Mumbai, Jul 20 (PTI) India has lost its global market share of cotton yarn as well as ready-made garments (RMG) to Vietnam and China because of high cost and lack of free trade agreements (FTAs) amid intensifying competition, according to a report.

India's share in global exports of cotton yarn shrunk 600 basis points to 23 per cent in CY2020 from 29 per cent in CY2015, while RMG share has stagnated at 3-4 per cent over the past decade, Crisil Research said in a report.

The report stated that the lack of FTAs and significant improvement in peer competitiveness have resulted in India's contracting global market share in both RMG and cotton yarn.

Textiles are important to India's USD 313 billion merchandise exports as it accounts for 11 per cent of the pie and the sector is also a significant employment generator, it pointed out.

Given its economic importance, the sector has seen a slew of measures from the government, including the textile parks announced in Union Budget 2021-22 and the inclusion of the sector for allocations under the production-linked incentive (PLI) scheme.

While these are steps in the right direction, the report said more is needed to address the issues and revive the sector.

In cotton yarn, India has lost market share over the past decade to Vietnam and China because of high cost and lack of FTAs amid intensifying competition, the report noted.

In RMG, India has done well to maintain its share even as global trade in the segment contracted, but competitors such as Vietnam and Bangladesh have done much better, it pointed out.

Bangladesh and Vietnam have capitalised on China's falling share in the past five fiscals, while India could not be added to the report.

Further, Indian textiles players were pushed to the brink in 2020 as the government reduced export incentives in line with guidelines of the World Trade Organization, it said.

Crisil Research does not expect any significant improvement in incentives with the launch of the Remission of Duties and Taxes on Export Products (RoDTEP) scheme, which aims to reduce the tax burden of exporting entities, it added.

However, to revive the textile value chain, the government has announced additional structural reforms whose impact needs to be evaluated.

The recently announced PLI scheme for man-made fibres (MMF) and technical textiles is expected to improve the potential of man-made fibre (MMF) based RMG exports where India's share has been weak.

Along with the integrated textile parks scheme, the PLI scheme may help the sector enhance its export share over the medium to long term, if implemented well, it stated.

However, continuous support in terms of trade negotiations, more investments to improve infrastructure at a larger scale may be needed, the report said.

"India is in a favourable position with China facing political backlash globally, but capitalising on this opportunity would need a continuous and concerted effort," it added.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)