India: Denim Destination

The global market for denim is forecast to reach $64.1 billion by 2020. The Indian denim
industry has shown continual growth over the years and currently the country has a denim
manufacturing capacity of around 1.2 billion meters per annum operating at a utilization
levels of 80-85%. Despite the impressive statistics, the Indian denim manufacturing industry
contributes 5 per cent to the global scenario, reflecting the overall performance of the
textiles industry. However, denim is the only segment in the Indian textile industry that has
the potential to grow manifold.
According to the Suryalakshmi report, India is being looked upon by an increasing number of
global denim manufacturers as an emerging denim export region, owing to its high
availability of cotton, quality standards, cost effectiveness and large pool of skilled work
force. Denim jeans manufacturing cost is substantially lower in India as compared to other
developed/developing nations.

On the domestic front, the denim wear market is driven by favorable demographics,
increasing disposable incomes, westernization of work culture and the ensuing rise in the
popularity of denim jeans as business casual wear. With increase in globalization, young
India prefers denims as a part of their essential daily wear.

The Indian demographic age is ripe for consumption where style dominates utility. The
median age of the Indian consumer is 26 years with maximum population lying in the age
bracket of 15- 59 years. By 2020, it is projected that India will add another 140 million
people in the consuming age group. This population has more aspirations, is more aware,
has higher spending power and is expected to consume across a greater number of
categories than the previous generation. According to the Indian census report, the number
of households with an annual income of $7,000 or more is going to increase from about 30
million today to 100 million by 2020. There will be 400 million individuals in the middle to
high income bracket by 2020. These indeed will fuel the per capita consumption of denim.
Current Indian Denim Market Scenario
Currently, the Indian market is facing an oversupply situation, following the capacity
expansion post 2011 due to lower incubation period after the demand for denim fabric
picked up due to recovery in the countrys economy. The domestic denim industry has
witnessed this cyclicality twice in the past, first major downturn between 1998 and 2001
owing to high capacity installation in China, followed by a period of rapid growth in demand
over 2002-07. To cater to increasing demand, denim fabric producers added fresh capacity.
However, post 2008, domestic and export demand for denim fabric in India declined owing
to the global economic meltdown, which effected the utilization rates of denim fabric
manufacturers. With gradual recovery in global economy and declining cost competitiveness
of China, demand for denim fabric picked up post 2011, which prompted players to again
embark on capacity expansion.

Many manufacturing units are unable to fully utilize their capacities, owing to oversupply in
the market which in turn, is having negative impact on the operating margins of these
players. The capacity addition has grown mostly in the bottom most segment of the market
and the mills in the lowest business segment are gravely affected. The mills in the mid and
high segment of the business, have faced the lowest impact of this situation.

Denim production capacity has grown by 500 million meters, from 700 million meters in
2010 to 1.2 billion meters in 2015. It is projected to reach 1.5 billion meters by 2020,

growing at a CAGR of 4.6%. The share of denim export is projected to increase from 35% in
2015 to 45% in 2020. The two giant denim producers; China and United States, have cut
down their production of denim, as a result of rising labor and energy costs. This will lead to
significant growth in export demand for Indian denim market. India has been one of the
major global suppliers of denim fabrics however, the country still falls behind other
competing nations in terms of denim apparel such as jeans. Most of the global brands
outsource denim apparel work to Indian players, much of it is meant for the domestic market
and not for exports.
The current consumption of denim jeans in India is 453 million pairs. The average per capita
consumption of denim jeans in India is 0.3 pair which is very less as compare to that of
China and U.S., where average per capita consumption of denim is 1.0 and 8.0, respectively.
The per capita consumption of denim jeans in anticipated to increase to 1.0, owing to
growing disposable income, favorable demographics, and increasing penetration in rural
market.

The value share of the Indian denim market is skewed in favor of mega metros and metros.
Mega metros and metros together account for ~49% share of the Indian denim market as of
2015. Though the markets of other urban areas and rural India contribute high in volume
terms, their combined share in market value was only 51% in the same year. Even today,

most of the demand from small urban clusters and rural areas are fulfilled by the unbranded
local denim manufacturers. This provides a case for branded manufacturers to reach out and
increase their supply in these upcoming markets. Once the penetration of branded denim
intensifies and awareness about its positive attributes, such as quality, design and fit etc.
increase in these upcoming urban clusters and rural areas, people would be willing to pay for
branded products, leading to increase in its overall market value.
Denim Industry Trends & Innovations
The global demand for denim is moving towards more refinement and subtle fashion. Fabrics
are becoming finer with superior shades, finishes and some value-additions like printing and
hand painting. Innovations are coming from blends, technical stretch denims, organic
denims and green recycled denims. The market is looking for something new at all times,
and blends can bring that newness. Thus, fabrics are being developed with many blends like
cotton with viscose/ modal / linen / bamboo fibre / soya fibre / hemp fibre, / milk fibre
/Sorona fibre and may other manmade and natural fibres. A lot of polyester fiber has made
inroads into denim in various forms, leading to lower priced products, while organic denim
has slowly taken a backseat.
A major issue related to production of denim is the water consumption, with 1,200 to 1,500
liters of water needed for one pair of jeans. However, denim garment washes are becoming
greener with sustainable washing methods, waterless washing and new fashion is based on
laser prints and laser designs, etc.
The Indian fabric manufacturers feel that colorful denim has a significantly good future. A
more comfortable and softer feel for ladies, lighter weights, with super stretch are in latest
trend. Tighter constructions and finer yarns are being used to construct denims. Sateen
weaves are popular in the Indian markets. Denim fabrics with different colors, tints and
coated denims are increasingly being used by Lifestyle brands in India.