India is losing an estimated $7 billion in annual apparel export revenue due to supply chain inefficiencies and low factory productivity. Improving production planning could boost earnings without needing new manufacturing capacity, though competition from hubs like Bangladesh remains a challenge.
India’s goal to become a global leader in the garment industry is facing a significant hurdle. A recent analysis by Vector Consulting Group indicates that the country is missing out on roughly $7 billion in export revenue every year. Rather than blaming only high costs or external trade barriers, the study points to internal operational inefficiencies as the main reason for this lost opportunity.
Operational Bottlenecks and Efficiency Issues
The core of the problem lies in how factories are managed. Current data suggests that many garment manufacturing units are operating at sewing efficiency levels between 58% and 70%. Furthermore, factories are struggling to meet deadlines, with on-time delivery rates for orders reported between 60% and 80%. When orders are delayed, exporters often have to pay for airfreighting to ensure products reach buyers on time. This extra cost eats directly into profit margins, making it harder for Indian firms to compete on price in the global market.
Value Addition and Raw Material Exports
Another major concern is the reliance on selling raw fabric rather than finished clothing. While India is the second-largest producer of textiles in the world, a significant portion of this output—estimated at 35% to 45%—is exported as raw fabric. By exporting fabric instead of turning it into high-value garments, Indian companies are missing out on the profit that comes from the final manufacturing stage. Industry experts suggest that if textile mills and garment manufacturers worked together more closely, they could create a more predictable production cycle and capture more value.
Competitive Pressures and Trade Dynamics
The challenges are not limited to internal supply chains. Competing manufacturing hubs like Bangladesh and Vietnam have historically held an edge due to higher labor productivity and more favorable trade conditions. While trade agreements, such as the one between India and the UK, are expected to provide a boost, industry leaders have noted that broader trade pacts with the US and European nations are necessary for India to compete on a global scale.
For investors, the key to the sector lies in whether companies can move toward higher-value products and improve their operational efficiency. The ability to increase garment production without relying heavily on massive new capital spending on factories is a potential positive. However, the next important updates for the sector will involve monitoring whether companies can improve their on-time delivery metrics and whether they can successfully pivot toward higher-margin finished apparel exports to offset the pressures of global competition.