Indian Textile Industry

October 2006
 Contents

Market Overview

Government regulations & policy

Business opportunities and Advantage India

© IMaCS 2006
Printed 7 Dec 2021
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Indian Textile industry - important from perspective
of overall economy

 Total market size (2004-05): USD 38 bn

 Domestic market ~ USD 25 bn
 Exports ~ USD 13 bn

 Strong contribution to Indian Economy

 14% contribution to industrial production
 4% contribution to GDP
 16% contribution to export earnings
 Direct employment to more than 35 million people

 Industry functions in the form of clusters (roughly 70 in number) across India,

producing 80% of the country’s total textile

 Sector is diverse, with the hand-spun and hand woven sector at one end of the
spectrum, and the capital intensive, sophisticated mill sector at the other

Source: Ministry of Textiles Annual Report, Industry Research

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 India has a strong base in raw materials

 Cotton dominates the industry

 Nearly 56% of yarn produced is made of cotton
 Country produces nearly 23 varieties of cotton
 India is the second largest player in the world cotton trade
Abundant
availability of raw
 India’s position is strong vis-à-vis other countries in most raw material is one of
materials the key
advantages of the
 Largest producer of jute
Indian textile
 Second largest producer of silk industry
 Third largest producer of cotton, accounting for nearly 16% of global
production
 Third largest producer of cellulosic fibre/yarn
 Fifth largest producer of synthetic fibres/yarn
 Eleventh largest producer of wool

Source: Ministry of Textiles Annual Report, Industry Research

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 Industry fragmented and dominated by small scale units

Spinning Weaving Processing & manufacturing

100% = 2922 mills 100% = 5.83 million units
 Of the 2300 processors in India, only
Composite mills 8% Organised sector 2% 200 units are integrated with spinning,
weaving or knitting units
 Bulk of apparel and home textile
Powerloom manufacturing accounted for by
Small Large
31% Handloom 77,000 small scale units
independent independent
sector
units units
67%
39% 53%

 The textile industry across the value chain is largely decentralised

 Units mostly independent and small scale in nature, rather than
composite units undertaking all activities together
 Large scope for entry of organised integrated textile manufacturers

Source: Compendium of Textile Statistics, 2004

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 Manufacturing units present at all levels of value chain

Raw materials

Cotton, wool, Garments

silk, jute Fibres and yarn

Grey fabric Processed fabric

 Knitting  Dyeing

 Weaving  Finishing
Man-made fibre/
Petrochemicals Home textiles
filament yarn*

Hand processing
Weaving/ knitting units, independent Garments &
Production Spinning mills
units - handlooms, power processing home textile
unit powerlooms, hosiery units, units attached producers
units to mills

Composite Mills

*Includes viscose staple fibre, polyester staple fibre, acrylic staple fibre, viscose
filament yarn, nylon filament yarn, polyester filament yarn © IMaCS 2006
Printed 7 Dec 2021
www.imacs.in Source: Industry Research Page 6
 Industry experiencing high growth

Yarn production CAGR Cloth production CAGR

million tonnes 3.6% billion sq. mtrs
3.4 45.0 4.1%
3.1 10% 6.0% 38.6 8.9%
8%
41%
2.4 17% 3.8% 31.5
100% non 20% 100% non 36%
cotton yarn 8%
cotton cloth 27%
Blended yarn 17% 13% 4.6%
15%
Blended cloth 13%

Cotton yarn 75% 72% 73% 3.2% Cotton cloth 60% 49% 46% 0.9%

1996 2000 2006 1996 2000 2005

 Increased output of yarn and fabric - CAGR of 3.6% and 4.1% respectively;
global market has grown at a CAGR of 2-2.5% in this period
 Highest growth seen in 100% non cotton yarn and fabric, followed by
blended yarn and fabric
 Cotton cloth continues to dominate the industry
© IMaCS 2006
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Source: Compendium of Textile Statistics Page 7
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 Exports are dominated by readymade garments

100% = INR 654 bn

800 Textile exports
7%
700 13%
100% = INR 390 bn
55%
600 5% 25%
9%

500
52% Year 2005-06 Readymade garments
34%
100% = INR 199 bn
400 Cotton yarn, fabric & made-ups
4%
10% Year 1999-00 Manmade staple fibres, yarn,
300 fabric & made-ups
Silk & woolen textiles, cotton
200 35% 51%
raw, incl waste

100
Year 1994-95

 Readymade garments dominate textile exports

 Share of manmade textiles in overall textile export basket
has risen, whereas that of cotton textiles has fallen

© IMaCS 2006
Printed 7 Dec 2021
www.imacs.in Source: Ministry of Textiles Page 8
 Dismantling of quotas has resulted in higher growth
in large markets

 In the first nine months of

CY2005, US imports grew by

Share in US textile and Share in EU textile and 7% to USD 8.9 bn and EU

clothing market clothing market imports grew by 3.7% to Euro
54.5 billion

 India has been one biggest

beneficiaries in post quota
2004 1st 9 2008* 2004 1st 9 2008* regime in these two markets,
months of months of
2005 2005 while countries like Mexico,
South Korea and Turkey have
lost share

*Forecasts Source: WTO study on gainers and losers post quota abolishment
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 Going forward, exports as well as domestic market
to drive growth

 Drivers of exports
 Rising outsourcing budgets of retail giants
Market size estimates  Indian companies evolving from mere
USD bn converters to vendor partners of global buyers
65  Large outsourcing orders helping Indian
companies build capacities, lower their per unit
cost and become more competitive
30
 Imposition of caps on certain import segments
37 from China by EU and US given the surge in
Exports Chinese exports has opened up opportunities
12
for India

Domestic
25 35  Drivers of domestic market
market
 Growing young population
2005 2010*  Rising household income levels
 Growth of organised retail

*Forecasts © IMaCS 2006

Source: Research commissioned by Confederation of Indian Textile Industry Printed 7 Dec 2021
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 Contents

Market Overview

Government regulations & policy

Business opportunities and Advantage India

© IMaCS 2006
Printed 7 Dec 2021
Page 11
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 Industry has witnessed a change in regulations

Emphasis on increasing scale

Post 1985

Emphasis on small scale sector

 Many segments (especially readymade garments,
knitwear and hosiery) deserved from reservation
for SSI
Pre 1985
 Schemes for technology upgradation and
 Importance given to cotton textiles modernisation introduced
 Favourable fiscal treatment given to  Multifibre approach adopted; emphasis on man
powerlooms (mainly tiny and small- made and synthetic fibres, in addition to cotton
scale units) as compared to  Taxation structure made simpler
composite mills
 Most segments reserved for small-
scale industry (SSI)*
 Restrictions on installation of
Measures aimed at
automatic looms
improving competitiveness
of industry to face a post
quota regime
*Latest definition: Investment in plant & machinery of INR 10 million for
most industries, INR 50 million for specified industries like hosiery, hand
© IMaCS 2006
tools, drugs & pharmaceuticals, sports goods and stationery items Printed 7 Dec 2021
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 Several government initiatives targeted to
attract investments

 Scheme launched in 1999 to provide firms access low interest loans for
Technology Upgradation technology upgradation and setting up new units with state-of-art
Fund Scheme technology
 Scheme has disbursed INR 91.61 bn till 31st December 2005

 Upto 100% foreign direct investment allowed in textile and apparel

Policy related to manufacturing industry, with approval of the Foreign Investment Promotion
foreign investment Board (FIPB)
 ~ USD 1.02 bn of FDI in the sector approved between 1991 and 2004
 Companies free to set up fully-owned sourcing (liaison) offices, as well as
marketing operations

 “Scheme for Integrated Textile Parks” (SITP), based on public-private

Upgrading partnership model to build world class infrastructure facilities
infrastructure  Product specific “Cluster Approach” targeting development of 100
additional clusters in textiles
 Technology Mission on Cotton (TMC), focusing on cotton R&D,
dissemination of technology to farmers, improvement of market
infrastructure and modernisation of ginning and pressing sector
© IMaCS 2006
Printed 7 Dec 2021
www.imacs.in Source: Ministry of Textiles, Industry Research Page 13
 Contents

Market Overview

Government regulations & policy

Business opportunities and Advantage India

© IMaCS 2006
Printed 7 Dec 2021
Page 14
www.imacs.in
 India has a cost advantage vis-à-vis
competing countries

Cost competitiveness South Korea

China
Yarn: USD per kg of yarn
Brazil
Fabric: USD per yard of fabric
India

Open-ended yarn & fabric Ring yarn & fabric Textured yarn & fabric
2.35 2.68 1.68
1.40
Yarn 2.51 2.76
2.31 2.61 1.90
2.17 2.45 2.06

0.70 0.75 0.55

Woven 0.65 0.69 0.51
0.55
fabric 0.60 0.65
0.61 0.66 0.59

0.06 0.18
1.22
0.04 1.21 0.14
Knitted 0.07 0.20
1.21
fabric 0.06 1.12 0.21

 India is cost competitive vis-à-vis competing countries in textile

production, except in case of textured yarn and fabric
© IMaCS 2006
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 There are several other industry specific advantages
arising out of the unique nature of the industry in India

 Large raw material base

 India has a rich raw material base, especially cotton which has seen improved productivity in the country
under the Cotton Technology Mission
 Wide variety of cotton produced India, making India capable of catering to various segments of world
trade
 Indian industry has ability to handle different materials - cotton, wool, silk and jute with equal skill

 Positive developments in the Textile Policy

 Reservation for small scale sector, especially key segments removed over last few years
 Fiscal anomalies in terms of excise duty structure removed

 Flexibility in production
 Capabilities across the entire value chain within the country reduces lead time for production and
reduces intermediate shipping time
 Indian companies have flexibility and skilled manpower to handle small orders with complex designs

 Product development and design capabilities

 Several institutes in India for textile development, the major one being National Institute of Fashion
Technology (NIFT)
 Several leading colleges also offer courses in Textile Engineering

© IMaCS 2006
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 Business opportunities exist for foreign players

 Invest in setting up vertically integrated large scale units

 Invest in setting up retail chains (single brand)
Investing in India
 Enter into marketing joint ventures with Indian companies
 Brand licensing to Indian players

 Partner with Indian vendors to import from India, by nominating

Sourcing from India large Indian companies having credibility in terms of capacities
and quality
 Readymade garments have maximum opportunity, given India’s
cost competitiveness

 With Indian consumers increasingly getting exposure to

Export to India international fashion trends, potential exists for export of
lifestyle brands of garments and accessories to India

© IMaCS 2006
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 Many foreign players have also entered India
Illustrative, not exhaustive

 Top 10 buyers in India (Gap, Wal-Mart, Li & Fung, The Children’s Place,
Buying and liaison
JC Penny, H&M, Federated, Fifth Avenue, Carrefour and Synergies India)
offices
account for 35% of total textiles sourced from India
 Other major companies include El Corte, Ecko, Kellwood, VF Corporation,
Tesco, Next, Karstadt-Quelle

Brand licensing/  Brand licensing - Hugo Boss, Tommy Hilfiger, Mango, Lovable, Nike, Lacoste
franchising  Master franchisee - Marks & Spencer, Crocodile

Manufacturing/  VF Arvind Brands - joint venture between Arvind Brands and VF

manufacturing Corporation to manufacture and sell latter’s brands in India
cum retailing  Benetton
 Levi Strauss
 Reebok
 Carreman Michel Thierry
© IMaCS 2006
Source: News articles Printed 7 Dec 2021
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 Key players in India
Illustrative, not exhaustive

 Large industry conglomerate, with turnover of USD 279 million and presence in textiles, retail,
engineering goods, personal care and prophylactics
 Textile products - worsted fabrics, wool and blended fabrics, specialty ring colour and stretch denim
fabric, cotton and linen shirting fabric, readymade garments, woolen blankets and home furnishings

 One of the oldest textile companies in the country, having turnover of USD 231 million
 Produces suitings, shirtings, sarees, towels, bed linen and men’s apparel; significant exporter
of polycotton blended fabrics and made ups

 One of the largest producers of denim in the world, having turnover of USD 338 million and
exports to more than 70 countries
 Produces denim fabric, cotton and blended fabric, knitted fabric, voiles, apparel

 One of the largest textile business houses in India, having turnover of USD 400 million
 Significant presence in acrylic fibre, cotton, synthetic and blended spun yarns, grey and
processed fabrics, cotton and synthetic sewing threads

 India’s largest exporter of readymade garments, having turnover of USD 180 million
 Supplies to more than 100 retailers and fashion brands across 39 countries

Source: Capitaline, Company websites © IMaCS 2006

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 Key players in India
Illustrative, not exhaustive

 Leading producer of silk yarns and fabric (mainly for decorative and bridal use), with annual
turnover of USD 32 million
 Other businesses include retailing of home furnishings in India and manufacture of bed linen
products for domestic and export market

 Amongst the top 3 terry towel producers in the world, with annual turnover of USD 132
million
 Other products include cotton yarns, polyester filament yarn, bathrobes, buttons and saw
pipes
 Belongs to one of the most diversified business groups in India (Aditya Birla Group) and has
turnover of USD 577 million)
 Key products in textiles include viscose filament yarn and branded apparel; other interests
include insurance, telecom, IT, carbon black

 Having turnover of USD 303 million, company is a major producer of polyester

yarns, fabrics, garments and textiles

 Has the largest composite textile mill in India for producing cotton fabric
 Having a turnover of USD 95 million, its products include viscose filament yarn,
viscose tyre/ industrial yarn, denim, cement and pulp and paper
© IMaCS 2006
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Source: Capitaline, Company websites Page 20
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 The India Brand Equity Foundation is a public-private partnership between the Ministry of
Commerce & Industry, Government of India and the Confederation of Indian Industry. The
Foundation’s primary objective is to build positive economic perceptions of India globally

India Brand Equity Foundation

c/o Confederation of Indian Industry
249-F Sector 18, Udyog Vihar Phase IV
Gurgaon 122015, Haryana, INDIA
Tel +91 124 401 4087, 4060 - 67
Fax +91 124 401 3873
Email ajay.khanna@ciionline.org
Web www.ibef.org

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