India’s Apparel Exports: Understanding the Policy Gaps Behind India’s Stagnant Apparel Exports

The apparel industry, which includes ready-made garments such as shirts, trousers, dresses, jackets and other clothing, is one of the world’s largest sources of employment and international trade. It is especially important for developing countries because it creates millions of jobs, requires relatively low investment to start manufacturing, and provides opportunities for women and small businesses.

Illustration by The Geostrata

As global demand for clothing continues to grow, a strong apparel industry can become an important source of exports, employment and foreign exchange. For developing economies, the sector therefore represents more than manufacturing and can also support wider economic development. India is well placed to benefit from this industry. It is one of the world’s largest producers of cotton and has a long history of textile and garment manufacturing. The country has a large workforce, skilled artisans, and a strong domestic textile base. These advantages should ideally make India one of the world’s leading apparel exporters. 

However, India’s export performance tells a different story. For nearly two decades, India’s share in global apparel exports has stagnated close to 3%, while countries such as China, Bangladesh, and Vietnam have significantly expanded their presence in international markets. During the same period, these countries increased exports while improving manufacturing efficiency, attracting investment, signing trade agreements, and responding quickly to changing global demand. This difference points towards the fact that having the resources to produce garments does not necessarily translate into stronger export competitiveness.

This raises an important question: If India has the raw material, skilled workers, and manufacturing experience, why has it struggled to increase its share in the global apparel market? This article explores the reasons behind India’s stagnant exports, compares India’s performance with China, Bangladesh, and Vietnam, and examines the policies and strategies that helped these countries succeed. It also discusses the key challenges facing India’s apparel sector and suggests practical, scalable, and socially acceptable policy measures that can help the country become a stronger player in the global apparel trade.

INDIA'S APPAREL EXPORTS STUCK AT 3% FOR TWO DECADES

India has long been recognised as one of the world’s largest textile producers. It is among the biggest producers of cotton, has a well-established textile industry, and employs millions of people in spinning, weaving, processing, and garment manufacturing. Given these strengths, India should have been one of the world’s leading apparel exporters. However, that has not happened. 

For nearly twenty years, India’s share in global apparel exports has remained close to 3%, even as the global apparel market expanded significantly. While India’s apparel exports have grown in absolute terms that is, from around USD 6-7 billion in the early 2000s to nearly USD 15-16 billion in recent years- its share of the global market has barely changed. In other words, India has continued to grow, but not at a pace that has allowed it to keep up with its major competitors.

The contrast becomes clearer when India is compared with other Asian exporters. China continues to dominate the global apparel trade, accounting for nearly 31% of global apparel exports despite rising labour costs. Bangladesh, which had a much smaller apparel industry two decades ago, has increased its global share to around 7-8%, becoming the world’s second-largest apparel exporter.

Vietnam has also emerged as a major player, raising its share to nearly 6% through rapid export-led growth. These developments show how countries with different structures have been able to expand their role in global apparel markets. This stagnation is particularly surprising because India possesses several natural advantages. It has abundant raw materials, a large and relatively young workforce, and one of the world’s largest integrated textile value chains covering everything from cotton cultivation to garment production. Yet these strengths have not translated into higher export competitiveness.

The COVID-19 pandemic created another opportunity for India. As global brands looked to reduce their dependence on China under the “China+1” strategy, many buyers shifted sourcing to alternative manufacturing hubs. Countries such as Vietnam and Bangladesh successfully attracted a significant share of these new orders through efficient manufacturing, competitive pricing, and strong trade partnerships. India also benefited to some extent, but it was unable to capitalise on the opportunity at the same scale.

The question, therefore, is no longer whether India has the potential to become a global apparel leader. The more important question is why countries with fewer natural advantages have consistently outperformed India in one of the industries where it should have had a clear competitive edge. 

HOW CHINA, BANGLADESH AND VIETNAM BECAME GLOBAL APPAREL POWERHOUSES

While every country followed a different path, China, Bangladesh and Vietnam shared one common strategy; they treated apparel as a major export industry and built policies around making their manufacturers globally competitive. China’s success was built on its ability to produce garments quickly, efficiently, and at a large scale. Instead of depending on different countries for raw materials, fabrics, accessories, and manufacturing, China developed a complete textile and apparel ecosystem within its own borders. This allowed manufacturers to source inputs, produce garments, and ship finished products in much less time. 

The Chinese government also invested heavily in transport infrastructure, industrial parks, modern ports, and reliable electricity, making it easier for businesses to operate efficiently. Over time, factories adopted advanced machinery and automation, helping them maintain high productivity even as labour costs increased. This combination of scale, technology, and infrastructure has made China the preferred sourcing destination for many international fashion brands. 

Bangladesh transformed its economy by making ready-made garments its leading export industry. The government encouraged export-oriented manufacturing through Export Processing Zones (EPZs), which offered businesses better infrastructure, tax incentives, and simplified regulations. These measures attracted both domestic and foreign investment into the apparel sector. 

The country also benefited from preferential trade access to several developed markets, allowing Bangladeshi garments to enter these countries with lower and zero import duties. Combined with a large workforce and competitive labour costs, this gave Bangladesh a significant pricing advantage. Today, the apparel sector contributes nearly 80% of the country’s merchandise export earnings, making it one of the most export-dependent garment industries in the world. 

Vietnam also created a favorable environment for Foreign Direct Investment (FDI). Global manufacturers invested in factories, modern equipment, and workforce training, bringing with them advanced production techniques and international supply chains. As a result, Vietnam became a preferred manufacturing base for global brands such as Nike, Adidas, and Uniqlo.

Although these countries followed different strategies, their experience points towards a similar policy lesson. They invested in efficient infrastructure, encouraged large-scale manufacturing, welcomed global investment, and adopted policies that supported exports. Their experience shows that success in the apparel industry depends not only on producing garments, but also on creating an ecosystem that allows businesses to compete efficiently in international markets.

WHY IS INDIA FALLING BEHIND?

India’s apparel industry has several natural advantages, but these have not translated into export success. The challenge is not the absence of resources, but the inability to convert these strengths into a globally competitive manufacturing ecosystem. 

One of the biggest challenges is the fragmented nature of India’s apparel industry. Nearly 80% of India’s garment manufacturers are Micro, Small and Medium Enterprises (MSMEs), many of which operate on a small scale. While these businesses generate employment, they often struggle to invest in modern machinery, meet large export orders, or maintain garments within strict timelines. For individual small manufacturers, meeting the scale and delivery requirements of international buyers can therefore be difficult.

For many years, restrictive labour regulations encouraged manufacturers to remain small rather than expand their workforce. As a result, India’s apparel industry became highly fragmented, making it difficult to compete with the large-scale factories in Bangladesh and China.This has created a wider policy challenge where employment generation and industrial expansion have not always moved together.

Another major gap is India’s limited participation in Free Trade Agreements (FTAs) with key apparel markets. Countries such as Vietnam enjoy lower or zero import duties in several major markets because of agreements like the EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Indian exporters, on the other hand, often face tariffs, making their products more expensive and less competitive despite similar production costs. 

However, India’s ongoing efforts to strengthen trade partnerships, including the signing of the India-EU Free Trade Agreement, have the potential to improve market access and enhance the competitiveness of Indian apparel exports once implemented. This could create new opportunities for Indian manufacturers, but better market access will only be useful if domestic firms are able to respond to the additional demand.

India has also been slow to shift towards man-made fibre (MMF) garments, even though global demand has changed significantly. Today, nearly 70% of global apparel trade is based on man-made fibres such as polyester, while India’s textile industry continues to have a strong focus on cotton. This mismatch means Indian manufacturers are not fully aligned with changing consumer preferences in international markets.

Government initiatives such as Atmanirbhar Bharat (Self-Reliant India) and Make in India have encouraged domestic manufacturing and strengthened India’s industrial base. However, these initiatives have primarily focused on expanding production within the country. Apparel exports require an additional set of reforms, including easier access to global markets, stronger trade partnerships, efficient logistics, and deeper integration into global value chains. Without these export-oriented measures, higher domestic production does not automatically translate into greater international competitiveness.

Finally, India has not attracted the same scale of Foreign Direct Investment (FDI) into apparel manufacturing as countries like Vietnam. International manufacturers often bring advanced technology, modern production methods, and access to established global supply chains. Greater investment in large-scale garment manufacturing could help Indian firms improve productivity, create better-paying jobs, and compete more effectively in international markets.

WHAT CAN INDIA DO BETTER?

India does not need to rebuild its apparel industry from scratch; rather, it needs to make it more competitive. The focus should shift from increasing production to increasing exports.

One of the most important priorities is helping manufacturers scale up production. Many Indian apparel firms remain small because they lack access to affordable finance, modern technology, and large manufacturing spaces. Expanding initiatives such as the PM MITRA Mega Textile Parks can help by bringing spinning, weaving, processing, garment manufacturing, and logistics together in one location. This reduces transportation costs, shortens production time, and allows manufacturers to handle larger export orders more efficiently.

India should also shift focus towards man-made fibre (MMF) apparel, which accounts for nearly 70% of global apparel trade. While cotton will continue to remain an important strength, greater investment in MMF production, technical textiles, and research can help Indian manufacturers better match changing global demand. Encouraging innovation in sustainable and recycled fibres can also position India as a supplier of environmentally sustainable clothing. 

Another important step is to expand India’s network of high-quality trade agreements. Countries such as Vietnam have shown how reduced tariffs can significantly improve export competitiveness. Future trade negotiations should prioritise major apparel markets while ensuring that domestic manufacturers receive the support needed to compete effectively once these agreements come into force. Trade agreements should therefore be seen as more than instruments for reducing tariffs. They can also provide Indian manufacturers with access to larger markets and encourage firms to improve their quality, productivity and match international standards.

India should also make it easier for businesses to become part of global value chains. Instead of producing every component domestically, manufacturers should be encouraged to specialise in different stages of production and collaborate with international suppliers and brands. This would help Indian firms access new technologies, improve product quality, and secure long-term export contracts with global retailers.

Finally, India has the opportunity to position itself as a leader in sustainable apparel manufacturing. As global demand shifts toward eco-friendly products, investing in renewable energy, water-efficient dyeing, textile recycling, and transparent supply chains can become a key export advantage. Sustainability should therefore be seen not only as a cost, but also as a long-term investment in India’s competitiveness in global markets.

THE ROAD AHEAD

The future of the global apparel industry will be shaped not just by cost, but by innovation, sustainability, and transparency. As international buyers increasingly demand traceable supply chains, India should prepare for emerging requirements such as Digital Product Passports (DPPs), which allow consumers to track a garment’s origin, materials, and environmental impact.

The country should also invest in circular textiles by promoting textile recycling, repair, and reuse. These measures can help manufacturers reduce waste while creating new business opportunities. Moving beyond basic garments and expanding into high-value products such as technical textiles, performance wear, and functional apparel can further strengthen India’s position in global markets.

These changes are important because the global apparel market is itself changing. International buyers are increasingly looking beyond price and considering environmental impact, supply-chain transparency, and production standards. India therefore has an opportunity to prepare for these changes before they become a larger barrier to exports.

By anticipating these shifts rather than reacting to them, India can build an apparel industry that is not only globally competitive but also future-ready.

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BY SHRUTI GIRDHAR

CENTRE FOR TRADE AND DEVELOPMENT TEAM GEOSTRATA

info@thegeostrata.com