A Project Report On

OPPORTUNITY ANALYSIS IN TEXTILE INDUSTRY

FOR INTERNAL ASSESSMENT FOR PROJECT TRIMESTER

SUBMITTED BY VINEET SARAFF SECTION: FN3 ROLL 82 PGP-SS-2008-10

INTERNATIONAL INSTITUTE OF PLANNING AND MANAGEMENT, NEW DELHI

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Table of Content

1. ABSTRACT ................................................................................... 3. 2. EXECUTIVE SUMMARY........................................................... 4. 3. HISTORY OF TEXTILE........................................................... 5-7 4. HISTORY OF INDIAN TEXTILE INDUSTRY.................... 8. 5. INDIAN TEXTILE INDUSTRY INTRODUCTION............... 9-10 6. CURRENT INDUSTRY SCENARIO................................... 11-12 7. BENEFITS TO OTHER INDUSTRIES.................................. 15-17 8. TRADE REFORMS AND EFFICIENCY OF FIRMS..........

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9. GLOBAL TRADE VOLUME AND TRENDS...................... 19-20 10. INDIAS COMPETITIVENESS............................................. 21-27 11. BIG INDIAN TEXTILE MANUFACTURERS.................... 28-32 12. BUSINESS ANALYSIS........................................................... 33-37 13. FUTURE PROSPECTS.....................................................

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ABSTRACT
India Textile Industry is one of the leading textile industries in the world. Though was predominantly unorganized industry even a few years back, but the scenario started changing after the economic liberalization of Indian economy in 1991. The opening up of economy gave the much-needed thrust to the Indian textile industry, which has now successfully become one of the largest in the world. India textile industry largely depends upon the textile manufacturing and export. It also plays a major role in the economy of the country. India earns about 27% of its total foreign exchange through textile exports. Further, the textile industry of India also contributes nearly 14% of the total industrial production of the country. It also contributes around 3% to the GDP of the country. India textile industry is also the largest in the country in terms of employment generation. It not only generates jobs in its own industry, but also opens up scopes for the other ancillary sectors. India textile industry currently generates employment to more than 35 million people. It is also estimated that, the industry will generate 12 million new jobs by the year 2010.

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EXECUTIVE SUMMARY
India textile industry is one of the leading in the world. Currently it is estimated to be around US$ 52 billion and is also projected to be around US$ 115 billion by the year 2012. The current domestic market of textile in India is expected to be increased to US$ 60 billion by 2012 from the current US$ 34.6 billion. The textile export of the country was around US$ 19.14 billion in 2006-07, which saw a stiff rise to reach US$ 22.13 in 2007-08. The share of exports is also expected to increase from 4% to 7% within 2012 Despite its being one of the oldest industries, textile has lagged in terms of IT adoption in the past. Now with many textile SMEs targeting the exports markets, their IT appetites have grown. A focus on the IT-spending trends in this vertical Although one of the largest breadbaskets next to agriculture and a major foreign exchange earner, the Indian textile industry, was marked with conservatism. This attitude is reflected with regard to its business too. The sector has been averse to sprucing up its infrastructure and technology. Funnily, IT has never figured as a top priority to this micro-vertical, as most of the business is run by close-knit families. Despite this, the textile industry recorded a high growth of 273.8 percent through exports to the US in 2005-06, and is confident of reaching $50 billion from the current $11 billion in 2010. Of this, $25 billion is expected to come from garments alone. An IDC India report says, of the total $19,225.5 million IT-spending by manufacturing in 2006, textile spent 26 percent, and this is expected to show healthy growth for the next four years. Indian textile industry can be divided into several segments, some of which can be listed as:
1. 2. 3. 4. 5. 6.

Cotton Textiles Silk Textiles Woollen Textiles Readymade Garments Hand-crafted Textiles Jute and Coir

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HISTORY OF TEXTILE
No one knows when exactly the spinning and weaving of textile began. It has been said that people knew how to weave even 27000 years ago. This was even before humans were able to domesticate animals. The oldest actual fragment of cloth found was in southern Turkey. People used fibers found in nature and hand processes to make fibers into cloth. Even though high technology was not available, skilled weavers created a wide variety of fabrics. Dyeing of fabrics was done to satisfy the universal human need for beauty. Within time, more complex social and political organization of people evolved. With the growth of cities and nations, improvements in technology came into place and there was a substantial development in the international trade, both of which involved textiles. Chinese textile was considered to be the most significant in international trade. Historians have claimed that silk from China has reached ancient Greece and Rome along a trade route called the Silk Road in the latter part of the second century B.C. and Egypt in 1000 B.C. The Romans also imported cotton from nearby Egypt and from India. Archeologists have found facilities for dyeing and finishing cotton fabrics in settlements throughout the Roman world. During the middle ages, the production and trading of the plant called woad, an important source of dye, was a highly developed industry. During the fifteenth century, Trade Fairs in southern France provided a place for the active exchange of wools from England and silks from the Middle East. The economic activities surrounding these events gave rise to the first international banking arrangements. Even the discovery of America was a result of the desire of Europeans to find a faster route not only to the spices but also to the textiles of the Orient. Textile trade quickly took root in America, as colonists sold native dyes such as indigo and cochineal to Europe and bought cottons from India. Although advances were being made in the technology of textile production, the manufacture of cloth in Western Europe in 1700 was still essentially a hand process. Yarns were spun on a spinning wheel and fabrics were woven by hand-operated looms. A major reorganization of manufacturing of a variety of goods occurred during the latter half of the 1700s in Western Europe. These changes, known as the Industrial Revolution, altered not only technology, but also social, economic, and cultural life. The production of textiles was the first area to undergo industrialization during the seventeenth and eighteenth centuries as the result of an economic crisis. Good quality textile products, produced inexpensively in Page | 5

India and the Far East, were gradually replacing European goods in the international market. In Britain, it became imperative that some means be found to increase domestic production, to lower costs, and to improve the quality of textiles. The solution was found in the substitution of machine or nonhuman power for hand processes and human power. Many important inventions, most importantly spinning machines, automatic looms, and the cotton gin, improved the output and quality of fabrics. These inventions provided the technological base for the industrialization of the textile industry. Each invention improved one step of the process. For example, an improvement that increased the speed of spinning meant that looms were needed that consumed yarn more rapidly. More rapid yarn production required greater quantities of fiber. The growth of the textile industry was further hastened by the use of machines that were driven first by waterpower, then by steam, and finally by electricity. The textile industry was fully mechanized by the early part of the nineteenth century. The next major developments in the field were to take place in the chemists laboratory. Experimentation with the synthesis of dyestuffs in the laboratory rather than from natural plant materials led to the development and use of synthetic dyes in the latter half of the nineteenth century. Other experiments proved that certain natural materials could be dissolved in chemical solvents and re-formed into fibrous form. By 1910, the first plant for manufacturing rayon had been established in the United States.

The manufacture of rayon marked the beginning of the manufactured textile fibers industry. Since that time, enormous advances have been made in the technology for every field in the textile industry. Today, the textile industry utilizes a complex technology based on scientific processes and vast economic organizations. With the application of advanced technology to the textile field, textile use has expanded from the traditional areas of clothing and home furnishings into the fields of construction, medicine, aerospace, sporting goods, and industry. These applications have been made possible by the ability of textile scientists to utilize textile fibers, yarns, and fabrics for specific uses. At the same time that textile technology is making strides in new directions, the fabrics that consumers buy for clothing and household use also benefit from the development of new fibers, new methods of yarn and fabric construction, and new finishes for existing fibers and fabrics.

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Today, a huge international industrial complex encompasses the production of fiber, spinning of yarns, fabrication of cloth, dyeing, finishing, printing, and manufacture of goods for purchase. Consumers purchase many different products made of textiles. The story of the journey that these products make as they progress from fiber to yarn to fabric to finished product is not just the story of spinning yarns, weaving or knitting fabric, or constructing the end product. It is also the story of a complex network of interrelated industries.

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HISTORY OF INDIAN TEXTILE INDUSTRY

The history of textiles in India dates back to nearly five thousand years to the days of the Harappan civilization. Evidences that India has been trading silk in return for spices from the 2nd century have been found. This shows that textiles are an industry which has existed for centuries in our country. Recently there has been a sizeable increase in the demand for Indian textiles in the market. India is fast emerging as a competitor to China in textile exports. The Government of India has also realized this fact and lowered the customs duty and reduced the restrictions on the imported textile machinery. The intention of the governments move is to enable the Indian producers to compete in the world market with high quality products. The results of the governments move can be visible as Indian companies like Arvind Mills, Mafatlal, Grasim; Reliance Industries have become prominent players in the world. The Indian textile industry is the second largest in the world-second only to China. The other competing countries are Korea and Taiwan. Indian Textile constitutes 35% of the total exports of our country. The history of apparel and textiles in India dates back to the use of mordant dyes and printing blocks around 3000 BC. The foundations of the India's textile trade with other countries started as early as the second century BC. A hoard of block printed and resist-dyed fabrics, primarily of Gujarati origin, discovered in the tombs of Fostat, Egypt, are the proof of large scale Indian export of cotton textiles to the Egypt in medieval periods. During the 13th century, Indian silk was used as barter for spices from the western countries. Towards the end of the 17th century, the British East India Company had begun exports of Indian silks and several other cotton fabrics to other economies. These included the famous fine Muslin cloth of Bengal, Orissa and Bihar. Painted and printed cottons or chintz was widely practiced between India, Java, China and the Philippines, long before the arrival of the Europeans. Today, Indian economy is largely dependent on textile manufacturing and exports. India earns around 27% of the foreign exchange from exports of textiles. Further, India Textile Industry contributes about 14% of the total industrial production of India. Furthermore, its contribution to the gross domestic product of India is around 3% and the numbers are steadily increasing. India Textile Industry involves around 35 million workers directly and it accounts for 21% of the total employment generated in the economy. Page | 8

INDIAN TEXTILE INDUSTRY

INTRODUCTION
The textile industry is the largest industry of modern India. It accounts for over 20 percent of industrial production and is closely linked with the agricultural and rural economy. It is the single largest employer in the industrial sector employing about 38 million people. If the employments in allied sectors like ginning, agriculture, pressing, cotton trade, jute, etc. are added then the total employment is estimated at 93 million. The net foreign exchange earnings in this sector are one of the highest and, together with carpet and handicrafts, account for over 37 percent of total export earnings at over US $ 10 billion. Textiles, alone, account for about 25 percent of Indias total forex earnings. Indias textile industry since its beginning continues to be predominantly cotton based with about 65 percent of fabric consumption in the country being accounted for by cotton. The industry is highly localized in Ahmedabad and Bombay in the western part of the country though other centers exist including Kanpur, Calcutta, Indore, Coimbatore, and Sholapur. The structure of the textile industry is extremely complex with the modern, sophisticated and highly mechanized mill sector on the one hand and the hand spinning and hand weaving (handloom) sector on the other. Between the two falls the small-scale power loom sector. The latter two are together known as the decentralized sector. Over the years, the government has granted a whole range of concessions to the non-mill sector as a result of which the share of the decentralized sector has increased considerably in the total production. Of the two subsectors of the decentralized sector, the power loom sector has shown the faster rate of growth. In the production of fabrics the decentralized sector accounts for roughly 94 percent while the mill sector has a share of only 6 percent. Being an agro-based industry the production of raw material varies from year to year depending on weather and rainfall conditions. Accordingly the price fluctuates too. The Ministry of Textiles under the Government of India has taken some significant steps to arrest these problems. It has framed "The National Textile Policy 2000" to address the aforesaid issues. This policy aims at negating these problems and increasing the foreign exchange earnings to the tune of US$ 50 billion by the year 2010. It includes rational roadmaps for the development and promotion of all the sectors involved directly or indirectly with Page | 9

the textile industry of India. Further, the policy also envisages to bring the unorganized decentralized textile sector (which accounts for 76% of textile production) at par with the organized mill sector. Furthermore, the policy also aims at introducing modern and efficient manufacturing machineries and techniques in the Indian textile sector The apparel industry supply chain can be broadly categorized into six major components raw materials, textile plants, apparel plants, export chains, retail stores and customers.

Supply Chain of the Textile Industry

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CURRENT INDUSTRY SCENARIO:

Close to 14% of the industrial output and 30% of the export market share is contributed directly by the Indian textile industry. Indian textile industry is also the largest industry when it comes to employment that generates jobs not just within but also in various support industries like agriculture. As per a recent survey the textile industry is going to contribute 12 million new jobs in India by 2010 itself. Indian textile industry is as old as the word textile itself. This industry holds a significant position in India by providing the most basic need of Indians. Starting from the procurement of raw materials to the final production stage of the actual textile, the Indian textile industry works on an independent basis. The final phase-out of the Multi-fiber Arrangement (MFA) and the system of quotas that has governed the global trade in textiles and apparel for the last forty-two years has significantly altered the institutional rules of trade in the textile and clothing industry. With the elimination of all remaining quotas on apparel from January 1 2005, the textile and clothing sector is now fully integrated into the regulatory framework of the General Agreement on Tariffs and Trade (GATT) of the World Trade Organization (WTO). Buyers are now free to source textile and apparel in any amount from any country; suppliers are similarly free to export as much product as they are able, subject only to a system of national tariffs. As global competition intensifies under the new quota-free trading regime, countries are bracing for major changes in the structure of sourcing and apparel supply worldwide. With the removal of the quotas, it was expected that the developing countris, who have a major play in the textile industry will benefit themselves as they have stable supply network, experience in networking, capacities for scaling up and the ability to offer a full bundle of services. It was also expected that smaller countries, which enjoyed the restriction on trade will fall out from the picture. The textile sector has increased their investment in projects to upgrade their equipment amid fierce market competition and to meet the growing demand for more textile products. Total investment in the textile industry between 2004 and 2008 was around Rs.65,478 crore in India, which is expected to reach Rs.1,50,600 crore by 2012. This enhanced investment would generate 17.37 million jobs-- 12.02 million direct and 5.35 million indirectby 2012. Investments in the textiles sector can be assessed on the basis of three factors:

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Plan schemes such as the Techno Up-gradation Funds Scheme (TUFS), Technology

Mission on Cotton, Apparel Parks, etc. Under the TUFS scheme, a total of Rs 916 billion has been disbursed for technology up gradation. There are around 26 Apparel Parks in eight states in India, with a total estimated investment of Rs 134 billion Industrial Entrepreneurship Memorandums implemented from 1992 to Aug 06, Foreign Direct Investments inflows worth US$ 910 million have been received by the amounting to Rs 263 billion textile industry between Aug 91 and May 06, which account for 1.29% of total FDI inflows in the country. Though significant investments are being made in the textiles segment, the bulk of them are in the spinning and weaving segments. A cumulative total of US$ 6.67 billion in investment was done in 2008. Of this, more than two-thirds is in the spinning and weaving segments, while only 25% is in processing and garment units The elimination of global textile quotas is expected to drive garment production to China, benefiting consumers in North America and Europe at the expense of developing nations where apparel manufacturing has become a bridge to an industrial economy. Africa received record high foreign direct investment (FDI) inflows in 2005 of US$31 billion, but this was mostly concentrated in a few countries and industries. The textile sector has increased their investment in projects to upgrade their equipment amid fierce market competition and to meet the growing demand for more textile products. The global fibre industry will continue to shift to the Asia/Pacific region, particularly China, South Korea and Taiwan. Textile trade in the world is estimated to be around US$ 300 billion currently. Industry experts predict that by 2014 the facilities in the west will close down and they will source their textiles from more efficient areas of the world resulting in the trade volume of around US$ 800 billion. The Indian textile industry, which has accelerated to an annual growth of 9-10 per cent, is expected to grow at a rate of 16 per cent in value terms and reach a level of USD 115 billion by 2012. With 8.6% growth rate, Turkey also recorded a very strong average annual growth rate of its textiles and clothing exports but from a much lower basis. It could increase its exports from 8.6 to 17.6 billion US-Dollars. Pakistan exports amounted to 9.9 billion US-Dollars in 2005 which translates into an average annual growth rate of 5.4%.

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As of now, the general impression any individual would get about the Indian textile industry leaders in the past few months is that it is in a major decline state. The following could be the reasons that attribute to this decline. Global recession Less export orders due to reductions in inventories by global retail giants like WalMart Rising price of raw materials like cottons Infrastructure bottlenecks such as power, particularly in Tamil Nadu

In the times of adversity, like what we are facing right now, it is an immediate task for all stake holders to pause for a moment and take stock of the difficulties and chart plans for sustainability and growth of the Indian textile industry. With the opening of world markets and the abolition of textile quotas since 2005, there came a negative situation as well. But, hindsight is always 20-20. Indian textile industry should have focused on all major sectors right from fibre to fashion and planned for an organized growth across the supply chain so as to compete with China and even countries such as Pakistan, Vietnam and Thailand, which are also growing from the textile perspective. Instead, the industry had put majority of its stock in the spinning sector. This is clearly evident in the utilization of Technology Upgradation Fund Scheme effectively by the spinning sector. Although it is a positive outcome, the industry did not focus on many other value adding segments such as weaving and finishing. Indian powerloom sector, which enables valueaddition is a highly unorganized industry and needed major upgradation. As of now, the powerloom segment is also picking up where in many of the unorganized powerlooms are becoming organized. Technical textiles sector is still in its infancy and a tangible growth will be highly visible by 2035 when the growth in this sector will be exponential. The weak links in the Indian conventional industry such as weaving and finishing have to be strengthened. There must be consolidated efforts by Indian Textile Machinery Manufacturers Association, end-users and the Government to undertake a major step and come-up with alternatives to European Machinery, which the Indian weaving sector can afford. This should be put into practice within the next five years, if dedicated efforts are undertaken with the financial support for R & D by the Government through its various schemes. Technical Page | 13

textiles sector must transform from a non crawling phase to at least a crawling industry in the next three years. General awareness on nonwoven and technical sectors has been created with the recent marathon training workshops and conferences such as, "Advances in Textiles, Nonwoven and Technical Textiles", organized for the past five years in Coimbatore by Texas Tech University, USA and those such as the Texcellance and IIT's Technical Textiles conferences. These have put India on the international map in technical textiles. These conferences are of less use if they do not translate into investments and new projects.

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BENEFITS TO OTHER INDUSTRIES

The pursuit of a better fibre and a better fabric is yielding products used in medicine, aeronautics, astronautics, seawater desalination, and construction of buildings and roads. The new kinds of textiles possess characteristics that make them useful in numerous formerly unexpected applications. Although textiles are still the major component of the clothes we wear and of many furnishings in our homes and offices, they are also used widely in medicine, aeronautics, astronautics, pollution abatement, and numerous other fields. Innovation in textile technology continues and more unusual products will almost surely emerge. MEDICAL Certain fibres and textile materials are especially suitable for use in building synthetic body parts and medical scientists are steadily expanding the types of body parts whose function can be mimicked. The artificial kidney is made from 7,000 hollow fibres, each of which is about the size of a human hair. Patients whose kidneys no longer function normally must have their blood freed by dialysis of metabolic wastes and excess water about every three days. This is accomplished by pumping the blood through a textile, hollow-fibre module while clean-sing solution rinses the blood free of urea. Patients with diabetes have a tendency to suffer from cholesterol blockage of arteries leading to their feet. If not corrected, poor circulation can lead to gangrene and loss of limbs. Artificial arteries that look like pencil diameters are surgically inserted to bypass the blockages, thus restoring circulation and saving limb functions. These implants require crucial textile technology to prevent clotting and rejection. It is estimated that more than 150,000 people in the United States have now had these artificial arteries for over five years.

SPACE
NASA space suits for launch and for space walks require zero-defect performance. The launch suits are made from PBI non-flammable high-performance fibres. The space-walk suits have different requirements. They require air-purifying, cooling, and pressurizing systems. Each suit is tailor-made for a particular astronaut and costs $1-1.5 million. Since the astronaut is under an oxygen pressure of eight pounds per square inch in this suit, special flexibility is needed to allow him or her to bend an elbow or grasp an article. Rocket exhausts Page | 15

and nose-cone covers for space shuttles are made of carbon and other high-performance fibres. These protect the vehicles from heat from air friction during launch and re-entry. The flames generated on the launch pad do not ignite the rocket because of the flame-resisting properties of graphite carbon-fibre-textile exhaust shields. Similarly on re-entry, the white-hot temperatures from atmospheric friction do not consume the shuttle because high-performance fibre and ceramic structures provide protection. AERONAUTICS Airplane parts, other than body construction, are also made of textiles. All U.S. commercial jets have brakes made from carbon composites. These are the only materials that can withstand the extreme high temperatures generated if takeoff is aborted. Stopping a plane weighing many tons in a short distance generates temperatures high enough to melt metals, making carbon brakes indispensable for heavy jets. Kevlar non-woven felt liners are now used as fire barriers to cover the urethane foam seats on all aircraft to prevent the production of highly toxic cyanide gases when such foams burn during airplane accidents. PURIFICATION OF WATER AND AIR Whole-body gas suits are required to protect soldiers from the chemicals used in gas warfare today. These chemicals can kill by absorption into the bloodstream through skin. The suits allow for transport of perspiration moisture to prevent soldiers from being overcome internally as would occur from a non-permeable film covering. It is well known to chemists that a cube of activated charcoal powder measuring one inch on each side has an adsorptive capacity equal to a football field. It was therefore believed that properly constructed porous carbon fibres could exhibit superior gas-adsorption capability. Drinkable sea water is now available through properly prepared hollow fibre reverse osmosis modules. Sea water is forced through these modules under a pressure of 400 pounds per square inch. Pure drinking water passes through the hollow fibre wall while concentrated salt water exudes out of the end. Concentration of liquids that normally deteriorate from heating is possible with reverse osmosis fibres and membrane systems. Many liquids, including orange juice and tomato juice, can be concentrated by pressure without heat to preserve the thermally unstable flavour ingredients. Most orange-juice concentrate on the market today is prepared this way. Similarly concentration of gases can be achieved by proper use of membrane and fibre composition. Gas-separation systems are currently in use at most U.S. petroleum refineries. Page | 16

CONSTRUCTION MATERIALS Super domes and stadiums are being constructed with roofs of silicone-coated fibreglass. This is particularly important in northern areas where heavy snowfall has caused the collapse of heavy concrete roofs. At the Hubert Humphrey dome in Minnesota, 800,000 square yards of such material in two layers allow warm air to be circulated to melt the snow. At an air terminal in Saudi Arabia, a multi-funnel design allows circulation by convection of the air up through hollow top ports. Many shopping malls are turning to these flexible composites to allow for more freedom in architectural design, improved aesthetics, better air circulation, and better light transmission. Rapid technological advances in the textile industry have opened now opportunities for many technical disciplines, but have resulted in a shortage of textile chemists, textile engineers, and textile-management executives. Some U.S. colleges with textile-engineering programs report that they could place nearly three times as many students in well paying jobs as they are currently graduating. Together with a bright outlook for further rapid advances and new products with unusual but useful properties, this shows that textiles remain among the most dynamic contemporary sectors in technology.

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TRADE REFORMS AND EFFICIENCY OF FIRMS

The cotton textile industry is one of the oldest and most highly regulated of Indias industries. Inefficiency, relative to the frontier, is therefore likely to be widespread in this industry. The last two decades have seen a number of reforms that may be expected to decrease this inefficiency. This paper, however, is mainly concerned with the impact on firms of the reforms undertaken in 1991. Liberalization increased overall welfare by increasing output in sectors with excess profits; allowing firms in sectors with unexploited scale economies to increase output; and by increasing technical efficiency, increasing competition and decrease market power, increasing the elasticity of demand facing domestic firms while at the same time shifting their demand curve to the left. Second, it is expected that the domestic sector will become more efficient as firms exit the industry in the face of increased competition. Surviving firms, in their turn, may experience an increase in technical efficiency because liberalization increases competition. Another dynamic benefit from liberalization is expected to be an increase in technological innovation Firms locating in certain regions may benefit from external economies of scale and scope, dynamism of a certain location as against the inertia displayed by firms in other locations. We also find that these changes in efficiency do have a regional dimension: while all firms fared less well after the reforms, those in Gujarat the fared less well than that in Tamil Nadu. The paper indicates that geographythe location of the firm within a state and its proximity to a major urban centre influences the efficiency levels of firms within it. The paper indicates that average efficiency seems to have increased in the post-reform period. We find that the behavior of many of these variables changed considerably in the post-reform period and led to changes in efficiency levels. This framework enables us to consider whether efficiency has increased because of factors such as market shares, exports, imports and capital.

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GLOBAL TRADE VOLUME AND TRENDS

As the apparel manufacturing industry has become more labour intensive and requires less capital investment, its concentration is shifting more towards the developing countries and even constituting large amount of their exports. They are concentrating more on developing countries as the labour cost is very less in such countries. This can be analyzed by the fact that the apparel production in industrialized countries decreased between 1980 and 1996, where as the production increased in developing countries during the same period. Similar trend was seen in exports, the apparel exports of developing countries increased six times between 1980 and 1997, and that of developed economies rose by 150%. The global apparel industrys total revenue in 2006 was US$1,252.8 billion, which was approximately 68% of the overall industry value. Asia Pacific constitutes the largest amount of production and trade in the apparel industry worldwide. Region wise Share of Total Trade Revenue (2006) Region Asia Pacific Europe USA Rest of the world % Share 35.40% 29.40% 22.30% 12.90%

Source: www.fashionproducts.com (http://www.fashionproducts.com/fashion-apparel-overview.html) China had captured 65% of the global market share towards the end of 2006 in total apparel exports. The other major apparel exporting nations include USA, Germany, Hong Kong, Italy, Malaysia, Pakistan, Thailand and India. Some of the apparel trade statistics are presented below.

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Exports of Apparels in 2006 Country China Hong Kong Italy Malaysia Germany Pakistan Thailand USA India US $ Billion 8,260.921 1,723.210 1,353.586 1,255.069 669.130 618.830 597.758 595.171 522.463

Source: www.fashionproducts.com (http://www.fashionproducts.com/fashion-apparel-overview.html)

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INDIAS COMPETITIVENESS
CONTRIBUTION TO ECONOMY:
With 3.9 million handlooms, India is the highest handloom producing country in the World. 30% of the total export income is generated by textile alone, it is second largest Employer industry after agriculture. The textile industry constitutes approximately 14% of country's total industrial production.

THE WORLD MARKET SHARE

In spite of the Chinese dominance, India has a fair opportunity to grab a substantial stake in the projected garment market share. According to PHD Chamber of Commerce and Industry (PHDCCI), post-MFA, India's market share in the US is expected to go up to 15 per cent from the present 4 per cent. In the EU, the market share increase is expected to be 50 per cent from the current 6 per cent to 9 per cent

Table showing the Indias Competitiveness with Other Country

There is no denying India is competitive enough and will become even more competitive once its infrastructure issues are sorted out. China has probably already reached its peak and further improvements may not be as dramatic, henceforth

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Key countries / regions China India, Pakistan

Key positives Efficient, low cost, vertically integrated Vertically integrated, low cost Proximity to market, duty and quota free Cheap labor Quota and tariff free, cheap labor Trading hubs proximity to China Non-quota barriers likely to prove irritant to imports

Key negatives Growth at the cost of profits Lacks economies of scale and infrastructure support Lack China and Indias degree of competitiveness No other cost or locational advantage Lacks integration and China and Indias degree of competitiveness No cost advantage, protected currently by quotas US$ 400 bn trade loss likely

Mexico (NAFTA), Turkey ASEAN (Vietnam, Cambodia, Indonesia) AGOA (African) countries, Bangladesh Hong Kong, Korea, Taiwan USA and EU

Source - Industry, I-SEC Research Countries and their positive and negative aspects with regard to textiles

Indian Textiles targets- 11th Five year Plan (2007-2012)

Market size of US$ 115 Billion Export target US$ 55 Billion Domestic market US$ 60 Billion Indias market share in world textiles trade to grow from 3% to 8 % 12 Million additional jobs Investment Rs.150,600 Crs

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Textiles Export Target (In Billions) Year ( April March) 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 Target 19.73 15.565 15.16 16.31 15.05 13.72 Achievement 19.62 17.80 13.04 13.16 12.41 10.76

Source: Textile India Progress

Top 10 Exporters (Textile)

Country 1990 Billion US$
Hong Kong China South Korea Germany Italy Taiwan USA France BelgiumLuxembourg Japan 6.54 5.88 6.29 5.65 7.01 6.75 4.52 4.35 7.99 7.10 6.04 14.00 9.80 6.13 5.03 7.21

1997 Billion US$

14.6 13.83 13.35 13.05 12.9 12.73 9.19 5.86

% share
7.68 6.82 5.81 13.46 9.43 5.90 4.83 4.65

% share
9.42 8.92 8.61 8.42 8.32 8.21 5.93
5.64

Top 10 Exporters (Apparel)

Country 1990 1997

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Billion US$
China Hong Kong Italy USA Germany Turkey 9.41 15.37 12.07 2.57 7.82 3.44

% share
9.14 14.92 11.72 2.49 7.59 3.34

Billion US$
31.8 23.11 14.85 8.68 7.29 6.7

% share
21.06 15.30 9.83 5.75 4.83 4.44

France UK South Korea Thailand Total (top 10) World

4.65 3.08 8.11 2.86 69.38 103.00

4.51 2.99 7.87 2.78 67.36 100.00

5.34 5.28 4.19 3.77 111.01 151.00

3.54 3.50 2.77 2.50 73.52 100.00

Multifibre Arrangement (1974-94) under which countries whose markets are disrupted by increased imports of textiles and clothing from another country were able to negotiate quota restrictions. The MFA was introduced in 1974 as a short-term measure intended to allow developed countries to adjust to imports from the developing world. The textiles and clothing industry was, until recently, the only major manufacturing industry that was not subject to the rules of the General Agreement on Tariffs and Trade (GATT). Instead, it was subject to extensive use of quotas by the major importing countries. The quota system started with the Long Term Agreement Regarding International Trade in Cotton Textiles (LTA) under the auspices of the GATT in 1962. In 1974 the LTA was extended to cover other materials than cotton, and became known as the Multi-Fibre Agreement (MFA). At the end of the Uruguay Round of negotiations it was agreed that t countries wishing to retain quotas would commit themselves to phasing them out gradually over a 10 year period, with the last quotas being lifted 1st of January 2005, as stated in the Agreement on Textiles and Clothing (ATC).Developing countries have a natural advantage in textile production because it is labor intensive and they have low labor costs. According to a World Bank/International Monetary Fund (IMF) study, the system has cost the developing world 27 million jobs and $40 billion a Page | 24

year in lost exports. At the General Agreement on Tariffs and Trade (GATT) Uruguay Round, it was decided to bring the textile trade under the jurisdiction of the World Trade Organization. The textiles and clothing (T&C) industry is considered to be an opportunity for the industrialization of developing countries in low value added goods. The industry is labor intensive and thus requires a large number of unskilled workers, including a high share of female workers. The end of the MFA in 2005 will change international trade significantly and lead to a restructuring of the sector worldwide. This restructuring process will result in major employment shifts within and between countries. However, the last three decades have seen various changes in the clothing and textile sector, thus forcing many countries to adjust to a constantly altering environment. Now, a number of countries fear that a new wave of cheap textile and clothing products will flood their markets, threatening their domestic industries that are not adequately prepared to face the new challenge. There are also those countries that hope for new export opportunities as a result of a free quota trade environment and a third set of countries that will lose their preferential access to the US or EU markets, thus facing higher competition for their exports to them. However, large tariffs remain in place on many textile products. However, the last three decades have seen various changes in the clothing and textile sector, thus forcing many countries to adjust to a constantly altering environment. Now, a number of countries fear that a new wave of cheap textile and clothing products will flood their markets, threatening their domestic industries that are not adequately prepared to face the new challenge. There are also those countries that hope for new export opportunities as a result of a free quota trade environment and a third set of countries that will lose their preferential access to the US or EU markets, thus facing higher competition for their exports to them.

CONCLUSION:
India has been repeatedly cited as a major potential beneficiary of the post-quota regime. The implementation of the ATC, meant as a transition period to full integration of the T&C sector, occurred in a back-loaded fashion. Before the ATC took effect, a significant portion of textile and clothing exports from developing countries to the industrial countries was subject to quotas under a special regime outside normal rules of the General Agreement on Tariffs and Trade (GATT). These former Multi-Fiber Agreement (MFA) quotas, when carried over into the ATC on January 1, 1995, represented the starting point for an automatic liberalization process. Liberalization was to be in four stages, with half of the integration to take place in the Page | 25

first three stages (1995-2005) and the second half to take place in the final phase in 2005.Famously inward-looking till the 1980s, the Indian textile and clothing industry has become increasingly integrated into global markets since the late-1980s and 1990s, emerging as one of the top ten global exporters of textiles and clothing after 1998. Indias apparel exports grew at an average compound rate of 22% per year throughout the 1980s (Chatterjee and Mohan 1993), and by about 13% in the 1990s (United Nations Statistical Division, 2005). By 2003, India exported more than $13.5 billion worth of textile and apparel, up fifteen-fold from the $0.9 billion it exported in 1985, when apparel exports were just taking off (United Nations Statistical Division, 2005). This export growth, though slow in comparison to exporters like China, is impressive because it occurred despite the persistence of many of the factors that observers have cited as shackling Indian productivity in textiles and apparel: technological obsolescence, fragmented capacities, low scales of operation, lack of an exit policy, and rigid labor laws. The domestic reforms of the mid-1980s were critical in triggering growth in the apparel and textile sector. Their initial focus on investment and technical upgrading in the textile and apparel sector created a tier of strong domestic firms in the spinning and apparel sector that increased investment, modernized their technical base, diversified their product mix and over time emerged as leading exporters. Trade liberalization of the 1990s deepened the processes that had the process of deregulation had already begun in 1985 and thus Indias textile and apparel industry went through many transitions and in the present context is impressive.

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BIG INDIAN TEXTILE MANUFACTURERS COMPANY PROFILE

India being one of the fastest growing economies of the world, which has both positively and negatively, affected the Indian apparel industry. On one hand it has become a major retailing hub and a host for various multinational companies on the other hand this has a negative effect on the domestic players. The emergence of mall, brand slavery, fashion awareness, rise in the income level has further reinforced the competition among the multinationals and the domestic players and has lead to opening of number of retail outlets in India. The introduction of VAT and the growth of organized retail industry are also likely to push up growth in the textiles and apparel sector domestically too. While the garments business will pose its own set of challenges in terms of providing flexibility in operations and dealing with labor productivity issues, an increasing contribution to revenues from the garments business, which is less capital-intensive and margins-accretive, would augur well for earnings growth. GOKALDAS EXPORTS Incorporated in 1979, based in Bangalore, its one of India's largest manufacturers and designer of garments for men, women and children and caters to the needs of several international fashion brands and retailers. Gokaldas Exports has been a major player in the readymade garment industry across the globe. In the present Indian fashion retailing, Gokaldas has grabbed a distinguished place for itself in the form of "The Wearhouse" catering to the specific fashion needs of the people. The Wearhouse has high profile outlets in Bangalore, Chennai, Hyderabad and Coimbatore. An ISO 9001:2000 Certified Company has a capacity to produce and export 2.5 million garments a month. The Group's products include coats, suits, jackets, parkas, windcheaters, ski wear; warm-ups, surf wear, swim wear; trousers, shorts; casual wear shirts, ladies blouses and dresses for customers in international market. It mainly operates in India but exports its products to countries like the United States of America, Canada, Mexico, United Kingdom, Germany, Austria, Spain, Italy, France, Netherlands, Middle East, South Africa, Japan, Denmark, Page | 27

Taiwan and Hong Kong. A few of the manufacturing units are 100% export units with capabilities of mass production. They have the license to import duty-free fabrics and accessories from all over the world for re-export. It has over 48,000 employees who work in around 48 fully equipped, modern, manufacturing factories. ARVIND BRANDS Arvind Mills Ltd. was incorporated in 1931 with share capital Rs.2525000 ($55000) in Ahmedabad by the Lalbhai group. The Company's operations are divided into the Textile Division, telecom division and garments division. We will be majorly concentrating on the garments division. Products manufactured are dhoties, sarees, mulls, dorias, crepes, shirtings, coatings, printed lawns & voiles cambrics, twills gabardine etc. Arvind Brands is part of the Lalbhai Group, which holds licenses for leading international brands such as Arrow, Lee, Wrangler, Gant and Tommy Hilfiger for retail and wholesale sales in the local market. Its mainstream brands are Excalibur and Flying Machine. In addition, it owns an array of casual sportswear and denim brands marketed in India, including Flying Machine, Newport and Ruf & Tuf jeans and Excalibur shirts along with licensed relationship with various international brands like Nautica, Jansport, Kipling, Hero by Wrangler, Lee Riders and Tommy Hilfiger, and joint ventures with VF Corporation and Diesel. But the company is facing severe competition from major brands like Louis Philippe, Park Avenue and small brands like Trigger and Blackberrys. It produces about 110 million meters of denim every year and the garment section is doing extremely well because of the customer loyalty it enjoys. The demand for jeans, in particular, is expected to rise, as manufacturing companies in the US have shut operations.

KOUTONS The winner of best retailer leadership award 2008 organized by retail congress, Mumbai, Koutons Retail India Limited engages in the design, manufacture, and retail of mens wear and integrated apparel in India. It currently sells its apparel using the Koutons and Charlie Outlaw brands. Mr. Kohli along with his brother in law Mr. Sawheny partnered to set up Charlie's Creation. Page | 28

In 1997 the Company diversified its business by introducing non-denim trousers in the existing product range of denim apparel. The company has inaugurated its 89th family Store in Hyderabad, which it claims to be its largest store in the country. Koutons India has an annual finishing and manufacturing capacity of 22.92 million pieces and 12.36 million pieces of apparel, respectively. The capacity utilization for the same was 41.21% and 21.99% respectively at the end of FY2007.Koutons has 18 manufacturing/finishing units and 14 warehouses spread across various locations in and around Gurgaon. The company's strategy is to have small, but more stores. This helps to save costs and at the same increase reach of the company. The company has a phenomenal growth record. ZODIAC Zodiac Clothing Company Ltd manufactures, exports and imports garments, textiles accessories etc. Zodiac has been in the apparel business for a period of 50 years by now and is known for its quality shirts. Zodiac, is today, the largest selling shirts & tie brand at Shopper's Stop according to Brand Equity (The Economic Times) The Company started business in 1954 and export of readymade garments to Europe started in early '60s, which included mainly ties and shirts. For many decades, Zodiac has been synonymous with ties. The business of ties is a high fashion business and Zodiac has taken this to new highs in India and across the globe. In fact, one can say that in India Zodiac is generically associated with ties. Following Zodiac's huge success with ties, the company entered the arena of men's accessories with Cuff links, Belts, Wallets and Handkerchiefs. In 1973, Zodiac had a stand-alone exclusive shirt shop in Hotel Taj in Mumbai. The company then entered the domestic shirt segment in late '80s.It employs around 3500 people in 7 manufacturing units in 16 offices located in UK, US, Germany, UAE etc. Each manufacturing unit is spread over 35000 sq.ft and has modern equipment to spread 60 yards of cloth at a time. All the manufacturing units are same in design and layout. Quality is maintained throughout the 40 stages of assembly line. All the units have their own power generating units in order to be efficient. It has its own 80 exclusive outlets and around 2000 multibranded outlets. Its continuously showing profit and has a consistently growing export business.

HOUSE OF PEARL House of Pearl Fashions Limited is a multinational ready to wear apparel manufacturing company. The company also provides supply chain solutions for the fashion industry globally Page | 29

along with warehousing & distribution networks in the UK & US. It operates in 11 strategic locations in six continents. It has two brands Kool hearts, DCC in the United States of America. The brand Kool hearts focuses on the young fashion, where as the focus of DCC is more towards the Missy segment It basically deals with 3 streams which are manufacturing to Retailers, souring solutions for retailers, Marketing, Distribution & Branding for Retailers. It takes care of the whole process from design & development, manufacturing or sourcing till offering a range of pre retailing services, warehousing to delivering at the door step on a call off basis. It manufactures a broad range of products comprising of knits, woven, sweaters and bottoms in basic as well as complex designs. It has a good manufacturing capacity; the present in-house manufacturing capacity of the company is twenty million pieces. Per annum spread over more than 725,000 sq feet of built up area with efficiently designed layouts to ensure smooth flow of materials. The company is planning to double the capacity by expanding the operations in Chennai, Bangladesh & Indonesia. It intends to have a capacity of 30million pieces by the end of 2009. The company adopts integrated marketing techniques and has merchandising teams in Canada, Europe, HK, UK, and US, closely interacting with existing and potential customers at their doorstep. The Company shares were listed on the stock exchanges first time in Feb, 07. It recently went for a joint venture with LERROS, a premium apparel brand from Germany. HARIA EXPORTERS Haria Exports Ltd. is a leading garment exporter in the country for the last twenty four years. It is a Star Trading Company and has won the golden status certificate in the year 1999. This company occupies a unique place in the industry of the by its contribution to Industrial output, employment generation and Foreign exchange earnings. Even though the textile industry has the distinctive advantage in respect of raw material and skilled labor, the industry is suffering from technology obsolescence which in turn affects the quality, productivity and cost effectiveness. The high capital cost is impeding the process of Hi- Tech up gradation. Therefore, the Government of India, Ministry of Textile has launched Technology Up gradation Fund Scheme for Textiles & Jute Industries of Rs.25000.00 crores at a concessional rate of interest of appx.5%. In order to compete with the outside world, the Page | 30

company is paying attention to the application of technology, closely following up the fashion trends and improved product quality. In order to be more cost efficient the company has acquired latest machinery which ascertained exact material consumption depending upon the style and pattern. The Government policies, interest rates, export incentives etc may also affect the overall performance of the company.

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BUSINESS ANALYSIS
SWOT Analysis of textile industry
Strengths Removal of quota restrictions to give a major boost to the exports. Export target in textiles in 2010 at USD is 50 billion. Low per capita consumption of textiles in India as the world consumption is 6.8, India only consume 2.8 of it. Thats why there is large scope of manufacturing and exports. Availability of the cheap labour in India would help the development of the textiles at the lower cost. Cost competition is not much in India as majority of Indian population is not dependent on the big brands like Armani, United Colours of Beneton etc, so India itself does not hold much competition with these brands. The large cotton production in India would lead to the development of the textile mills in the better way, as India does not have to import the raw material from outside. There are well established production bases for made ups export as well as for domestic purpose. Weakness The most serious problem of the industry is the lack of adequate processing facilities; there is over-dependence on hand processors and traditional items. The Indian textile industry is fragmented. Most of the SMEs are tiny and cottage type units without sufficient capital back-up.

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 The government policies in India for the textile industries are traditional as they are not upgraded like the up gradation of the policies for the IT industries. The quality of wider-width fabrics for meeting the export demand is lacking in many respects, which is acting as a disadvantage to the growth of the industry. The technology used in the most of the textile mills is old enough that they cant be modified, but there have to be new machineries imported to give the edge in technological advancements in this sector.

Opportunities As per available information, the market for processed cotton fabric will increase in the European and other markets and, therefore, the powerloom industry may benefit and expand substantially. Further the growth in the export segment will be mainly from cotton made-ups and garments along with processed fabrics. Grey fabric export is continuing to grow and will show increasing trends. Value added products will have greater demand and, therefore, processing will play an important role.

India with traditional designs and craftsmanship can command a greater market share for niche products in made-ups and garments.

Indian companies need to focus on the product development and this could easily be possible as there is the greater scope in the Indian Market. As the new generation is keen towards the western culture the training for specially textiles could be provided to them and they could be encouraged to develop the efficient sector of India. Increased use of computer aided designing to develop the designing capabilities of the textile. Using new technologies and softwares ease the Page | 33

use of virtual design on the computer and then choosing from various alternatives.

Threats

Increased competition in the domestic market yield to the development of the more SMEs which invest more to survive in the market. The working area of most of the industries in the textile industries is not hygienic enough to give the workers more comfortable area to work in. so this condition has to be improved. Need to revamp consumer consciousness Chinese goods are cheap as well as the machinery provided by them is also cheap. So the threat for the export and designing is the Chinese Aggression over the International market. Continuously quality improvement is needed to make sure that people would rely on Indian goods not on the foreign goods. Traditional items like terry towels are manufactured in EOUs all over the country with superior quality. This has been eroding the traditional markets for powerloom and handloom products forcing them to go for product diversification.

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BCG MATRIX BCG Matrix is also called the Boston Matrix because it was created by Bruce Hendeson for the company Boston Consulting Group in 1970. The BCG matrix method is based on the product life cycle theory that can be used to determine what priorities should be given in the product portfolio of a business unit.

Star The high growth and high market share brands that exist in Indian market and are the market leaders. This category consists of the companies like Zodiac, Du Pont etc. These companies are regularly investing in R&D and gaining market share as time passes. These stars try to become the cash cows of the future and want to remain in the market. Cash Cows The companies which have low business growth and high market share are the cash cows that generate milk continuously with the small investment to be as the mature company in the market. Question marks (also known as Problem Childs) The companies that have high growth rate and lower market share are the question mark as they could be new ventures started or they are companies that do not have liquidity enough to increase their share in the market. But these companies have potential to be the star in the market due to good growth rate and thus they could invest more into their business to expand as the star and then becoming the cash cows. Page | 35

Dogs The dogs are more charitable pets that exist in the market and have the low market share and low growth rate so these companies are better to get out of the market or much cash is required to set them up. These companies have the cash traps which ties up the money in a business with the lower potential.

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FUTURE PROSPECTS
The global apparel manufacturing industry is expected to grow more than ever in times to come. According to an estimate, the global apparel industry will reach a value of US$ 1,781.7 billion by the end of 2010. The apparel manufacturers are now adopting new techniques to increase their trade. New business models and competitive strategies are used to enhance profits and growth. The consumer is more aware and more demanding with the development of media like television and Internet. They have more choices in quality, price and design. This is the reason why apparel chains all over the world are focussing more on improving the quality of the product and offering in varied range of fashion designs. Apparel manufacturers are developing methods to keep up with the pace of change like offering on wholesale prices to survive in the global competition. Though the above trends show a very positive picture but according to some experts, the dilution of MFA (Multi Fibre Agreement)1 will make a lot of apparel workers to loose their jobs, in many regions of USA, Asia, Central and Latin America and these jobs will shift to China. The World Bank report says, this will be one of the largest short-term transfers in history. Despite these developments the apparel industry is estimated to grow at very high pace and will provide employment to a large number of people all across the world. The Textiles Ministry headed by Union Textile Minister Shankersinh Vaghela has set an ambitious cumulative annual growth rate (CAGR) of over 20 percent to be achieved by the year 2010. This will be achieved through aggressive exports of textile from $50 billion to $130 billion.

CONCLUSION
India is now a fast emerging market inching to reach half a billion middle income population by 2030. All these factors are good for the Indian textile industry in the long run. Even though the global economic crisis seams to be worsening day-by-day, as long as economies are emerging and growing as those in South and South East Asia, textile industry is here to grow provided it takes competition and innovation seriously.

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