Analyzing Textiles Industry of India

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  • Dear Devanshu,Good Report.. can you please share the same on my email id : jdsharma78@gmail.com
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  • Dear Devenshu, While reading the Analyses textile Industry Report. It was useful and on the point information is required. Thanks for the same., But Chapter 3 - Current Status - the images (3.1.1.,3.2.1,3.1.3) are not shown, request youto please look into this. Regards,
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  • Dear Devanshu ,

    I am Sankar from BASF India . Working on Textile Industry project from R/M supply ability point of biew . Can you send me the download copy of the project for my reference as this is an excellent starting point for my secondary research purpose .
    You can mail me at sankar.mitra@basf.com . My contact number is 09619263845
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Analyzing Textiles Industry of India

  1. 1. IndustryAnalysis:TextilesAnalysing Textile Industryof IndiaContributors: Ashwani Kumar Chavi Gupta Devanshu Singhal Dharmendra Kumar Ruchi Gupta Suryakant Chauhan
  2. 2. Department of Management Studies, IIT Roorkee, Roorkee - 247667 BONAFIDE CERTIFICATECertified that this project report “Industry Analysis: Indian Textiles” is the bona fide work offollowing students: 1. Ashwani Kumar - 11810020 2. Chavi Gupta - 11810023 3. Devanshu Singhal - 11810026 4. Dharmendra Kumar - 1181007 5. Ruchi Gupta - 11810070 6. SuryakantChauhan - 11810082They carried out the project work under my supervision for their course work under the subjectof ‚Managerial Economics‛in 1st Semester of their MBA.SIGNATUREDr. BabitaSinhaAssistant ProfessorDepartment of Humanities and Social SciencesIIT Roorkee,Uttarakhand - 247667 1|Page
  3. 3. Table of Contents1. Chapter01 - Executive Summary ................................................................................................................................................................................................................................... 5 1.1. Industry Definition ........................................................................................................................................................................................................................................... 5 1.2. Current Industry Value .................................................................................................................................................................................................................................... 5 1.3. Industry Forecast .............................................................................................................................................................................................................................................. 5 1.4. Industry Segmentation ..................................................................................................................................................................................................................................... 6 1.5. Major Players & Competition .......................................................................................................................................................................................................................... 62. Chapter 02 - Growth & Evolution of the Industry ....................................................................................................................................................................................................... 7 2.1. Industry through time ...................................................................................................................................................................................................................................... 7 2.1.1. Origins ........................................................................................................................................................................................................................................................ 7 2.1.2. Roots in India ............................................................................................................................................................................................................................................. 7 2.1.3. Industrial Revolution................................................................................................................................................................................................................................. 7 2.2. Indian Textiles – Introduction.......................................................................................................................................................................................................................... 8 2.3. Industry Structure ............................................................................................................................................................................................................................................. 8 2.3.1. Industry Segments ..................................................................................................................................................................................................................................... 8 2.3.2. Simple Value Chain ................................................................................................................................................................................................................................... 93. Chapter03 - Current Status ............................................................................................................................................................................................................................................11 3.1. Present Scenario ...............................................................................................................................................................................................................................................11 3.1.1. Exports .......................................................................................................................................................................................................................................................11 3.1.2. Domestic demand remains strong ...........................................................................................................................................................................................................12 3.1.3. Cotton prices continue to rally.................................................................................................................................................................................................................12 3.1.4. Government Backs TUFS .........................................................................................................................................................................................................................13 3.2. Verdict ...............................................................................................................................................................................................................................................................134. Chapter04 – Current Scenario (Size of Industry/GDP Contribution) ........................................................................................................................................................................14 4.1. Introduction ......................................................................................................................................................................................................................................................14 4.2. Sub Industry Analysis .....................................................................................................................................................................................................................................14 4.2.1. Cotton Textiles ...................................................................................................................................................................................................................................14 4.2.2. Silk Textiles.........................................................................................................................................................................................................................................15 4.2.3. Hand Crafted Textiles .......................................................................................................................................................................................................................15 4.2.3.1. Handlooms ..................................................................................................................................................................................................................................15 4.2.3.2. Handicrafts ..................................................................................................................................................................................................................................16 4.2.4. Jute Textiles ........................................................................................................................................................................................................................................16 4.2.5. Man-Made ..........................................................................................................................................................................................................................................16 4.3. Outlook .............................................................................................................................................................................................................................................................175. Chapter05 – Textile Exports ..........................................................................................................................................................................................................................................18 5.1. Introduction ......................................................................................................................................................................................................................................................18 5.2. Country Wise Exports .....................................................................................................................................................................................................................................19 5.3. Segment Wise Exports .....................................................................................................................................................................................................................................20 2|Page
  4. 4. 6. Chapter06 - Industry and Macro Environment ...........................................................................................................................................................................................................22 6.1. Politico – Legal Factors ....................................................................................................................................................................................................................................22 6.1.1. Major reforms policy initiatives ...............................................................................................................................................................................................................22 6.1.2. Indian Textile Policy, 2000 .......................................................................................................................................................................................................................23 6.1.3. National Jute Policy, 2005.........................................................................................................................................................................................................................23 6.2. Demographic ....................................................................................................................................................................................................................................................23 6.3. Socio – Cultural ................................................................................................................................................................................................................................................24 6.4. Economic ..........................................................................................................................................................................................................................................................24 6.5. Natural ..............................................................................................................................................................................................................................................................24 6.6. Technological ...................................................................................................................................................................................................................................................257. Chapter07 - SWOT Analysis .........................................................................................................................................................................................................................................27 7.1. Introduction ......................................................................................................................................................................................................................................................27 7.2. Strengths ...........................................................................................................................................................................................................................................................28 7.2.1. Strong and Diverse Raw Material base ...................................................................................................................................................................................................28 7.2.2. Vertical & Horizontal integrated textile value chain. ............................................................................................................................................................................29 7.2.3. Low Manufacturing Costs ........................................................................................................................................................................................................................29 7.2.4. Novelty in Traditional Handlooms and Handicrafts ............................................................................................................................................................................30 7.2.4.1. Handlooms .........................................................................................................................................................................................................................................30 7.2.4.2. Handicrafts .........................................................................................................................................................................................................................................31 7.3. Weaknesses .......................................................................................................................................................................................................................................................31 7.3.1. Highly fragmented industry ....................................................................................................................................................................................................................31 7.3.2. Technological obsolescence ......................................................................................................................................................................................................................32 7.3.3. Rigid Labour laws .....................................................................................................................................................................................................................................32 7.3.4. Wide supply and demand gap in training facilities ..............................................................................................................................................................................33 7.3.5. Infrastructural bottlenecks .......................................................................................................................................................................................................................33 7.3.6. Intermediaries in Supply Chain...............................................................................................................................................................................................................34 7.4. Opportunities ...................................................................................................................................................................................................................................................34 7.4.1. Technical Textiles: An emerging sector ..................................................................................................................................................................................................34 7.4.2. Quota Phase-out: Post MFA Scenario .....................................................................................................................................................................................................35 7.4.3. Buoyant Domestic Economy ....................................................................................................................................................................................................................35 7.4.4. Credit Availability through Govt. sponsored schemes .........................................................................................................................................................................35 7.5. Threats ..............................................................................................................................................................................................................................................................36 7.5.1. Possibility of global recession and fluctuating US Dollar .....................................................................................................................................................................36 7.5.2. Growing International Competition .......................................................................................................................................................................................................36 7.5.3. Non-availability of Indigenous textile machinery .................................................................................................................................................................................36 7.5.4. Increased Sociological and Ecological awareness ..................................................................................................................................................................................368. Chapter08 – Industry Outlook ......................................................................................................................................................................................................................................379. References .......................................................................................................................................................................................................................................................................38 3|Page
  5. 5. List of TablesTable 5-A: Textile Exports - Top Ten Countries {Source: Ministry of Textiles} .................................. 19Table 7-A: Projected production of fibres during the Eleventh Plan [Working Group Report .... 28Table 7-B: International Cost Comparisons {ITMF Data - 2006}........................................................ 30Table 7-C: Costs of various factors in different countries, 2006 [NCAER Report] ......................... 33List of FiguresFigure 2-1: Industry Segments ................................................................................................................. 9Figure 2-2: Estimated data based upon NSSO, 62nd round, 2005-06. {Source: NCAER Report} ........ 9Figure 3-1: India’s Textile Exports {Source: Datamonitor group} ......................................................... 11Figure 3-2: Cloth Production: {Source: Datamonitor Group} ................................................................ 12Figure 3-3: Cotton Yarn Prices: {Source: Datamonitor Group} .............................................................. 13Figure 4-1: The Cotton Balance Sheet for 2009-10 {Source: Ministry of Textiles} ............................... 14Figure 4-2: Raw Silk Production {Source: Ministry of Textiles ............................................................. 15Figure 4-3: Sales during Marketing Events {Source: Ministry of Textiles} .......................................... 15Figure 4-4: Production of Artificial & Man Made Textiles {Source: Ministry of Textiles} ................ 16Figure 4-5: Fabric & Yarn Production growth {Source: Ministry of Textiles} ..................................... 17Figure 5-1: Textile Exports Basket {Source: Ministry of Textiles} ......................................................... 18Figure 5-2: Segment wise growth in Exports {Source: Ministry of Textiles}....................................... 20Figure 7-1: The Value Chain in Textiles ................................................................................................ 29Figure 7-2: TOP 15-By Sales in Rs. Millions {Source: Capital One Database}...................................... 31 4|Page
  6. 6. 1. Chapter01 - Executive Summary 1.1. Industry Definition The textiles market includes yarns, fabrics, non-apparel, and apparel finished products. The value of each segment is for consumption, defined as domestic production plus imports minus exports; all valued atmanufacturer prices. Fabrics cover woven, non-woven, and knitted fabrics (including knitted products such as sweaters).Apparel covers all other clothing except leather and footwear. Non-apparel products include technical,household, and other made-up non-clothing products. 1.2. Current Industry Value At current prices the Indian textiles industry is pegged at US$ 55 billion, 64% of which services domestic demand. The textiles industry accounts for 14% of industrial production, which is 4% of GDP; employs 35 million people and accounts for nearly 12% share of the countrys total exports basket. 1.3. Industry Forecast After facing a sharp decline following the global downturn, the textile industry is on a recovery road now. Textile exports, which declined through most of the last fiscal year, have got some respite in the current year. Overall, there are clear signs pointing towards a recovery in India`s textile industry in 2010, following the dismal operating environment that the sector had to contend with for two consecutive years. The year 2011 is expected to be better on a sequential basis and the situation is more favorable to domestically-focused and synthetic textile companies given the stable demand and cost side, while the cotton textile exporters may continue to face a few more challenging months before cotton prices start coming down in second half of the year. The textile industry is expected to reach a market size of US$ 115 billion by the end of the Eleventh Five Year Plan [2007-12], comprising of US$ 55 billion of exports and US$ 60 billion of domestic market. 5|Page
  7. 7. 1.4. Industry SegmentationThe major sub-sectors that comprise textiles sector include:  Organized Cotton/Man-Made Fibre Textiles Mill Industry.  Man-Made Fibre / Filament Yarn Industry.  Wool and Woolen Textiles Industry.  Sericulture and Silk Textiles Industry.  Handlooms.  Handicrafts.  Jute and Jute Textiles Industry.  Textiles Exports.1.5. Major Players& CompetitionIndustry is dominated by small, fragmented and non-integrated units with the exception ofspinning sector. The spinning segments production is dominated by large units and hasbeen able to undergo significant modernization at a rapid rate. In recent years, a trendtowards consolidation and integration with the value chain upstream along withmodernization in segments like garments has been witnessed.Following are some major players in the field of Indian Textile Industry.  Arvind Mills: Arvind Mills is one of the major and fully vertically integratedcomposite mills player in India. It has large production in denim, shirtingand knitted garments. It is now adding value by manufacturing denimapparel.  Raymonds: Raymonds has the large, diversified integrated businessmodel, which is spread across the value chain from yarn to retail. It isspecialized in Diversified woolen textiles. It already supplies to some USretailers.  Reliance Textiles: Reliance Textiles is one of the major Textile Companiesthat is in the business of fully integrated manmade fiber. It has capacity ofmore than 6 million tonnes per year. It has joint venture partners like DuPont, Stone & Webster, Sinco (Italy) etc.  Vardhaman Spinning: Vardhman deals in spinning, weaving andprocessing segment of the industry. It is an approved supplier to global retailers like GAP, Target and Tommy Hilfiger. 6|Page
  8. 8. 2. Chapter 02 - Growth & Evolution of the Industry 2.1. Industry through time 2.1.1. Origins The term Textile is a Latin word originated from the word texere which means to weave. Textile refers to a flexible material comprising of a network of natural or artificial fibers, known as yarn. Textiles are formed by weaving, knitting, crocheting, knotting and pressing fibers together. The history of textile is almost as old as that of human civilization and as time moves on the history of textile has further enriched itself. In the 6th and 7th century BC, the oldest recorded indication of using fiber comes with the invention of flax and wool fabric at the excavation of Swiss lake inhabitants. In India the culture of silk was introduced in 400AD, while spinning of cotton traces back to 3000BC. In China, the discovery and consequent development of sericulture and spin silk methods got initiated at 2640 BC while in Egypt the art of spinning linen and weaving developed in 3400 BC. The discovery of machines and their widespread application in processing natural fibers was a direct outcome of the industrial revolution of the 18th and 19th centuries. The discoveries of various synthetic fibers like nylon created a wider market for textile products and gradually led to the invention of new and improved sources of natural fiber. The development of transportation and communication facilities facilitated the path of transaction of localized skills and textile art among various countries. 2.1.2. Roots in India Indian textile enjoys a rich heritage and the origin of textiles in India traces back to the Indus valley Civilization where people used homespun cotton for weaving their clothes. Rigveda, the earliest of the Veda contains the literary information about textiles and it refers to weaving. Ramayana and Mahabharata, the eminent Indian epics depict the existence of wide variety of fabrics in ancient India. These epics refer both to rich and stylized garment worn by the aristocrats and ordinary simple clothes worn by the common people. The contemporary Indian textile not only reflects the splendid past but also cater to the requirements of the modern times. 2.1.3. Industrial Revolution New innovations in clothing production, manufacture and design came during the Industrial Revolution. During the Industrial Revolution, new machines such as spinning wheels and handlooms came into the picture. Making clothing material quickly became an organized industry; as compared to the domesticated activity it had been associated with before. A number of new innovations led to the industrialization of the textile industry in Great Britain. Clothing manufactured during the Industrial Revolution 7|Page
  9. 9. formed a big part of the exports made by Great Britain. They accounted for almost 25% of the total exports made at that time, doubling in the period between 1701 and 1770. The center of the cotton industry in Great Britain was Lancashire - and the amount exported from 1701 to 1770 had grown ten times. However, wool was the major export item at this point of time. In the Industrial Revolution era, a lot of effort was made to increase the speed of the production through inventions such as the flying shuttle in 1733, the flyer-and-bobbin system, and power loom in 1784.2.2. Indian Textiles – IntroductionThe Indian textile industry is one the largest and oldest sectors in the country and amongthe most important in the economy in terms of output, investment and employment. Thesector employs nearly 35 million people and after agriculture, is the second‐highestemployer in the country. Its importance is underlined by the fact that it accounts for around4% of Gross Domestic Product, 14% of industrial production, 9% of excise collections, and18% of employment in the industrial sector, and 16% of the country’s total exports earnings.With direct linkages to the rural economy and the agriculture sector, it has been estimatedthat one of every six households in the country depends on this sector, either directly orindirectly, for its livelihood.A strong raw material production base, a vast pool of skilled and unskilled personnel, cheaplabour, good export potential and low import content are some of the salient features of theIndian textile industry. This is a traditional, robust, well‐established industry, enjoyingconsiderable demand in the domestic as well as global markets.2.3. Industry Structure 2.3.1. Industry Segments The Indian textiles industry is extremely varied, with the hand-spun and hand-woven sector at one end of the spectrum, and the capital intensive, sophisticated mill sector at the other. The decentralized powerlooms / hosiery and knitting sector from the largest section of the Textiles Sector. The close linkage of the Industry to agriculture and the ancient culture, and traditions of the country make the Indian textiles sector unique in comparison with the textiles industry of other countries. This also provides the industry with the capacity to produce a variety of products suitable to the different market segments, both within and outside the country. Figure 2.1 provides a brief glimpse of Indian Textile’s major segments. 8|Page
  10. 10. Figure 2-1: Industry Segments Indian Textile Industry Handlooms & Man-Made Silk Cotton Woolen Jute Handicrafts Decentralized Organized Sector Sector Cotton Mills Hand Looms (Private Public & (Cloth) Co-Operative) Spinning Mills Power Looms (Yarn) (Cloth) Composite Mills (Yarn & Cloth)2.3.2. Simple Value ChainIndia’s textile industry comprises mostly small-scale, non-integrated spinning,weaving,finishing, and apparel-making enterprises. The figure below depicts the overallvalue chain and the number and type of units within the industry.Figure 2-2: Estimated data based upon NSSO, 62nd round, 2005-06.{Source: NCAER Report} Weaving/Knitti Units Spining Mills ng units Processing Units Apparels Manufacturers Knitting: No. of Non Factory: 2992 22, 362 Non Factory > 80, 000 17, 55, 023 Weaving: Units 8, 97, 085 Output Yarn Fabric Fibre, Cotton, Jute, Silk, Wool Garment 9|Page
  11. 11. India is one of the few developing countries today with a fully developed textile valuechainextending from fibre to fabric to garment exports. The presence of capabilitiesacross the entire value chain within the country is an advantage as it reduces the leadtime for production and cuts down the intermediate shipping time. Indian textile firmshave leveraged this advantage to integrate their operations, either forward or backward. 10 | P a g e
  12. 12. 3. Chapter03 - Current Status 3.1. Present Scenario The Indian textile industry continued the recovery strongly throughout in the year 2010 after hitting a low in 2009 following the global economic recession. Domestic demand was the first to recover and has been providing good support over last 5-6 quarters or so even as exports too begin to recover gradually. However, the cotton textile exporters continue to face another challenging year in wake of sharp increase in cotton yarn prices and strong competition being witnessed from rival exporters from China and Bangladesh. 3.1.1. Exports Figure 3-1: India’s Textile Exports {Source: Datamonitor group} The Industry witnessed strong growth in three years preceding the FY09 with exports surging at double digit pace, but was also one of the hardest hit by the global economic downturn as demand from both export and domestic markets declined. After facing two consecutive difficult years, the industry is on the recovery road now. During the crisis, the hardest hit companies were the ones with greater share of revenue from exports. While players with a greater focus on domestic demand were hit too, the improvement in Indian economy much ahead of the global scenario helped the locally focused textile companies begin recovery in second half of 2009. The export oriented companies however had to wait a bit longer and only by second quarter of 2010 a reasonable recovery momentum was observed in this space. 11 | P a g e
  13. 13. 3.1.2. Domestic demand remains strongEven as the textile exports declined throughout the 2009, domestic demand recoveredrather quickly. This has helped keep the production in green for most of the subsegments after a brief period in the second half of FY09.Figure 3-2: Cloth Production: {Source: Datamonitor Group}This is reflected in strong growth in cloth production total cloth production in thecountry has increased by nearly 9% during FY10 to 57,036 million square meter (msm)compared with 52,402 msm in the previous fiscal. Similarly, production of spinning yarnhas increased from 3914 million kg (mkg) in 2008-09 to 4187 mkg in 2009-10.The positive trend in inputs of textile industry has continued in the current fiscal as well.Cloth production has increased by little over 3% during the first five months of thecurrent fiscal to 50,774 msm from 49,424 msm in the same period a year ago. Similarly,production of the spun yarn has increased more than 11% to 3877 mkg from 3473 mkgover the same period.3.1.3. Cotton prices continue to rallyEven though demand side for the textile producers has been improving quite robustlyover last few quarters, increasing prices of inputs, particularly of cotton has beenkeeping the industry in a tight corner. The Indian textile industry is heavily biased infavor of cotton compared with the global industry. In this wake, rising cotton prices asglobal demand-supply fundamentals for the commodity remain in favor of producershave been impacting margins of textile companies.Demand-supply scenario of cotton started shifting in producer’s favor in theinternational market since the start of last season (august-July). The steep rise in cotton 12 | P a g e
  14. 14. prices over the first two quarters of the current season (July-Dec 2010), accompanied by high volatility, reflects primarily a combination of low global cotton stocks and continued demand by spinning mills, but has also been reinforced by panic induced by fear of defaults on contracts. Global cotton stocks fell by 25% in 2009-10 to 8.9 million tonnes, the smallest in seven seasons, whereas cotton demand rebounded by 5% to 24.6 million tonnes. In cotton year 2010-11, rising production and higher mill use are expected to keep global stocks tight. The strengthening of prices over the last couple of quarters has been exacerbated by several additional factors like unavailability of supplies at short notices, and severe competition in global markets. Figure 3-3: Cotton Yarn Prices: {Source: Datamonitor Group} 3.1.4. Government Backs TUFS In the General Budget for 2011-12, the finance ministry has provided an allocation of Rs 2,980 crores for the Technology Upgradation Fund Scheme (TUFS), which is expected to bolster the industry in a highly competitive export environment. Industry insiders expect the infusion of funds under the TUFS scheme in the first week of April. The allocation for TUFS in 2011-12 has increased by Rs 713 crores compared to previous year.3.2. VerdictThe Indian textile industry is in a stronger position now than it was in the last six decades.The industry which was growing at 3 – 4 percent during the last six decades has nowaccelerated to an annual growth rate of 9 – 10 percent. There is a sense of optimism in theindustry and textiles sector has now become a ‘sunrise’ sector. 13 | P a g e
  15. 15. 4. Chapter04 – Current Scenario(Size of Industry/GDP Contribution) 4.1. Introduction The Indian textile industry contributes about 14 per cent to industrial production, 4 per cent to the countrys gross domestic product (GDP) and 17 per cent to the country’s export earnings. The industry provides direct employment to over 35 million people and is the second largest provider of employment after agriculture. 4.2. Sub Industry Analysis 4.2.1. Cotton Textiles Cotton is one of the principal crops of the country and is the major raw material for domestic textile industry. It provides sustenance to millions of farmers as also the workers involved in cotton industry, right from processing to trading of cotton. The Indian textile industry consumes a diverse range of fibres and yarn, but is predominantly cotton based. Despite adequate opening stock of 71.5 lakhbales at the inception of the current cotton season, the domestic demand coupled with rising demand for exports from China and other countries has resulted in an unprecedented increase in prices of cotton by 35 percent and of cotton yarn by 25 percent, creating supply line distortions and inadequate availability of yarn to the domestic garment industry. Figure 4-1: The Cotton Balance Sheet for 2009-10 {Source: Ministry of Textiles} 14 | P a g e
  16. 16. 4.2.2. Silk TextilesIndia is endowed with all four varieties of silk; Mulberry, Eri, Tasar and Muga and thecountry is the second largest producer of silk in the world, contributing about 15% to thetotal world raw silk production. The focus of the Government is to increase theproductivity and to make Indian silk comparable to that available internationally. Figure 4-2: Raw Silk Production {Source:Sericulture continues to be an important labour- Ministry of Textilesintensive and agro-based cottage industry,providing gainful occupation to around 6.8million persons in rural and semi-urban areas inIndia. Of these, a sizeable number of workersbelong to the economically weaker sections ofsociety and women. Post cocoon activities;including reeling, weaving and garmenting alsoprovide significant opportunity for inclusive growth for large segment of population innumber of States.4.2.3. Hand Crafted Textiles 4.2.3.1. Handlooms India has the largest handlooms industry in the world. The handloom sector, with a long tradition of excellence in craftsmanship, not only plays an important role in preserving the countrys heritage and culture, it also makes a major contribution to the economy. About 65 lakh persons are engaged in weaving and associated activities. There are 32, 88,556 household looms, and 1, 97,752 non-household looms. Niche handloom products were provided a marketing platform through 561 marketing events; the first Handloom Week was organized from December, 2009. These measures generated a business of over Rs.340 crores. Such initiatives are taken up by government in order to sustain this labor intensive sector. Figure 4-3: Sales during Marketing Events {Source: Ministry of Textiles} 15 | P a g e
  17. 17. 4.2.3.2. Handicrafts Handicrafts symbolize the rich and diverse culture heritage of the country. The handicraft sector provides employment to an estimated 70 lakh artisans, of which 47.42% are females; 24.73% of handicraft artisans belong to Scheduled Castes, and 12.33% to Scheduled Tribes. Government announced the development of world-class infrastructural and production facilities at handicrafts, clusters through adoption of the Comprehensive Cluster Development approach; at Narsapur (Andhra Pradesh), Moradabad (Uttar Pradesh), Srinagar (Jammu & Kashmir) and Mirzapur - Bhadohi (Uttar Pradesh).4.2.4. Jute TextilesJute, the golden fibre, meets the standardsfor safe packaging in view of being a natural,renewable, bio-degradable and eco-friendly product. Jute has myriad applicationsbesides packaging. The focus of the Government is to facilitate the industry tomodernize and shift its focus to diversified jute products.4.2.5. Man-MadeIndia is the second largest producer of manmade fibres (MMF) in the world (WorldFibre Report 2008). Out of a total consumption of 4.74 billion kgs; including cotton andman-made; 2.09 billion kgs, i.e. 44% is manufactured by the man-made fibre and yarnindustry. Textiles made of man-made fibres constitute about 16.4% of India’s totaltextiles exports.Figure 4-4: Production of Artificial & Man Made Textiles {Source: Ministry of Textiles}The domestic fibre consumption ratio in India atpresent is 41:59 (FY’09) in favor ofcotton, while itis almost 60:40 globally. The global fibre consumption trend in future islikely to further tilt in favor ofman-made fibres as there is a limitation to growthof cottonon account of limited availability of landfor cotton cultivation. 16 | P a g e
  18. 18. 4.3. OutlookTextiles will continue to lead India’s economy due to its share of GDP and the number ofpeople it engages.Figure provides a brief glimpse of growing Fabric and Yarn production.Figure 4-5: Fabric & Yarn Production growth {Source: Ministry of Textiles} 17 | P a g e
  19. 19. 5. Chapter05–Textile Exports 5.1. Introduction With a very low import-intensity of about 1.5% only, it is the largest net foreign exchange earner in India, earning almost 35% of foreign exchange. . At current prices the Indian textiles industry is pegged at US$ 55 billion, 64% of which services domestic demand. It also accounts for nearly 12% share of the countrys total exports basket. The Vision Statement for the textiles industry for the 11th Five Year Plan (2007-12), inter-alia, envisages India securing a 7% share in the global textiles trade by 2012. The export basket consists of wide range of items containing cotton yarn and fabrics, man- made yarn and fabrics, wool and silk fabrics, made-ups and variety of garments. Textile export in major segments during period 2009-10 is shown below: Figure 5-1: Textile Exports Basket {Source: Ministry of Textiles} 18 | P a g e
  20. 20. 5.2. Country Wise Exports India’s textile products, including handlooms and handicrafts, are exported to more than a hundred countries. However, the USA and the EU, account for about two-third of India’s textiles exports. The other major export destinations are Canada, U.A.E., Japan, Saudi Arabia, Republic of Korea, Bangladesh, Turkey, etc. Table 5-A: Textile Exports - Top Ten Countries{Source: Ministry of Textiles}SI. Country Crore (Rs.) US $ Million %Share %ShareNo April- April- April- April- % April- April- % Sept(20 Sept(20 Sept(20 Sept(20 Grow Sept(20 Sept(20 Grow 09-10) 10-11) 09-10) 10-11) th 09-10) 10-11) th 1 USA 9315.54 10318.9 10.77 1916.79 2242.33 16.98 18.95 19.89 2 2 UAE 4206.50 4039.88 -3.96 866.97 878.07 1.28 8.57 7.79 3 UK 3957.05 3422.78 -13.50 814.15 744.28 -8.58 8.05 6.60 4 German 3618.04 3067.69 -15.21 743.99 666.57 -10.41 7.35 5.91 y 5 Banglad 976.44 1966.22 101.44 201.11 428.07 112.85 1.99 3.80 esh 6 France 1910.15 1558.49 -18.41 392.88 338.71 -13.79 3.88 3.00 7 Italy 1508.13 1473.51 -2.30 310.95 319.88 2.87 3.07 2.84 8 Spain 1590.79 1468.65 -7.68 327.42 319.18 -2.52 3.24 2.83 9 China 896.37 1438.12 60.44 184.74 313.15 69.51 1.83 2.78 10 Turkey 911.28 1272.73 39.66 187.77 277.72 47.90 1.86 2.46 Total 28890.2 30027.6 3.94 5946.77 6527.96 9.77 58.79 57.89 (Top 9 9 Ten) Others 20239.7 21852.2 7.97 4169.01 4747.62 13.88 41.21 42.11 0 4 Total 49129.9 51879.9 5.60 10115.7 11275.5 11.47 Textile 9 3 8 8 19 | P a g e
  21. 21. 5.3. Segment Wise ExportsFigure 5.2 depicts the growth in exports for major sub sectors of Indian Textiles.Figure 5-2: Segment wise growth in Exports {Source: Ministry of Textiles} Cotton Textiles Silk Textiles R R s 12000 s 3200 10000 3100 I I n 8000 n 3000 6000 2008-2009 2008-2009 C C 2900 4000 2009-2010 2009-2010 r r 2800 o 2000 o r r 2700 e 0 e Year Year Hand Crafted Woolen Textiles R R s Exports s 2280 11300 2260 I 11200 I n n 2240 11100 2220 2008-2009 C 11000 2008-2009 C r r 2200 2009-2010 10900 2009-2010 o 10800 o 2180 r r 10700 2160 e e Year Year 20 | P a g e
  22. 22. Ready Made Jute and ChoirR Rs Garments s Garments 80000 1200I In 60000 n 1150C 40000 2008-2009 C 1100 2008-2009r ro 20000 2009-2010 o 1050 2009-2010r re 0 e 1000 Year Year SyntheticRs Garments 17000In 16500C 16000 2008-2009ro 15500 2009-2010re 15000 Year 21 | P a g e
  23. 23. 6. Chapter06 - Industry and Macro Environment 6.1. Politico – Legal Factors 6.1.1. Major reforms policy initiatives The Textile Industry came out of Quota Regime of Import Restrictions under the Multi- Fiber Arrangement (MFA). This development came on 1st January 2005 under the World Trade Organization (WTO) Agreement on Textiles & Clothing. In an effort to increase Indias share in the world textile market, the Indian Government has introduced a number of progressive steps. 1. 100 per cent FDI allowed through the automatic route. 2. De-reservation of readymade garments, hosiery and knitwear from the SSIsector. 3. Technology Mission on Cotton has been launched to make availablequality raw material at competitive prices. 4. Technology Up gradation Fund Scheme (TUFS) has been launched tofacilitate the modernization and up gradation of the textiles industry. 5. Scheme for Integrated Textile Park (SITP) has been started to provideworld-class infrastructure facilities for setting up their textile units throughthe Public Private Partnership model. 6. The Indian Textile Plaza is being built, in the city of Ahmedabad toencourage exports to overseas markets. 7. 50 textile parks are being established to enhance manufacturing capacityand increase the industrys cost competitiveness. 8. A cluster approach for the development of the handloom sector has beenadopted from the year 2005-06 onwards. 9. Measures have been initiated for protection of handloom items likeBanarasi brocades, Jamdani of Bengal etc., under the GeographicalIndications of Goods (Registration and Protection) Act, 1999. 10. For the handicraft sector, some of the new initiatives include the facilitycenter for exporters and entrepreneurs in the Public Private Partnership(PPP) mode on build, own and operate model with the governmentmeeting 40% of the total cost of setting up the center with maximuminvestment of Rs. 24 lakhs. 11. In the Wool Sector, a project in public private partnership mode wasapproved for setting up processing and finishing facilities for shawlmanufacturers at Ludhiana in Punjab. 12. In the Jute Sector, the Jute Technology Mission was started during theyear 2006- 07 with Mini Missions being implemented by the Ministry. Thefocus of the mission is on improvement of the yield and quality of JuteFibre, establishing market infrastructure, storage facilities, developingprototypes of machinery with private sector involvement, development ofhuman resources for the jute industry etc. 22 | P a g e
  24. 24. 6.1.2. Indian Textile Policy, 2000 For the growth and development of the Indian Textile Industry and to make itmore vibrant, the Government of India passed the National Textile Policy in 2000, which had the following objectives: 1. To produce and provide good quality cloth in affordable price to fulfilldifferent needs of customers; 2. To increase the share of India in Global Textile Market. 3. To increase the contribution for employment and economic growth ofcountry. 6.1.3. National Jute Policy, 2005 The objectives of the policy are to: 1. Enable millions of jute farmers to produce better quality jute fibre for valueadded diversified jute products and enable them to enhance per hectare yield of raw jute substantially. 2. Facilitate the Jute Sector to attain and sustain a pre-eminent globalstanding in the manufacture and export of jute products. 3. Enable the jute industry to build world class state-of-the-art manufacturingcapabilities in conformity with environmental standards, and, for thispurpose, to encourage Foreign Direct Investment, as well as research and development in the sector. 4. Sustain and strengthen the traditional knowledge, skills, and capabilities ofour weavers and craftspeople engaged in the manufacture of traditional aswell as innovative jute products. 5. Expand productive employment by enabling the growth of the industry. 6. Make Information Technology (IT), an integral part of the entire valuechain of jute and the production of jute goods, and thereby facilitate theindustry to achieve international standards in terms of quality, design, and marketing. 7. Increase the quantity of exports of jute and jute products by achieving a CAGR of 15% per annum. 8. Involve and ensure the active co-operation and partnership of StateGovernments, Financial Institutions, Entrepreneurs, and Farmers’Organizations in the fulfillment of these objectives.6.2. DemographicWith the continuous expansion of Indian middle class, Indian domestic market is alsogrowing with a rapid pace. In the scenario where significant amount of population isconstituted of younger generation and with the increase in changing fashion trends, willfurther boost the demand in Textile industry.High Technology based sector in Textile industry e.g. Technical Textile will benefit by easilyavailability of skilled labour force due to increase in education levels in India. 23 | P a g e
  25. 25. 6.3. Socio – CulturalEach and every region of India contributes in creating a myriad of textile tradition. The hillyregion of the country produces a rich variety of woollen textiles. The pashmina andshahtoosh shawls of Kashmir, shawls and woollen garments of Himachal Pradesh and othernorth eastern states provides excellent examples of world famous woollen Indian textiles.The barren and semi barren regions like Rajasthan and Gujarat usually prefers embroideredbright colored textiles. The coastal areas of the south eastern regions prefer light coloredfabrics and particularly cotton and silk textiles are very popular over here. The homefurnishing utilitarian textile products like bedspreads and sheets, pillows and cushions,linens and mats, curtains and napkins, carpets and rugs and many such other items areproduced by all parts of the country.Silk and cotton weaving predominates the rich tradition of weaving in India. Silk weaving ismost popular in various parts of the country. Assam, Banaras, Mysore, Surat, Kanchipuramand Surat are all important centres of silk weaving. All these centers specialize mostly incotton and silk sari weaving and some of the popular traditional Indian saris are Banarasi,Patola, Baluchari, Pochampalli, Paithani and many others.The ornate style of appliqué most commonly done bright colored fabrics from the Kutchhregion of Gujarat is very popular in the country as well as in abroad. The state of Punjab isfamous for its phulkari work. Lucknow is famous for its chikan work. Apart from thosementioned, each and every region and state of India has its own distinct individual style intextile.6.4. EconomicTrends in India are changing, with increase in disposable income levels, consumerawareness and propensity to spend. According to NCAER data, the Consuming Class, withan annual income of US$ 980 or above, is growing and is expected to constitute over 80 percent of the population by 2009-10. There is a change in the consumer mindset that has led toa trend of increased consumption on personal care and lifestyle products as well as brandedproducts. These trends offer great growth opportunities for companies across varioussectors, including textiles. Supporting the increasing demand for consumption is therevolution taking place in India’s retail sector. Organized retail is playing a key role instructuring the Indian domestic market, reinforced by the rapid rise of supermarkets, malls,theme stores and franchises across urban India. India thus presents a large and vibrantmarket for textiles and apparels, with a potential for sustained growth.6.5. NaturalControlling the Pollution caused by its manufacturing processes is a big challenge for IndianTextile industry. Textile processing industry is characterized not only by the large volume ofwater required for various unit operations but also by the variety of chemicals used for 24 | P a g e
  26. 26. various processes. There is a long sequence of wet processing stages requiring inputs ofwater, chemical and energy and generating wastes at each stage. The other feature of thisindustry, which is a backbone of fashion garment, is large variation in demand of type,pattern and color combination of fabric resulting into significant fluctuation in wastegeneration volume and load. Textile processing generates many waste streams, includingliquid, gaseous and solid wastes, some of which may be hazardous. The nature of the wastegenerated depends on the type of textile facility, the processes and technologies beingoperated, and the types of fibres and chemicals used. The main environmental problemsassociated with textile industry are typically those associated with water body pollutioncaused by the discharge of untreated effluents. Other environmental issues of equalimportance are air emission, notably Volatile Organic Compounds (VOC)’s and excessivenoise or odor as well as workspace safety.Cleaner production is an attractive approach to tackle environmental problems associatedwith industrial production and poor material efficiency. Since the cleaner productionapproach has been successfully implemented in some areas in the textile sector, it showsthat significant financial saving and environmental improvements can be made by relativelylow-cost and straightforward interventions. This improves the quality of products andminimizes the cost of production, enabling the branch to compete in the global market.6.6. TechnologicalThere is a huge technological gap between technology used in competitor countries and thatused in India. There is thus lots of scope of massive technology up gradation in the sectorand Government can play major role in it. In order to secure its global textile market share,the Indian textile industry needs to procure more modern equipment to help improvequality and productivity, thus enhancing global competitiveness. Given the obsolete ornear-obsolete technology level in the Indian textile industry, especially in the weaving andprocessing sectors, large-scale importation of the latest technology is imminent. TheTechnology Up-gradation Fund Scheme (TUFS), launched by the Government of India,provides buyers a five percent reimbursement on the interest rate charged by the lendingagency. There is no cap on funding under this plan. Technology levels are benchmarked interms of specified machinery for each sector of the textile industry. Machinery withtechnology levels lower than that specified will not be permitted for funding under theTUFS.The use of computers in the sector is also increasing at a rapid pace. Originally CAD wasused in designing high precision machinery solely it found its way in other industries also.In 1970s it made an entry in the textile and apparel industry. Most companies abroad havenow integrated some form of CAD into their design and production process. Today in ourcountry automation is not only used for substituting the labour, it is also adopted forimproving quality and producing quantity in lesser time. However, a CAD system is only asgood (or as bad) as the designer working on it. Computer only speeds up the process of say 25 | P a g e
  27. 27. repeat making, color changing, motif manipulation etc. It is actually the CAM aspect ofCAD that will help reduce lead time.Acquiring new technology is also crucial in current era to promote new emerging areas liketechnical textile. 26 | P a g e
  28. 28. 7. Chapter07 - SWOT Analysis 7.1. Introduction Strengths Strong and diverse Raw Material base. Vertical & Horizontal integrated textile value chain. Low Manufacturing Costs Unique offerings through traditional handlooms and handicrafts. Weaknesses Highly fragmented industry. Technological obsolescence Rigid Labour laws. Wide supply and demand gap in training facilities. Infrastructural bottlenecks. Intermediaries in Supply Chain. Opportunities Technical Textiles: An emerging sector. Quota Phase-Out: Post MFA Scenario. Buoyant Domestic Economy. Credit & Financing through Govt. sponsored schemes. Threats Possibility of global recession and fluctuating US Dollar. Growing International competition Non-availability of indigenous textile machinery. Increased Sociological and Ecological awareness. 27 | P a g e
  29. 29. 7.2. Strengths 7.2.1. Strong and Diverse Raw Material base The broad based vertically integrated textiles industry consumes a diverse range of textile’s fibres and yarns to produce various types of products for the domestic and export markets. The range of fibres consumed by the industry includes natural fibres like cotton, silk, wool, jute and man-made fibres like polyester, viscose, nylon, acrylic, polypropylene, etc. Though the textiles industry is pre-dominantly cotton based, the consumption of other fibres/yarns is also significant. In the global scenario, the consumption ratio of cotton to non-cotton is 40: 60, while in India it is reverse. The projected consumption ratio indicates the continuation of the same trend. This consumption trend is on account of the fact that cotton production is on the upswing and India is expected to emerge as the second largest producer of cotton in the world. It is appropriate to consume cotton produced in the country (instead of exporting raw cotton) to produce value added products for the domestic and export market. India is third largest producer of cotton and fifth largest producer of man-madefibre and yarn. Table 7-A: Projected production of fibres during the Eleventh Plan [Working Group Report Type Of Tenth Plan Assumed Eleventh Plan projections Fibre ](In 2005- 2006-07 Growth 2007-08 2008-09 2009-10 2010-11 2011-12 Million. Kgs.) Rate(11thYr 06 Plan) Raw 4148 4454 8.28 4823 5222 5655 6123 6630 Cotton Man Made Fibres V.S.F 229 230 5 242 254 266 280 294 P.S.F 428 754 10 829 912 1004 1104 1214 A.S.F 108 131 10 144 159 174 192 211 P.P.S.F 3 2 6 2 2 2 2 3 Sub Total 968 1117 9 1217 1327 1446 1578 1722 (Man Made) Grand 5116 5571 7 5909 6240 6546 6848 7672 Total 28 | P a g e
  30. 30. 7.2.2. Vertical & Horizontal integrated textile value chain.India is one of the few countries which have a presence across the entire value chain ofthe Textile and Apparel Industry. A well-defined strategy will enable India’s textileindustry to shift focus to Value Added products.Figure 7-1: The Value Chain in TextilesThe greatest value addition in the textile chain is generated in the apparel segment.7.2.3. Low Manufacturing CostsCompetitiveness is a function of factors related to cost of production, as well as thoserelated to non-price factors such as delivery schedules, reliability of producers, and suchintangible factors like image of the country/company and brand equity. Together, theydefine the competitive sinews of a product to compete under free market conditions.In the sphere of cotton yarn, India is one of the lowest cost producers. InternationalTextiles Manufacturers Federation (ITMF) statistics, 2006 shows comparative cost ofproduction of yarn and fabric of some major textiles producing countries- India, Brazil,China, Italy, Korea, Turkey and USA. Indian cost of Ring Yarn at US$2.13 per kg is muchlower than USA (US$2.81 per kg.), Italy (US$3.20 per kg.) and China (US$2.89 per kg.)during 2006 (see Table 7.2).Cheap availability of raw material and low labour cost are the major causes of low costof production of ring yarn in India 29 | P a g e
  31. 31. Table 7-B: International Cost Comparisons {ITMF Data - 2006} Brazil China India Korea Turkey USA ItalyTotal Cost of 2.65 2.89 2.13 2.54 2.61 2.81 3.20Ring Yarn($/kg)Manufacturing 0.21 0.19 0.22 0.25 0.23 0.30 0.40of Ring Yarn-Weaving($/mtr)Total Costs 0.715 0.740 0.595 0.704 0.707 0.741 0.911Woven Ring-Yarn Fabric($/mtr)Total Costs 0.643 0.692 0.511 0.612 0.624 0.691 0.806Knitted Ring-Yarn Fabric($/mtr) 7.2.4. Novelty inTraditional Handlooms and Handicrafts 7.2.4.1. Handlooms The Government of India, since independence, has been following a policy of promoting and encouraging the Handloom Sector through a number of programs and schemes. Concerted efforts are being made through these programs to increase the production, productivity and efficiency of the Handloom Sector and enhance the income and socio economic status of weavers by upgrading their skills and providing infrastructure and marketing support and essential inputs. The sector employs a workforce of 65 lakh persons directly and indirectly, contributes about 15 percent to cloth production; has contributed over $544 million in export earnings in 2002-03 and growing at 25.63 percent over the previous year; it is the largest handloom industry in the world; it is low capital intensive and production does not require electricity; has no import content in assets/raw materials; presents incredible array of traditional designs and products, and the products are environmental and ecologically friendly. The Handloom Sector has potential to arrest migration of population to urban areas and has an edge over the powerloom and mill sectors in its ability to commercially produce the goods in small volumes. 30 | P a g e
  32. 32. 7.2.4.2. Handicrafts The Handicrafts sector plays a significant & important role in the country’s economy.It provides employment to a vast segment of craft personsin rural & semi urban areas and generates substantial foreign exchange for the country, while preserving its cultural heritage. Some of the promising areas in the crafts sector are: • Exports continued to grow for high value-added crafts products. • Consumer tastes changed rapidly on account of economic liberalization. • Focus on quality and product diversification with increasing consumer awareness. • Government policy envisaged a greater role for NGOs, and participation of private resources – both human & financial. 7.3. Weaknesses 7.3.1. Highly fragmented industry The clothing industry is pre-dominantly fragmented in the small-scale sector. The reason for this could be attributed to the SSI reservation policy which was in place till 2001 for woven apparels and up to March 2005 for knitwear. The quota policy which prevailed during the quota regime also did not encourage consolidation of the units. However, subsequent to quota phase out and de-reservation, the process of consolidation has started but momentum is slow.Figure 7-2: TOP 15-By Sales in Rs. Millions{Source: Capital One Database} Eskay KNIt (India) Ltd. Bombay Rayon Fashions … Gokaldas Exports Ltd. Welspun India Ltd. Garden Silk Mills Ltd. Koutons Retail India Ltd. Bombay Dyeing &… Raymond Ltd. KSL & Industries Ltd. Garden Silk Mills Ltd. Pradip Overseas Ltd. Alok Industries Ltd. S Kumars Nationwide Ltd. Weizmann Ltd. Grasim Industries Ltd. 0 20000 40000 31 | P a g e
  33. 33. Figure 7.2 showsthe fragmented nature of the industry and compared to internationalstandards. All the major firms have sales less than Rs. 2,000 million.Another example is in the spinning sector, a capacity of 1, 00,000 Spindles is consideredlarge in India. But compared to international standards this capacity is small to average.In China for example, a capacity of 3 lakh spindles is quite common, where there areunits, which are large with one million (10 lakh) spindles. Similarly, in the weavingprocessing and garment sectors our capacities are miniscule compared to internationalstandards. In China and Sri Lanka the average machine per garment factories is 500compared to 50 in India.7.3.2. Technological obsolescenceStructural backwardness has resulted in the need for significant technology investmentsto achieve world class quality. As per the Working Group Report on Textiles, India has ashare of 2 percent of shuttle less looms of total looms as against world average of 16percent and China, Pakistan and Indonesia 15 percent, 9 percent and 10 percentrespectively.This has a major impact upon the value added goods manufactured by industry.7.3.3. Rigid Labour lawsLabour laws should be framed in such a manner that it should not hinder the growthand instead be used for the overall development of both workers and industry. It is abottleneck particularly to the garment sector. Large seasonal orders cannot be takenbecause the labour strength cannot be reduced during the slack season. These pointsexplain the rigidness in legal structure:  Permit use of contract labour in Export Oriented Units (EOUs): The exportbusiness is seasonal and contractual in nature. Excess labour during lean periods orduring the initial stages of developing an export market(s), when the uncertainty oforders is high, can lead to financial difficulties. Section 10 of the Contract Labour(Regulation and Abolition) Act, 1970 needs to be amended. For example, countries such as China, Bangladesh and Sri Lanka have allowed contract labour in the textiles sector.  Permitting firms to adjust their workforce:Units employing over 100 peoplecurrently fall under the purview of Industrial Disputes Act, 1956. The Act stipulatesthat employers must obtain necessary approvals for lay-offs. This proves to be ahindrance, especially for medium sized enterprises. There is need to relax the norms ofthe Industrial Disputes Act (Chapter VB), by keeping units employing up to 500 people(presently 100) outside its purview. For example, Malaysia regards the right to hire,assign work, reward, transfer, promote and adjust the workforce as managerial rights. 32 | P a g e
  34. 34.  Extending work hours: The Government also needs to consider the demand oflabour intensive sections of the textiles industry such as made-ups and garmentingindustry to increase the hours in a shift from nine at present to twelve, and also increasethe working hours in a week from forty eight to sixty, in order to cater to the peakseason requirements of customers, and to compensate for lower labour productivity. 7.3.4. Wide supply and demand gap in training facilities Along with modernization there occurs need for skilled workers who can run the machinery efficiently and understand the modern production processes. Thus skill requirement increases with the technological up gradation. Due to inadequate quantity skilled labour, many firms in the industry are hesitant to expand their scale of operations or enter into higher technology segments. To mitigate the skill gaps of labour at the lower end government should open training schools on a massive scale. This should be on a public -private partnership module so that it can run on a sustainable basis. In this regard the government should also consult the industry associations of both large as well as small units in the major apparel clusters. 7.3.5. Infrastructural bottlenecksTable 7-C: Costs of various factors in different countries, 2006 [NCAER Report]All Values in US India Bangladesh Indonesia Egypt China Pakistan Vietnam$ CentsCurrency against Rs 45 Tk 71.8 Rp 9275 EGP LE Cny Rs 60.2 VndUS $ 6.02 7.98 16708Raw Water 14/46 Ground Ground 0.23 42 18.2 24Cost(cents/cm3) Water WaterCost Power 10 5 6.3 4 8.5 6.1 6.5(cents/kwH)Source of Power Grid Captive Grid Grid Grid Grid GridFuel (cents/kg)Fuel Coal Gas Furnace Furnace Coal Furnace Furnace Oil Oil Oil Oil Table 7.3 depicts power and other costs in comparison to other economies competing with India in international markets. There is a great need of government spending in infrastructure for the industry to keep pace with dynamic markets. 33 | P a g e
  35. 35. 7.3.6. Intermediaries in Supply Chain According to asurvey conducted by NCAER, it was observed that wholesalers in most of thecases purchase fabric/garments through agents. Direct purchase from powerloom or readymadegarments units is relatively much less. Next in chain is generally, small wholesalers who in then purchase from large wholesalers. Main cause of purchasing fabric through agent is that the factory does not sell directly to a wholesaler because the latter purchases in small quantity; the agent provides fabric to wholesaler at factory price against a commission, which is provided by the factory. An agent usually has contract with more than one factory. There are instances when value addition work is undertaken by wholesalers after the purchase of fabric/ garments. On an average, it increases the value of fabric/ garments by 34 percent. The traders also face various challenges which include over stocking, under stocking/ shortage. Price of fabric/ garments generally increased with the number of intermediates in the chain. In case of 4-5 intermediates, the price to consumer is 183-210 percent of the ex- factory price. Textile firms need to develop managerial capabilities required to manage large work force and design an appropriate supply chain. There is need for emergence of specialized firms that will consolidate orders, book capacities, manage warehouses and logistics of order delivery. Firms need to make their supply chain leaner in order to overcome these disadvantages. The new market will be won on the basis of capabilities across the supply chain. Policy will need to facilitate this building of capabilities at the firm level and the flexible strategies that firms will need to devise periodically.7.4. Opportunities 7.4.1. Technical Textiles: An emerging sector Technical textiles are textile materials and products used for their technical performance and functional properties. Technical textiles are an important part of the textile industry and its potential is still largely untapped in India. With increase in disposable income, the consumption of technical textiles is expected to increase. The Working Group for theEleventh Five Year Plan has estimated the market size of technical textiles to increase from Rs.26, 077 crores in 2006-07 to Rs. 52, 200 crores in 2011-12 without any regulatory framework and to Rs.74, 758 crores with regulatory framework. The Scheme for Growth and Development of Technical Textiles (SGDTT) has been designed to promote indigenous manufacture of technical textile to exploit the global opportunities and cater to the domestic demand. The scheme encompasses three components i.) Baseline survey to build the database of technical textile industry. ii.) Setting up of centers of excellence iii.) Creation of awareness among the entrepreneurs. 34 | P a g e
  36. 36. 7.4.2. Quota Phase-out: Post MFA ScenarioQuotas which have restrained the export growth of the Indian textile industry foroverfour decades were eliminated with effect from 01.01.2005. This has unshackledIndian exports, and this is evident from the growth registered in the quota markets.Apparel exports to USA during 2005 have increased by 34.2 percent, while textilesexports have increased by 16 percent. Similarly, in Europe, apparel exports haveincreased by 30.6 percent and textiles exports by 2.2 percent, during the correspondingperiod. In 2006 also the export growth in these two markets is continuing with the sametrend. This increasing trend in exports is expected to continue as major global playersare not inclined to source exclusively from China. India is considered as the second mostpreferred destination for major global retailers due to its strength of vertical andhorizontal integration.7.4.3. Buoyant Domestic EconomyDemographic trends in India are changing, with increase in disposable income levels,consumer awareness and propensity to spend. According to NCAER data, theConsuming Class, with an annual income of US$ 980 or above, is growing and isexpected to constitute over 80 per cent of the population by 2009-10. There is a change inthe consumer mindset that has led to a trend of increased consumption on personal careand lifestyle products as well as branded products. These trends offer great growthopportunities for companies across various sectors, including textiles. Supporting theincreasing demand for consumption is the revolution taking place in India’s retail sector.According to NCAER, The propensity to spend in the case of working women is higherby 1.3 times as compared to a house wife. India has witnessed a tremendous increase inworking women population.Organized retail is playing a key role in structuring the Indian domestic market,reinforced by the rapid rise of supermarkets, malls, theme stores and franchises acrossurban India. India thus presents a large and vibrant market for textiles and apparels,with a potential for sustained growth.7.4.4. Credit Availability through Govt. sponsored schemesThe Indian Government is trying to create an environment to attract an investment of Rs1,400 billion in the Eleventh Plan period (2007-2012) when the textiles and garmentexports are expected to rise from the current US$14 billion to US$40 billion. Numerousinitiatives are already covered in Section 6.1. 35 | P a g e
  37. 37. 7.5. Threats 7.5.1. Possibility of global recession and fluctuating US Dollar The Vision Statement for the textiles industry for the 11th Five YearPlan (2007-12), inter- alia, envisages India securing a 7% share in the global textiles trade by 2012. But therecent economic crisis in economies of US and Europe has cast a shadow over these targets. At current prices the Indian textiles industry is pegged at US$ 55 billion, 64% of which services domestic demand. This means that 36% of goods are exported and the currency in operation is US dollar pre-dominantly. In the last decade, a great amount of fluctuation has been observed; a weakened dollar hence impacts the industry adversely. 7.5.2. Growing International Competition India faces constant threat from Bangladesh, Pakistan, Vietnam, Sri Lanka apart from China which is the market leader. All these countries are dealing in textiles from a long time and textile business finds deep cultural and social roots. This also means that industry has to constantly update technologies and competencies to sustain the competition. 7.5.3. Non-availability of Indigenous textile machinery The textiles machinery is one of the critical inputs in the accelerated growth process of the textiles industry. Therefore, the import of textiles machinery at a concessional rate of duty is necessary, particularly where the textiles engineering industry does not have adequate capacity. However, simultaneously, Indian textiles engineering industry will be encouraged to increase its capacity to meet the demand of the different segments of the textiles industry in a time bound manner. 7.5.4. Increased Sociological and Ecological awareness Developed markets have seen extensive developments in the form of increased consumer consciousness on issues such as usage of polluting dyes, usage of child labor, unhealthy working conditions etc. Standards like SA 8000 have now started being implemented extensively in the industry. This has resulted in increased pressure on companies to limit sourcing from countries/companies known to have such practices. The Indian industry needs to prepare for fall-out of such issues by improving its working practices. 36 | P a g e
  38. 38. 8. Chapter08–Industry Outlook After facing a sharp decline following the global downturn, the textile industry is on a recovery road now. Textile exports, which declined through most of the last fiscal year, have got some respite in the current year. While the overall level of textile exports in FY10 remained in red, things improved in FY11 and so far the exports are expected to have remained in green broadly. Further, the industry has been actively trying to diversify both, the direction as well as the basket of exports. Riding on the sops provided by the government under the Market Linked Focus Product Scheme the industry has been looking to export into new and relatively under tapped markets like Japan and also looking to export new products. This should further help textile producers to increase export numbers going forward. However, pressures continue on the cost side as cotton prices have increased significantly in last 2-3 quarters and continue to remain close to the higher range seen in recent months. This has been putting pressures on textile company’s margins. A silver lining is there in that the production of cotton is expected to surge in next season following a strong supply response which should help bring down the cotton prices. Overall, there are clear signs pointing towards a recovery in India’s textile industry in 2010, following the dismal operating environment that the sector had to contend with for two consecutive years. The year 2011 is expected to be better on a sequential basis and the situation is more favorable to domestically-focused and synthetic textile companies given the stable demand and cost side, while the cotton textile exporters may continue to face a few more challenging months before cotton prices start coming down in second half of the year. 37 | P a g e
  39. 39. 9. References 1. Annual Report 2010-11, Ministry of Textiles. 2. Website of Ministry of Textiles: www.texmin.nic.in 3. Working Group on Textiles for 11th five year plan. 4. NCAER report ‘Assessing the Prospectsfor India’s Textile andClothing Sector’. 5. Datamonitor Report – APAC Textiles. 6. Datamonitor Report – Global Textiles. 7. Capital One database. 8. Textile Resurgence Report, Ministry of Textiles. 38 | P a g e

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