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India’s Textile Industry is Resilient, Backed by the Government for Further Growth

Textile exports in India for the first half of 2021 have surpassed pre-pandemic levels, a welcomed development after the dire effects that the COVID pandemic has inflicted on the economy. The Indian government recently introduced a scheme that is expected to help the industry further expand its growth within the next five years.

 

Indian textile workers

Resilience Amidst the Pandemic

From January to July 2021, India exported US$23.8 billion worth of textile products, 52.6% higher than the same period in 2020, and 13.7% higher than the pre-pandemic level of 2019. This positive result came amid a heavy summer as COVID cases surged in the country.

Graph showing Indian textile exports

A leading factor in this exceptional growth is the China Plus One strategy, the business strategy to avoid investing in only China and diversifying into additional countries, which has been adopted by many European and US apparel brands. The US ban on Chinese cotton is also a contributing factor. Improved global demands, especially from the US and European markets, has helped the Indian textile industry stay afloat.

In terms of export destinations, a major share of the exported textile products during January-July 2021 went to the US, followed by Bangladesh and United Arab Emirates (UAE). Interestingly, a total of US$6.05 billion of textile products were exported to the US, three times as much as the US$2.07 billion export value to Bangladesh.

Table showing destinations for Indian textile exports

The textile industry contributed to 7% of the industrial output, 2% to the nation’s GDP, 12% of the export earnings, and accounted for 5% of the global market. India is one of the largest textile producers in the world, placed as the sixth largest textile exporter in the world.

Government Approves New Scheme to aid the Textile Industry

In September 2021, the Indian Union Cabinet approved a Production-Linked Incentive (PLI) scheme for the textile sector worth US$1.42 billion. The purpose of the scheme is to attract new private investments of US$2.56 billion for in-demand textile production, with an expected total turnover of US$40.42 billion over five years. The in-demand textile segments are Man-Made Fiber (MMF) fabrics, garments, and technical textiles.

The focus of the PLI scheme would help boost the value of the textile sector and shift production to align with global demands. Among the APAC countries, India is currently strong in exporting upstream segments of raw materials and yarn spinning, while much weaker in fabrics and finished goods. This evidently limits the value of India’s export. China, in comparison, has a higher share than India in all segments, including downstream products that generate higher value.

Graph showing India and China shares of textile market in APAC region

Moreover, the majority of India’s apparel export is cotton products, while the trend in global consumption is towards manmade textiles.

Table showing India and China share of exports by fibre type

The PLI scheme will give incentives in two categories. With the first category, any person or company that invest a minimum of US$40.42 million in plants, machinery, equipment, and civil works (except for land and administrative building cost) to produce either MMF fabrics, garments, or technical textiles, will be eligible to participate. The second category requires investors to spend a minimum of US$13.47 million under the same conditions.

Companies participating in the scheme are expected to meet the minimum turnover requirements within 2 years. If they pass, they will be entitled to 3-11% of the incremental revenues year-on-year for five years. Any subsequent reception of the incentives will be heavily dependent on the companies’ performance in those years.

Table showing summary of India's PLI scheme for the textile industry

The rebound of the textile and garments industry in India is more than impressive as the country braves through the COVID pandemic. The government’s fresh policy arrived at the right time as the sector competes to regain its position globally. Fueled by the unprecedented growth and the government’s strong support, India’s textile industry is expected to magnify both in scales and specialities.


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    by Asia Perspective Asia Perspective No Comments

    A Look at India’s Dominating Vaccine and Pharma Industry

    India emerged as one of the world’s largest COVID vaccine exporters in 2020/21. Extensive production with intensive development of “made-in-India” vaccine products enable rapid growth for the nation’s pharma industry as it prepares to become the leader in the post-pandemic world.

     

    Indian scientist holding a vaccine ampoule

     

    As of May 2021, India supplied cumulatively 69 million vaccines to 71 countries. The country pledged to export 1 billion COVID vaccines to the COVAX program by December 2022. After a halt in exports due to a surge in COVID cases from April to September 2021, government officials announced that the country would resume its vaccine exports to developing nations in the last quarter of 2021. The country aims to export 8 million vaccine shots by the end of October.

    Graph showing Indian COVID vaccine production

    Serum Institute of India (SII), the world’s largest vaccine manufacturer, was a major driver behind India’s export resumption. The manufacturer managed to produce more doses of Covid-19 shots than the government’s most optimistic forecast. Currently, SII delivers around 150-200 million Covishield shots per month to its government. Covishield is a version of the UK-based AstraZeneca’s vaccine. Bharat Biotech, another major producer of Indian vaccines, is also producing domestically developed Covaxin Covid shots.

    India aims to produce its own mRNA-based Covid vaccine – a breakthrough that would help ease the global vaccine shortage crisis – by the end of 2021. India’s first mRNA vaccine candidate, known as HGCO19, comes from the lab of Gennova Biopharmaceuticals Ltd. Chief Executive Sanjay Singh claimed that their vaccine candidate could be stored between 2 and 8 degrees Celsius, making it more manageable for distribution to low- and middle-income countries, where ideal logistics and storage are limited.

    The “Pharmacy of the World”

    From a modest 5% contribution to the global medicine landscape in 1969, medicine ‘made in India’ has taken up 80% of the global pie by 2020. The Indian pharmaceutical industry is now ranked third globally in volume and 14th in value. In 2020, the industry directly contributed to the GDP by 1.5%, and 3% indirectly.

    Considered as the ‘pharmacy of the world’, India is the largest distributor of generic medicine, with a 20% share of the global market. The drugs and pharmaceuticals sector has attracted a total FDI inflow of US$17.99 billion from April 2000 to March 2021. Drug and pharmaceutical exports reached US$24.4 billion in FY21 (Fiscal year 21, 1 April 2020 to 31 March 2021), with a remarkable YoY growth of 17.9%. Between FY16 and FY21, pharma exports have grown at a CAGR of 7.6%.

    Graph showing India pharmaceutical exports

    The US is India’s key market with a 30.4% share of the total exports, followed by the UK, South Africa, Russia, and Brazil with less than a 5% share each. Meanwhile, India accounts for 40% of the generic pharmaceutical drug demand in the US, and 25% of all medicines in the UK. There remains a largely untapped market for India in Japan, China, Australia, Southeast Asia, the Middle East, Latin America, and other African countries. Domestically, the market is dominated by the native pharma companies making up roughly 80.5% of the market.

    Charts showing India Pharma market size

    India also boasts strong capabilities and capacities for vaccines production. The nation supplies more than 50% of the global demand for different types of vaccines. Indian vaccine producers cumulatively could manufacture 8.2 billion vaccine doses on an annual basis. Regardless, the vaccines market was significantly under-penetrated in 2019 with a then-estimation of US$250 million in value. In crisis come opportunities. As governments globally include vaccines as a key item of their agendas, India has a US$11 billion global COVID vaccine market opportunity to tap on, according to a recent report from the CARE Rating Agency. A report released by Kearney in collaboration with the Confederation of Indian Industry (CII) also hailed the future of the Indian vaccine market with a forecasted value growth from US$2 to US$4 billion by 2026.

    India also found opportunities in biosimilars production. The nation manufactured US$500 to US$600 million in the $12 billion biosimilars market in 2020, with its strongest player – Biocon, among the top 10 global players by revenue. The global market for biosimilars is expected to reach US$35.7 billion by 2025, growing at a CAGR of 24.7%, making it a more-than-attractive field for the Indian pharma sector.

    India’s healthcare and pharma sector set an ambitious target to reach US$130 billion in market size by 2030 from US$42 billion in 2020. The COVID pandemic, though posing many challenges, has brought about multiple opportunities for the industry and helped accelerate its ambition. With strengthened government support and investment flows in R&D and Infrastructure, India has a great potential to become the actual pharmacy of the world.


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      by Asia Perspective Asia Perspective No Comments

      India’s Unicorn Flush Creates Multiple Opportunities for Investors

      India is an increasingly attractive land for investors. 28 new companies joined the unicorn list in 2021, indicating promising future robust capital markets. Foreign investment into India grew by 90% during the first three months of the fiscal year, confirming a global appeal in one of the best-performing markets in the region.

       

      Indian investors in discussion

      A New Unicorn Every Three Months

      ‘Unicorn’ is the term coined by the venture capital industry to address private-held startup companies with a valuation of $1 billion or above. Currently, the country with the most unicorns is none other than the US, where around 50% of the unicorn share belongs to Silicon Valley. Racing behind is China, the host of the world’s most valuable unicorn company ByteDance. India strives to close the gap in third place, with a record number of investment during the year as of September 2021.

      Graph showing unicorn creation in India

      India marked 2021 as its most productive unicorn minting year to date, with 28 new startups reaching unicorn status as of September. That is over 40% of the nation’s total number of unicorns. This strong growth in billion-dollar startups signifies the country’s maturing startup ecosystem, as well as investors’ increasing confidence in its value creation opportunities.

      The majority of the recorded Indian unicorns up until September 2021 are in the Fintech sector. Four of the new unicorns are in e-Commerce. A similar number is recorded for the SaaS (Software as a Service) and the marketplace (manufacturing, human resources, secondhand products) segment. Edtech, NBFC (Non-Banking Financial Companies) and B2B (business to business) sectors garnered two new unicorns each. The rest of the 2021 unicorn list are startups in gaming, cryptocurrency, logistics services, social media, and conversational messaging.

      Charts showing the importance of fintech within the unicorn market

      This sectoral trend is also observable globally. By September 2021, 162 out of the global 832 unicorns belong to the Fintech category. 8 out of the UK’s 9 unicorns in 2021 (September) were in the Fintech sector. Fintech also leads the 2021 unicorn batch in China with four new startups up until. The Fintech sector in the US has introduced 49 new unicorns in 2021, only one less than the internet software and services sector. The growth in Fintech startups is backed by the strong interest among investors. Fintech investments reached US$98 billion in the first half of 2021, $52 billion of which is from VC (Venture Capital) investment.

      India’s 2021 batch also welcomed the historically fastest startup to reach unicorn status, the 21-month-old hiring startup Apna.co. The company became the world’s second-largest internet market to reach unicorn status. Asides from the coveted unicorn title, 32 Indian startups are titled gazelles (valued at over US$500 million) and 54 are cheetahs (valued at over US$200 million).

      Investors Rush to India for Unicorn Hunting

      India is undoubtedly one of the most attractive markets for global investors. Foreign investment to India totalled at US$22.5 billion in the first three months of the fiscal year, which started on April 1st. That is 90% higher than the same period 2020. Between January and September of 2021, 840 venture capital deals were announced with a disclosed value of US$49 billion.

       

      Chart showing investment growth in India

      Collectively, Indian unicorns are valued at around $300 billion. The opportunities are abundant for early and late-stage investors as well as retail ones. A record number of unicorns and start-ups have announced their plans to list in the stock market.

      Food-delivery company Zomato Ltd. became the country’s first unicorn to make its stock market debut in 2021, raising US$1.3 billion and backed by Morgan Stanley, Tiger Global, and Fidelity Investments. Fintech unicorn Paytm filed a prospectus together for what could potentially become India’s largest IPO. The lineup also includes e-commerce giant Flipkart and ride-hailing startup Ola. The momentous wave of startups going public helps ease investors fear of Indian startups’ ability to be listed.

      Attractive investment opportunities are extended beyond the equity market to the overall capital market, including debt issuance. There is also a growing interest in the more sophisticated instruments of derivatives, bonds, and other markets. Indian tech companies “can attract global investors who’ve burnt their hands in Chinese tech companies,” said Nilesh Shah, group president and managing director at Kotak Mahindra Asset Management Co in Mumbai.

      Once a startup goes public or gets acquired, it will no longer be considered a unicorn. That fact alone makes some venture investors relentless in their hunt for the next unicorns. Tiger Global, Sequoia Capital and other venture giants are directing their attention to India with Tiger Global being the leader of the pact. A significant number of newly generated Indian unicorns are backed by Tiger Global. The investment firm raised US$6.65 billion for its 13th fund, a major proportion of which is set to invest in India.

      India is one step closer to prove itself as the next big startup hub with a very high record number of unicorn births in 2021. The momentous rise of unicorns in India was fostered by a strong growth in overseas investments, supporting local startups in their transformation and scaleup strategies. 2021 also marks the first listed unicorn from India, signaling great investment opportunities for interested investors.


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        Marcus Sohlberg, Business Development Director

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