TEXTILEINDUSTRYREPORT

ByDun&BradstreetIndia

OVERVIEWOFTHETEXTILEINDUSTRY
TheIndiantextileindustryisonethelargestandoldestsectorsinthecountryandamong
themostimportantintheeconomyintermsofoutput,investmentandemployment.The
sector employs nearly 35 million people and after agriculture, is the secondhighest
employer in the country. Its importance is underlined by the fact that it accounts for
around 4% of Gross Domestic Product, 14% of industrial production, 9% of excise
collections, 18% of employment in the industrial sector, and 16% of the countrys total
exportsearnings.Withdirectlinkagestotheruraleconomyandtheagriculturesector,it
hasbeenestimatedthatoneofeverysixhouseholdsinthecountrydependsonthissector,
eitherdirectlyorindirectly,foritslivelihood.
A strong raw material production base, a vast pool of skilled and unskilled personnel,
cheap labour, good export potential and low import content are some of the salient
features of the Indian textile industry. This is a traditional, robust, wellestablished
industry,enjoyingconsiderabledemandinthedomesticaswellasglobalmarkets.
IndiavisvisGlobalTextiles
TheglobaltextileandclothingindustryisestimatedtobeworthaboutUS$4,395bnand
currentlyglobaltradeintextilesandclothingstandsataroundUS$360bn.TheUSmarket
is the largest, estimated to be growing at 5% per year, and in combination with the EU
nations,accountsfor64%ofclothingconsumption.
The Indian textile industry is valued at US$ 36 bn with exports totalling US$ 17 bn in
20052006. At the global level, Indias textile exports account for just 4.72% of global
textile and clothing exports. The export basket includes a wide range of items including
cottonyarnandfabrics,manmadeyarnandfabrics,woolandsilkfabrics,madeupsanda
varietyofgarments.Quotaconstraintsandshortcomingsinproducingvalueaddedfabrics
andgarmentsandtheabsenceofcontemporarydesignfacilitiesaresomeofthechallenges
thathaveimpactedtextileexportsfromIndia.
Indiaspresenceintheinternationalmarketissignificantintheareasoffabricsandyarn.
Indiaisthelargestexporterofyarnintheinternationalmarketandhasashareof
25%inworldcottonyarnexports
Indiaaccountsfor12%oftheworldsproductionoftextilefibresandyarn
Intermsofspindleage,theIndiantextileindustryisrankedsecond,afterChina,and
accountsfor23%oftheworldsspindlecapacity
Around6%ofglobalrotorcapacityisinIndia

The country has the highest loom capacity, including handlooms, with a share of
61%inworldloomage.

IndiasTextileIndustryStructure
Cotton textiles continue to form the predominant base of the Indian textile industry,
though other types of fabric have gained share in recent years. In 199596, the share of
cottonandmanmadefabricwas60%and27%respectively.Morerecently,cottonfabrics
accountedfor46%ofthetotalfabricproducedin200506,whilemanmadefibreshelda
share of 41%. This represents a clear shift in consumer preferences towards manmade
fabric.
TheTextileandApparelsupplychain

Thefibreandyarnspecificconfigurationofthetextileindustryincludesalmostalltypesof
textilefibres,encompassingnaturalfibressuchascotton,jute,silkandwool;synthetic/
manmadefibressuchaspolyester,viscose,nylon,acrylicandpolypropylene(PP)aswell
asmultipleblendsofsuchfibresandfilamentyarnssuchaspartiallyorientedyarn(POY).
Thetypeofyarnusedisdictatedbytheendproductbeingmanufactured.
TheManmadetextileindustrycomprisesfibreandfilamentyarnmanufacturingunitsof
cellulosic and noncellulosic origin. The cellulosic fibre/yarn industry is under the
administrative control of the Ministry of Textiles, while the noncellulosic industry is
undertheadministrativecontroloftheMinistryofChemicalsandFertilisers.
It is wellestablished that India possesses a natural advantage in terms of raw material
availability. India is the largest producer of jute, the secondlargest producer of silk, the
thirdlargest producer of cotton and cellulosic fibre/yarn and fifthlargest producer of
syntheticfibres/yarn.
Theindustrystructureisfullyverticallyintegratedacrossthevaluechain,extendingfrom
fibre to fabric to garments. At the same time, it is a highly fragmented sector, and
comprises smallscale, nonintegrated spinning, weaving, finishing, and apparelmaking
enterprises. The unorganised sector forms the bulk of the industry, comprising
handlooms, powerlooms, hosiery and knitting, and also readymade garments, khadi and
carpetmanufacturingunits.Theorganisedmillsectorconsistsofspinningmillsinvolved
only in spinning activities and composite mills where spinning, weaving and processing
activitiesarecarriedoutunderasingleroof.
AsinJanuary2006,therewere1779cotton/manmadefibretextilemillsintheorganised
sector,withaninstalledcapacityof34.1millionspindlesand395,000rotors.Ofthese,218
werecompositemillswhichaccountedforjust3%oftotalfabricproduction,with97%of
fabric production happening in the unorganised segment. Cloth production in the mill
sectorhasfallenfrom1,714millionsqmtrsin19992000toaprojected1,493millionsq
mtrsin200506,decliningatarateof2%perannum.Asaresult,thenumberofsickunits
intheorganisedsegmenthasalsobeengrowingrapidly.
Thecompetitivenessofcompositemillshasdeclinedincomparisontothepowerloomsin
the decentralised segment. Policy restrictions relating to labour laws and the fiscal
advantagesenjoyedbythehandloomandpowerloomsectorshavebeenidentifiedastwo
ofthemajorconstraintsresponsibleforthedecliningscenarioofthemillsector.

Nonetheless,overallclothproductioninthecountryhasbeengrowingat3.5%perannum
since 2000, with growth driven largely by the powerloom sector. Being the largest
manufacturer of fabric in the country, the powerloom sector produces a wide variety of
cloth,bothgreyaswellasprocessed.AccordingtotheMinistryofTextiles,thereare1.923
mn powerlooms in the country distributed over 430,000 units. The sector accounts for
63% of the total cloth production in the country and provides employment to 4.815 mn
people.
Thehandloomsectoristhesecondhighestemployerinthecountryafteragriculture.The
sectoraccountsfor13%ofthetotalclothproducedinthecountry,notincludingwool,silk
andhandspunyarn.Theproductionofhandloomfabricshadgoneupto4629mnsqmtrs
in2005,from500mnsqmtrsinthe1950s,representinganannualgrowthofaround4%.
Thesectorisweigheddownbyseveralproblemssuchasobsoletetechnology,unorganised
productionsystems,lowTheManmadetextileindustrycomprisesfibreandfilamentyarn
manufacturing units of cellulosic and noncellulosic origin. The cellulosic fibre/yarn
industry is under the administrative control of the Ministry of Textiles, while the non
cellulosic industry is under the administrative control of the Ministry of Chemicals and
Fertilisers. XV productivity, weak marketing links, overall stagnation in demand and
competitionfromthepowerloomandmillsectors.
Knitting and hosiery units account for around 17% of fabric production in the country.
According to data available for the year 2000, India had about 6,000 knitting units
registered as producers or exporters and most of these units were registered as small
scaleunits.
TrendsinProduction
Yarn and fabric production has been growing annually at 1.9% and 2.7% respectively,
since2000.Yarnproductionhasincreasedfrom3,940mnkgin199900to4,326mnkgin
200405.Manmadeyarnhasdrivenmuchofthis,showingarobustgrowthof4.3%inthe
last five years. Spun yarn production and the cotton yarn sector have also grown, albeit
lessimpressively,recordinggrowthsof2.4%and0.6%respectively.

Source:MinistryofTextiles,GoI

Fabric production has been growing at 2.7% annually between 2000 and 2005, driven
primarily by the smallscale, independent powerloom sector. Growth in the 100% non
cottonsegmenttouched5%,followedbycottonfabricat1.5%andblendedfabricat0.3%.
Fabric production touched a peak 45,378 million sq mtrs in 200405, and in Nov 06,
production recorded a robust 9% growth compared to the corresponding period in the
previousyear.

Source:MinistryofTextiles,GoI

TradeScenario
AccordingtotheprovisionalDGCI&Sdata,textileexportsduringfiscal200506stoodat
around US$17 billion, recording a 22% growth yearonyear. Except for manmade
textiles, all segments in the textile industry, including handicraft carpets, wool and silk,
haverecordedagrowthinexportsduring200506thefirstyearsincethephasingoutof
thequotasystemintheglobalmarket.
Readymadegarments(RMG)isthelargestexportsegment,accountingforaconsiderable
45%oftotaltextileexports.Thissegmenthasbenefitedsignificantlywiththetermination
oftheMultiFibreArrangement(MFA)inJan05.In200506,totalRMGexportsgrewby
29%,touchingUS$7.75bn.In200304and200405,thegrowthinRMGexportswas8.5%
and 4.1% respectively. The jump in 200506 exports has been largely due to the
eliminationofquotas.
Exports of cotton textiles which include yarn, fabric and madeups constitute over
2/3rd of total textiles exports (excluding readymade garments). Overall, this segment
accountsfor26%oftotaltextileexports.AccordingtotheMinistryofTextiles,in200506,
total cotton textile exports Source: Ministry of Textiles, GoI Source: Ministry of Textiles,
GoI XVI were worth US$ 4.5 bn, implying a growth of 27% over the exports in 200405,
whichwereworthUS$3.5bn.
Manmadetextilesexportshavewitnessedadeclineof2.5%in200506.Between1999
2000and200203,manmadetextilesexportsweregrowingataround30%perannum.
Theslowdownbegansince200304andhavebeenonthedeclinesince.
MajorexportdestinationsforIndiastextileandapparelproductsaretheUSandEU,which
together accounted for over 75% of demand. Exports to the US have further increased
since 2005, post the termination of the MFA. Analysis of trade figures by the US Census
BureaushowsthatpostMFA,importsfromIndiaintotheUShavebeennearly27%higher
thaninthecorrespondingperiodin200405.
SegmentwiseExports,20022006(US$bn)
Category
CottonTextiles
ManmadeTextiles
Silk
Wool
ReadyMadeGarments
Handicrafts
Jute
Coir&CoirManufactures
Total

200203
3.62
1.53
0.49
0.29
5.75
1.42
0.20
0.08
13.37

200304
3.68
1.86
0.56
0.35
5.92
1.11
0.25
0.08
13.80

200405
3.54
2.05
0.59
0.42
6.02
1.01
0.28
0.11
14.03

200506
4.49
2.00
0.69
0.47
7.75
1.24
0.29
0.13
17.08

Investments
Investmentsinthetextilessectorcanbeassessedonthebasisofthreefactors:
Plan schemes such as the Technology Upgradation Funds Scheme (TUFS),
TechnologyMissiononCotton,ApparelParks,etc.UndertheTUFSscheme,atotal
ofRs916bnhasbeendisbursedfortechnologyupgradation.Therearearound26
ApparelParksineightstatesinIndia,withatotalestimatedinvestmentofRs134
bn
Industrial Entrepreneurship Memorandums implemented from 1992 to Aug 06,
amountingtoRs263bn
Foreign Direct Investments inflows worth US$ 910 mn have been received by the
textileindustrybetweenAug91andMay06,whichaccountfor1.29%oftotalFDI
inflowsinthecountry.

Thoughsignificantinvestmentsarebeingmadeinthetextilessegment,thebulkofthem
areinthespinningandweavingsegments.AcumulativetotalofUS$6.67bnininvestment
isexpectedby2008.Ofthis,morethantwothirdsisexpectedinthespinningandweaving
segments,whileonly25%isexpectedinprocessingandgarmentunits.

Source: Ministry o
Textiles

GovernmentInitiatives

The Governments role in the textile industry has become more reformist in nature.
Initially,policiesweredrawntoprovideemploymentwithaclearfocusonpromotingthe
smallscale industry. The scenario changed after 1995, with policies being designed to
encourage investments in installing modern weaving machinery as well as gradually
eliminatingtheprodecentralisedsectorpolicyfocus.TheremovaloftheSSIreservation
for woven apparel in 2000 and knitted apparel in 2005 were significant decisions in
promotingsettingupoflargescalefirms.GovernmentschemessuchasApparelParksfor
Exports (APE) and the Textile Centres Infrastructure Development Scheme (TCIDS) now
provideincentivesforestablishingmanufacturingunitsinapparelexportzones.
ThenewTextilePolicyof2000settheballrollingforpolicyreformsinthetextilesector,
dealingwithremovalofrawmaterialpricedistortions,clusterapproachforpowerlooms,
pragmaticexitofidlemills,modernisationofoutdatedtechnologyetc.Theyear2000was
also marked by initiatives of setting up apparel parks; 2002 and 2003 saw a gradual
reductioninexcisedutiesformosttypesoffabricswhile2004offeredtheCENVATsystem
onanoptionalbasis.TheUnionBudgetof20052006announcedcompetitiveprogressive
policies,whosesalientfeaturesincluded:

Amajorboosttothe1999establishedTechnologyUpgradationFundSchemeforits
longevitythroughaRs4.35bnallocationwith10%capitalsubsidiesforthetextile
processingsector
Initiationofclusterdevelopmentforhandloomsector
Availabilityofhealthinsurancepackageto0.2mnweaversfrom0.02mninitially
Reduction in customs duty from 20% to 15% for fibres, yarns, intermediates,
fabrics and garments; from 20% to 10% on textile machinery and from 24% to
16%inexcisedutyforpolyesterorientedyarn/polyesteryarn
Reductionincorporatetaxratefrom35%to30%with10%surcharge
Reductionindepreciationrateonplantandmachineryfrom25%to15%
InclusionofpolystertexturisersundertheoptimalCENVATrateof8%

TomeetthechallengesofthepostMFAsetup,theGovernmentofIndiainitiatedareforms
process which aimed at promoting large capital investments, pruning cumbersome
procedures associated with the tax regime, etc. The Textile Vision 2010 was born as a
result of interaction between the government and the industry which envisages around
12% annual growth in the textile industry from US$ 36 billion now to US$ 85 billion by
2010.Additionally,Vision2010alsoproposesthecreationofanadditional12millionjobs
throughthisinitiative.

SMESINTHETEXTILEINDUSTRY
ThephasingoutoftheinternationalquotasystemisamajorturningpointfortheIndian
textile industry an opportunity and a threat. The textile industry is among the SME
intensive sectors in India, largely an outcome of government policies during the early
years of Independence. Focusing on promoting domestic employment, largescale
productioninthetextileindustrywascurtailedthroughrestrictionsontotalcapacityand
level of mechanisation. Several textile items were reserved for the small scale segment.
Thesepoliciespromotedtheextensivegrowthofsmallscaletextileenterprisesthatwere
highlylabourintensive,thoughiterodedthecompetitivenessoftheindustryandactedas
adisincentiveforcapitalinvestment.
Thesepoliciespursuedfromthe1950stothe1970sresultedinthedominanceofthe
decentralisedpowerloomandhandloomsectorsinthetextileindustry,whicharemainly
smallandmediumscaleenterprises.Infact,manyofthelargetextilecompaniesarealso
conglomeratesofmediumsizedmills.StatisticsreleasedbytheMinistryofTextilesshows
a highly fragmented industry, except in the spinning subsegment. The organised sector
contributesover95%ofspinning,buthardly5%ofweavingfabric.SmallScaleIndustries
(SSIs)performthebulkoftheweavingandprocessingoperations.
Dereservationoftextileproductshasbeenapriorityareaforthegovernmentsince1997,
which was believed to be the most effective way to foster productivity and efficiency
withinthesector.Alltextileitemswereremovedfromthereservationlistby2005.These
measures were a prerequisite to compete globally in the postMFA regime. As trade
barrierscomedownandcapitalmobilityincreases,large,organisedandintegratedfirms
will gain importance in establishing a presence in the global market and to tap
opportunities.
In the new scenario of a quotafree world, the readymade garments sector will play a
crucial role in the economy, in terms of contributing to exports as well as employment
generation, considering its inherent labourintensive nature. In the cloth production
segment,thehosieryandmillsectorsarelikelytobethegainers.
DefiningMSMEs
TheMicro,SmallandMediumEnterprisesDevelopmentAct,2006,whichcameintoeffect
fromOctober2,2006,defineSMEsonthebasisofinvestmentsinplantandmachinery.
Forenterprisesengagedinthemanufactureofgoods:
MicroInvestmentinplantandmachinerylessthanRs2.5mn
SmallInvestmentinplantandmachineryoverRs2.5mnbutnotexceedingRs50
mn
MediumInvestmentinplantandmachineryinexcessofSSIlimitbutlessthanRs
100mn

Forenterprisesengagedinprovidingorrenderingofservices:

MicroInvestmentinequipmentnotexceedingRs1mn
SmallInvestmentinequipmentoverRs1mnbutnotexceedingRs20mn
MediumInvestmentinequipmentisinexcessofSSIlimitbutlessthanRs50mn

BuyerDrivenNetwork
Theglobaltextileindustry,abuyerdrivennetwork,isdominatedbyretailers,marketers
andmanufacturers.Inthenewlydefinedbusinessenvironmentfortextiles,retailerslike
Zara,H&M,etc.haveredefinedthelifeoffashiontrendsfromtheearlierfivetosixmonths
toaroundtwomonths.Inthisscenarioofsuchshortshelflife,thesmallscaleoperations
of Indian SME apparel manufacturers gives them the flexibility to service custommade
orders at low cost. It is likely that India will become a preferred destination for global
manufacturersandretailersaswell,andbigopportunitiesforSMEsareforthcoming.
Today, apart from the big Indian textile manufacturers like Gokuldas Exports, Alok
Industries, Raymonds, Welspun India, Arvind Mills and Madura Garments, several small
andmediumsizedapparelmanufacturershavealsobecomesignificantcontributorstothe
total apparel exports of the country. Cotton knitwear suppliers of Tirupur, hosiery
suppliersofLudhianaandsuppliersofhometextilesfromTamilNadu,KeralaandPunjab,
amongothers,havebeenacceptedashighqualityandcosteffectiveapparelsuppliersin
internationalmarkets.
These regions are also SME dominated textile clusters that have emerged either due to
market access, availability of raw material or private initiatives. The textile industry of
Indiaoperateslargelyintheformofclustersmostlynaturalclusterswithroughly70
textile clusters producing 80% of the countrys total textiles. Based on a UNIDO study
conductedonSMEclustersinIndia,somenoteworthytextileclustersinclude:

Panipat,accountingfor75%ofthetotalblanketsproducedinthecountry
Tirupur,responsiblefor80%ofthecountryshosieryexports
Ludhiana,whichaccountsfor95%ofthecountryswoollenknitwearproduced.

ClusterbasedApproachtoDevelopment
Inspiteofsomenaturaladvantagessuchaslowcostsandflexibility,theSMEssufferfrom
disadvantagesofbeinginarelativelyisolatedenvironment.
TheGovernmentofIndiasclusterdevelopmentinitiatives,involvingtechnicalassistance,
subsidies for technology upgradation and marketing support, have strengthened the
competitivenessoftheSMEs,whichhasalsoconsolidatedtheirpositionintheglobalvalue
chain. A case in point is the initiative undertaken by the Textile Committee under the
Ministry of Textiles, which has undertaken a clusterbased programme for capacity
buildingintextileandclothingSMEsinacross20clustersinthecountry.

SomekeybenefitsofaclusterbasedapproachfordevelopingSMEsare:

Networkingamongenterprises
Economiesofscale
Improvedbargainingpower
Technologyandskillupgradation
Globalvisibilityandbeingpartofthevaluechain
Easieraccesstofinance
Greaterinstitutionalsupport.

AmongthesuccessesoftheTextileCommitteesclusterdevelopmentinitiativeshasbeen
the acquiring of intellectual property rights protection for the Pochampally Ikat tieand
dyesari,fromAndhraPradesh.ItisthefirsttraditionalIndiancrafttoreceivethisstatusof
XXVIII geographical branding,and isexpected to benefit at least 100,000weaversinthe
state.ThepowerloomclustersinSholapurandSalemarealsofollowingsuitinacquiring
geographicalindicationsprotection.
Another successful initiative is seen in the Terry Towel cluster of Solapur, where some
majorinterventionswereundertakenbythecommitteesuchassettingupofapolytechnic
institute, acquiring quality certifications for some of the units, setting up an export
consortiumandestablishingnetworks.
The concentration of textile firms in the form of clusters is to a natural advantage for
adoptingaclusterbaseddevelopmentapproachofthetextileSMEsegment.International
and domestic experience has proved that this approach has helped firms in attaining
competitivenessarequisiteintodaysnewmarket.
LinkingwiththeGlobalValueChain
An inevitable outcome of the opening up of the textile markets is the rationalisation of
supplierbasebylargeretailchainssuchasWalMartandGap.Undersuchcircumstances,
it will be difficult for small enterprises to individually meet the requirements of these
internationalbuyers.Hence,itwillbeessentialtobuildvaluenetworksthroughlinkages
withlargeplayerswhocanwinlargeorders,whilesmallerplayersservicetheseorders.
Thisentryintovaluenetworkswillnotonlylinkupsmallplayerstotheglobalvaluechain
but also assure a market for their products. Incorporation of textile SMEs as third and
fourthtiersupplierswillbeaneffectivewayofensuringthattheygainfromthegrowing
demands of the global market. However, here the role of the government and the large
textilecompanieswillbeimperative.
SWOTAnalysisofIndianTextileSMEs
Strengths
Selfreliance
Manufacturingflexibility

Weaknesse
Highlyfragmented
Highdependenceoncotton

Abundance of raw material

production
Designexpertise
Availabilityofcheaplabour
Growing
economy
and
domesticmarket
Progressivereforms

Lowerproductivity
Decliningmillsegment
Technologicalobsolescence
Nonparticipants in trade
agreements

Opportunities

Threats
Stiff
competition
from
Endofquotaregime
developing
countries;
Shift in domestic market to
especiallyChina
brandedreadymadegarments
Pricingpressure
Increaseddisposableincome
Locationaldisadvantage
Emerging mall culture and
International
labour
and
retailexpansion
environmentallaws

IndianTextileClusters
Cluster
Location

State

Guntur

AP

Nagari
AP
Narsapur
AP
Pochampally AP
Anantpur
AP
Sirsilla
AP
Warangal
AP
Delhi
Delhi
Ahmedabad Gujarat
Jetpur
Gujarat
(Rajkot)
Gandhinagar Gujarat
Surat
Gujarat
Vijapur
Gujarat
Bhiwani
Haryana
Gurgaon
Haryana
Panipat
Haryana
Bangalore Karnataka
Belgaum
Karnataka

Product
Specialisation
Powerloom
CottonGinning
Powerloom
Crochetlace
Tieanddyeing
Jeans/RMG
Powerloom
Powerloom
RMG/Hosiery
RMG
Textileprinting
Powerloom
Powerloom
Weaving
Powerloom
RMG
Powerloom
RMG
Powerloom

&

Bellary
Karnataka Jeans
Gadag
Karnataka Powerloom
Mysore
Karnataka Silk
Ernakulam Kerala
Powerloom
Faizlure
Kerala
Powerloom
Kannur
Kerala
Handloom
MallappuramKerala
Powerloom
Palakkad
Kerala
Powerloom
Burhanpur MP
Powerloom
Chanderi
MP
Handloom
Indore
MP
RMG
Jabalpur
MP
RMG/Powerloom
Maheshwar MP
Handloom
Ujjain
MP
Powerloom
Bhiwandi
Maharashtra Powerloom
Ichalkaranji Maharashtra Powerloom
MadhavnagarMaharashtra Powerloom

Cluster
Product
State
Location
Specialisation
Malegaon
Maharashtra Powerloom
Mumbai
Maharashtra RMG/Hosiery
Nagpur
Maharashtra Powerloom,RMG
Pune
Maharashtra RMG
Solapur
Maharashtra Powerloom
Balasore
Orissa
Powerloom
Dhenkanal
Orissa
Powerloom
Ganjam
Orissa
Powerloom
Nuapatna
Orissa
Tussarsilk
Amritsar
Punjab
Powerloom
Ludhiana
Punjab
Woollenknitwear
Jaipur
Rajasthan Garments
Jodhpur
Rajasthan Handprocessing
Kishangarh Rajasthan Powerloom
Sanganer &
Hand
block
Rajasthan
Bagru
printing
Bhavani
&
TN
Hometextiles
Chennimalai
Karur
TN
Hometextiles

Madurai

TN

Rajapalyam
Salem
Surampatti
Tirupur

TN
TN
TN
TN

Agartala

Tripura

Banda
Gorakhpur
Jhansi
Kanpur

UP
UP
UP
UP

Lucknow

UP

Mau
Noida
Varanasi
Kolkata
Ranaghat

UP
UP
UP
WB
WB

Tie & dye, hand

printing,RMG
Surgicaltextiles
Powerloom
Powerloom
Knitwear/Hosiery
Handloom & Loin
Looms
Powerloom
Powerloom
Powerloom
Hosiery
Chikan
embroidery
Powerloom
RMG
Powerloom
Hosiery/RMG
Powerloom

Source:D&BResearch,UNIDO,SIDO

FUTUREOUTLOOK
Expectations are high, prospects are bright, but capitalising on the new emerging
opportunitieswillbeachallengefortextilecompanies.Someprerequisitestobeincluded
inthegloballycompetingtextileindustryare:

Imbibingglobalbestpractices
Adoptingrapidlychangingtechnologiesandefficientprocesses
Innovation
Networkingandbettersupplychainmanagement
Abilitytolinkuptoglobalvaluechains.

The Indian textiles industry has established its supremacy in cotton based products,
especiallyinthereadymadegarmentsandhomefurnishingssegment.Thesetwosegments
will be the key drivers of growth for Indian textiles. Readymade garment exports were
worth US$ 8 bn in FY06 and will cross US$ 16 bn by the end of 2010, assuming a
conservative growth of 15% per annum. According to estimates, investments in textiles
areexpectedtotouchUS$31bnby2010.
The readymade garment segment will be the principal driver of growth even in the
domesticindustry.ThechangingpreferencesofIndianconsumersfrombuyingclothto
readymadegarmentshavepromptedseveralcompaniestomoveupthevaluechaininto
thefinishedproductssegment.
StrategicInitiatives
Business integration especially forward integration by the larger textile companies
has been prominent among Indian companies. Several companies that are engaged in
fabric manufacturing, are now keen to enter the readymade garments space. A recent
entrant is Siyaram, which launched its readymade garments range in Nov 06, following
suitwithothermajorslikeCenturyTextilesandRaymonds.
Mostofthelargetextilecompanieshaveoptedforaninorganicgrowthstrategytoscaleup
operations. Acquisition is the most logical step towards integrating operations and
building the value chain. Domestic acquisitions are on the rise, while acquiring foreign
assetsisyettogaintraction.Somerecentdomesticacquisitionsthathavebeenexecutedin
2006includeKSL&IndustriesacquisitionofDeccanCooperative,andAmbatturClothing
taking over Celebrity Fashions. Another growing phenomenon observed among Indian
textilecompaniesisthesettingupofmanufacturingfacilitiesinstrategicregionsoutside
India,where they canavail of duty concessions andreduce exportleadtime.Zodiac and
AmbatturClothinghavesetupfacilitiesintheGulfregiontocutdownonexportdelivery
schedulestotheEuropeanandUSmarkets.RaymondshassetupaunitinBangladeshto
availofthezerodutyaccesstotheEU.

Thistrendisseenprimarilyamongthelargedomesticplayers,whoaretryingtoachieve
sizable scales in order to win orders from the large retailers in the US and EU. Global
retailers prefer largesized companies that can scale up capacities consistently, keep up
withdeliveryschedulesandmeettheirgrowingdemand.Theyhaveclearpreferencesfor
companieswithintegrateddesign,processandmanufacturingfacilities.
Aninterestingcommonalityincountrieswithsuccessfulgarmentexportsisthattheyhave
a much lower level of subcontracting than India. A study during the 1990s found that
apparel firms Future Outlook XXXIII in India subcontracted 74% of their output, as
comparedtoonly11%inHongKong,18%inChina,20%inThailand,28%inSouthKorea
and36%inTaiwan.Consequently,thesecountrieshaveawiderbaseofexportsandhave
doneverywellinthemarketforlargevolumesofuniformproducts.
ForeignAcquisitionsbyIndianTextileCompanies
Period

Acquirer

May01

ArvindMills

Jun01

AmbatturClothing

Sep01

Raymonds

Sep03
Dec04
May05

JindalPolyester
JCTLtd
RelianceGroup

Jun05

ZodiacClothing

Dec05

GHCL

May06

MalwaIndustries

May06
Jul06

MalwaIndustries
WelspunIndia

Jul06

SpentexIndustries

Jul06
GHCL
Source:D&BResearch

AcquiredCompany
License Of Healthtex Kidswear
BrandOfVfCorpn(USA)
Colourplus(UK)
Regency Texteis Portuguesa
Limitada(Portugal)
RexorGroup(France)
CNLTMalaysia(Synegal)
ICIPakistanLtd(Pakistan)
Shirting Company Located In
AlqozeIndustrialArea(Dubai)
DanRiver(USA)
Emmetre
Tintolavanderie
Industrial(Italy)
ThirdDimensionApparels(Italy)
CHTHolding(UK)
TashkentToyetpa Tekstil Ltd
(Uzbek)
Rosebys(UK)

TheexportsmarketwillremainfavourableforIndiatill2008,whenquotarestrictionson
China end. Post 2008, competition will become tougher. This will be the phase in which
Indian textile companies will come under tremendous pricing pressures and tighter
product delivery schedules. Nevertheless, the valueadded segments of readymade
garments,homefurnishingsandmadeupswillcontinuetogrow.

ImplicationsforSMEs
Thenewbusinessdynamicshavevaryingundertonesacrossthevaluechain.Thesegment
thatislikelytobehitisweaving.TheSMEsinthepowerloom andhandloomsectorwill
face significant churn in the future. Spinning mills that account for 95% of the yarn and
fibreproduction,willmoveupthevaluechainintoweaving.Thiswillerodetheviabilityof
thehithertoprotectedpowerloomandhandloomoperatorsnumberingover400,000,who
have remained insulated from competitive forces so far. A possible remedy could be for
theseweaverstoalignwithbiggerplayersorintegrateoperationsthatwouldensureoff
takeoftheirproducts.
The fragmented industry structure has in the past been beneficial in generating
employment, but will be difficult to sustain in a globally competitive environment. For
fabric manufacturers in the unorganised segment, this will mean inefficient units losing
outeventually,whilethemoreefficientanddynamiconesaligningwithmanufacturersor
buyers.For readymade garment SMEs, rising demand and preference for readytowear
outfitsinthedomesticmarketwillsustainalargenumberofunitsinthissector.Thiswill
bethemostthrivingsegmentintheindustryandSMEswillplayakeyrole.
Indias key assets include a large and lowcost labour force, sizable supply of fabric,
sufficiencyinrawmaterialandspinningcapacities.Onthebasisofthesestrengths,India
will become a major outsourcing hub for foreign manufacturers and retailers,with
compositemillsandlargeintegratedfirmsbeingtheirpreferredpartners.Itwillthusbe
essential for SMEs to align with thesefirms, that canensure a market for theirproducts
andneworders.
Weaknesses of the Indian textile industry include fragmentation of the industry,
lengthMessages in this topic (1) y delivery times, delays in customs clearance and high
transportationandinputcosts.Totacklethesefactors,theGovernmentwillhavetoplaya
key role. Infrastructure development, reforms in labour laws and significant policy
supportwillbeessential.

Source:www.dnb.co.in