India shows signs of trumping China as sourcing shift proves to be real

China’s dominance in apparel and textile manufacturing seems to be shaking… Alleged unethical practices in its Xinjiang region has further made a dent on its textile and apparel manufacturing industry’s reputation and a lot of fashion brands and buyers such as Asos, M&S, OVS and We Fashion among others have committed to act responsibly and prevent their supply chains from being linked to the forced labour in China and have made their commitments public.

Adding to this is the setback that China faced back in 2020 (this is still continuing) when US Department of Commerce placed a lot of Chinese enterprises in Xinjiang region and others on the US ‘entity list’ – precisely under export blacklist. The negative impact has been clearly seen in the US import data of Jan.-Jun. ’21 period, indicating all those reports (such as QIMA’s) that cited India will be benefited in terms of sourcing shift from China have stayed true.

There are facts and statistics justifying all these predictions that seem to be true now. According to OTEXA, a trade body of US Department and Commerce, China remains at top of the tally with US $ 7.31 billion worth of apparel shipment to USA in H1 ’21, accommodating 20.68 per cent of total apparel import value of USA, which is marginally down from H1 ’20 when China’s share was 20.70 per cent. What’s noteworthy is a whopping decline from H1 ’19 period when its share in the overall US apparel imports was 28.29 per cent and that means the country’s exports to USA have shrunk by 7.61 per cent in 2 years. At the time when USA increased sourcing in 2021 on Y-o-Y basis and remained almost similar in volume-terms on 2-year basis, China’s tumbling share clearly indicates other manufacturing destinations have successfully grabbed opportunity as sourcing is moving away from the Asian manufacturing giant.

India has tapped a bit of orders shifting away from China. Though India couldn’t beat pre-COVID shipment values, what’s noteworthy is that it has increased its apparel export share from 5.55 per cent in H1 ’20 and 5.65 per cent in H1 ’19 to 5.75 per cent in H1 ’21.

Also Read: It’s official! Apparel sourcing from China is down as says US import data of H1 ’21

As far as textile export is concerned, China accommodated US $ 5.74 billion worth of textile shipment to USA in January to June ’21 period, constituting around 35.26 per cent of total textile import value of USA. The value is down from 41.35 per cent that China clocked in H1 ’19. On the other hand, the Indian shipment of textile products to USA valued US $ 2.72 billion in H1 ’21. Markedly, India’s share increased from 14.53 per cent in H1 ’19 to 17.82 per cent in H1 ’21, clearly indicating number two has grabbed the orders from number one textile shipper to USA.

Therefore, the shift of business from China is not just on papers as rumoured by some industry stakeholders in the neighboring countries. It’s worth mentioning here that the growth in Indian textile exports is achieved despite the fact that the country went into a series of lockdowns across states in April and May, putting a temporary pause on the business activities and creating ruckus in supply chains.

Another reason for shift in textile sourcing to India is that the country has been a traditional cotton production hub and is seen as an alternate to China since always. However its true potential in textile sector is yet to be recognised. In the recent times, export of cotton, cotton yarns, fibres and fabrics have escalated significantly and it’s very likely that the buyer base will keep skewing away from China at least for some time in near future.

China left upset over reduced sourcing by Indian apparel buyers…

On one hand, China’s textile shipment is reducing in the US market. India’s US $ 85 billion worth of organised apparel retail industry, on the other hand, is also limiting its apparel imports from this Asian giant. COVID-19 caused a dent on the Indian apparel retail industry and forced retailers to keep stores closed in 2020. This resulted in a significant decline in the country’s apparel import during FY ’21. According to Ministry of Commerce and Industry (India), the country tumbled 24 per cent to import US $ 881.08 million worth of garments during FY ’21 that ended in March this year, as compared to US $ 1.14 billion in FY ’20.

Though China remained the top import destination for the Indian apparel buyers who imported US $ 317.55 million worth of garments from China, the huge outrage against ‘Made in China’ products in 2020 helped India see a decline in sourcing from its Chinese suppliers by around 36 per cent.

In FY ’20, China had constituted around 43 per cent of India’s total apparel import values which got reduced to 36 per cent in FY ’21 and the benefits seem to be grabbed by Bangladesh. Despite pandemic and reduced overall sourcing, India saw a significant increase from Bangladesh by 16.72 per cent to US $ 272.60 million (See Table 1), which strengthens the fact that orders that used to go to China were shifted to Bangladesh, hence it’s safe to say China is losing apparel business!

Table 1 – Data is compiled by Apparel Resources using Ministry of Commerce and Industry’s statistics

If data from Jan.-Jun. ’21 is taken into consideration, China declined by 36.55 per cent to ship US $ 92.80 million worth of garments to India as compared to US $ 146.25 million in the same period of 2020. Interestingly, India’s import of apparels increased by 11.29 per cent in the first 6-month period of 2021; hence China is knocked over by the Indian buyers (see Table 2).

Table 2 – Data is compiled by Apparel Resources using Ministry of Commerce and Industry’s statistics