Chapter 4

India's Performance and Competitiveness

of Textile and Clothing sector in RCEP
region
4.1. Introduction

Textile is one of the important items exported from India with the export value standing at

44.89 billion USD in 2018-19 (Ministry of Commerce & Industry, GOI,2021a). Given its

importance in the Indian manufacturing sector, Textile and Clothing (T&C) was chosen in

this study for a sectoral analysis. Textiles have a 12 % share in the total export basket of India

in the year 2018-19 (IBEF, 2021). Textile Industry played an important role in India for

centuries and its importance for employment can be emphasised given that the sector directly

employs more than 4.5 crore people (IBEF, 2021). It is the second-largest employer after

agriculture. Textiles & Clothing, in general, is considered to be a prerogative of developing

countries due to the availability of low-cost labour in those countries. Nevertheless, India has

been facing competition from low-cost economies within RCEP like Cambodia, Indonesia,

and Vietnam. Textile manufacturing includes products manufactured in labour-intensive

handloom and power loom industries as well as capital-intensive spinning and weaving.

As per one of the recently available estimates, the size of India’s textile industry is, growing

at a CAGR of 10.23 % (IBEF, 2021). It contributes to 13 percent of our total exports

earnings, 10 percent of total industrial output, and 2 percent of our GDP

(Dhiman et al., 2020)
. However, in 1991, textiles used to contribute 28 percent of India’s total exports which

has dropped substantially. Multi Fibre Agreement (MFA) came to an end on January 1 st,
2005 abolishing the quota system in textiles exports (Manoj, 2014). This made the textile

industry worldwide more competitive. As per the WITS database, it is found that while China

had a market share of 29 percent of textile exports in the world in 2010, India’s contribution

was only 4 percent. In 2017, China’s textile exports stood at USD 257.40 billion against

India’s USD 37.22 billion. The total world exports in 2017 were USD 793.16 billion,

indicating China’s Market share of 32.4 % and India’s market share of 4.7 %. We can see an

increase in market share of both the Asian countries who are ranked at 1 and 2 respectively in

the textile exports in the world (WITS database, 2021).

The policies of the Ministry of Textiles, GOI focuses on export promotion measures. Annual

report (2019-20) of Ministry of Textiles, GOI mentions export promotion strategies as to

provide subsidies (interest rebate, duty exemption, and rewards), strengthening the

infrastructure of the industry, and promoting exports through market access and market

development through institutions like Exports Promotion Councils (EPCs). Market

diversification is adopted as an important strategy and there is an effort to identify markets

beyond traditional and established US and EU markets of Indian textile. Considering the

recently concluded RCEP agreement and proximity of the RCEP region with India,

identification of markets and measuring their potential is important for policymaking. India

already has an FTA with 12 members of RCEP except for China, Australia, and New

Zealand.

In 2015, sixteen RCEP negotiating countries (including India) exported 54 % and imported

31 % of world textile and apparel (Lu,2019). Lu (2019) also mentions that a substantial

amount of these was collaborative supply with the participation of more than one RCEP

country in the supply chain. There was a large amount of intra industry trade between RCEP

countries strengthening the value chain in the region. For India, 75.2 % of textile imports and

40.6 % of apparel imports were from RCEP countries (China's share being 58.9 % in textiles
and 33.9 % in apparel) (Lu,209). However, India's exports to RCEP countries were only 10.6

% in textiles and 4.5 % in apparel of its total exports (Lu, 2019). As per the analysis of Lu

(2019), the trade creation effect of RCEP will make the members source even more within

the member countries after signing of the agreement and the members will gain more

competitiveness being part of the integrated supply chain. There will be barriers for non-

RCEP countries to export to the RCEP region. While intra RCEP trade will be given

preference with no tariff barrier, India is likely to face the tariff barrier which will reduce its

competitiveness. Expert committee on textiles of Indian chamber of commerce (ICC) (2019)

in a press release expressed caution and the urgent need of Indian T& C industry to become

globally competitive in the context of RCEP. It said that the share of India in total exports of

T&C from RCEP members was around 9 %. The press release also mentioned that India had

a trade surplus in T& C with all RCEP members except China with whom it had an almost

USD 1 billion trade deficit in textiles in 2018. The dominance of Chinese imports in the

Indian T&C sector is apparent.

The top three T&C export items from India are Non-knitted apparel, Knitted apparel, and

Cotton. India also has a good number of exports of carpet, manmade filament, made-up

textile items, and manmade fibres. These seven product groups together at HS 2 Digit level

comprise 93 % of India's Global Exports in the T&C category and 92 % to the RCEP region.

This study focuses on the above mentioned seven items’ exports into eight major RCEP

countries that consume 93 percent of Indian exports of T&C to the RCEP region. These

major eight RCEP countries are China, Vietnam, South Korea, Australia, Japan, Malaysia,

Thailand, and Indonesia.

In this chapter, the prospect of India’s textile trade is measured with RCEP members.

Identification of competitiveness will enable product-specific strategy formulations in India's

textile and export policies. In the literature, there is evidence of studies measuring the
competitiveness of Indian textiles with Revealed Comparative Advantage (RCA) (Dhiman &

Sharma, 2017; Kathuria, 2018; Kim, 2019; Rout & Saini, 2021). Compounded Annual

Growth Rate (CAGR) or growth orientation gives an idea about the future potential of a

product (Gupta & Khan, 2017; Dhiman & Sharma, 2017). This chapter measures the

competitiveness of Indian T& C in RCEP markets with Revealed Comparative Advantage

(RCA) and Growth orientation. It also analyses product wise tariff rates applicable for Indian

T&C in various RCEP countries.

In the next section, some important studies in this area are reviewed, followed by the

methodology used for the study. In the fourth section, a discussion on the policy of India

towards the development of the export market for the textile industry is taken up. In the fifth

section, the findings are explained, and finally, we conclude with our findings.

4.2. Literature review

Here, some of the literature about export competitiveness of Textile and Clothing (T&C)

using different competitiveness indices are reviewed.

Kim (2019) measured India's comparative advantage in the US market in Textile and

Clothing. He considered Revealed Comparative Advantage (RCA), Market Comparative

Advantage (MCA), and Comparative Advantage by Countries (CAC) from 1991 to 2017.

CAC and MCA were developed for analysing competitive advantage in a specific country

and comparative advantage in a specific market respectively, based on the concept of

comparative advantage The study shows that India had a comparative advantage in the T&C

sector in the U.S. during the above period though there is increasing threat from low-cost

manufacturing countries like Bangladesh, Vietnam, and Honduras. In a comparison of trade

performance and competitiveness of India with Vietnam and China for the time period from
1988 to 2016, immense opportunities for Indian textiles are seen as most of the T& C

products have shown positive growth of exports (Gautam & Lal, 2020). The study covered 11

products having HS code 50 to 60 and found that during 2000 to 2016, there are

improvements in RCA for both China and India but it is quite substantial in the case of

Vietnam (Gautam & Lal, 2020). Competitiveness of the Indian Textile industry is analysed

and compared with China, EU (28), US, Turkey, Republic of Korea, China, Taiwan Province,

Hong Kong, China SAR, Pakistan, Brazil, Italy, and Japan with RCA and compound annual

growth rate (CAGR) to conclude that India is the biggest beneficiary of the agreement on

textile and clothing (ATC) followed by China (Gupta & Khan, 2017). Competitiveness of the

Indian textiles industry is measured for 2-digit harmonic code from HS code 50 to 60 with

RCA and Compounded Annual Growth Rates (CAGR) of textile commodities for the period

of 2010-2014 by Dhiman & Sharma (2017). It was found that the majority of Indian textile

products enjoy a comparative advantage. Silk, cotton, vegetable textile fibers, paper yarn,

woven fabric, manmade filament, manmade staple fibers, carpets, and other textile floor

coverings, and special woven or tufted fabric, lace, tapestry have RCA of more than 1.

Impregnated, coated, or laminated textile fabric and special woven or tufted fabric, lace,

tapestry are the commodities that have high CAGR indicating swift growth. (Dhiman &

Sharma, 2017). Kathuria (2018) measured the competitiveness of India's clothing sector with

Vietnam, Bangladesh, China, and Turkey with RCA and two of its variants; Revealed

Symmetrical Comparative Advantage (RSCA) and Dynamic RCA for the period of 2003-

2013. The study shows that India is losing its competency in many products to low-cost

countries like Vietnam and Bangladesh. Export competitiveness of Indian textile products

with export similarity index (ESI) was studied for codes HS 56–60 for the period 2013–2017

by Kanupriya (2020). For the 2-digit level code, in each category 5, six-digit level products

are selected and their exports to the top five exports destinations are considered. Products and
markets are chosen based on the average highest values for the above period. The study

concludes that Indian textile products need improvement in the competitiveness front. The

high cost of manufacturing, the high tariff of export partner countries, and the lack of

technological upgradation are deterrents for the Indian textile industry (Kanupriya, 2020).

Rout and Saini (2021) studied the trade competitiveness of India's manmade fiber (MMF)

based textile and apparel sector with RCA, EII, and ESI for the period of 2010-19 at a

disaggregated level (HS code six digits). They found that India did not have high competition

in this sector and had high export intensity with USA and UK in fabric, apparel, made up, and

carpet. Though the present share of MMF in India's export basket is 33 % against 52 % of

cotton, the growth in the former is higher following the global trend. This also conforms to

the policy of GOI to increase the share of MMF in India’s textile export basket (Rout and

Saini, 2021). A study of India woolen exports competitiveness with RCA and EII shows that

India’s wool exports should have a rising trend in Saudi Arabia, Sri Lanka, South Africa and

UAE while it may remain constant to Australia. The study suggests initiatives to reduce cost

of production, increase in production capacity and integration of fragmented supply chain

(Siddiqui and Singh, 2021)

Intra-regional trade effects in textiles & clothing within ASEAN are measured by Hamid and

Aslam (2017). Their result of intra industry trade and Revealed Comparative Advantage

shows that most of the countries compete in unprocessed products or raw materials and few

countries trade in consumer or finished products, suggesting that product diversification has

enabled ASEAN countries to export more. Their study also shows the status quo in the case

of Thailand, Malaysia, and the Philippines in Textiles and Clothing exports during 2001-14

wherein Indonesia achieved good growth and Vietnam achieving rapid growth. The authors

find that the main external competition of ASEAN is with China. An increased investment
for achieving the scale of the economy is suggested to face external competition (Hamid and

Aslam, 2017).

To summarize, several studies have explored the export competitiveness of the Indian T&C

sector with RCA. But, we do not come across any studies on the performance and

competitiveness of Indian textiles with the RCEP block. Bilateral Revealed Comparative

advantage (BRCA) used in this study indicates the comparative advantage in bilateral trade

while Growth orientation compares the growth of exports of a product of a country compared

to the world growth in a particular market. This study enables us to assess the competitive

scenario with RCEP members based on the trend of RCA and growth orientation.

4.3. Objective and hypothesis

In this chapter, T & C sector’s competitive position and prospects are measured with RCEP

members. The chapter attempts to find out

1) The competitive position of India with RCEP block in T&C sector by analysing RCA

of various commodities

2) The trends in the market share in various T&C commodities by analysing Product

Growth Orientation of exports

The following hypotheses are tested in this chapter:

1. Most of the Indian T & C products do not have high RCA in the RCEP market

2. Most of the Indian T & C products do not have a high product growth

orientation in the RCEP market

4.4. Database and Methods

 In this study, the unit of analysis is 15 RCEP member countries and India.

The performance of 14 Indian Textile & Clothing commodities are examined for T&C

products with a 2-digit HS code from 50 to 63.

The performance and potential of a product is measured with

a) Growth orientation of products

b) Bilateral Revealed Comparative Advantage

Growth Orientation of Products: This indicator evaluates the growth potential for a

country’s exports by comparing the compound annual growth rate (CAGR) of its primary

exports to the worldwide growth rate of those products. A growth rate above world growth

implies an increase in market share which is an indicator of good export performance (WITS,

2021).

Countries with products in high growth industries are expected to grow in the future. If a

country lags behind world growth that indicates poor performance with possible trade

barriers.

Growth Orientation of Products for all 14 T& C items (HS Code 50 to 63) for the period of

2000 to 2019 is collected from the WITS database.

Bilateral RCA is computed as follows:

Xkij
Xij
Wkj
BRCA=
Wj

Where in Xkij = Export of product k from country i to j

Xij = Total export of country i to country j

Wkj = World export of product k to country j

Wj = Total world export to country j

A bilateral RCA above one tells us that for that particular good, the country 'i' has a revealed

comparative advantage in country j's market, compared with the rest of the world. In the case

of bilateral RCA, a product's competitiveness in bilateral trade is gauged vis-a-vis the world

market. Bilateral RCA can explain the relative comparative advantage of a product in

bilateral trade more clearly compared to RCA which is calculated based on the country's trade

in a product with the rest of the world. Bilateral RCA for the product code of 50 to 63

(Product group T&C) for India with RCEP member countries are used. A change in bilateral

RCA over the period 2010-2019 is analysed.

The product wise (HS Code 50 to 63) RCA of India with all prospective RCEP countries for

the period of 2010- 2019 is collected from the WITS database.

The weighted applicable tariff rates for Indian T & C at 2-digit HS code for exports to

various RCEP countries are collected. 2-digit HS code can give an overview of the T&C

sector by dividing the entire sector into 14 primary product groups. More disaggregation may

give more specific results but may not be able to remain true representative of the entire

industry which is possible at an aggregated level. Apart from quantitative research, Indian

policy on the development of exports of textiles is examined in this chapter with various

policy documents and press releases available in the public domain.

4.5. India’s Policy formulation for T& C Sector

India was a leading exporter of Textile & Clothing before its independence due to

homegrown raw materials, cheap labor, and access to British industry for machinery (Roy,

1998). However, it could not expand much internationally during the closed economic
regime after independence. During the 1991 economic reforms, the textile industry was a

major beneficiary as exports were encouraged and the import of machinery and intermediates

were allowed (Roy,1998). The cost of resources came down during the new economic regime

compared to the earlier era of protectionism. The deregulation removed barriers for

expansion which allowed the industry to reach desired economies of scale. The changes were

initiated in India's Textile Policy of 1985 and the process of liberalization influenced the

Textile Policy of 2000 (Kasi & Chitra, 2016). The new textile policy is due for quite a long

time as the last formal policy was released in the year 2000. Textile Ministry under the

Government of India is collecting inputs from various state governments and industry

associations on various segments of the textile industry, wherein the government is trying to

formulate a new textile policy (Press Information Bureau, GOI. 2020; 2021).

The textile industry is highly dependent on the export market. Ministry of Textiles,

Government of India focuses on access to major export markets, market diversification,

neutralising high tariffs by India's FTA partners, engagement in the value chain, support to

small exporters, and rebate on taxes and levies to enhance Indian T&C exports.

MEIS Scheme

Market Access Initiative under Merchandise Exports from India Scheme (MEIS) encourages

exporters to focus on specific products and markets. It approves funds under various

promotional schemes in new markets like assistance for marketing projects abroad, building

capacity through promotions like events, exhibitions, etc. It also reimburses charges or fees

paid by the exporters for statutory obligations in the importing country.

For availing reward under MEIS, the countries are classified into A, B, and C categories.

ASEAN, South Korea, and Japan are in category B. Initially the reward was not offered to

ASEAN and South Korea but they were included in November 2015. For HS code 50 to 63,

the reward rate was 2 % of the FOB value. For Handloom, handicraft, and jute items it was 5
% for all countries in 2015. The Government of India has doubled rates from 2 % to 4 %

for readymade garments and made-ups with effect from 01.11.2017. For all handicrafts and

handloom items, MEIS revised rates are 5 % to 7 %. Reward rates vary from product to

product and are mostly in the range of 2 -7 %. (Ministry of Textile, Annual Report 2019-20,

2020).

Ministry of textiles, GOI, (2021) and Ministry of Commerce, GOI, (2021b) informs about

various schemes of Govt. of India. Market Development Assistance (MDA) is given for

promotional expenses in an already existing market. It is given for export promotion in

specific markets such as FOCUS LAC, Focus Africa, Focus CIS, and Focus ASEAN + 2

(Australia and New Zealand) programmes. There are three slabs of a grant of Rs 2,50,000 for

Latin American Countries (LAC), Rs 2,00,000 for Focus Africa, Focus CIS, and Focus

ASEAN, and Rs 1,50,000 for the general area. Exporters with an f.o.b. value of exports of up

to Rs. 30 crores in the preceding year are eligible for MDA assistance. (Ministry of Textiles,

GOI, 2021; Ministry of Commerce, GOI, 2021b).

Interest subvention

Under the Interest equalization scheme, the interest subvention of 2 to 3 % is allowed

depending on the product to ease the interest burden of Indian textile exporters. It was

launched in 2015 for three years. From 01.11.2018, it is enhanced from 3 % to 5 %. Further,

the scheme which was only for manufacturer exporters is covering merchandise exporters

since 2019. (Ministry of Textile, Annual Report 2019-20,2020). Additionally, including the

merchandise exporters is a booster for the exporters of textiles who are dependent on contract

manufacturing or trading.

Duty Drawback Scheme

Duty drawback scheme is applicable on cotton yarn, cotton fabric, manmade fabric, apparel,

and home textile. Duty drawback increases with value addition. After availing of CENVAT,

duty drawback is in the range of 1.2 to 8.9 % (the Highest being in a category of home

textile), which is a support from the government for the exporters. The incentive for value

addition may encourage the Indian textile industry to export more end products.

From the above, we find that the textile policy of India has been export-oriented. Exporters

are offered financial assistance by interest subvention, duty drawback, and direct subsidy.

The government of India is also trying to promote exports through various market access

initiatives.

It is observed that GOI’s various schemes for export promotions are not designed specifically

for a sector but applicable in general to all sectors. The market potential varies from product

to product. Separate market research for the textile industry and schemes as per the need of

the sector is imperative. The inclusion of countries like China, Japan, and South Korea in

MDA may benefit the textile industry.

Export Promotion Councils

There are eleven textile export councils for the textile sector working in various areas. These

export promotion councils conduct various mega textile shows, often jointly with the host

countries. They conduct exhibitions, technical fairs, as well as foreign delegate meets. It is

found that in 2014-15, textile export promotion councils conducted 43 promotional fares in

the countries of Japan, Hong Kong, Colombia, Israel, South Africa, Chile, Uruguay, Spain,

China, USA, Germany, Brazil, and Australia under Market Access Initiative Scheme. There

were no countries from the ASEAN block in this list. India may try to develop the market in

the ASEAN region considering existing FTA and proximity.

Trade relationship with partners

 The government of India has conducted various bilateral negotiations during the last decade

with foreign countries for the promotion of Indian textiles. The list includes Japan,

Uzbekistan, EU, Belarus, and Kyrgyz. MOUs were signed between India and other countries

for mutual co-operation. The most important bilateral negotiation was with the EU wherein a

joint working group was formed in textiles and clothing. There were duty anomalies between

exports from India and Pakistan. While Pakistan is entitled to duty-free exports to the EU,

Indian yarn fabric and home textiles attract 4, 8, and 9.6 % duty respectively for entering into

the EU. To counter this, the Government of India has allowed a 2 % bonus to Indian

exporters (Ministry of Textiles, 2015). Ministry of textiles should also look into sector-

specific MOUs with RCEP member countries.

Technological upgradation and Integration of supply chain

The complexity of the supply chain is a constraint for the Indian textile industry (Manoj,

2014). In 2016, a scheme of Rs 6000 crore was launched to encourage employment,

investment, and exports. The press release said that 56 textile parks were set up under the

scheme for integrated textile parks (SITP). Out of these 34 were operational. The advantage

of integrated textile parks is their ability to cut down on delivery time as the entire supply

chain is managed in a single place. Concessions on state level taxes and incentives were

announced to boost exports (Press Information Bureau, GOI, 2020). The government of India

has also initiated Amended Technology Upgradation Fund Scheme (A-TUFS).

To summarize India Government's policy on textile exports, the following areas can be

highlighted:

1) To provide subsidies to the exporters as rewards for exports or duty exemption

2) To strengthen the infrastructure in the industry in various sectors with schemes like TUFS

3) To promote exports through market access and market development

4) Build up institutional mechanisms with various EPCs, research institutions, and institutions

like the National Institute of Fashion Technology (NIFT)

The above strategy is further analysed in the following paragraphs:

Providing subsidies to the exporter is a choice that is heavy on the exchequer. It has a limited

capacity. To counter tariff and non-tariff barriers, subsidy may be an effective tool but

negotiation at the bilateral or multilateral level is expected to work better in long term and be

more sustainable.

Building infrastructure, technological upgradation are necessities to remain competitive. Here

again, the government may have limited capacity to support exporters financially. Instead of

direct funding, Government may look into policies that make input costs lower in India. Skill

Development agenda in the textile sector may enhance the productivity of Indian labours

(Ministry of Textile, Annual Report 2019-20, 2020). Focus on increasing labour productivity/

reducing labour costs, reducing power costs, reducing transport costs, and reducing the VAT

rates for apparel are major points mentioned in the Strategic plan 2012-17 of the Ministry of

Textiles. Presently India scores lower on these factors compared to its competitors like

Vietnam, China, or Bangladesh.

India exports to more than 100 countries but 2/3 rd of its exports are into the EU and USA

(Ministry of textiles, Strategic Plan 2012-17, 2014). This directs us to the need for market

access and diversification. The markets should be selected as per the potential and existing

trend of exports and value realization. Focus ASEAN+2 (Japan and Korea) can be extended

to ASEAN + 5 to include all RCEP countries particularly China which is India's largest trade

partner in textile among RCEP countries. Market access and market development schemes

and the involvement of the local embassies can help India to strengthen its global network.

Here, we need to take up market research and study competitiveness to select the markets that
we want to expand on priority. Strengthening Institutional mechanisms is imperative for the

ministry of textiles to give a competitive edge to the industry. India is already having a

network of research institutions and EPCs that can help the industry with the required

institutional mechanism.

4.6. India's Trade Competitiveness in T&C with RCEP

members

In this study, the following products are considered:

Products Group Description: Textile & Clothing

Table 4.1 India’s Exports to RCEP members for the Year 2018-19

Sl.No. Product Product Description Total Exports to % Share in total

Code RCEP Region in T& C Exports to
USD million RCEP Region
1 50 Silk 22.46 0.46

2 Wool, fine or coarse animal hair;

horsehair yarn and woven fabric

51 77.58 1.59

3 52 Cotton 2879.51 59.33

4 Other vegetable textile fibres;

paper yarn and woven fabrics of

53 paper yarn 154.37 3.18

5 54 Manmade filaments; strip and the 269.85 5.56

 like of manmade textile materials

6 55 Manmade staple fibres 217.38 4.48

7 Wadding, felt and nonwovens;

special yarns; twine, cordage,

ropes and cables and articles

56 thereof 45.84 0.94

8 Carpets and other textile floor

57 coverings 132.74 2.73

9 Special woven fabrics; tufted

textile fabrics; lace; tapestries;

58 trimmings; embroidery 23.71 0.49

10 Impregnated, coated, covered or

laminated textile fabrics; textile

articles of a kind suitable for

59 industrial use 44.56 0.92

11 60 Knitted or crocheted fabrics 20.49 0.42

12 Articles of apparel and clothing

61 accessories, knitted or crocheted 211.17 4.35

13 Articles of apparel and clothing

Accessories, not knitted or

62 crocheted 489 10.07

14 63 Other madeup textile articles; sets; 264.21 5.44

worn clothing and worn textile

 articles; rags

Source: Export Import Data Bank Department of Commerce; Govt. of India,n.d.

Based on India’s total exports of T&C to the World for the last 10 years, it is clear that India's

topmost exports are Non-Knitted apparel, Knitted apparel, and Cotton. Carpet, manmade

filaments, manmade fibres, and other made-up textiles follow these three types of products.

In the year 2018-19, out of India's total T&C exports to RCEP countries, cotton had a share

of 59.33 % followed by non-knitted apparel at 10 % and other made-up textiles at 5.44 %.

Knitted apparel had a share of 4.35 %. Manmade filaments and manmade fibres together had

a share of 10 % in the total T&C exports to RCEP member countries in 2018-19.

Country Export (USD Million) % Share in India’s exports to

RCEP Group
Lao PDR 0.38 0.01

Brunei 1,64 0.03

Cambodia 30.8 0.62

Singapore 67.92 1.37

New Zealand 76.83 1.55

Myanmar 87.12 1.76

Philippines 94.79 1.91

Indonesia 262.77 5.30

Thailand 263.86 5.32

Malaysia 291.54 5.88

Japan 406.76 8.2

Australia 437.08 8.81

Korea, Rep. 467.76 9.43

Vietnam 633.28 12.77

 China 1837.91 37.05

Total 4960.5 100

Table 4.2 India’s T &C exports to various RCEP countries

Source: WITS database (2021), Figures are given for the year 2018

India’s highest amount of textile exports within RCEP is to China, followed by Vietnam.

Australia, Korea, and Japan are then featured in the list, followed by Malaysia, Thailand, and

Indonesia. 93 percent of Indian exports of T&C in the RCEP region are into these 8 countries,

76 percent being to the top 5 destinations. Below, a detailed analysis of the T& C exports to

the top 8 countries are carried out based on RCA and Product growth orientation:

Table 4.3. RCA and Product Growth Orientation in 7 top T&C product
Exports from India
Product Code Product name RCA>1 in RCA<1 in Product Growth
countries countries Orientation>
World Growth

62 Non knitted Australia, China, Indonesia, Korea, All

apparel Japan, Malaysia, Vietnam
Thailand

61 Knitted apparel Australia, China, Indonesia, Japan, All

Thailand South Korea,
Malaysia,
Vietnam

52 Cotton Australia, China, - All except Japan

Indonesia, Japan, and Australia
Thailand,
Vietnam,
Malaysia, South
Korea

57 Carpet Australia, China, Indonesia, All except Japan

Japan, Korea, Vietnam
Malaysia,
Thailand
 54 Manmade Australia, Japan, China, Indonesia, All
Filament Korea, Malaysia, Vietnam
Thailand

63 Made-up textile Australia, China, Indonesia, All except Japan

Japan, South Vietnam and Indonesia
Korea, Malaysia,
Thailand

55 Manmade fibers Australia, China, Vietnam All

Indonesia, Japan,
South Korea,
Malaysia,
Thailand

Source: computed by author using WITS database (2021)

Out of the above 8 countries, India has RCA >1 with Vietnam only in cotton, though Vietnam is the

second-largest destination of Indian T& C exports within RCEP. With Indonesia too, India has RCA>

1 only in cotton and manmade fibres. India has RCA> 1 with Australia in all T& C commodities and

with China in all except manmade filament. India has RCA>1 in cotton with all the eight major RCEP

countries. Except for knitted garments, in all categories, India has RCA>1 with most of the countries.

Based on the RCA results, we reject our initial hypothesis that most of the Indian T & C products

do not have high RCA in the RCEP market. It is also seen that with prospective RCEP

members, Indian Growth Orientation is more in most of the T&C products compared to

World Growth. In the case of Vietnam and Indonesia, where Indian T&C products have

mostly RCA< 1, it could still achieve a higher growth orientation. This enables us to reject

our second hypothesis that most of the Indian T & C products do not have a high product

growth orientation in the RCEP market. Growth is seen more in product code 62 i.e. non-

knitted apparel compared to knitted apparel (product code 61) (See Appendix-Table 4.3). The

demand for Indian cotton is seen in China, Vietnam, Myanmar but it is less in Australia,

Japan or Korea. India has a steady demand for synthetic items (filament yarn and manmade

fibres; product codes 54 and 55) from Vietnam, Cambodia, and Myanmar which are known

for the production of finished apparel (See Appendix-Table 4.3). In knitted apparel, India has
positive RCA only with three countries. It appears that India is lagging behind countries like Vietnam

or Cambodia in garments. Apart from China, India needs to focus on South Korea and Japan for the

expansion of T& C exports. The duty-free access to Japan and Korea (except cotton) is an opportunity

for Indian T& C exporters.

Tariff in RCEP countries for Indian T&C

We have considered applied weighted tariff for Indian T&C exports to RCEP member

countries for our analysis (See, Appendix Table 4.4). Indian apparel (Articles of Apparel and

Clothing Accessories, Knitted or Crocheted HS Code, 61) to Indonesia has an applied tariff

of a weighted average of 24.61 and that is the highest tariff barrier within the region. Indian

wool attracts a tariff rate of 16.7 percent in China. Cambodia has a weighted average applied

tariff of 15 % for Indian apparel. Out of all the products, Indian knitted apparels face the

stiffest tariff in RCEP countries, followed by non-knitted apparel. This also explains India's

less than 1 RCA in various RCEP countries in non-knitted apparel.

Indian T & C has duty-free access in Brunei (except HS code 60 and 63; apparel), Korea

(except HS Code 52, cotton), Japan, and Singapore. It appears India has benefitted from

CEPA with both Korea and Japan. The tariff gain witnessed in cases of ASEAN countries is

mixed with the high tariff barrier seen in Indonesia and Cambodia for Indian apparel.

Considering trade volume, India's gain can be maximum if it gets tariff-free access to

Australia and China.

Below, we carry out a country-wise analysis of India's bilateral trade based on RCA, product

growth orientation, and average weighted applicable tariff.

Australia

India has consistent performance in textile exports to Australia wherein we can see much

higher average product growth compared to world growth. India has negative growth in
cotton and silk. Out of all the T&C products, the highest growth in Australia is seen in other

vegetable fibres and knitted or crocheted fabrics. There is good growth in nonwoven items

too.

We can see a drop in revealed comparative advantage of India with Australia in quite a few

items including cotton and silk in the last ten years (See Table 4.4 in Appendix). However,

there is improvement in RCA for all apparel items. India could maintain its RCA in wool and

carpet during the last ten years. The tariff range in Australia for Indian T&C is 0 to 5. Indian

Carpet attracts an effectively applied weighted average tariff of 2.83 %. Presently India does

not have an FTA with Australia which is a possibility in the future. An FTA is likely to

enhance India's performance in the Australian market.

China

China is the largest buyer of cotton from India which they convert into finished goods. China

is the biggest market for Indian Textiles within RCEP. Indian carpets have high RCA in the

Chinese market. India has maintained a higher Product Growth Orientation in almost all the

T&C items in China compared to world growth. During 2010, India had RCA with China in

6 T&C items which have improved to 9 in 2019. This is despite no FTA between the two

countries. Almost 37 percent of Indian exports to RCEP countries are to China though China

is also a major producer of T & C items. In the Chinese market, the applied weighted average

tariff for Indian T &C ranges from 3.41 to 16.7 %. Cotton, manmade filament, and fibres

have respective tariffs of 5.57, 5.94, and 4.35 %. Applied weighted average tariffs for silk

and wool are 7.28 and 16.7 % respectively. India faces the second-highest average tariff for

the T& C products in China within RCEP.

Indonesia
India had the best growth with Indonesia in Knitted fabric (HS code 60) and Knitted Apparel

(HS Code 61). It also had good growth in other vegetable fibres (HS code 53). India has

considerably higher growth in almost all T & C items compared to world growth in

Indonesia. In terms of RCA, there had been considerable improvement in the RCA of cotton

but India could not sustain the momentum. It may be mentioned that raw material exports

from India are often dependent on domestic demand and lobbying of end products exporters.

(The Times of India, 2021; Madhavan, 2012). India did not have RCA more than 1 with

Indonesia in any of the apparel or carpet which are considered to be India's strong products.

Carpets attract an applied tariff of 8.57 %, while it is 23.98 % for non-knitted and 24,61 % for

knitted apparel. However, there has been RCA for India in filament yarn and manmade

fibres which attract weighted applied tariff of 3.39 and 7.32 % respectively. It appeared that

high tariff rates is negatively related to India's RCA in T& C products in Indonesia. India

faces the stiffest tariff rates in Indonesia among RCEP countries and has RCA only in two

categories out of the seven most traded T&C products.

Japan

With Japan, India has more growth orientation in Industrial textiles and manmade staple

fibres. Japan is one of the major markets for Indian textiles but its performance in knitted

fabric or knitted apparels are not very encouraging. We note that India has less than 1 RCA in

both of these. India has done a good improvement in recent years in wool exports to Japan.

India has RCA more than 1 in 11 categories out of 14 T&C product groups. It may be

mentioned that Indian T& C attracts no tariff in Japan due to the existing comprehensive
economic partnership agreement (CEPA). India needs to focus on Japan as it is the largest

consumer of textile items within RCEP members.

South Korea

Indian exports to South Korea rank at third position among the 15 prospective RCEP

members. In 2010, India had RCA with South Korea in 4 categories, in 2019 it had RCA in

11 categories except both knitted and non-knitted apparel and industrial textiles. This

improvement may be due to tariff benefits enjoyed by Indian textiles as a consequence of the

comprehensive economic partnership agreement (CEPA) between the two countries. India

has maintained good RCA in cotton all along. There has been tremendous improvement in

RCA in wool. It is noted that Indian apparels exports had good growth compared to the rest

of the World in the Korean market during the last decade but still have less than 1 RCA in

both knitted and non-knitted categories. A similar trend is observed in Indian exports to both

Korea and Japan. In both, cases India had an RCA of more than 1 in 11 product categories.

Indian cotton attracts a nominal weighted applied tariff of 1.18 % in Korean markets, the rest

of all products have duty-free access to the market. The tariff figure available for South

Korea is for 2018. India does not have a strong presence in the apparel market in both Japan

and South Korea and had an improvement in exports of wool.

Malaysia

India gained RCA in knitted and crotched apparel in Malaysia and had a sharp decline in

RCA in Carpets. It has an RCA of more than 1 in 11 commodities in 2019 compared to 8 in

2010. India had good growth in nonwoven, industrial fabric, and knitted apparel. The growth

orientation of products for India is greater compared to the world growth. The tariff figures

available for India- Malaysia is for the year 2016. It had a range of applied weighted average

of 0-10.43 %. Tariff is low on both knitted and non-knitted apparel, being less than 0.1 %.
The low tariff on apparel can be linked with India's gain in RCA in both categories. For

cotton, the tariff is 6.09 % and for carpet stands at 9.21 %. The decline in RCA in carpet and

high tariffs are likely to be related. Malaysia has the third-highest average tariff within RCEP

for Indian T&C products.

Thailand

India had good growth in knitted fabric and knitted and non-knitted apparel in Thailand

which also reflects in its increased RCA in these categories. There is a good rise in RCA in

carpet and cotton. India had RCA in 7 T& C categories in 2010 which has since improved to

10 in 2019. Except for wool and silk, in all T& C categories, India had a positive CAGR

during 2010-19. India- Thailand tariff rate is low at below 1 % for cotton, wool, manmade

fibre, and filament. For non-knitted, knitted apparel and carpet, the tariff rate is in the range

of 12 %. The overall range of tariff is 0-12.08. We note that despite the high tariff, there is a

rise in RCA in carpet. The tariff data applicable for Thailand is for the year 2015.

Vietnam

In Indian exports to Vietnam, good growth in cotton, filament yarn, manmade fibres, and

industrial textiles is observed. It shows that the demand for raw materials and intermediates

in Vietnam is high as it is doing well in textile exports. Vietnam is a competitor to India in

global Textiles exports. India had RCA in 3 categories with Vietnam in 2010 which is 4 in

2019. This is the lowest number of RCAs for India with any major country among RCEP

members. However, the tariff cannot be termed as high in Vietnam, particularly in

comparison to Indonesia or China. It is in the range of 0-9.38 %. The higher range of tariff is

applicable in the cases of knitted and non-knitted apparel, respectively at 7.1 and 9.38 %.

Despite duty-free access in the category of carpet, India has low RCA in Vietnam.
 4.7. Conclusion

India is a leading exporter of Textile & Clothing products in the world. While we have 14

product groups at HS 2-digit level, 93 % of India's export to the world market and 92 % of its

exports to the RCEP market comprises seven items out of 14. Again, 93 percent of Indian

exports to RCEP countries land in eight destinations, namely China, Vietnam, Australia,

Japan, South Korea, Thailand, Malaysia, and Indonesia. India has RCA more than 1 in most

of the commodities, ranging between 9-11 with Japan, Korea, Malaysia, Thailand, and China.

Only in the case of Vietnam India has RCA in 4 products. Revealed Comparative Advantages

of Indian T&C have gone up with most of the countries during the last decade and India

enjoyed high growth orientation in most of the products with prospective RCEP countries.

Based on the above two positive parameters, it can be concluded that Indian textiles &

clothing items have good export potential in RCEP countries

The present tariff rates by RCEP members for Indian T&C products have wide variations.

Indian T&C exports face higher tariffs in Indonesia and China among the major importers

within RCEP. It has a comparatively low tariff in Vietnam and Australia and a moderate tariff

in Thailand. Due to the CEPA, tariffs are close to zero in Japan and Korea. There are very

high tariffs for Indian apparel in Indonesia and Cambodia. Similarly, it is steep for Indian

wool in China. Despite FTA with 12 member countries within RCEP, India faces tariff

barriers in many products. There is scope of negotiating this aspect at the bilateral level. It

also appears that India is losing its apparel business to Cambodia and Vietnam. Countries like

China and Australia have demand for all kinds of textiles & clothing items from India. Indian

textiles & clothing product categories have a large share of intermediates and raw materials

like cotton, manmade fibres, filament yarn. India may focus on exporting more value-added

products compared to an item such as cotton which constitutes the largest proportion of
exports from India. India's T&C exports are majorly into USA and EU markets and

comparatively less to RCEP countries. Although there is improvement in RCA and growth

orientation of India with RCEP members in T&C products during the last decade, Indian T &

C exports to RCEP countries except China is less. Knitted and non-knitted apparels from

India have an advantage in Australia, China, and Thailand. Indian Carpets and made-ups have

comparative advantages in Australia, China, South Korea, Malaysia, and Thailand. Product

Growth Orientation of Indian T&C is encouraging and shows an increase in market share.

However, India had a reduced growth compared to world growth in Japan in carpet, made up

textile, and cotton, which need to be probed. India should diversify its exports within RCEP

beyond China, focusing on prosperous markets like Australia, South Korea, and Japan.

Domestic reforms in the textile industry including technological upgradation can help the

Indian T&C industry to be more competitive. The complexity of the value chain is a

challenge for the Indian textile industry and setting up apparel and textile parks may work to

an extent. India may prefer to focus on building competitiveness of the industry with low-cost

input material rather than providing direct subsidies to the exporters. The liberal import of

raw materials and intermediates may help in lowering input costs. Better tariff negotiation

may also reduce the requirement of subsidies to the exporters under various schemes. It will

be interesting for future researchers to analyse India's export trends in textiles & clothing to

RCEP member countries, post-signing of the agreement.