has been an effort to reverse this. India today possesses a fully integrated textile value chain, from cotton to spinning, weaving, processing, garment manufacturing and exports. The key catch is the employment intensity of the sector. Apparel alone generates 153 jobs for every Rs 1 crore invested, against 27 in automobiles and 14 in steel. Yet its share of global apparel exports has stagnated at around 3 per cent for over two decades even as Bangladesh’s rose from 2.2 per cent to 9 per cent, Vietnam’s from 1 per cent to 6 per cent. How does a civilisation that once clothed the world end up with 3 per cent of a $521 billion global apparel market?
This is the question our new book, Stitching India’s Apparel Export Strategy: From Farm to Foreign, released last week, sets out to answer. The book presents a comparative policy analysis of China, Bangladesh and Vietnam through five pillars of competitiveness: Scale and ecosystem, capital, labour and skilling, clusters and institutions, and market access and trade facilitation.
The lesson from China is one of an ecosystem approach: Vertically integrated clusters, concessional finance and the Sinosure model of export credit insurance and institutional governance that transformed China into the largest apparel exporter. Bangladesh leveraged Least Developed Country (LDC) preferences through readymade garment (RMG)-specific finance, back-to-back letters of credit, and export processing zones offering plug-and-play infrastructure and one-stop regulatory services. Vietnam aligned foreign investment, industrial parks and free trade agreements (FTAs) into one integrated strategy and industry-academia partnerships to attract global manufacturers. Each country followed a different path, but all created integrated ecosystems that enabled firms to compete at scale. Besides all these aspects, one that is very important but much less talked about is the issue of undervalued Chinese currency. Estimates by the IMF, the US Treasury (2026) and Goldman Sachs suggest the yuan has been undervalued by 16 to 30 per cent against the US dollar, acting as an implicit export subsidy.
To realise the government’s ambition of $100 billion in Textile and Apparel (T&A) exports by 2030, India must strengthen these fundamentals of competitiveness across the entire value chain. The first is scale and ecosystem development. The “missing middle” of mid-sized, export-ready firms capable of handling large, fast turnaround orders remains a constraint. Equally relevant is fibre mix. Global apparel trade is dominated by man-made fibre (MMF). India’s textile industry remains skewed towards cotton, with a 60:40 cotton-to-non-cotton fibre consumption ratio, in contrast to the global average of 25:75. This mismatch locks India out of the fastest-growing segments such as activewear, technical textiles and athleisure. The recent rationalisation of the inverted duty structure in the MMF segment must now be complemented by investment in MMF spinning and weaving. Second is capital. India’s real interest rates of 6.2 to 8.2 per cent remain significantly higher than those of China (3.1 per cent), Vietnam (around 1 per cent) and Bangladesh (negative real rates). Delays in Goods and Services Tax (GST) refunds and export incentive disbursals also constrain liquidity. Next is labour and skilling. India’s apparel sector is highly dependent on migrant labour, moving from Bihar, Odisha and Jharkhand into production clusters such as Bengaluru, Tiruppur, Surat etc. There is high attrition and absenteeism during the festival season, when assembly lines fall short. In our opinion, a more sustainable model is to move factories to where the cheap labour is. Pearl Global’s Muzaffarpur unit in Bihar is a step in that direction. The gains are multiple: Higher female labour participation, lower migration costs and a pathway for labour-surplus states like Bihar to accelerate manufacturing-led growth.
Finally, with the UK-CETA (Comprehensive Economic And Trade Agreement) and EU-FTA, India has achieved tariff parity with competitors such as Bangladesh and Vietnam. But competitiveness extends far beyond tariffs. India needs seamless end-to-end integration of trade processes so exporters can move goods, documents and approvals with minimal compliance costs, speed and predictability.
The reform agenda for India is clear: Build an ecosystem approach to competitiveness. PM-MITRA (PM Mega Integrated Textile Region and Apparel) parks, announced in 2021, embody this approach by integrating the five pillars of competitiveness — scale, infrastructure, finance, skills and market access — within a single institutional framework. Their timely implementation is critical if India is to seize the current window of opportunity in global apparel trade. Complemented by the export promotion mission and the integrated programme for the textiles, these reforms can reposition India as a scale-driven, digitally-enabled, sustainable and women-inclusive global sourcing hub. History tells us that India once clothed the world through craftsmanship. The future will depend on whether it can stitch together an ecosystem where firms, finance, institutions and supply chains move with the speed, scale and predictability that global value chains demand.
Gulati and Rao are distinguished professor and senior fellow, respectively, at ICRIER. Views are personal
