The slowdown in the Indian economy has impacted demand across sectors including food, automobiles, durables, etc., and readymade apparel. So, this is an opportune time to review the outlook for the apparel industry in 2020…

Payal is a young professional working for a multinational company in Mumbai. She loves shopping and keeps abreast of latest fashions. During Diwali, as she strolled through fashion outlets like GAS, H&M, Marks and Spencer and Zara, she was surprised to see that many retail stores were virtually empty. There were very few purchasing customers. “Visitors come, touch, feel the garments; then if we are lucky, they may buy a shirt,” laments Mangesh a salesman in a retail outlet. Retailers in shopping malls and High Streets, say that their sales are about 10 to 25 per cent lower than last year. Ramakant, a women’s apparel retailer, who sits in his four by four square metre shop, opposite Palladium Mall, reiterates the fall in consumer demand, saying, “Sales are very low.” The slowdown in the Indian economy has impacted demand across sectors including food, automobiles, durables, etc., including readymade apparel. So, this is an opportune time to review the outlook for the apparel industry in 2020.


The Indian textile and apparel industry is one of the oldest and largest in the world, going back centuries. It accounts for about four per cent of the global market, about 2 percent of the GDP of India, 7 percent of the industrial output value and 15 percent of the country’s total export earnings. The industry is the second largest sector, employing 45 million people, after agriculture. The industry is largely unorganized, with small shops and boutiques, particularly in the non-metro cities and towns of India. The organized sector, selling domestic brands, foreign brands and the private labels of organized retailers, are augmenting their footprints, across the country.


Garment manufacturing is a challenging and labour-intensive industry. A single garment piece such as a jacket could require multifarious types of materials and accessories, sourced from different parts of the world. First, the design and the materials are 􀃺 nalised. The necessary materials and accessories such as the fabric, buttons, zipper, threads, laces, elastic, etc., are sourced from various vendors. The production stage involves creating a technical design, matching the fabric colours with the design, cutting of fabric, stitching, washing, attaching the price tags and labels, performing quality checks, and 􀃺 nally packing the garment for shipment to various markets. Any garment not delivered on schedule, becomes out-of-fashion and depreciates in value. This is a perpetual challenge that garment manufacturers confront.


The apparel industry in India has blossomed at a CAGR of 13 percent from `2,432 billion (`2.43 lakh crores) in 2010 to `6,484 billion (`6.48 lakh crores) in 2018. (Exhibit 1.) The steadily growing population; has given wings to the industry.
The domestic readymade garments market can be broadly classified into men’s wear, women’s wear and kids’ wear. Men’s wear is the largest segment contributing to about 41 percent, followed by women’s wear at 38 percent and kids’ wear with 21 percent. The total apparel exports from India in 2018-19 were `1,128 billion (`1.13 lakh crores), 4.7 percent higher than 2017-18.


The major players in the organized sector in India are Arvind Limited (US Polo, Arrow, Flying Machine, Tommy Hil􀃺 ger, GAP, etc.), Madura Fashion and Lifestyle (Louis Philippe, Van Heusen, Allen Solly, Peter England, etc.), Raymond (Raymond, Park Avenue, ColorPlus, Parx, Ethnix, etc.), Siyaram Silk Mills (Siyaram’s Suitings and Shirtings, J. Hampstead, Cadini, etc.), Reliance (Marks & Spencer, Burberry, Armani Exchange, Diesel, Emporio Armani, etc.), among others.
These organizations market their garments to the consumers via their own retail outlets in malls, High Streets and through multi-brand garment retailers such as Shopper’s Stop, Lifestyle, etc. Some also sell through online portals like Amazon, Flipkart, Myntra, Shopclues, etc.


Boosting sales despite the current slowdown, will be a major challenge in 2020 for the apparel industry. “The present economic crisis is worse than 2008 recession,” opined Prachi Mishra, chief economist of Goldman Sachs.
In September 2019, the industrial production contracted by 4.3 percent, the lowest performance in last eight years. The rate of unemployment reached 8.5 percent in October 2019, highest in past three years. The Reserve Bank of India (RBI) dipped its growth forecast from 6.9 to 6.1 percent, for 2019-20. Deepak Seth, Group Chairman, Pearl Group of Companies, one of the leading garment manufacturers and exporters, explains that “The ‘feel-good’ factor is currently missing in the economy, with the general economic slowdown, bankruptcies, etc. Once this ‘feelgood’ factor returns, conditions will improve.”


1. Battling Rural Distress – Lower Incomes and Spending:
India’s growth story was fuelled by agricultural productivity and rising rural incomes. Demonetization in late 2016 crippled the rural economy. The prolonged agrarian distress, uneven rainfall spread, and stagnant rural incomes have impacted demand.
Daily necessities like a Lux tablet or a Colgate toothpaste acquired the status of luxuries in villages like Vidisha in Madhya Pradesh. In many rural households, toothpaste has been replaced with “raakh” (ash). For the September quarter 2019, rural consumption (􀃺 ve per cent) grew at a slower pace than the urban consumption (eight per cent), according to a Nielsen report.

2. Sliding Demand:
The key challenge confronting retailers and the apparel industry in 2020 in India is: How do we prevent a further slide in demand? How do we kindle fresh demand? On a visit to a mall in Delhi, Dileep Salecha, a sales manager exclaimed that a customer who used to buy four trousers, now only buys one. Another branded retail store owner, Urvashi Bhaliya was disappointed that her monthly average sales in 2019 have reduced by 50 percent to mere `20 lakhs from `40 lakhs in the previous year.
The average consumer is shy to spend. He wants to hold onto what he has. Even if he has surplus income, he is looking to save, as he is uncertain about the future. Rahul Mehta, Ex President of The Clothing Manufacturers Association of India, says, “Slowdown in the apparel sector is also due to slowing down of sentiments. The overall discretionary spending has gone down. Besides, credit has dried up in the economy, especially for the textile units.”

3. Consumers Want Promotions and Discounts (Cost- Conscious):
Indian consumers love sales, promotions and discounts. E-commerce players like Amazon, Flipkart and others offer enticing markdowns during festive seasons. Brand Factory, multi-brand retail store in India, ensures some promotions throughout the year. Future Group promotes by offering up to 60 percent discount at times, on apparel through Amazon, Big Bazaar, etc.
In 2020, expect margins of retailers to be under pressure and competitive. It will be tough to maintain manufacturing margins with sustained marketing costs. The cost of every additional button, hook, lapel or sequin will have to be evaluated and a call taken, does the consumer really need it? Fashion retailer, Zara, posted a 13.4 percent drop in their products in India for the year ended March, 2019. A renowned international brand like Forever 21 filed for bankruptcy, closing 350 out of its 800 stores. Early this year, US Jeans maker Diesel USA Inc., filed for bankruptcy.

4. New Life for Medium and Small-Scale Garment Enterprises:
The medium/small-scale enterprises need to recuperate in 2020. Ashok Mishra, a young retailer selling unbranded garments in the busy Karol Bagh market in Delhi, says, “The new GST regulations have overwhelmed me. I do not even have a laptop!” Smaller businesses now engage accounting professionals to manage GST regulations. To exacerbate woes, competition from online sites and malls has compelled them to operate on thin margins. They also face a liquidity squeeze.

5. Adapting to Changing Trends and Fast Fashion:
With the concept of “Fast-Fashion” gaining momentum in India, the apparel industry will have to ensure that the latest fashion trends are in stores expeditiously, at attractive prices. Fast-fashion companies like Zara, H&M, Forever 21 and Woolworths, are tantalising consumers with ever changing designs, colours, patterns, trends, etc. The traditional seasons in the fashion industry are evaporating.

6. GST – Flaws in the Law and Delays in Refunds:
System issues, delayed reimbursement of input credit, limited knowledge among companies, etc., have frustrated apparel manufacturers and retailers. Delays in GST refunds have choked the cash cows of many businesses. The Government should take the bull by the horns and simplify the GST regulations in 2020. All apparel and its inputs should carry a maximum GST of five per cent, to give a fillip to this potential industry.

7. Increasing Imports from Bangladesh:
The apparel imports from Bangladesh are increasing in India; they give strong competition to domestic manufacturers, due to zero tariffs. The imports from Bangladesh in 2018-19 are at `2,569 crores, about 3.5 times that in 2014-15. Table 1 shows the apparel imports from Bangladesh from 2014-15 to September 2019.

India exports cotton t-shirts, men’s cotton shirts, women’s dresses, blouses or shirts,
baby’s cotton garments, etc. The top 10 apparels exported from India in 2018-19 are presented below.

1. Higher Production Costs in India, Lower Margins:
Most global retailers outsource their manufacturing to vendors in China, Bangladesh, Vietnam, Indonesia, India, etc. Indian manufacturers will have to be highly cost effective to be competitive in 2020. Wage rates are increasing in India, as are raw material costs. High-power costs further add to overheads. Global retailers increasingly prefer low cost Bangladesh, Vietnam, Sri Lanka, Indonesia, etc., to source supplies.

2. Higher Trade Barriers, Less Competitive Prices:
Companies in India face higher trade barriers in key markets like the European Union (EU) and USA, as compared to those in competing countries like Vietnam Bangladesh, Pakistan, etc. The average tariff rates on Indian products in EU and USA, compared to others are presented below. (Table 3.)


1. Favourable Demographics:
An increasing young population, higher disposable incomes, migration to large cities, greater awareness of fashion, spread of modern retail formats, etc., boosts sales. India’s youth population (15 – 34 years) is almost 35 percent of the population. India’s urban population is also growing. It has grown from 31.1 percent in 2011 to 33.2 percent in 2017. Urbanites generally have higher income levels and easier access to brands. So, the apparel is positioned to grow.

2. Growth of Tier II & III Cities:
When Prachi Pohani visited a local mall in Vadodara, she realized that leading brands like Marks & Spencer, Raymond, Arrow, Peter England, Calvin Klein, etc., were now easily accessible. For some years top fashion brands in the country had focussed on the cities. However, with the proliferation of e-commerce and the growing mall culture in the towns like Chandigarh, Ludhiana, Kolhapur, Lucknow, Bhubaneswar, Cochin, etc., brands have percolated down to smaller towns. This will boost their sales.

3. Value for Money Products:
Well-known brands like Nike, Adidas, Raymond, Gap, ColorPlus, etc., launch new collections every season to lure customers. They also promote aggressively to push the older collections at significant discounts. Indians love sales and bargains and wait for months to buy apparel at discounts. Manufacturers should focus on popular and low priced products, to garner market shares.

4. Emergence of E-Commerce Channels for Apparels:
Now, Indians can get anything, and everything delivered at the doorstep, except a Boeing aircraft! India has the world’s second largest internet using population, with 56.6 crores users in 2018. E-commerce is set to grow exponentially in India.
The popularity of online shopping of apparel is constrained by consumers’ unwillingness to shift from the “touch-and-feel” traditional shopping. Technologies like virtual dressing rooms, 360 degrees viewing, etc., are being developed. Facilities like cash on delivery, easy returns, etc., are convincing more consumers to try e-commerce.

5. Reduction in Corporate Tax Rates:
In 2019, the government slashed the basic corporate tax rate to 22 percent from 30 percent to improve corporate investment. For new manufacturing companies the rates were reduced from 25 to 15 percent.

The reduction in tax rates may improve the profitability of companies. They may transfer a part of bene􀃺 t received to the customers or they may reinvest the additional funds into advertising or promotions. This
could provide a boost to garment consumption in 2020.

6. Favourable FDI norms:
The government has allowed 100 percent foreign direct investment (FDI) in single brand retail through the automatic route. Uniqlo, Japan’s largest fashion brand, is a recent brand entry. Walmart and Flipkart are keen to tap the potential for apparel. Global premium fashion brand, Kenneth Cole, has also entered the market. With new brands poised to launch, the market for apparel and fashion could expand in 2020.

7. Sustainable Clothing, “Care for the Environment”:
Kushal Shah purchased a t-shirt made from recycled fabrics (80 percent) and plastic bottles (20 percent) in a Decathlon store. With growing concerns about climate change and global warming, consumers are getting conscious of what they wear. Sustainable fashion could lead to rental clothing, exchange of old clothes for a discount, etc., which will gain some momentum in 2020.

8. Growth in the Designer Wear Segment:
The Indian designer wear industry is growing exponentially. From Priyanka Chopra to Anushka Sharma, celebrities dazzle in Sabyasachi wedding “lehengas”, growing at 30 per cent per annum. Indian designer wear will continue to blaze in 2020 also.

9. The Ever-Popular Denim:
Denim garments have been in vogue in the urban markets for decades. India’s rural areas are also waking up to this steadfast material. Denim material apparels are low maintenance. With an increase in the youth population, the denim market is bound to grow further.

10. Prominence of Ethnic and Traditional Wear:
The ethnic wear and Indian fashion segment will continue to flourish in 2020. In 2018, ethnic wear was the largest category in women’s wear segment. The urban young is embracing Indian clothing styles, with ethnic wear brands entering the market. Aurelia, FabIndia, Biba, Manyavar, Soch, etc., are some popular ethnic brands. In smaller cities and towns, the preference for traditional Indian clothes is very strong. The unorganised sector will continue to play an important role in this segment. Kurtis, salwar-kameez, lehengas, etc., will continue to reign the wardrobes of consumers.

11. Growth of Celebrity Brands:
Celebrities and apparel brands have a symbiotic relationship. Celebrities have started their own apparel labels. Seven (by M.S. Dhoni), Wrogn and One8 (Virat Kohli), True Blue (Sachin Tendulkar), YouWeCan (Yuvraj Singh), Gully (K.L. Rahul) etc, are some apparel brands launched by cricketers. Being Human (Salman Khan), HRX (Hritik Roshan), All About You (Deepika Padukone), Rheson (Sonam and Rhea Kapoor), Nush (Anushka Sharma) etc., are some brands launched by Bollywood stars. The Indian market will see more new celebrity brands in 2020, as social media and mesmerizing fan-followings continue to increase.

12. Growth of Private Labels:
Organized retailers are increasingly shifting to private label brands. Reliance, Future Group, D-mart, etc., are allocating more space to their own private label brands. Retailers like Reliance have manufacturing and sourcing vendors’ bases in South Asia, to support low-cost manufacturing of their private label apparels.

1. Diversi􀃺 cation of Fibre Base and Apparel Types:
More than half the apparels exported from India are made of cotton. Globally, man-made 􀃺 bre segment has a much bigger share of the market, compared to cotton. India must diversify its production. Rahul Mehta, says, “We are focussed on very niche segments, e.g. cotton casual wear. We are lagging in the man-made fibre segment, woollen segment, uniforms, winter and sports clothing, etc. These are the areas
that we really need to look at, if we want to have a quantum jump, in our exports.”

2. US-China Trade War:
The on-going trade tussle between China and the USA will impact the global apparel industry in 2020. Mr. Deepak Seth, explains, “This trade war between China and USA is creating a huge upheaval in the global supply chain. Many retailers and customers are wary about continuing to work with China. They want to explore other destinations for sourcing. Countries like Vietnam, Indonesia, Bangladesh and India, could benefit by this. This ‘China shift’ will benefit the good players, who are efficient and operationally strong. Such players are going to benefit by 20 to 25 percent in 2020.” India needs a strategy to support the growth of apparel exports. Our exporters need to become lean and mean in costs.


The apparel industry is projected to grow between 10 to 26 percent in 2020, according to industry sources. However, the industry will have to be creative and innovative, to grow in the current global gloom. Rahul Mehta shows hope for a better 2020, but advocates tighter operating norms, “Performance in the domestic segment is improving. Orders will come but with tight pricing and lower margins. The top line might grow but maintaining the bottom line will be a challenge.” The Government has allocated `690 crores to set up 21 garment manufacturing units. The apparel industry may witness a marginal growth in 2020.

Time to Ignite the Buying Cycle:

To revive the economy, the Government has reduced corporate taxes. Hopefully the corporate sector will cease the various layoffs of personnel and the closures of ancillary factories. It is important to kick-start the economy by igniting the buying cycle. It will be smart to put more purchasing power in the hands of the consumers. This is also the time to reduce the rate of individual taxation, which at the highest level is 30 percent, to a maximum of 20 percent and lowering the goods and services tax, introduced in 2017, from the highest tier of 28 percent to a maximum of 15 percent. Besides, the Government could also consider following other measures:

  1. Enter into Trade Agreements with the EU and USA: Government must seal trade agreements with important markets like EU and USA, to give preference to Indian manufacturers.
  2. Reduction in Import Tariff Rates: Tariff rates on fabric imported for manufacture of export garments, should be reduced.
  3. Assesse Friendly Laws: An entrepreneur should devote time to grow his business rather than be flummoxed in complying with regulations. Every businessman is not a thief, out to cheat the government. Businessmen are not hoods or highway robbers. They are entrepreneurs. They generate employment, revenues and provide livelihoods. Laws should be friendly and easy to obey.

The apparel industry should focus on the followings:

  1. Understand Consumer Wants: Young India may prefer cotton and linen garments, or fast fashion at economic prices or durable. clothing. The players should 􀃺 rst understand the local market and launch suitable offerings.
  2. Emphasise on Customer Service: Once, I had to return a brand new unused suit purchased from Marks & Spencer, in UK, after 11 years. To my surprise, they graciously took the suit back, and within minutes fetched full details of my original transaction. Retailers in India should focus on providing excellent customer service before, during and after the sales.
  3. Creative Merchandising and Displays: Indian retailers could learn from the retailers in Dubai, London, etc. on creating attractive product displays, improving presentation of the stores, vibrant interiors, signboards, posters, etc.
  4. Focus on Durability and Quality: Indians are value and cost conscious. Retailers should focus on increasing the durability of their merchandise.
  5. Training and Development of Staff: The staffs in many retail stores are ill-informed about the products, are not well groomed and are not polite. This needs focus.


In 2020, in a stressed economy, consumers may downgrade and use cheaper brands. Value for money products in the medium to economic price range category would be in greater demand. The retail sector will face augmented pressure from e-commerce stores. Expect some brick-and-mortar retailers to shut shop. The year 2020 may seem a bit daunting and unsure, amidst national and global economic concerns. However, the impact of the slowdown may abate in the latter half of the year. Value for money products could be the shining stars.
“It’s the Economy, Stupid” “It’s the economy, stupid” is a phrase coined by James Carville, a strategist in Bill Clinton’s 1992 presidential campaign. It means that when the economy of a country, is doing well, the leader and government are appreciated for everything. But, when the economy performs badly, they take the blame even for minor mistake or mishap. The current government should remember this and revive the economy.

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