Indian Textile Industry

October 2006

Contents

Market Overview

Government regulations & policy

Business opportunities and Advantage India

www.imacs.in

© IMaCS 2006 Printed 24-Sep-10 Page 2

with the hand-spun and hand woven sector at one end of the spectrum.imacs. and the capital intensive. sophisticated mill sector at the other Source: Ministry of Textiles Annual Report.Indian Textile industry . producing 80% of the country¶s total textile Sector is diverse.in © IMaCS 2006 Printed 24-Sep-10 Page 3 .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. Industry Research www.

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 Abundant availability of raw material is one of the key advantages of the Indian textile industry    Source: Ministry of Textiles Annual Report. Industry Research www.imacs.in © IMaCS 2006 Printed 24-Sep-10 Page 4 .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 India¶s position is strong vis-à-vis other countries in most raw materials    Largest producer of jute Second largest producer of silk Third largest producer of cotton.

in © IMaCS 2006 Printed 24-Sep-10 Page 5 . 2004 www.000 small scale units Small Large independent independent units units 39% 53% Powerloom Handloom 31% sector 67% The textile industry across the value chain is largely decentralised Units mostly independent and small scale in nature.83 million units Processing & manufacturing Of the 2300 processors in Organised sector 2% India. weaving or knitting units Bulk of apparel and home textile manufacturing accounted for by 77. rather than composite units undertaking all activities together Large scope for entry of organised integrated textile manufacturers Source: Compendium of Textile Statistics.Industry fragmented and dominated by small scale units Spinning 100% = 2922 mills Composite mills 8% Weaving 100% = 5.imacs. only 200 units are integrated with spinning.

in Source: Industry Research © IMaCS 2006 Printed 24-Sep-10 Page 6 . polyester filament yarn www. units attached to mills Garments & home textile producers Composite Mills *Includes viscose staple fibre. wool. acrylic staple fibre.Manufacturing units present at all levels of value chain Raw materials Cotton. silk. hosiery units Hand processing units. polyester staple fibre. powerlooms. jute Fibres and yarn Grey fabric Knitting Weaving Petrochemicals Man-made fibre/ filament yarn* Processed fabric Dyeing Finishing Home textiles Garments Production unit Spinning mills Weaving/ knitting units . independent power processing units. nylon filament yarn.imacs.handlooms. viscose filament yarn.

5 27% 15% 13% 41% 36% 45.1% 8.0 CAGR 4.8% Cloth production billion sq.9% 4. followed by blended yarn and fabric Cotton cloth continues to dominate the industry www.0% 3.4 100% non 8% cotton yarn Blended yarn 17% 20% 10% 17% CAGR 3.2% Cotton cloth 60% 49% 46% 0.Industry experiencing high growth Yarn production million tonnes 3.6% 6.6% Blended cloth 13% Cotton yarn 75% 72% 73% 3.in Source: Compendium of Textile Statistics © IMaCS 2006 Printed 24-Sep-10 Page 7 .imacs. mtrs 38.9% 1996 2000 2006 1996 2000 2005 Increased output of yarn and fabric . global market has grown at a CAGR of 2-2.6% and 4.1% respectively.1 8% 2.6 100% non cotton cloth 31.4 3.CAGR of 3.5% in this period Highest growth seen in 100% non cotton yarn and fabric.

imacs. whereas that of cotton textiles has fallen © IMaCS 2006 Printed 24-Sep-10 Page 8 www. cotton raw.in Source: Ministry of Textiles . fabric & made-ups Silk & woolen textiles. incl waste 200 35% 100 Year 1994-95 0 Readymade garments dominate textile exports Share of manmade textiles in overall textile export basket has risen. fabric & made-ups 100% = INR 199 bn 4% 10% Year 1999-00 51% 300 Manmade staple fibres. yarn.Exports are dominated by readymade garments 800 Textile exports 100% = INR 390 bn 100% = INR 654 bn 7% 13% 55% 25% 700 600 9% 5% 500 34% 400 52% Year 2005-06 Readymade garments Cotton yarn.

South Korea and Turkey have lost share *Forecasts www. while countries like Mexico.7% to Euro 54.4% 5.in Source: WTO study on gainers and losers post quota abolishment © IMaCS 2006 Printed 24-Sep-10 Page 9 .5 billion 4.0% Share in EU textile and clothing market 9.Dismantling of quotas has resulted in higher growth in large markets In the first nine months of CY2005.3% .0% 7. US imports grew by Share in US textile and clothing market 15.2% India has been one biggest beneficiaries in post quota 2004 1st 9 months of 2005 2008* 2004 1st 9 months of 2005 2008* regime in these two markets.imacs.9 bn and EU imports grew by 3.0% 7% to USD 8.

Going forward.in Source: Research commissioned by Confederation of Indian Textile Industry © IMaCS 2006 Printed 24-Sep-10 Page 10 . exports as well as domestic market to drive growth Drivers of exports  Rising outsourcing budgets of retail giants Indian companies evolving from mere converters to vendor partners of global buyers Large outsourcing orders helping Indian companies build capacities.imacs. lower their per unit cost and become more competitive Imposition of caps on certain import segments from China by EU and US given the surge in Chinese exports has opened up opportunities for India Market size estimates USD bn 65   30 37 Exports 12  Domestic market 25 35 Drivers of domestic market  Growing young population Rising household income levels Growth of organised retail 2005 2010*   *Forecasts www.

in © IMaCS 2006 Printed 24-Sep-10 Page 11 .Contents Market Overview Government regulations & policy Business opportunities and Advantage India www.imacs.

in Many segments (especially readymade garments. in addition to cotton Taxation structure made simpler quota regime © IMaCS 2006 Printed 24-Sep-10 Page 12 . drugs & pharmaceuticals.imacs.Industry has witnessed a change in regulations Emphasis on increasing scale Post 1985 Emphasis on small scale sector Pre 1985 Importance given to cotton textiles Favourable fiscal treatment given to powerlooms (mainly tiny and smallscale units) as compared to composite mills Most segments reserved for smallscale industry (SSI)* Restrictions on installation of automatic looms Measures aimed at improving competitiveness of industry to face a post *Latest definition: Investment in plant & machinery of INR 10 million for most industries. sports goods and stationery items www. knitwear and hosiery) deserved from reservation for SSI Schemes for technology upgradation and modernisation introduced Multifibre approach adopted. INR 50 million for specified industries like hosiery. hand tools. emphasis on man made and synthetic fibres.

imacs. dissemination of technology to farmers. focusing on cotton R&D.61 bn till 31st December 2005 Technology Upgradation Fund Scheme Upto 100% foreign direct investment allowed in textile and apparel Policy related to foreign investment manufacturing industry. with approval of the Foreign Investment Promotion Board (FIPB) ~ USD 1. Industry Research .Several government initiatives targeted to attract investments Scheme launched in 1999 to provide firms access low interest loans for technology upgradation and setting up new units with state-of-art technology Scheme has disbursed INR 91.in © IMaCS 2006 Printed 24-Sep-10 Page 13 Source: Ministry of Textiles. improvement of market infrastructure and modernisation of ginning and pressing sector www. based on public-private Upgrading infrastructure partnership model to build world class infrastructure facilities Product specific ³Cluster Approach´ targeting development of 100 additional clusters in textiles Technology Mission on Cotton (TMC).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 ³Scheme for Integrated Textile Parks´ (SITP).

in © IMaCS 2006 Printed 24-Sep-10 Page 14 .imacs.Contents Market Overview Government regulations & policy Business opportunities and Advantage India www.

31 2.35 South Korea China Brazil India Ring yarn & fabric 2.60 0.51 2.65 0.75 0.68 2.59 0.65 0.90 2.18 0.06 0.55 0.20 0.12 Textured yarn & fabric 1.imacs.in © IMaCS 2006 Printed 24-Sep-10 Page 15 .07 0.21 1.21 1.76 2.06 India is cost competitive vis-à-vis competing countries in textile production.66 1.14 0. except in case of textured yarn and fabric www.India has a cost advantage vis-à-vis competing countries Cost competitiveness Yarn: USD per kg of yarn Fabric: USD per yard of fabric Open-ended yarn & fabric 2.40 1.55 0.61 Knitted fabric 0.06 0.22 1.69 0.04 0.70 Woven fabric 0.45 0.68 1.51 0.61 2.17 0.21 Yarn 2.

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. silk and jute with equal skill Positive developments in the Textile Policy   Reservation for small scale sector.cotton.imacs. especially cotton which has seen improved productivity in the country under the Cotton Technology Mission Wide variety of cotton produced India. the major one being National Institute of Fashion Technology (NIFT) Several leading colleges also offer courses in Textile Engineering © IMaCS 2006 Printed 24-Sep-10 Page 16 www. wool.in . making India capable of catering to various segments of world trade Indian industry has ability to handle different materials . 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.

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.Business opportunities exist for foreign players Invest in setting up vertically integrated large scale units Investing in India Invest in setting up retail chains (single brand) Enter into marketing joint ventures with Indian companies Brand licensing to Indian players Partner with Indian vendors to import from India.in © IMaCS 2006 Printed 24-Sep-10 Page 17 . potential exists for export of lifestyle brands of garments and accessories to India www.imacs.

Crocodile Manufacturing/ manufacturing cum retailing VF Arvind Brands .in Source: News articles © IMaCS 2006 Printed 24-Sep-10 Page 18 . Lacoste Master franchisee .imacs. JC Buying and liaison offices Penny. Fifth Avenue.Many foreign players have also entered India Illustrative. Next. Tommy Hilfiger. Karstadt-Quelle Brand licensing/ franchising Brand licensing .joint venture between Arvind Brands and VF Corporation to manufacture and sell latter¶s brands in India Benetton Levi Strauss Reebok Carreman Michel Thierry www. H&M. Tesco. Ecko.Marks & Spencer. VF Corporation. The Children¶s Place. Carrefour and Synergies India) account for 35% of total textiles sourced from India Other major companies include El Corte. Kellwood.Hugo Boss. Lovable. Mango. Wal-Mart. Federated. Li & Fung. Nike. not exhaustive Top 10 buyers in India (Gap.

having turnover of USD 338 million and exports to more than 70 countries Produces denim fabric. sarees. cotton and blended fabric. having turnover of USD 400 million Significant presence in acrylic fibre. cotton and linen shirting fabric. grey and processed fabrics.imacs. having turnover of USD 180 million Supplies to more than 100 retailers and fashion brands across 39 countries Source: Capitaline. knitted fabric. with turnover of USD 279 million and presence in textiles. significant exporter of polycotton blended fabrics and made ups One of the largest producers of denim in the world.in © IMaCS 2006 Printed 24-Sep-10 Page 19 . woolen blankets and home furnishings One of the oldest textile companies in the country. specialty ring colour and stretch denim fabric. wool and blended fabrics. Company websites www. towels. personal care and prophylactics Textile products . shirtings. retail.Key players in India Illustrative. cotton.worsted fabrics. cotton and synthetic sewing threads India¶s largest exporter of readymade garments. synthetic and blended spun yarns. voiles. having turnover of USD 231 million Produces suitings. not exhaustive Large industry conglomerate. bed linen and men¶s apparel. engineering goods. readymade garments. apparel One of the largest textile business houses in India.

IT. viscose tyre/ industrial yarn. carbon black Having turnover of USD 303 million. telecom. not exhaustive Leading producer of silk yarns and fabric (mainly for decorative and bridal use). bathrobes. Company websites © IMaCS 2006 Printed 24-Sep-10 Page 20 . with annual turnover of USD 132 million Other products include cotton yarns. denim. cement and pulp and paper www.imacs. 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. polyester filament yarn. other interests include insurance.Key players in India Illustrative. company is a major producer of polyester yarns. garments and textiles Has the largest composite textile mill in India for producing cotton fabric Having a turnover of USD 95 million. 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. its products include viscose filament yarn. fabrics.in Source: Capitaline.

The India Brand Equity Foundation is a public-private partnership between the Ministry of Commerce & Industry.ibef.in © IMaCS 2006 Printed 24-Sep-10 Page 21 .67 Fax +91 124 401 3873 Email ajay. 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. Haryana.khanna@ciionline.org www. 4060 .imacs. INDIA Tel +91 124 401 4087.org Web www. Udyog Vihar Phase IV Gurgaon 122015.

imacs. The Author and IBEF neither recommend or endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed in this presentation. the content is not to be construed in any manner whatsoever as a substitute for professional advice. All copyright in this presentation and related works is owned by IBEF and the Authors. modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation). IMaCS (³Authors´) All rights reserved.in © IMaCS 2006 Printed 24-Sep-10 Page 22 . ICRA Management Consulting Services Limited www.Disclaimer This presentation has been prepared jointly by the India Brand Equity Foundation (³IBEF´) and ICRA Management Consulting Services Limited. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of the Author¶s and IBEF¶s knowledge and belief. The same may not be reproduced. Neither the Author nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.

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