RSWM Ltd Management Discussions

An E_nomic O_r‚ew

Global Economy: In 2024, global growth stabilised as inflation approached target levels, while monetary easing fostered activity in advanced economies, emerging markets and developing economies (EMDES).

Major economies adeptly adapted to changing trade trends and policies, thereby creating pathways for sustainable and inclusive growth opportunities. Although the recovery trajectory was dynamic, these transformations facilitated the emergence of a more balanced and adaptive global economy.

Growth in advanced economies was estimated at 1.7% for 2024, with robust activity in the United States offsetting slower growth in other regions. Sustained momentum in the U. S. was attributed to strong consumer spending, a resilient labour market and favourable financial conditions. The Eurozone recorded a moderate growth of 0.8% for 2024. Despite a sluggish growth trajectory, Chinas economy expanded by 4.8% in the same year.

Global inflation declined more rapidly than anticipated across most regions, reaching 5.8% in 2024. Commodity price trends in 2024 presented a mixed outlook. An abundance of supply coupled with subdued demand resulted in relative stability of commodity prices during the latter half of 2024. Oil prices continued to experience downward pressure in late 2024, primarily due to lacklustre demand and an abundance of supply.

Global trade, a fundamental driver of economic activity, expanded by 3.3% in 2024, following a 3% contraction in 2023. This deceleration reflects challenges such as escalating protectionism, trade distortions and the ramifications of the Ukraine-Russia conflict, which disrupted supply chains and drove up costs.

Financial markets remained dynamic, with U. S. equities benefiting from business-friendly policies and emerging markets adjusting to evolving capital flows. The strengthening of the dollar continued to impact global trade and investment patterns significantly.

Outlook: The global economic outlook demonstrates resilience and opportunity. Global output is anticipated to grow steadily by

3.3% in 2025 and 2026, with the US maintaining strong momentum and emerging economies exhibiting significant growth potential.

Global headline inflation is projected to reach 4.4% in 2025 and 3.5% in 2026. In line with this, crude prices are likely to decline in 2025. However, non-fuel commodity prices are set to rise by 2.5%, supporting growth in key resource-driven sectors. Economic policy shifts and evolving trade dynamics will likely drive businesses to adapt, innovate and compete in a rapidly changing global market.

(Sources: IMF, World Bank, UNCTAD)

Indian economy: India, recognised as the worlds fastest-growing major economy, continued its expansion in the fiscal year 2025. However, attributable to a high base effect, this growth appeared moderate. The GDP growth rate decreased from

9.2% in fiscal year 2024 to 6.5% in fiscal year 2025. Favourable domestic consumption trends, increased services output and a growing share of high-value manufacturing in exports facilitated this expansion.

In February 2025, headline inflation experienced a moderation to a seven-month low of 3.6%, facilitated by favourable weather conditions, relatively stable commodity prices, an enhanced supply chain and a significant decline in vegetable prices Conversely, wholesale inflation increased to an eight-month high of 2.8% during the same period. It is anticipated that annual inflation will remain at 4.8% in FY25. Easing pressure on commodity prices led the

MPC to cut the repo rate by 50 basis points, from 6.5% to 6.0%, reducing it twice during the fiscal year, in five years.

The agriculture sector rose by 3.8%, the industry sector by 6.2% and the service sector by 7.2% in 2024, while the core sector grew by 4.6% until January 2025. Indias Index of Industrial Production (IIP) expanded by 5.0% in January 2025, the highest in eight months, compared to 3.2% in December 2024. The net GST collections increased by 9.4% to C22.08 lakh crore from April to March of FY25.

India is poised to achieve its fiscal deficit target of 4.8% of GDP inFY25, driven by strong economic growth. Service exports grew 11.6%, while FDI inflows surged

17.9% to C4.81 lakh crore (US$55.6 billion) and overall exports increased 6.0% YoY during April-December in 2024. The foreign exchange reserves had increased to an all-time high of US$688.13 billion by the end of April 2025.

Outlook: For FY26, it is anticipated that the Indian economy will exhibit stable growth, with real GDP growth expected to range from 6.3% to 6.8%, albeit from a high base. Consequently, India is poised to reinforce its status as one of the fastest-growing major economies, making a significant contribution to global

GDP growth. However, external risks such as a global economic slowdown, geopolitical stress and trade disruptions could impact Indias future economic outlook. Moreover, a slowdown in urban consumption, a spike in food inflation and slow growth in capital formation can also influence Indias economic growth.

(Sources: Reuters, The Hindu, The Economic Times, Times of India, IBEF, Statista, Livemint, Fortune India, India Tracker, Business Standard)

The Indian textile industry is at an inflexion point, poised for growth despite global economic uncertainties. Indias strong heritage, strategic positioning and expertise in specialised segments such as spinning, denim, home textiles and man-made fibres drive this expansion. It plays a seminal role in driving the nations economic growth, significantly boosting exports, creating employment opportunities and empowering women while celebrating Indias rich heritage and culture. India is the worlds second-largest producer of textiles and garments. It is also the fifth-largest exporter of textiles, spanning apparel, home and technical products.

The Indian textile and apparel industry is a major sector in the Indian economy, contributing significantly to exports, employment and GDP. As the countrys second-largest employer, after agriculture, this sector is pivotal in improving livelihoods and promoting inclusive growth. The industry aligns with governmental initiatives such as Make in India, Skill India, Womens Empowerment and Rural Youth Employment, thereby significantly contributing to the comprehensive development of the nation.

Between April 2000 and March 2024, India attracted US$4.47 billion in foreign direct investment (FDI) in its textile sector, including segments such as dyed and printed fabrics.

This reflects growing international interest and confidence in Indias textile market, highlighting its potential as a lucrative growth opportunity.

Fiscal Year 2024-25 presented a spectrum of challenges and successes. On one hand, Indias textile and apparel industry contended with elevated raw material costs, price volatility and fierce competition from more economically priced imports. Conversely, it surmounted these obstacles and achieved a commendable single-digit growth rate.

Indias exports of textiles and apparel experienced a growth of 6.32% during the financial year ending March 31,

2025, compared to the previous year, with the apparel segment serving as the primary catalyst for growth. Apparel exports surged by 10.03% to reach US$15.989 billion, whereas textile exports increased by 3.61% to US$20.617 billion.

This growth can be attributed to the enhanced momentum in establishing new trade alliances and the implementation of supportive policy decisions by the government, which have bolstered confidence among exporters. The robust performance in apparel exports and steady growth in textiles, amidst global challenges, underscore the resilience, adaptability and global competitiveness of the Indian textile and apparel industry.

However, rising imports from China and Bangladesh, amounting to US$5.43 billion in FY25, have continued to undermine the competitiveness of Indias textile sector. The Ready-Made Garment (RMG) industry is experiencing a slowdown, with revenue growth anticipated to decline modestly by 4-6% from prior years. This increasing dependence on imports threatens Indias textile industry, resulting in production slowdowns, pricing pressures and potential job losses, jeopardising long-term sustainability.

Furthermore, the tariffs imposed by the US on Indian textile products are undermining export competitiveness, limiting market access and negatively impacting the industrys global growth potential.

India possesses a comparative advantage in cotton and cotton-based products; however, global demand has increasingly shifted towards products fabricated from man-made fibres (MMF). The countrys significant dependence on cotton-based apparel is evolving into a liability as the global market increasingly favours MMF garments due to their superior durability and cost-effectiveness. MMF-based products encompass a wide variety of items, including yoga pants, athleisure wear and technical textiles utilised in the aviation, aerospace and automotive industries.

This misalignment has exacerbated the demand-supply gap, with MMF textiles now representing 34% of total imports, thereby disadvantaging domestic manufacturers. By engaging with the MMF value chain, India stands to benefit from the consistent upward trajectory of global MMF demand. Currently, Indias share in global MMF production is 9.2% and there exists substantial potential for the country to align itself more closely with the production levels of global front-runners such as Vietnam, China and Taiwan.

The prospects for the textile and apparel industry improved towards the close of FY25 and credible estimates suggest that the upward momentum will be sustained in the next few quarters as well. The recent political turmoil in Bangladesh will remain a monitorable for the industry as it could disrupt supply chains and impact regional trade flows this may offer a temporary advantage to Indian exporters, the long-term implications on competition, pricing and sourcing strategies will require close observation.

Indias textile industry is expected to grow at a CAGR of 10% across domestic and export markets, aiming for US$350 billion by 2030. India aims to expand its domestic market from US$110 billion to US$1.8 trillion by 2047.

Indias textile industry aims to double its contribution to the GDP from 2.3% to nearly 5% by the end of this decade. This surge underscores the sectors expanding influence on the nations economy and its potential to drive sustainable development.

The industry relies heavily on imported machinery, such as auto-coners, winders and sophisticated

. While doublers utilised in the spinning and knitting processes. To reduce this dependency on imports, the government is considering implementing a 7% interest subsidy for a minimum of 10 years to stimulate domestic textile machinery manufacturing.

The allocation of Rs5,272 crores to the Ministry of Textiles aims to improve credit accessibility and infrastructure for Micro, Small and Medium Enterprises (MSMEs), thereby enhancing their prospects in both domestic and international markets.

Increased incentives for technical textiles, along with the extension of the PLI scheme, will encourage innovation and expand manufacturing capacity. Additionally, reduced import duties on raw materials are expected to lower production costs, improving global competitiveness.

Sources : Textileinsights, fibre2fashion, economictimes, reuters, manufacturing, ibef , textilesresources https://textileinsights.in/indian-ta-sector-may-continue-its-revival-journey-in-2025/ https://www.fibre2fashion.com/news/international-textiles-trade-news/india-s-rmg-industry-to-see-slower-4-6-revenue-growth-in-fy25-crisil-298809-newsdetails. htm#:~:text=Indias%20RMG%20industry%20to%20see%20slower%204%2D6%,modest%20capex%20and%20steady%20working%20capital%20cycles.

(https://economictimes.indiatimes.com//news/economy/foreign-trade/indias-textile-exports-grew-7-pc-to-usd-21-35-bn-during-apr-oct-period-of-fy25-govt/ articleshow/116882278.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst)

(https://www.reuters.com/world/india/india-promote-its-textiles-political-crisis-hits-bangladeshs-exports-say-sources-2025-01-14/?utm_source=chatgpt.com)

(https://www.fibre2fashion.com/news/textiles-policy-news/indian-ministry-of-textiles-year-end-review-2024-org/industry/textiles,https://www.textilesresources.com/articles/union-budget-2025-of-india-key-highlights-for-textile-sector/, https://manufacturing.economictimes.indiatimes.com/news/industry/indias-textile-exports-to-touch-65-billion-by-2025-26-invest-india/112800410)

India is the worlds largest cotton producer, accounting for 23% of global production. Cotton is vital to the Indian economy, supporting the livelihoods of around 60 million people. It is grown on 13.06 million hectares in India, out of a total of 33.1 million hectares globally.

In the 2024-25 cotton year (October-September), Indias cotton industry faced significant challenges, primarily driven by declining domestic production and a growing reliance on imports to meet demand. Indias Ministry of Agriculture estimates cotton production at 29.53 million bales (170 kg each) for the current season compared to last seasons 32.5 million bales production.

Indias cotton imports in 2024-25 are likely to double this year. According to reports, India is projected to import 3 million bales in the current cotton year, up from 1.52 million bales imported in the previous year (CY 2023-24). The Cotton Association of India (CAI) forecasts a 37% decline in cotton exports, estimating a drop to 1.8 million bales in the current cotton year from 2.85 million bales in the previous cotton year.

India currently produces around 32 million bales of cotton annually; however, with the textile industrys demand projected to reach 45 million bales by 2026, a significant supply-demand gap is emerging. This challenge is compounded by stagnant productivity, with cotton yields at 447 kg per hectare, much below global standards.

To address this disparity, the Government of India, in conjunction with the Export Promotion Council, is prioritising essential reforms. The initiatives encompass modernising agricultural practices by incorporating advanced technologies, such as precision agriculture and sustainable techniques, to increase cotton fibre productivity to an anticipated range of 800-900 kg per hectare. By fostering the adoption of high-yielding seed varieties, optimising resource utilisation and promoting best practices, these endeavours aim to elevate the quality and quantity of cotton, thereby ensuring that the sector can fulfil domestic demand and enhance its competitive standing in global exports.

A new initiative, the "Cotton Mission," with a financial commitment of Rs500 crore, aims to enhance cotton production, with a particular focus on extra-long staple varieties. This initiative aims to address the growing demand within the textile sector while promoting advanced agricultural techniques to enhance productivity. In conjunction with this development, the government has markedly increased the budget allocation for the textile sector, raising it from Rs4,417 crore in Fiscal Year 2025 to Rs5,252 crore in Fiscal Year 2026.

This augmented financial support will fortify the Amended Technology Upgradation Fund Scheme and the Production Linked Incentives (PLI) scheme, facilitating technological advancements and encouraging investment.

(Sources: IBEF, The Hindu, The Business Standard) (https://www.ibef.org/exports/cotton-industry-india, https://www.thehindubusinessline.com/economy/ budget/union-budget-2025-26-national-mission-launched-to-revitalise-indias-cotton-sector/ article69168218.ece, https://www.business-standard. com/budget/news/budget-2025-26-cotton-mission-gets-a-boost-to-improve-productivity-125020101359_1. html, https://www.reuters.com/markets/commodities/ indias-cotton-imports-double-output-falls-short-says-trade-body-2025-03-11/?utm_source=chatgpt. com, https://www.fibre2fashion.com/news/cotton-news/india-s-cotton-production-estimates-vary-prices-may-follow-ice-trends-301422-newsdetails. htm#:~:text=The%20industry%20organisation%20 had%20estimated%20production%20at,lakh%20 bales%20in%20the%20last%20season%20 (2023%2D24).&text=It%20did%20not%20revise%20 Indias%20estimate%20from,of%20170%20kg)%20 in%20the%20last%20season, https://www.reuters.com/ markets/commodities/indias-cotton-output-fall-lower-area-excess-rain-trade-body-says-2024-10-22/?utm_ source=chatgpt.com)

The spinning mill industry in India possesses a rich history, establishing itself as a prominent leader in the global textile market. With the second-largest spinning capacity worldwide, comprising 48 million spindles, India not only excels in production but also maintains a dominant position in the global yarn trade, exporting approximately 1.2 million tons and commanding a 30% market share.

The origins of Indias spinning mills can be traced back to the formative years of the cotton textile industry. Cotton-producing regions, such as Rajasthan, Maharashtra and Gujarat, have evolved into the focal points of this sector. Local factors, including the availability of abundant raw materials, favourable transportation infrastructure, labour accessibility and a humid climate, played a significant role in the development of the industry. Consequently, these areas evolved into the nucleus of Indias textile trade, giving rise to thriving mill towns and significantly contributing to economic prosperity, particularly in Mumbai, where the industry played a pivotal role during the early 20th century.

The Indian spinning sector experienced subdued growth during the fiscal year 2024-25, primarily due to weak demand from key export markets, including the United States and Europe. Economic uncertainty, persistent inflation and declining consumer spending in these regions have led to a decrease in textile orders, affecting overall production and revenue.

In light of the reduced global demand, Indian spinners have increasingly relied on domestic consumption to sustain their operations. Although a resurgence in the garment and home textile industries has provided some measure of support, it has proven insufficient to counterbalance the slowdown in exports fully.

Fluctuating raw material prices alongside the disparity between domestic and international cotton rates have created market uncertainty, thereby affecting profit margins.

Moreover, escalating competition from synthetic yarn producers and cost-effective manufacturers in countries such as Vietnam and Bangladesh has persistently diminished Indias market share, rendering the recovery of the spinning sector increasingly challenging.

The Indian spinning sector is anticipated to navigate a challenging landscape in FY26, influenced by diminished domestic cotton production and an increased reliance on imports. Subdued global demand may further hinder growth, potentially leading to a slowdown.

Government initiatives, including heightened budget allocations and technology enhancement schemes, hold the potential to alleviate some of the challenges. As global markets stabilise, export opportunities may improve, presenting a pathway for sustained growth within the sector.

(Sources: The Yarn Bazaar, Fibre2Fashion, The Economic Times)

(https://theyarnbazaar.com/spinning-mills-in-india. html, https://www.fibre2fashion.com/news/cotton-news/icra-forecasts-recovery-for-india-s-cotton-spinning-industry-in-fy25-296731-newsdetails.htm, https://economictimes.indiatimes.com/industry/cons-products/garments-/-textiles/indian-cotton-spinning-industry-expected-to-recover-in-fy25-icra-report/ articleshow/111782851.cms?from=mdr, https://www. fibre2fashion.com/news/yarn-news/cottonyarntrends -india-s-export-growth-china-s-domestic-challenges-297942-newsdetails.htm)

Indias Man-made Fibre (MMF) industry exhibits dynamism and is undergoing rapid expansion. The nation produces a comprehensive array of synthetic fibres, including polyester, viscose, nylon and acrylic, which bestows upon it a competitive advantage relative to other countries. Currently, India is the second-largest producer of both polyester and viscose globally.

Worldwide, man-made fibres constitute a significant portion of fibre consumption, accounting for approximately 70% of the market share, whereas natural fibres account for only 30%. In India, however, this ratio is inverted, reflecting the abundance of cotton and the prevailing tropical climatic conditions.

The Indian MMF textile industry maintains self-sufficiency throughout the entire value chain, from raw materials to finished apparel. Renowned for its fabrics of international quality, the industry is distinguished by superior craftsmanship, vibrant hues, comfort, durability and advanced technical characteristics.

The market for man-made fibres in

India is projected to exhibit steady growth over the next five years, driven by advancements in textile manufacturing technologies, an escalating demand for eco-friendly and recycled fibres and significant government support. Trends emphasising sustainability within the textile sector are anticipated to accelerate the adoption of recyclable materials, with the polyester segment identified as a principal beneficiary due to its inherent versatility and recyclability. Moreover, innovations in fibre production, encompassing energy-efficient processes and bio-based alternatives, will further enhance the market dynamics.

Indias exports of man-made fibre

(MMF) textiles are expected to expand by 75%, reaching a valuation of US$11.4 billion by the year 2030. This increase is attributed to the Production Linked Incentive (PLI) scheme, as well as the recent free trade agreements established with the United Arab Emirates (UAE) and

Australia. Such growth signifies a notable advancement from the US$6.5 billion recorded in the fiscal year 2021-2022, reflecting enhanced global trade partnerships and policy-driven industrial support.

(Sources: Texmin. Nic.in The Economic Times, Textile Magazine, Ken Research, UnitedWebNetwork.com, Indian Textile Journal)

(https://texmin.nic.in/sites/default/files/Indian%20Manmade%20fibre%20textile%20industry_0.pdf, https:// economictimes.indiatimes.com/industry/cons-products/garments-/-textiles/manmade-fibre-textiles-exports-to-rise-

75-by-2030-textile-industry/articleshow/105553793.cms?from=mdr, https://www.indiantextilemagazine.in/focus-on-man-made-textiles-vital-to-achieve-300-billion-ta-market-by-2025/,https://www.kenresearch.com/industry-reports/ india-synthetic-fiber-market, https://storage.unitedwebnetwork.com/files/63/281771b99d8361d5437110b6d5a7e104. pdf, https://indiantextilejournal.com/manmade-fibre-textile-exports-to-surge-75-by-2030/, https://economictimes. indiatimes.com/news/economy/foreign-trade/indias-textile-exports-grew-7-pc-to-usd-21-35-bn-during-apr-oct-period-of-fy25-govt/articleshow/116882278.cms?utm_source=chatgpt.com&from=mdr)