Rahul Mehta says that the current GST framework creates structural distortions in the apparel market, with the biggest concern being the Rs 2,500 threshold beyond which garments attract 18 per cent GST
India has “no choice” but to move towards man-made fibres (MMF) to remain competitive in global apparel trade, said Rahul Mehta, Chief Mentor and former President, Clothing Manufacturers Association of India (CMAI). Noting that 60 to 65 per cent of global apparel trade is MMF-based, he said India should “add MMF to cotton, not replace it”, arguing that the country must preserve its niche in cotton while expanding into faster-growing categories such as sportswear, performance wear and specialised garments.
In an interview with BW Retail World, Mehta stated, “We do not have an option but to move towards MMF because that is where 60 to 65 per cent of the global trade takes place whether it is in terms of polyester-based garments or performance garments, specialised garments, sportswear. If we want to actually increase our exports, particularly in the apparel sector, we will have to switch to MMF.”
Mehta argued that the current GST framework creates structural distortions in the apparel market, with the biggest concern being the Rs 2,500 threshold beyond which garments attract 18 per cent GST. Calling the distinction “illogical”, he said many products such as winter wear, sportswear and ethnic wear are pushed into the higher tax slab despite not being luxury purchases. To illustrate the anomaly, he noted, “If you buy a saree for Rs 1 lakh, it is charged at 5 per cent but if you buy a churidar kurta for Rs 5,000, it is charged at 18 per cent. It does not make sense.”
He further said the existing GST regime also burdens retailers by increasing operating costs. According to Mehta, nearly 20 to 25 per cent of a retail outlet’s revenue is spent towards rent, on which retailers do not receive GST relief, ultimately raising the cost of apparel for consumers. “GST is an economic tool and should be looked at from an economic angle,” he emphasised.
Reiterating CMAI’s long-standing demand, Mehta said the industry needs a single 5 per cent GST rate across the entire apparel value chain. He argued that while most of the textile value chain is taxed at 5 per cent, garments above a certain price point are treated differently without a sound economic rationale. A uniform GST structure, he added, would simplify the tax regime, remove market distortions and improve affordability.
India’s Export Competitiveness Challenge
Mehta traced India’s export competitiveness challenge to structural issues that date back decades rather than recent years. “The origin of us missing the bus goes back many more years than just the last few years,” he said, explaining that the apparel sector’s long-standing reservation for small-scale industries led to a fragmented manufacturing base. Labour policies, he added, further discouraged entrepreneurs from building large factories, resulting in production being spread across multiple units instead of creating globally competitive manufacturing capacities.
According to Mehta, this fragmented structure has made India less attractive to global buyers, who increasingly prefer sourcing from countries with large integrated factories. “The strength of the Indian manufacturing centre, which is the ability to be flexible, the ability to take small orders and the ability to take on value-added production, has also become our major weakness,” he said.
While these capabilities serve the domestic market well, he noted that fulfilling international orders of “1,00,000 pieces per style or 5,00,000 pieces per style” remains difficult. He added that the challenge extends to textiles as well, with even the country’s largest fabric suppliers struggling to deliver “1,00,000 metres or 2,00,000 metres in one lot.”
“It is too late for us now to think in terms of being the number one manufacturing hub,” he pointed out, even though the country continues to benefit from an integrated cotton-to-garment supply chain. In his view, that advantage is “losing a bit of its importance” as global sourcing becomes easier and brands increasingly procure from multiple countries. Citing Bangladesh as an example, he noted that despite having “hardly any supply chain”, it has emerged as the world’s second-largest apparel manufacturer through business-friendly policies, while India’s end-to-end supply chain now offers “credibility” and “trustworthiness” but not the competitive edge it once did.
Leaner Inventories Amid Global Uncertainty
On the impact of the West Asia crisis, Mehta explained the industry has fared better than initially feared despite early disruptions. “The markets are not as bad as we had feared when the war started,” he said, recalling that oil shortages, closure of smaller restaurants and reverse migration of workers had temporarily affected business. While “things have now stabilised”, he cautioned against making predictions, saying, “I personally refuse to make any forecast… you just do not know what the Americans are going to do.”
According to Mehta, brands are responding to the uncertainty by reducing inventory, opting for shorter production runs and forecasting demand closer to the season. Sharing an example, he said dealers who would earlier place orders for 10,000 pieces are now initially committing to 6,000 pieces and returning later for the balance, allowing both retailers and manufacturers to “hedge” their risks.
Mehta believes the disruption has ultimately made the industry more disciplined. “Inventory management has become much more stricter, sharper, forecasting has become much more accurate,” he said, adding that “most of the industry has taken advantage out of this adverse situation” and is now better equipped to manage demand and sustain business amid an uncertain global environment.
The Shift Towards Bigger Brands
Mehta argued that the distinction between the organised and unorganised apparel sector has become “debatable and controversial”, saying the industry should move away from the traditional definition. While earlier the unorganised sector largely referred to businesses operating outside the tax net, he said today even small compliant manufacturers are often clubbed into that category simply because of their size.
He, however, believes the shift towards branded apparel is unmistakable. “The shift towards branded products will definitely help the larger players,” he said, adding that unbranded local and regional brands are increasingly losing ground. According to Mehta, consumers across tier 2,3 and 4 cities are now exposed to national brands through organised retail, television and online platforms, driving aspirations for branded products that offer “trustworthiness, quality and consistency”. “I personally am in favour of this shift happening,” he added.
On artificial intelligence, Mehta said the technology itself will not disadvantage micro, small and medium enterprises (MSMEs). “AI can be utilised by anybody… I do not think AI will become an issue for an MSME,” he said, noting that startups are often adopting AI faster than large corporates. He maintained that the real challenge for smaller manufacturers lies in investing in expensive machinery and advanced production technologies rather than AI adoption itself.
The bigger divide, according to Mehta, will come from scale. “The gap between the larger factories and the smaller factories is increasing and will continue to increase,” he said, as global buyers increasingly prefer working with “five factories than 50 factories”. He added that initiatives such as Prime Minister Mega Integrated Textile Region and Apparel (PM Mitra) parks and the PLI scheme are also geared towards promoting large-scale manufacturing, making the shift “inevitable” if India wants to significantly expand its apparel exports.
