Professional Documents
Culture Documents
Power Pack - RMG PDF
Power Pack - RMG PDF
Readymade Garments
1
• Industry Overview :3
• Industry Characteristics :8
• Business Models : 15
• Growth Outlook : 22
Industry Overview
Domestic RMG sales were ~2.9 times the exports in 2017
• The Indian readymade garments (RMG) industry can be classified into domestic and
exports segments.
• The total size of the domestic RMG market was estimated to be Rs. 3417 billion in
2017, while the turnover of the industry from garment exports stood at Rs. 1185 billion
during the year.
• The corresponding figures for 2016 were Rs. 3201 billion for the domestic market and
Rs.1173 billion for the exports market.
RMG market size - 2017
• Until December 31, 2000, the manufacturing of woven garments was reserved for the
small-scale sector, while manufacturing of knitted garments was reserved for the small-
scale sector until 2004-05.
• This restricted growth of the industry.
• Manufacturing units could not purchase modern machinery on account of the Rs. 30
million investment ceiling on plant and machinery, thereby resulting in fragmentation,
and hence poor economies of scale.
• The government de-reserved the woven garment segment on January 1, 2001.
• On the other hand, the government recognised the need for attracting large investments
and the need to enhance the competitiveness of the Indian knitting segment by exploring
economies of scale.
• Finally, in 2004-05, the knitting segment was de-reserved.
Reservation for small scale industries: Until December 31, 2000, the
manufacturing of woven garments was reserved for the small-scale
• Quota restrictions: Exports to the US and the EU were governed by quota restrictions
till the beginning of 2005.
• Within this overall restriction, there was a specific cap that applied to each company.
• Since no company could increase its exports significantly due to the cap, there was no
incentive for expansion.
Business Models
Several business models exist in Indian RMG industry
• Players in the Indian RMG industry adopt a number of business models.
• They can be differentiated based on the strategy used to manufacture or procure
(purchase or outsource) apparel, and the strategy used to distribute it.
• There is intense competition in the industry among both domestic as well as export
players due to high fragmentation.
• However, competition is not severe in the designer wear and branded garment segments
on account of brand positioning and the niche nature of the market.
• The Indian readymade garments (RMG) industry is highly fragmented.
Several business models exist in Indian RMG industry
• There is intense competition among players, both in the domestic as well as international
(export) markets.
• However, competition is not very intense in the designer wear and branded garment
segments due to brand positioning and the niche nature of the market.
• Thus, the garment industry can be classified into mass market and niche market.
• Competition in the exports market is more intense than in the domestic market.
• Indian exporters face competition from low-cost producing countries such as China,
Pakistan, Vietnam, Bangladesh, etc in the mass market.
• In the niche market, India faces competition from Germany, Italy, France and Turkey,
among other countries.
Several business models exist in Indian RMG industry
• Thus, players with high volumes get the benefit of economies of scale and can sustain
competition in the mass market, while players in the niche market need high-end fashion
designs to sustain.
Business models in Indian RMG industry
• Indian RMG players employ various business models.
• The two key differentiating factors in these models are the strategy used to manufacture
or procure (purchase or outsource) apparel, and the strategy used to distribute it.\
• Business models can be analysed by dividing these into: manufacturing, branding and
distribution stage.
• Companies often operate across segments, depending on their strategy and business
models.
RMG industry - Key business models
Key business models employed by RMG players
Growth Outlook
22
RMG exports to slow down up to 2023
• The domestic RMG market is expected to improve between 2018 and 2023.
• Export growth, though, is expected to slow down as India loses competitiveness versus
Bangladesh and Vietnam.
23
Exports to decelerate over long term due to lower competitiveness
• India's readymade garment (RMG) exports, which rose 6.4% CAGR in US dollar terms
over 2012 to 2017, is forecast to grow at a slower 3.0-3.5% CAGR between 2018 and
2023 because of low competitiveness of India in terms of lower FTAs and higher labour
cost. compared with Bangladesh, China and Vietnam, and expected slower growth in
non-traditional markets, i.e., non-US and non-EU markets
• Also restricting the upside is China and Vietnam's favourable product mix dominating
MMF based apparels.
• The projected deceleration could have been sharper, but for the government's sporadic
interventions in the sector by providing export incentives.
24
Exports to decelerate over long term due to lower competitiveness
26
Domestic sales to be healthy on improved consumer spending
• The pace of growth on the domestic front is projected at 10-12% CAGR between 2018
and 2023 versus 10% CAGR during 2013 to 2018, supported by rising income levels,
higher penetration of organised retail, and growing preference for RMG over tailor-made
garments.
• Also, realisation is expected to rise at ~5% CAGR as compared with 4-5% CAGR in the
previous corresponding period, owing to rising premiumisation of the garment segment
with increase in the number of branded players.
27
Domestic market size trajectory
29
Consequently, share of exports in overall RMG market to shrink
Break-up of overall market size