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New Paradigms for Textiles Industry

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Wazir was the knowledge partner for Texcon 2012. The conference was themed "New Paradigms for Textiles Industry". The knowledge paper details the way Indian textile industry is trending and New ...

Wazir was the knowledge partner for Texcon 2012. The conference was themed "New Paradigms for Textiles Industry". The knowledge paper details the way Indian textile industry is trending and New Paradigms which can help achieve growth.

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    New Paradigms for Textiles Industry New Paradigms for Textiles Industry Document Transcript

    • New Paradigms forTextiles Industry Knowledge Partner
    • Table of ContentsForeword................................................................................................................................................. 11. Executive Summary ......................................................................................................................... 22. Overview of Indian Textile Industry ................................................................................................ 4 a. Industry structure ....................................................................................................................... 4 b. Domestic Consumption............................................................................................................... 5 c. External Trade ............................................................................................................................. 6 d. Key challenges ............................................................................................................................. 83. Change Drivers .............................................................................................................................. 10 a. Indian ........................................................................................................................................ 10 i. Urbanization.......................................................................................................................... 10 ii. Younger, working age population ......................................................................................... 10 iii. Increasing internet penetration ............................................................................................ 12 iv. Growth of Organized retail ................................................................................................... 12 b. Global ........................................................................................................................................ 144. Growth Imperatives ...................................................................................................................... 16 a. Government support policies ................................................................................................... 16 b. Enhancing manufacturing competitiveness.............................................................................. 18 i. Skill upgradation ................................................................................................................... 18 ii. Technology upgradation ....................................................................................................... 18 iii. Partnerships .......................................................................................................................... 18 c. Realizing domestic market potential ........................................................................................ 19About CII ............................................................................................................................................... 21About Wazir Advisors............................................................................................................................ 22
    • List of FiguresFigure 1: Value Chain & Capacities ............................................................................................ 4Figure 2:Historical Growth of Indian Domestic Textile & Apparel Market................................ 5Figure 3: Projected Growth of Indian Textile & Apparel Domestic Consumption .................... 6Figure 4: Indian Textile & Apparel Exports ................................................................................ 6Figure 5: Historical Share of Largest Exporters (2010) in Global Exports .................................. 7Figure 6: Indian Textile & Apparel Imports ................................................................................ 7Figure 7: Urban Population in India (Mn) ................................................................................ 10Figure 8: Age-wise Segmentation (Mn) ................................................................................... 11Figure 9: Working Women in Indian Organized Sector (%) ..................................................... 11Figure 10: Number of Internet Users in India (million) ........................................................... 12Figure 11: Size of Organized Retail & Organized Retail (India) ................................................ 12Figure 12: Growth Rate Comparisons in % (India) ................................................................... 13Figure 13: Global Trade of Textiles & Apparel (US$ Bn) .......................................................... 14Figure 14: Shift of Textile Production over last 10 years ......................................................... 14Figure 15: Growth of Top Textile & Apparel Exporter Countries over last 5 years(Having Export Value > US $ 5 bn) ........................................................................................... 15Figure 16: Size of Indian Apparel Market (Rs. 000’ Crores) ..................................................... 19
    • Foreword Textile and Apparel manufacturing industry in India today is witnessing a sea change amid several impacting factors – domestic as well as global. On one hand where the manufacturers are continuously on their feet because of fluctuations in raw mmaterial prices and currency; they are also facing the manpower challenge in terms of cost, skill and availability. Not to mention that the demand which fell sharply during global slowdown is yet to pick up fully in international markets. Even back home the consumer has remained apprehensive as inflation remained record high for long in a slowing down economy. When we started having deliberations on this Conference; there were myriad of themes to choose from, but finally we decided to focus on options which are a solution to the challenges rather than deliberating on the challenges only. Hence, the Theme of “New Paradigms for Textile industry - Policy, competitiveness and domestic market” was chosen. The coverage of this Conference has applicability on the entire clothing manufacturing value chain. In order to shed light on them briefly and explain the role each of them have in leading the industry on a path of sustainable growth, we have prepared this report. It provides an overall direction where the industry needs to head in order to confront the industry biggest challenges it faces. Given the fact that external and economic changes are much beyond the control of any industry sector per se, we have to look internally, utilizing the resources in hand and adapt to changes in most efficient manner. This is the intent of the Conference and this knowledge paper. The idea is not only to discuss and debate on the topics which are most relevant in today’s context; but also identify what needs to be done, whose action is required and who will be is the catalyst for the required changes. CII has been actively engaged with the Textiles sector addressing their key issues relating to policy matter and developing a roadmap to leverage the growth potential of this sector. TEXCON 2012 – Conference on New Paradigms for Textiles Industry is another step forward in this direction. We look forward to have your inputs during, and even after, the Conference.D L Sharma Prashant AgarwalConference Chairman, TEXCON 2012 & Joint Managing DirectorDirector Wazir AdvisorsVardhman Textiles Ltd. (Knowledge Partner) 1
    • 1. Executive SummaryIndian Textile and Apparel industry is the second largest manufacturer in the world with anestimated export value of ~ US$ 34 billion and domestic consumption of ~ US$ 57 billion.The sector contributes to about 6% of the US$ 1.7 trillion Indian economy. It also providesemployment to ~35 million persons directly & ~55 million persons indirectly.India is among the very few countries which have a presence across the entire supply chain,from natural and synthetic fibers right up to finished goods manufacturing. It has presencein organized mill sector as well as decentralized sectors like handloom, powerloom, silk, etc.The total Indian consumption of textiles and apparel is estimated at ~US$ 57 billion (apparelretail contributes ~ US$ 40 billion, technical textiles contributes ~ US$ 13 billion and hometextiles contributes ~ US$ 4 billion).It is expected to reach ~US $ 100 billion by 2016 growing at a compounded annual rate of12%. Along with this, the exports have grown from US$ 19 billion to US$ 34 billion in past 6years at a CAGR of 12%.However, the industry has not performed to its full potential. It faces several challenges inaspects of production, marketing, and support infrastructure. The technology used inmanufacturing of textile and apparel in India considerably lags behind that of developednations and this is mainly due to lack of value addition, low productivity, low pace ofmodernization, economies of scale and high fragmentation. The industry also suffers due togeneral infrastructure related issues which lead to higher transaction costs, unreliability intransit times, etc. along with focus on limited markets, weak brand positioning of India andoverdependence on cotton.Currently we are witnessing a high growth in domestic consumption which is being fueledby several factors including rising disposable income of the consumers, growth in organizedretail, increasing brand awareness, rapid urbanization and increase in working agepopulation.The current global trend has been increase in raw material costs as well as manufacturingcosts, mainly manpower. In order to remain competitive in this challenging scenario it isimportant for Indian industry to focus on new paradigms for growth including Governmentsupport, driving manufacturing competitiveness and tapping the domestic marketopportunity. 2
    • With the objective of accelerating growth in investments and exports; Government of Indiahas launched several schemes, a few of them are: • Technology Upgradation Fund Scheme (TUFS) • Scheme for Integrated Textile Parks • Development of Mega Cluster • Integrated Skill Development Scheme (ISDS) • Technology Mission on Technical Textiles (TMTT) • A manufacturer can focus on a large number of business parameters in order to improve the manufacturing competitiveness. However, the most critical parameters having significant impacts are: • Skill Upgradation • Technology Upgradation • PartnershipsThere is a huge potential in the apparel market and there are many factors contributing tothe boom in this sector. To name a few, increased consumerism with a capacity to spend onluxury items and increased spending power in the hands of Indians.Along with this, the retail sector in India is growing at a phenomenal pace. According to theGlobal Retail Development Index 2012, India ranks fifth among the top 30 emerging marketsfor retail. International brands have begun to mull over the various possibilities of enteringin India. The recent announcement by the Indian government with Foreign DirectInvestment (FDI) in retail, especially allowing 100% FDI in single brands and also thinking ofopening up the sector for multi-brand FDI has created positive sentiments in the retailsector. 3
    • 2. Overview of Indian Textile IndustryIndian textile industry is the second largest manufacturer in the world today, second only toChina. India is among the very few countries which have a presence of complete supplychain, from natural and synthetic fibers right up to finished goods manufacturing. Theindustry holds vital importance in Indian economy too. With an estimated domesticconsumption of ~ US$ 57 billion and an export value of ~ US$ 34 billion; it contributes toabout 6% of the US$ 1.7 trillion Indian economy. The share in total exports also stands at asignificant 11% of the total Indian exports and 5% of the global trade in textiles and clothing.The industry holds importance from the employment point of view as well. It is estimatedthat ~35 million people are directly employed in this sector, whereas an additional ~55million are employed indirectly. Apart from the employment potential, the large number ofskilled and unskilled activities in the industry makes the sector extremely important fromthe perspective of inclusive growth. a. Industry structureThe key feature of Indian textiles industry is good availability of raw material along with thepresence of complete manufacturing value chain which exists in an organized mill sector aswell as decentralized sectors like handloom, powerloom, silk, etc. Figure 1: Value Chain & Capacities Source: Ministry of Textiles 4
    • However, it can be observed that downstream capacities are not proportional to ensurecaptive use of raw material and semi-processed goods. This indicates that a lot of goods arebeing exported in semi-finished form from India resulting in loss of value addition andadditional employment opportunity.Maximum capacity of Indian textile industry is with small scale sector which has lowerproductivity and efficiencies but provides flexibility in executing smaller order sizes which isunique to India. b. Domestic ConsumptionThe total Indian consumption of textiles and apparel is estimated at ~US$ 57 billion, out ofwhich apparel retail contributes to ~ US$ 40 billion, technical textiles contributes ~ US$ 13billion and home textiles contributes ~ US$ 4 billion. The market has grown at a yearlygrowth rate of 13% over last 5 years. Figure 2: Historical Growth of Indian Domestic Textile & Apparel Market 57 + 13 % 50 44 13 39 11 35 4 10 4 9 3 8 3 2 40 31 35 25 27 2007 2008 2009 2010 2011 Technical Textiles Home Textiles Apparel Source: Wazir AdvisorsThe domestic consumption has been fueled by several factors like growing consumerprosperity and awareness, increasing availability of product variations, catching up withinternational trends, growth of organized retail, etc.On the basis of these factors, it is estimated that the Indian domestic consumption willbecome ~US $ 100 billion by 2016 growing at an overall annual rate of 12%. 5
    • Figure 3: Projected Growth of Indian Textile & Apparel Domestic Consumption 113 + 12 % 26 6 57 + 8% 13 4 81 + 15% 40 2011 2016 Technical Textiles Home Textiles Apparel Source: Wazir Advisors c. External TradeIndian textile and clothing exports have come a long way in last decade or so, tripling theexports value in this duration. Indian textile & apparel as an export category hasoutperformed several large textile producers of past including Germany, Italy, USA, Turkey,etc. Figure 4: Indian Textile & Apparel Exports + 12 % 34 27 22 21 22 19 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Source: Exim Databank of Ministry of CommerceThe reasons for high growth of textile and apparel exports from India is country’s strong rawmaterial base, design and skill heritage, manufacturing capacities that are flexible for smallorders, manpower cost competitiveness and government’s incentive schemes for exportpromotion. 6
    • Figure 5: Historical Share of Largest Exporters (2010) in Global Exports 3% 3% 3% 4% 6% 6% 4% 4% 5% 5% 5% 8% 7% 7% 5% 9% 24% 29% India 23% 38% USA Germany Italy China & HK 52% 55% 51% 43% Others 1995 2000 2005 2010 Source: UN ComtradeIndia also imports textile and apparel goods to the tune of US$ 4 billion, which comprisesmainly of products like high end woolen / worsted fabrics, coated and performance fabrics,other technical textile and specialty products, fine cotton yarn dyed fabrics, premium andsuper premium garment categories, etc. The main reason of imports is unavailability ofthese products. In recent years even some inexpensive commodity articles like raw silk,other fibers, basic fabrics and garments have also made in-roads from suppliers like China. Figure 6: Indian Textile & Apparel Imports Values in US$ Bn +7% 4 4 3 3 3 2006-07 2007-08 2008-09 2009-10 2010-11 Source: Exim Databank of Ministry of Commerce 7
    • d. Key challengesIndian textile and apparel industry suffers several challenges in aspects of production,marketing, and support infrastructure. Due to its inherent nature several challenges areshort-term but cyclical, which have a global nature and may not be avoided like raw material termprice changes, currency fluctuation, etc. However, certain challenges are unique to Indian challengesmanufacturing industry as illustrated below: Support Manufacturing Marketing Others Infrastructure• Lack of value • Limited markets • Infrastructure • Low FDI addition • Sluggish demand issues • Overdependence• Low productivity in traditional • High transaction on cotton• Low pace of markets costs modernization • Higher growth of • High interest• Lack of competitors rates Economies of • weak brand scale positioning of•High fragmentatio India nThe Indian product basket consists majorly of basic product categories and a large chun of product chunkexports is in form of semi-processed goods. The production technology also lags behind t processed thatof developed countries and since the industry is led by small scale industries, which do not small-scalehave fiscal resources for continuous upgradation or expansions. As a result they are not result,able to generate economies of scale nor are the higher rates of produ productivity achievable.Other concerns related to manufacturing include weak supply chain linkages, lack ofindigenous research and development and inadequate worker training. Labor force in Indiamay be cheap but they have a much lower productivity as compared to the competing comparedcountries.In terms of export markets, Indian exports are very much focused on few countries. Lack of muchbuyer diversification has made Indian exporters prone to the demand variation in these,limited markets. As seen during recent demand slowdown in the US and then someEuropean countries, the industry clusters have suffered quite adversely. Even recognition ofIndia as a brand in global textile and apparel markets is non non-existent.The industry also suffers due to general infrastructure related issues which lead to highertransaction costs, unreliability in transit times, etc. The interest rates along with other inputcosts like power are also not comparable to countries like China, Bangladesh, Turkey, etc. 8
    • Although the industry is open to FDI, such investments generally require large capitaloutlays and a more developed textile infrastructure than India has to offer. This is thereason why even after having huge domestic market potential, FDI in this sector is quiteminiscule.Another challenge for the sector is biasness towards cotton related product manufacturing.The global fiber demand is more of the synthetics whereas Indian manufacturing is moregeared up for manufacturing and processing cotton based products. This has led to loss oftrade possibility in some of the large traded commodities. 9
    • 3. Change Drivers a. Indian i. UrbanizationIn pre-industrial times, India had a slow growth in urbanization vis-a-vis other countries. Buttoday, India is one of the fastest urbanizing societies. As per National Council for AppliedEconomic Research (NCAER), by 2030, 70% of new employment in India will be created incities, 91 Mn urban households will be middle class, up from 22 Mn today and 68 cities willhave a population of over 1 Mn, up from ~50 today. Figure 7: Urban Population in India (Mn) 800 2.4% 590 80% 600 2.7% 470 60% 320 365 400 40% 200 35% 37% 20% 29% 30% 0 0% 2005 2010 2020 (P) 2030 (P) Urban Pop. Urban Pop. as % of totalIndian urban population will be more than the combined population of US, UK and Germanyin the coming years and some of the Indian metro regions would be bigger than certaincountries.This increase in urbanization will possibly lead to greater awareness among the peopleregarding fashion and brand. As a result of brand consciousness, India is witnessing a changein lifestyle resulting in increased demand for western wear clothing & home furnishing andhence increasing per capita consumption of branded apparel. ii. Younger, working age populationAbout 50% of the Indian population is below the 25 years mark. In the next 2-3 decades, thissection will move towards the middle-age/working age population category which has ahigher propensity to consume. India will be adding ~ 14 Mn people per year to its laborpool. Going forward, as this young population enters the Indian workforce there will beincreased demand for work wear including formal clothing as well. As Indian consumermatures, there will be a greater shift in tastes & preferences in favor of more & morebranded items. 10
    • Figure 8: Age-wise Segmentation (Mn) 1.2% 1.6% 1347 1200 129 1019 96 83 213 160 138 194 142 162 196 210 181 209 221 238 353 365 363 2005 2010 2020 (P) 0-14 15-24 25-34 35-44 45-59 60+Increased participation of women in workforce has led to their financial independence. As a result,there is an increase in their propensity to spend on apparel, accessories, home furnishing & personalcare. There is a direct increase in spending on corporate clothing for women. Also, their spending on corporateother forms of apparel has increased as well which includes casual wear and party wear. Figure 9: Working Women in Indian Organized Sector (%) : 20.3 21 17.6 18.9 2000 2005 2010 2015(P)There is increased demand for readymade Indian ethnic wear with the entry of large retailers likeFab India, W and Biba. Women are following fast changing fashion which results in higher no. ofpurchases of fashion items. 11
    • iii. Increasing internet penetrationBesides this one of the decisive key change drivers in Indian consumption pattern is growthof internet penetration in India. According to Internet World Stats (IWS), Indian internetpenetration has followed the pattern below-Figure 10: Number of Internet Users in India (million) 237 +24% +24% 80 27 2005 2010 2015 (P)Number of internet users has been increasing at a CAGR of ~24% between 2005- 2010.Internet penetration in India is expected to increase to 19% of the population by 2015, upfrom the current 9%. Increase in internet penetration has increased awareness amongIndians regarding western clothing & organized retail. iv. Growth of Organized retailThe organized retail segment in India is projected to be 9 per cent of total retail market by2015 and 20 per cent by 2020. Figure 11: Size of Organized Retail & Organized Retail (India) 1000 500 290 8.7 35 90 2005 2010 2015 P Total Retail Organised RetailThe share of organized retail in total retail has doubled in the last 5 years, from ~3% to ~7%,growing at a CAGR of ~32% (2005-2010). 12
    • Figure 12: Growth Rate Comparisons- Organized Retail, GDP & Private Consumption in % (India) 33% 31% 31% 27% 29% 27% 25% 25% 21% 16% 9% 10% 9% 8% 9% 9% 9% 9% 6% 7% 7% 8% 8% 8% 9% 5% 7% 7% 6% 3% 2006 2007 2008 2009 2010 2011 2012 P 2013 P 2014 P 2015 P Private Consumption GDP Growth Organized RetailIncreasing disposable incomes, expansion of stores and supporting economic factors willlead to higher sales in apparel. 13
    • b. GlobalThe global trade in textiles and apparel is estimated at US$ 650 bn. in 2011. This isapproximately 4% of the total global trade of all commodities estimated at ~ US$ 15 trillion.In previous 15 years (1995 to 2010) the textile and apparel trade has grown at a modestCAGR of 5% per annum. Figure 13: Global Trade of Textiles & Apparel (US$ Bn) 616 628 610 650 504 556 542 304 360 1995 2000 2005 2006 2007 2008 2009 2010 2011 (Est.)During 1995 to 2000, the trade growth remained muted @ 3% CAGR. However, itaccelerated to 7% during 2000 to 2005 and then fell in subsequent 5 years to 4% CAGR.In the last 10 years, world has witnessed a gradual shift in textile production fromdeveloped / western countries to developing / Asian countries. Figure 14: Shift of Textile Production over last 10 years Major Consumption Hub Major Production Hub 14
    • During last 5 years, several new suppliers like Bangladesh and Viet Nam have shownspectacular growth in exports. Below is a graphical representation of the growth ratesof major textile & apparel exporter countries over last 5 years. Figure 15: Growth of Top Textile & Apparel Exporter Countries over last 5 years : (Having Export Value > US $ 5 bn)Over last year or so, the industry has seen an unprecedented increase in labor costs acrossthe globe. This along with raw material price fluctuations has led to major ripples in theindustry. With these constraints, the days of lowest prices are over. The unit value priceshave already started seeing an upward trend.In near future, it is expected that the manufacturers will have to focus increasingly onimproving the operational efficiencies, productivity, reducing wastages and go for processautomation and control in order to drive their competitiveness. on 15
    • 4. Growth Imperatives a. Government support policiesThe textile industry, being one of the most significant sectors in the Indian economy, hasbeen a key focus area for the Government of India. Government policy has played afundamental role in shaping the growth, structure and technological evolution of the textilesector in India over the last decade. The strong demand from domestic and export marketcoupled with conducive policy environment provided by the Government has catalyzed thegrowth of the textile industry.With the objective of accelerating growth in investments and exports; Government of Indiahas launched several schemes. Some of the major schemes are discussed briefly ahead: i) Technology Upgradation Fund Scheme (TUFS)–The Technology Upgradation Fund Scheme (TUFS) is the flagship Scheme of the Ministry ofTextiles which was launched on April 1, 1999. It was launched to enable firms to access low-interest loans for technology upgradation.The Scheme mainly provides for - • Reimbursement of 5% (4% for spinning machinery) interest charged by the financial institutions • Coverage of exchange rate fluctuation not exceeding 5% (4% in respect of spinning machinery) points per annum in respect of foreign currency loans instead of 5% interest support • 5% interest reimbursement plus 10% capital subsidy for specified finishing machinery, garmenting machinery and technical textiles machinery. ii) Scheme for Integrated Textile Parks (SITP)The Scheme was introduced to neutralize the weakness of fragmentation in the various subsegments of textile value chain and unavailability of quality infrastructure.The primary objective of the SITP is to provide the industry with world-class infrastructurefacilities for setting up their textile units to facilitate textile units to meet internationalenvironmental and social standards. iii) Development of Mega ClusterThe broad objectives of the Mega cluster approach Scheme is to enhance thecompetitiveness of the Powerloom clusters, Handloom clusters & Handicraft clusters, interms of increased market share and ensuring increased productivity by higher unit valuerealization of the products. The scheme comprises of following components: 16
    • Comprehensive Powerloom Cluster Development Scheme:-To assist entrepreneurs to set upworld-class units with modern infrastructure, latest technology and adequate training andhuman resource development along with appropriate market linkagesComprehensive Handloom Cluster Development Scheme: - To address the challenges facedby weavers within the cooperative sector and outside, due to poor infrastructure in someclustersComprehensive Handicraft Cluster Development Scheme:-To enhance the competitivenessin terms of access to technology, increased market share, ensure effective integration ofscattered artisans and linking them to SMEs, generate additional livelihood opportunities,provide linkages in terms of adequate infrastructure technology, product security and othersuch components. iv) Integrated Skill Development Scheme (ISDS)Integrated Skill Development Scheme was launched by the Ministry of Textiles to traincandidates according to the industry needs, provide professionals skills in multiple fields intextiles, and provide knowledge to the working professionals on the developments in theindustry.ISDS aims to train over 27 Lacs people within the next 5 years. The scheme would cover allthe sub sectors of the textile sector such as textile and apparel, handlooms, jute andsericulture. v) Technology Mission of Technical Textiles (TMTT)Government has launched TMTT with two mini missions for a period of five years (from2010-11 to 2014-15). The aim of TMTT is to address the issues like lack of basicinfrastructure in terms of testing facilities, lack of market development support, skilledmanpower, lack of R & D, absence of regulatory measures, absence of specifications andstandards for technical textiles etc. The total fund outlay for TMTT is Rs 200 Crores.Mini Mission I of TMTT is aimed at Standardization, creating common testing facilities withnational international accreditation, indigenous development of prototypes and resourcecenter with IT infrastructure, incubation centre by establishing four new Centers ofExcellence (COEs) and upgradation of existing four COEs.Mini Mission II of TMTT is to provide support under 6 components, i.e., a. Support for business start-up; b. Providing fund support for organizing workshops; c. Social compliance through standardization, regulatory measures; d. Market development Support for marketing support to bulk and institutional buyers; 17
    • e. Market development Support for export sales and f. Contract Research and Development through IITs/TRAs/Textile Institutes.In addition, FDI policy for manufacturing in this sector is quite hassle free as 100% FDI isallowed under the automatic route*. Apart from these larger schemes which target a broadrange of industry, there are various schemes specifically targeted to help decentralizedsectors grow like handloom, silk and powerloom.*FDI under automatic route implies that the foreign companies do not need a prior approvalfor investment by the authorities. The investors are only required to intimate the Regionaloffice concerned of the Reserve Bank within 30 days of receipt of inward remittance. b. Enhancing manufacturing competitivenessA manufacturer can focus on a large number of business parameters in order to improve themanufacturing competitiveness. Some of the most critical, having significant impacts arediscussed below: i. Skill upgradationWith increasing labor costs and decreasing availability, skill upgradation is one suchparadigm which can solve the manpower challenge that industries face, to some extent. Onone hand skill upgradation can increase the influx of manpower from distant corners of theindustry; whereas on the other making them skilled in operations of their choice can checkthe inter segment migration to some extent. ii. Technology upgradationDespite considerable amount of global exposure, technological modernization anddiversification, a large section of Indian Textile industry continues to work on conventionalmanufacturing technologies. Technological advancements have improved not only theproductivities, efficiencies and quality but also have enhanced the product mix. iii. PartnershipsPartnership will help open the gateway of opportunities to expand the Indian market. Oneof the reasons is that many western manufacturers are looking for a destination to expandtheir manufacturing bases in order to be more competitive. Secondly, Indian domesticconsumption in itself has become quite attractive for international players. However, inorder to succeed in a large, diverse market such as India, a partnership with local player whohas an existing network and operational understanding of various channels is what theinternational players want to tap. This creates opportunities for Indian manufacturers toupgrade their existing technical, quality and design knowhow and also start tapping intoglobal marketing network. 18
    • c. Realizing domestic market potentialIndian apparel market currently valued at ~US$ 36 billion is expected to grow at a CAGR of15% in next 5 years and is estimated to be pegged at ~US$ 74 billion by 2016. This growth isprimarily driven by increase in disposable income, brand penetration, working population,apart from increase in per capita consumption of clothing due to favorable consumerdemographics.Currently Men’s wear is the biggest segment of the market, however women’s wear isgrowing faster than other apparel segments and is expected to gain majority share in future.Kidswear is also growing rapidly with a CAGR of 14%. Figure 16: Size of Indian Apparel Market (Rs. 000’ Crores) 74 +15% 20 +12% 5 36 28 26 9 23 7 3 5 2 12 2 9 7 23 8 10 13 2007 2009 2011 2016 (P) Kidswear Unisex wear Womens wear MenswearThere is a huge potential in the apparel market backed by fashion consciousness ofconsumers, rapid urbanization, increasing government infrastructure spending and growingsectors, etc.Although many brands have entered the Indian retail space in last decade, but still manybrands have not marked their presence in India due to poor infrastructure, high real estatecosts and FDI regulations. The total Retail Space in India has increased from 1.5 Mn sq. ft. in2001 to 53 Mn sq. ft. in 2010, growing at a CAGR of 43%. Another 65 mn sqft will be addedin next 5 years time. So, here is a huge opportunity for Indian retail to expand. 19
    • Table 1: Inter Country Comparison of Retail Space Per Capita Total Retail Per Capita Mall Country Space (sq. Ft.) Space (sq. ft/.) Dubai n/a 25.3 USA 46.6 23.1 Singapore 15.7 7.2 Australia, 24-31 5.5-6.8 New Zealand UK 12 3.9 Japan 12-13 3.8 China 11.2 2.7 India 2.22 0.09India has a huge scope of expansion as the retail space per capita in India is very less incomparison with other countries.Besides, due to recent liberalization of the Foreign Direct Investment (FDI), India hasbecome one of the fastest growing destinations for FDI inflows. 100% FDI in single brandretail is a welcome sign for the luxury and niche retailers. Moreover, the revival of theproposal to permit 51% FDI in multi-brand retail could bring a positive impact on Indianretail sector. This is very well demonstrated in Scandinavian furniture retailer IKEA’sannouncement of its plans to invest Rs 10,500 crores (~US$ 2 billion) in retail in India.Organized retail will result in more productive, efficient & compliant manufacturing units,more employment, increased domestic supply opportunity and more consumption. 20
    • About CIIThe Confederation of Indian Industry (CII) works to create and sustain an environmentconducive to the growth of industry in India, partnering industry and government alikethrough advisory and consultative processes.CII is a non-government, not-for-profit, industry led and industry managed organisation,playing a proactive role in Indias development process. Founded over 117 years ago, it isIndias premier business association, with a direct membership of over 7000 organisationsfrom the private as well as public sectors, including SMEs and MNCs, and an indirectmembership of over 90,000 companies from around 400 national and regional sectoralassociations.CII catalyses change by working closely with government on policy issues, enhancingefficiency, competitiveness and expanding business opportunities for industry through arange of specialised services and global linkages. It also provides a platform for sectoralconsensus building and networking. Major emphasis is laid on projecting a positive image ofbusiness, assisting industry to identify and execute corporate citizenship programmes.Partnerships with over 120 NGOs across the country carry forward our initiatives inintegrated and inclusive development, which include health, education, livelihood, diversitymanagement, skill development and water, to name a few.The CII Theme for 2012-13, ‘Reviving Economic Growth: Reforms and Governance,’ accordstop priority to restoring the growth trajectory of the nation, while building GlobalCompetitiveness, Inclusivity and Sustainability. Towards this, CII advocacy will focus onstructural reforms, both at the Centre and in the States, and effective governance, whiletaking efforts and initiatives in Affirmative Action, Skill Development, and InternationalEngagement to the next level.With 63 offices including 10 Centres of Excellence in India, and 7 overseas offices inAustralia, China, France, Singapore, South Africa, UK, and USA, as well as institutionalpartnerships with 223 counterpart organisations in 90 countries, CII serves as a referencepoint for Indian industry and the international business community. Confederation of Indian Industry Northern Region Block 3, Dakshin Marg, Sector 31 A, Chandigarh T: +91-172-6510188 • F: +91-172- 2606259 E: ciinr@cii.in • W: www.cii.in Reach us via our Membership Helpline: 00-91-11-435 46244 / 00-91-99104 46244 CII Helpline Toll free No: 1800-103-12 21
    • About Wazir AdvisorsWazir Advisors is a management consulting firm based out of India that advises clientsglobally on business strategies, mergers and acquisitions, joint ventures, funding andinvestments. Wazir is focused on the Indian consumer segments like Fashion & Lifestyle,Food & FMCG, Education, Media & Entertainment, Health & Wellness, Consumer Durables,etc.Wazir offers strategic direction and momentum to Indian and multi-national firms that arelooking to address the growing needs of one of the world’s largest and fastest growingmarket. Wazir assists its clients in developing winning business strategies and implementingthem successfully from end to end.With a team of experienced professionals, Wazir offers a comprehensive range of servicesto its clients to create, compete and develop their consumer-centric businesses in theexciting and challenging Indian market. Wazir’s team comprises of engineers, MBA’s,financial experts and economists from reputed institutes like INSEAD, IIT, IIM, TIT, NIFT, IMS,IIFT and ICFAI.Wazir’s service offerings:a. Strategic Advisory Services c. Services for International Companies-Assess market opportunity -Develop market entry strategy-Develop business & sales strategy -Pursue M&A opportunities-Conduct business & financial planning -Identifying local partners: JV, franchisee or licensee-Support action planning & assistimplementation -Facilitate setting up business in Indiab. Business Advisory Services d. Services for PE Funds-Facilitate M&A -Develop sector investment strategy-Promote JV & alliances -Identify targets & facilitate investments-Provide funding & investment support -Due diligence of target companies 22