Generally, the health of India’s home textile market is indicated by its exports to USA, the largest consumer of home textiles in the world. Before the outbreak of the pandemic India’s exports to USA (of home textiles) was stagnating/showing a declining trend. However, outbreak of Covid has changed the scenario altogether.
Exports USA is increasing
India’s home textile exports to US have been on increasing trend as reflected in November 2020 statistic, where exports to US surged 25% YoY at USD 281 million. In fact, home textile exporters are emerging out of the downturn faster than other textile segments with increase in demand from people working from home and a sharper focus on health and hygiene amid the pandemic. Export order in home textile has been improving since the beginning of the 2QFY21 owing to reopening of departmental stores and pent-up demand in the international market. The momentum is expected to stay strong in the coming quarters too as the hygiene factor is still on top of the mind of the people.
India’s home textile exports to USA continue to benefit from the situation arising out of Covid. The sector is benefiting from higher in-home consumption due to increased work-from-home period and higher emphasis on health & hygiene driven by the pandemic. Home textile manufacturers are now operating at a significantly higher capacity as orders continue to galore.
Outbreak of Covid throws up new opportunities
Further, outbreak of the pandemic has thrown open an opportunity for the home textile manufacturers to venture into health and hygiene textile segment – PPEs, facemasks, wipes, disposable linens etc. It should also be noted that structural uptrend in home textile demand owing to ‘work from home’/hygiene ascribing more relevance to bed sheets/towels usage is likely to further aid demand in the coming months. Also, fund raising by global retailers has ensured return to normalcy in home textile order books and working capital cycle.
China’s pain, others’ gain
Outbreak of Covid-19 has benefited the home textile industry in another way too. The outbreak and spread of pandemic which halted production in China for few weeks has alerted the global businesses the risk of dependence on one source, that is, China, for their entire requirements. Also, there has been news that the US government is considering a ban on some or all products made with cotton from the Xinjiang region of China over alleged human rights violations. Many retailers in the US and Europe are likely to discourage sourcing of textile products made from the raw material (cotton / cotton yarn) produced in the region. Against the backdrop of the pandemic and the growing preference for India as a potential supplier, domestic textile players are seeing significant market share gains from China.
From Jan-Sep 2020, market share (as a % of imports to the US) of China in Terry Towels & Bed sheets reduced by 350bp and 510bp, respectively, to 21% & 15%, while India’s market share in the same category, that is, Terry Towels & Bed sheets) increased by 360bp/90bp to 43% & 50% over the same period.
PLI new attraction
Further, last year the Prime Minister stressed the need for self-reliance while launching Atma Nirbhar Bharat Abhiyan. In order to make India as an export hub for textile, government included textile sector under Production Linked Incentive (PLI) scheme just like many other sectors. Home textile industry is likely to be a major beneficiary of this incentive scheme.
Thus, all these developments present an opportunity for Indian exporters of textiles and clothing to cater to the requirements of global buyers and become an alternative supplier.
However, cotton prices may turn out to be a game spoiler for the industry. The USDA projects 2020-21 global cotton production to decline by 6.7% YoY to 24.8mn tons while Global consumption is estimated to increase by 13.1% YoY to 25.2mn tons, implying global deficit of 0.4mn tons. For India, production is estimated to be flat YoY at 6.4mn tons but consumption should see an uptick of 20% YoY to 5.2mn tons, leading to a surplus of 1.2mn tons. However, since March 2020, the domestic cotton prices have rebounded by 8% and continued upsurge in cotton prices may take away some of the advantages enjoyed by the domestic home textile exporters.