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  • 1. Indian Textile Industry
  • 2. Contents Market Overview Government regulations & policy Business opportunities and Advantage India
  • 3. Indian Textile industry - important from perspective of overall economy
    • Total market size (2004-05): USD 38 bn
      • Domestic market ~ USD 25 bn
      • Exports ~ USD 13 bn
    • Strong contribution to Indian Economy
      • 14% contribution to industrial production
      • 4% contribution to GDP
      • 16% contribution to export earnings
      • Direct employment to more than 35 million people
    • Industry functions in the form of clusters (roughly 70 in number) across India, producing 80% of the country’s total textile
    • Sector is diverse, with the hand-spun and hand woven sector at one end of the spectrum, and the capital intensive, sophisticated mill sector at the other
    Source: Ministry of Textiles Annual Report, Industry Research
  • 4. India has a strong base in raw materials
    • Cotton dominates the industry
      • Nearly 56% of yarn produced is made of cotton
      • Country produces nearly 23 varieties of cotton
      • India is the second largest player in the world cotton trade
    • India’s position is strong vis-à-vis other countries in most raw materials
      • Largest producer of jute
      • Second largest producer of silk
      • Third largest producer of cotton, accounting for nearly 16% of global production
      • Third largest producer of cellulosic fibre/yarn
      • Fifth largest producer of synthetic fibres/yarn
      • Eleventh largest producer of wool
    Source: Ministry of Textiles Annual Report, Industry Research Abundant availability of raw material is one of the key advantages of the Indian textile industry
  • 5. Industry fragmented and dominated by small scale units
    • The textile industry across the value chain is largely decentralised
    • Units mostly independent and small scale in nature, rather than composite units undertaking all activities together
    • Large scope for entry of organised integrated textile manufacturers
    Spinning Weaving Processing & manufacturing Source: Compendium of Textile Statistics, 2004 Large independent units 53% Small independent units 39% Composite mills 8% 100% = 2922 mills 100% = 5.83 million units Handloom sector 67% Powerloom 31% Organised sector 2%
    • Of the 2300 processors in India, only 200 units are integrated with spinning, weaving or knitting units
    • Bulk of apparel and home textile manufacturing accounted for by 77,000 small scale units
  • 6. Manufacturing units present at all levels of value chain Raw materials Cotton, wool, silk, jute Petrochemicals Fibres and yarn Man-made fibre/ filament yarn*
    • Grey fabric
    • Knitting
    • Weaving
    • Processed fabric
    • Dyeing
    • Finishing
    Garments Home textiles Production unit Spinning mills Weaving/ knitting units - handlooms, powerlooms, hosiery units Hand processing units, independent power processing units, units attached to mills Garments & home textile producers Composite Mills *Includes viscose staple fibre, polyester staple fibre, acrylic staple fibre, viscose filament yarn, nylon filament yarn, polyester filament yarn Source: Industry Research
  • 7. Industry experiencing high growth
    • Increased output of yarn and fabric - CAGR of 3.6% and 4.1% respectively; global market has grown at a CAGR of 2-2.5% in this period
    • Highest growth seen in 100% non cotton yarn and fabric, followed by blended yarn and fabric
    • Cotton cloth continues to dominate the industry
    1996 2000 2006 Cotton yarn Blended yarn 100% non cotton yarn Yarn production million tonnes 2.4 3.1 3.4 75% 17% 8% 72% 20% 8% 73% 17% 10% CAGR 3.2% 3.6% 3.8% 6.0% 1996 2000 2005 Cotton cloth Blended cloth 100% non cotton cloth Cloth production billion sq. mtrs 31.5 38.6 45.0 60% 13% 27% 49% 15% 36% 46% 13% 41% CAGR 0.9% 4.1% 4.6% 8.9% Source: Compendium of Textile Statistics
  • 8. Exports are dominated by readymade garments
    • Readymade garments dominate textile exports
    • Share of manmade textiles in overall textile export basket has risen, whereas that of cotton textiles has fallen
    Readymade garments Cotton yarn, fabric & made-ups Manmade staple fibres, yarn, fabric & made-ups Silk & woolen textiles, cotton raw, incl waste 51% 35% 10% 4% 52% 34% 9% 5% 55% 25% 13% 7% 100% = INR 654 bn 100% = INR 390 bn 100% = INR 199 bn Year 1994-95 Year 1999-00 Year 2005-06 Textile exports Source: Ministry of Textiles
  • 9. Dismantling of quotas has resulted in higher growth in large markets
    • In the first nine months of CY2005, US imports grew by 7% to USD 8.9 bn and EU imports grew by 3.7% to Euro 54.5 billion
    • India has been one biggest beneficiaries in post quota regime in these two markets, while countries like Mexico, South Korea and Turkey have lost share
    2004 1st 9 months of 2005 2008* 2004 1st 9 months of 2005 2008* Share in US textile and clothing market Share in EU textile and clothing market Source: WTO study on gainers and losers post quota abolishment *Forecasts
  • 10. Going forward, exports as well as domestic market to drive growth
    • Drivers of exports
      • Rising outsourcing budgets of retail giants
      • Indian companies evolving from mere converters to vendor partners of global buyers
      • Large outsourcing orders helping Indian companies build capacities, lower their per unit cost and become more competitive
      • Imposition of caps on certain import segments from China by EU and US given the surge in Chinese exports has opened up opportunities for India
    • Drivers of domestic market
      • Growing young population
      • Rising household income levels
      • Growth of organised retail
    2005 2010* *Forecasts Market size estimates USD bn Domestic market Exports 25 12 37 35 30 65 Source: Research commissioned by Confederation of Indian Textile Industry
  • 11. Contents Market Overview Government regulations & policy Business opportunities and Advantage India
  • 12. Industry has witnessed a change in regulations Pre 1985 Emphasis on small scale sector
    • Importance given to cotton textiles
    • Favourable fiscal treatment given to powerlooms (mainly tiny and small-scale units) as compared to composite mills
    • Most segments reserved for small-scale industry (SSI)*
    • Restrictions on installation of automatic looms
    Emphasis on increasing scale Post 1985
    • Many segments (especially readymade garments, knitwear and hosiery) deserved from reservation for SSI
    • Schemes for technology upgradation and modernisation introduced
    • Multifibre approach adopted; emphasis on man made and synthetic fibres, in addition to cotton
    • Taxation structure made simpler
    Measures aimed at improving competitiveness of industry to face a post quota regime *Latest definition: Investment in plant & machinery of INR 10 million for most industries, INR 50 million for specified industries like hosiery, hand tools, drugs & pharmaceuticals, sports goods and stationery items
  • 13. Several government initiatives targeted to attract investments Technology Upgradation Fund Scheme Policy related to foreign investment Upgrading infrastructure
    • Scheme launched in 1999 to provide firms access low interest loans for technology upgradation and setting up new units with state-of-art technology
    • Scheme has disbursed INR 91.61 bn till 31st December 2005
    • Upto 100% foreign direct investment allowed in textile and apparel manufacturing industry, with approval of the Foreign Investment Promotion Board (FIPB)
    • ~ USD 1.02 bn of FDI in the sector approved between 1991 and 2004
    • Companies free to set up fully-owned sourcing (liaison) offices, as well as marketing operations
    • “ Scheme for Integrated Textile Parks ” (SITP), based on public-private partnership model to build world class infrastructure facilities
    • Product specific “ Cluster Approach ” targeting development of 100 additional clusters in textiles
    • Technology Mission on Cotton (TMC), focusing on cotton R&D, dissemination of technology to farmers, improvement of market infrastructure and modernisation of ginning and pressing sector
    Source: Ministry of Textiles, Industry Research
  • 14. Contents Market Overview Government regulations & policy Business opportunities and Advantage India
  • 15. India has a cost advantage vis-à-vis competing countries
    • India is cost competitive vis-à-vis competing countries in textile production, except in case of textured yarn and fabric
    Cost competitiveness Yarn: USD per kg of yarn Fabric: USD per yard of fabric Open-ended yarn & fabric Ring yarn & fabric Textured yarn & fabric Yarn Woven fabric Knitted fabric South Korea China Brazil India
  • 16. There are several other industry specific advantages arising out of the unique nature of the industry in India
    • Large raw material base
      • India has a rich raw material base, especially cotton which has seen improved productivity in the country under the Cotton Technology Mission
      • Wide variety of cotton produced India, making India capable of catering to various segments of world trade
      • Indian industry has ability to handle different materials - cotton, wool, silk and jute with equal skill
    • Positive developments in the Textile Policy
      • Reservation for small scale sector, especially key segments removed over last few years
      • Fiscal anomalies in terms of excise duty structure removed
    • Flexibility in production
      • Capabilities across the entire value chain within the country reduces lead time for production and reduces intermediate shipping time
      • Indian companies have flexibility and skilled manpower to handle small orders with complex designs
    • Product development and design capabilities
      • Several institutes in India for textile development, the major one being National Institute of Fashion Technology (NIFT)
      • Several leading colleges also offer courses in Textile Engineering
  • 17. Business opportunities exist for foreign players Investing in India Sourcing from India Export to India
    • Partner with Indian vendors to import from India, by nominating large Indian companies having credibility in terms of capacities and quality
    • Readymade garments have maximum opportunity, given India’s cost competitiveness
    • Invest in setting up vertically integrated large scale units
    • Invest in setting up retail chains (single brand)
    • Enter into marketing joint ventures with Indian companies
    • Brand licensing to Indian players
    • With Indian consumers increasingly getting exposure to international fashion trends, potential exists for export of lifestyle brands of garments and accessories to India
  • 18. Many foreign players have also entered India
    • Top 10 buyers in India (Gap, Wal-Mart, Li & Fung, The Children’s Place, JC Penny, H&M, Federated, Fifth Avenue, Carrefour and Synergies India) account for 35% of total textiles sourced from India
    • Other major companies include El Corte, Ecko, Kellwood, VF Corporation, Tesco, Next, Karstadt-Quelle
    Buying and liaison offices
    • Brand licensing - Hugo Boss, Tommy Hilfiger, Mango, Lovable, Nike, Lacoste
    • Master franchisee - Marks & Spencer, Crocodile
    Brand licensing/ franchising Manufacturing/ manufacturing cum retailing
    • VF Arvind Brands - joint venture between Arvind Brands and VF Corporation to manufacture and sell latter’s brands in India
    • Benetton
    • Levi Strauss
    • Reebok
    • Carreman Michel Thierry
    Source: News articles Illustrative, not exhaustive
  • 19. Key players in India
    • Large industry conglomerate, with turnover of USD 279 million and presence in textiles, retail, engineering goods, personal care and prophylactics
    • Textile products - worsted fabrics, wool and blended fabrics, specialty ring colour and stretch denim fabric, cotton and linen shirting fabric, readymade garments, woolen blankets and home furnishings
    • One of the oldest textile companies in the country, having turnover of USD 231 million
    • Produces suitings, shirtings, sarees, towels, bed linen and men’s apparel; significant exporter of polycotton blended fabrics and made ups
    • One of the largest producers of denim in the world, having turnover of USD 338 million and exports to more than 70 countries
    • Produces denim fabric, cotton and blended fabric, knitted fabric, voiles, apparel
    Illustrative, not exhaustive
    • One of the largest textile business houses in India, having turnover of USD 400 million
    • Significant presence in acrylic fibre, cotton, synthetic and blended spun yarns, grey and processed fabrics, cotton and synthetic sewing threads
    • India’s largest exporter of readymade garments, having turnover of USD 180 million
    • Supplies to more than 100 retailers and fashion brands across 39 countries
    Source: Capitaline, Company websites
  • 20. Key players in India
    • Leading producer of silk yarns and fabric (mainly for decorative and bridal use), with annual turnover of USD 32 million
    • Other businesses include retailing of home furnishings in India and manufacture of bed linen products for domestic and export market
    Illustrative, not exhaustive Source: Capitaline, Company websites
    • Amongst the top 3 terry towel producers in the world, with annual turnover of USD 132 million
    • Other products include cotton yarns, polyester filament yarn, bathrobes, buttons and saw pipes
    • Belongs to one of the most diversified business groups in India (Aditya Birla Group) and has turnover of USD 577 million)
    • Key products in textiles include viscose filament yarn and branded apparel; other interests include insurance, telecom, IT, carbon black
    • Having turnover of USD 303 million, company is a major producer of polyester yarns, fabrics, garments and textiles
    • Has the largest composite textile mill in India for producing cotton fabric
    • Having a turnover of USD 95 million, its products include viscose filament yarn, viscose tyre/ industrial yarn, denim, cement and pulp and paper
  • 21. The India Brand Equity Foundation is a public-private partnership between the Ministry of Commerce & Industry, Government of India and the Confederation of Indian Industry. The Foundation’s primary objective is to build positive economic perceptions of India globally India Brand Equity Foundation c/o Confederation of Indian Industry 249-F Sector 18, Udyog Vihar Phase IV Gurgaon 122015, Haryana, INDIA Tel +91 124 401 4087, 4060 - 67 Fax +91 124 401 3873 Email ajay.khanna@ciionline.org Web www.ibef.org
  • 22. Disclaimer
    • This presentation has been prepared jointly by the India Brand Equity Foundation (“IBEF”) and ICRA Management Consulting Services Limited, IMaCS (“Authors”)
    • All rights reserved. All copyright in this presentation and related works is owned by IBEF and the Authors. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF.
    • This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of the Author’s and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice.
    • The Author and IBEF neither recommend or endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed in this presentation.
    • Neither the Author nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.
    ICRA Management Consulting Services Limited