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Indian Textile Industry: A Growth Perspective

Mr. Sachit Jain

Vardhman Group Singapore, March, 2010
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Indian Textile Industry: Growth Drivers

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o Global Opportunities o Domestic Policy Frame-Work o Manufacturing competitiveness

The consolidation of textile manufacturing in Asia e or p gives impetus to Indian Textile Industry growth ga n
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70 % of world fiber processing takes place in Asia. China, India and Pakistan account for 60% of world fiber consumption. Though Bangladesh and Vietnam have been emerging as competing textile economies. They depend on the imported textile inputs. Global retailers are preferring single point service helping integrating suppliers of textile and clothing.

World Textile Fiber Processing

Rest of world 30%

Asia 70%

Growing world trade in textile and clothing offers e or p significant opportunities for Indian T&C exports ga n
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1600 1400 1200 1000 800 600 400 200 0 310 158 152 1995 355 198 157 2000 277 203 2005 362 250 2008 480 440 612 720 Total Clothing Textile World Trade in Textiles and Cothing(USD bn)

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280 2012

 0 With removal of quantitative restrictions especially after 2002, Indias 1 20 textile and clothing exports grew at a higher rate during 2002-2007 re in tandem with growth in world trade in T&C.
Comparative growth rate in World Trade in T&C(%)* Textile 1995-2002 World India 2002 -2007 World India
*CAGR

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World Trade in Textile and Clothing e or

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Clothing

T&C

0.2% 4% 9% 11%

4% 5% 11% 11%

2% 4% 10% 11%

Indias T&C exports growth was lower than China, which registered 23% growth in T&C exports during 2002-2007. China exported $171 bn T&C products against $22 bn from India It indicates missed opportunities as well as scope for future growth 5

Growing importance of cotton in world trade in 0 01 2 textilereand clothing is visible in USA T&C imports po
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USA: Textile and Clothing Imports( USD bn)

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USA T&C imports: Percentage share of cotton products

60000 50000 40000 30000 20000 13 10000 0 1990 1995 2000 2005 2008 15 24 20 40 32 37 52

56
60

58

59

48

38

50 40
Cotton products Non cotton products

30 20 10 0 1990 2000 2005 2008

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0 The Industry Structurally has a Significant 01 2 e r po Potential to Grow ga n Si 0 01 2

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Attributes of Indias Textile Industry which provides structural advantage to grow Context for Firm Strategy and Rivalry
Presence in all parts of value chain

Factor (Input) Conditions

Availability of Raw Materials and Workforce

Large numbers of producers

Demand Conditions

Growing International demand , Large domestic market

Related & Supporting industries

Well developed textile machinery industry

0 India share in world installed capacity of spindles 01 2 e r and shuttle-less looms po a ng Si 0 01 2

250 200 150 100 50 0

Spindles Installed capacity ( mn nos.)

212

Shuttle-less looms installed capacity(in 000 nos.)

970 1000 800 370 50

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104 39

600 400 200 0 India

India

China

World

China

World

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e Breaking from the past legacy or ap

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Fragmented Industry Structure Low Level Of Technology Sub-scale Of Operations

Because of past policy distortion, the profitability and investments remained subdued in the past
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20 e r po a ng Si India: Trends in Effective Rate of Excise Duty on Fabric and Fabric Processing

Fiscal Policy Framework : From fragmented duty 10 structure to unified approach

1 2002 Exemption Limit(if any) B.E.D. S.E.D. FABRIC(WOVEN ) Cotton Fabric Optional Duty12(optional) 1993-94 (Rs./sqm)

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Fabric Cotton fabric whose value per sqm. a) Does not exceeds Rs.10 b.) Exceeds Rs.10 but does not exceeds Rs.25 c.) Exceeds Rs.25 but does not exceeds Rs.40 d.) Exceeds Rs.40 but does not exceeds Rs.100

Particulars

2003 B.E.D. 10 10

2004/2006

0.20

Man Made/ Blended Fabric FABRIC (KNITTED) Cotton Blended & MMF

Optional Duty12(optional)

0.50

Optional Duty12(optional) Optional Duty12(optional)

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0.50+5% 2.50+ 20% of the value exceeding Rs.40 per sqm.

FABRIC PROCESSING B.E.D. B.E.D. 0 Hand Processing(W ith out aid of Power/steam) Hand Processing (with specified 12 power processes for 100% cotton fabric) Hand Processing (with specified 12 power processes for Blended and 100% non cotton fabric) Hand processing(with specified 7 power processes for man made fabric) Processed fabric -woven Processed fabric knitted-Cotton Optional Processed Fabric KnittedMMF Optional

A.1

e.) Exceeds Rs.100

20%

A.2

Blended and man made fabric, whose value per sqm

A.3

4% on a cotton fabric and 8% on blended and non cotton fabric for all categories

A.4 a.)Does not exceeds Rs.40 per sqm. b.) Exceeds Rs.40 but does not exceeds Rs.100 c.) Exceeds Rs.100 per sqm 3

0.50+5% 2.50+ 20% of the value exceeding Rs.40 per sqm. 20%

C D

12

10 8

12(optional) 10 12(optional)

Grey fabric exempted from duty Cotton/Blended/Manmade fabric processed with out aid of power is exempted from duty

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e or p ga Restoration of level playing field n Si Organised vs. unorganized sector 0 Small vs. large units 01 2 re Unequal fiscal treatment has been abandoned

Domestic10policy frame work-Recent initiatives 20

Duty rationalization Technology upgradation fund(TUF) Reduction in import duty on most of textile machinery Capital subsidy for fabric processing Development of SEZ and apparel parks are put on fast track.

Fiscal policy reforms refurbish the investment outlook of the industry

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0 01 industry committed efforts to harness the Textile 2 e r po fundamental strengths are visible in growing investments a ng Si 0 01 2

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Investment approved under TUF ( USD 40 bn)

16 14 12 10 8 6 4 2

19992000

20002001

20012002

20022003

20032004

20042005

20052006

20062007

20072008

20082009

About equal amount of investment is projected in next 10 years

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0 01future growth lies in fundamental Scope for 2 e r po the Indian Textile Industry ga n Si 0 01 2

strengths of

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Well integrated production base Wide range of Cotton / Spun yarn Strong base for Cotton , PSF and PFY Wide range of Cotton and Synthetic fabric Growing domestic market for high quality textiles Growing demand for Technical Textiles / Performance Fibres

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Indiase share in cotton production in the world is r po a growing( mn tons) ng

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25 World India % share of India in 25%

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26

23

21% 20%

20

19 17
16% 15%

15 12% 10

12% 10%

2
1993/94

5%

0 2000/01 2005/06 2008/09

0%

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The principle cause for higher cotton e or p production is growing productivity( kg/ha) ga in
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Productivity per hectare( kg/ha)

724 554 610 524 478 286 278 World India
80 60 40 20 0

India recorded higher growth rate in productivity 100

100

800 700 600 500 400 300 200 100 0 1993/94

761

100

100 66

100 69
World India

52

46

2000/01

2005/06

2008/09

1993/94

2000/01

2005/06

2008/09

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0 01 Increasing cotton productivity : 2 e r po a ng Village adoption program Si

0 01 2 o The cotton yield in Punjab declined to very low level 300 kg/ha in 1999 re

leading to drop in cotton cultivation o Best yield award to cotton growers started in 2001 o Village adoption program for increasing cotton productivity by improving cultivation practices and quality seed started in 2003 o Cotton productivity grew to 700 kg/ha in Punjab o The model is all set to be replicated in rest of cotton producing States in India, which will give sustainable increase in productivity and cotton crop
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r po a ng Si 0 01 2

0 01 India: Foreign trade trends in cotton 2 e

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India: Import and export of cotton fiber( mn tons)

1.0 0.8 0.6 0.4 0.2 0.0 1993/94 2000/01 2005/06 2008/09 Import Export

The Indian cotton is attractive to foreign Buyers due to its peculiar characteristics Cotton constitutes a major part of imported cotton for manufacturing Higher counts

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e or p ga n Si C O T T O N E C O N O M Y O F IN D IA O U T L O O K 2 0 2 0 0 01 2
A re a u n d e r c o tto n c u ltiv a tio n - m n h a 2008 10 560 5 .6 4 1 .6

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2020 10 750 7 .5 6 .2 1 .3

m n h e c ta re k g /h a m n to n s m n to n s m n to n s

P ro d u c tiv ity P ro d u c tio n C o n s u m p tio n C o tto n s u rp lu s

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Cotton fiber place in Indian textile value chain will 0 01 2 remain important e or
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PRODUCTION OF SPUN YARN (IN '000 TONNES)

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4000 3500 3000 2500 2000 1500 1000

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5000

4500

2948

2800
COTTON BLENDED 100% N.C.

2267 1894 1510

2272

646
500 0 1990 1995 2000 YEAR

585 248 366

677 378

800

207

395 107 196

2005

2008

2020

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e or p ga n Si 0 01 2 PSF

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India: MMF consumption projections( mn kg) 2009 651 223 91 3 1336 44 30 17 2395 2020 1965 695 320 9 3500 136 111 39 6775
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VSF ASF PPSF PFY VFY NFY PPFY TOTAL

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INDIA: TEXTILE FIBER CONSUMPTION e or p OUTLOOK 2020 ga n

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Fiber consumption outlook-2020( mn tons)

6.7

Composition of fiber consumption(% share)

60 49 40 2009 2020 51

8 6 4 2 0 2009 4 2.7

6.5

60 50 40 30 20 10 0

Cotton MMF

2020

Cotton

MMF

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70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00

Size10of Indian Textile Industry-Exports 0

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Textile and Clothing exports(USD bn)

60.00 15 10 5 0 19.10 21.50 22.00 19.27 21.64 24.30 -5 -10 T&C exports 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 20102011 20112012 growth rate -15 20122013 20142015 20192020

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40.00

13.50

14.05

17.50

18.36

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e or p ga n Si 0 01 2

0 Scope for growth in domestic market: 01 2

Per capita fiber consumption(Kg)

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30 25 20 15 13 10 3.5 5 0 10

INDIA

CHINA

WORLD

USA

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PROJECTED SIZE OF INDIAN TEXTILE INDUSTRY( USD BN)

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160 140 120 100 80 60 40 20 0 35 2008-09 2014-15 2019-2020 22 60 37 90 60 Exports Domestic

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0 SWOT01analysis of Indian Textile Industry: 2 e r po a Strengths ng Si 0 01 2

Independent & Self-Reliant industry. Availability of Low Cost and Skilled Manpower Availability of large varieties of cotton fiber and has a fast growing synthetic fiber industry. India has great advantage in Spinning Sector and has a presence in complete textile value chain.
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SWOT analysis of Indian Textile Industry: e or p Weaknesses ga in

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The fabric and garmenting sector need modernization, which is under process Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and transportation Time. Unfavorable labor Laws. Lack of Trade Membership, which restrict to tap other potential market. Economies of Scale- average spinning mill14000 spindles Higher Indirect Taxes, Power and Interest Rates.
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SWOT analysis of Indian Textile Industry: e or p Opportunities ga in

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Growth rate of domestic Textile Industry is 6-8% per annum. Large potential in International Market. Product development and diversification to cater global needs. Elimination of Quota Restrictions leads to greater Market Access. Market is gradually shifting towards Branded Readymade Garments. Emerging Retail Industry and Malls provide huge opportunities for the Apparel, Handicraft and other segments of the industry. Greater Investment and FDI opportunities are available. Large scope for technical textile linked with growing industrialization, large infrastructure projects in stream
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SWOT analysis of Indian Textile Industry: e or p Threats( Concerns) ga in

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Competition from other developing countries, especially China in domestic market also will lead to consolidation Elimination of Quota system has led to fluctuations in Export Demand. Rising prices of inputs-raw material Formation of trading blocks
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e or p ga n Si Vardhman

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Vibrant Private Sector

Bombay Rayon Alok Ahima JCT Welspun Trident Gokaldas exports Orient Craft Bombay Rayon Fashions Raymond

Group

Nahar Arvind mills Shanmugvel Madura Surya Laxmi Group Ramlinga Group Lakshmi Group LNJ Group Chola Group Raja Palayam Super spinning Centaury GTN group

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Thank You

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