You are on page 1of 38

1.

Textile Industry Overview


Textile Industry is one of the largest and oldest industries in India. It has a significant role in
India as it fulfils the essential and basic need of people. Textile Industry in India stands at
unique place and has maintained a sustainable growth over the years. This is a self-reliant and
independent industry and has great diversification and versatility. Textile Industry in India
provides great contribution for the development of economy. It is the second largest textile
industry in the world after China. It provides ample employment opportunities to people
belonging to all classes. After agriculture this industry provides employment to maximum
number of people in India employing 35 million people.
Textile Industry represents the rich culture, tradition, heritage & economic well-being of
country with diversified range and versatility. At the same time industry is competitive
enough to fulfill different demand patterns of domestic and global markets. Indian Textile
Industry plays vital role in country's economic development and contributes 14% to industrial
production in the country. Textile Industry contributes around 4% of GDP, 9% of excise
collections, 18% of employment in industrial sector, and 16% share in countrys export.
Indian Textile Industry is valued at US $36 bn. The development of Indian Textile Industry
started in 1985. This was the year, for the first time Textile sector was considered as an
important industry and a separate policy was formulated for sectors development. In the year
2000, National Textile Policy was announced.
With further development Textile Industry came out of Quota Regime of Import Restrictions
under the Multi Fiber Arrangement (MFA). This development came on 1 st January 2005
under the World Trade Organization (WTO) Agreement on Textiles and Clothing. Because of
the elimination of quota restrictions, most of the developing countries now can develop the
potential market at both domestic and international level. These countries can develop the
industry expertise and can have competitive advantage through implementing new
technology, more skilled labor will improved distribution channel, cost effective operation
and production with greater value addition in each step of value chain. Moreover it will help
for Foreign Direct Investment in industry that will create great opportunity to strengthen the
sector. Some of the strengths of Indian Textile Industry are large and potential domestic and
international market, large pool of skilled and cheap labor, well-established industry,
promising export potential etc.

2. 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.
India Textile Industry is one of the largest textile industries in the world. 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.

3. Indian Textile Industry Market


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 15 million
new jobs by the year 2015
India is a traditional textile -producing country with textiles in general, and cotton in
particular, being major industries for the country. India is among the worlds top producers of
yarns and fabrics, and the export quality of its products is ever increasing. Textile Industry is
one of the largest and oldest industries in India. Textile Industry in India is a self-reliant and
independent industry and has great diversification and versatility. The textile industry can be
broadly classified into two categories, the organized mill sector and the unorganized
decentralized sector.
The organized sector of the textile industry represents the mills. It could be a spinning mill or
a composite mill. Composite mill is one where the spinning, weaving and processing
facilities are carried out under one roof. The decentralized sector is engaged mainly in the
weaving activity, which makes it heavily dependent on the organized sector for their yarn
requirements. This decentralized sector is comprised of the three major segments viz., power
loom, handloom and hosiery. In addition to the above, there are readymade garments, khadi
as well as carpet manufacturing units in the decentralized sector.

The Indian Textile Industry has an overwhelming presence in the economic life of the
country. It is the second largest textile industry in the world after China. Apart from
providing one of the basic necessities of life i.e. cloth, the textile industry contributes about
14% to the country's industrial output and about 17% to export earnings. After agriculture this
industry provides employment to maximum number of people in India employing 35 million
people. Besides, another 50 million people are engaged in allied activities. India is the largest
producer of Jute, the 2nd largest producer of Silk, the 3rd largest producer of Cotton and
Cellulosic Fibers/Yarn and 5th largest producer of Synthetic Fibers/Yarn.
The main objective of the textile policy 2011 is to provide cloth of acceptable quality at
reasonable prices for the vast majority of the population of the country, to increasingly
contribute to the provision of sustainable employment and the economic growth of the nation;
and to compete with confidence for an increasing share of the global market. India's textile
industry is considered a pioneer in the industry, as the industrialization of India in other areas
is managed by funds generated by the textile machinery industry. However, since the
beginning of liberalization in 1992 to 1970, the industry tends to protect domestic producers
of cotton with a clear objective continuous erosion of its prosperity.
Prospect
Considering the continual capital investments in the textile industry, the Govt. of India may
extend the Technology Upgradation Fund Scheme (TUFS) by the end of the 11th Five Year
Plan, in order to support the industry. Indian textile industry is massively investing to meet
the targeted output of $85bn, aiming exports of $50bn. There is huge development foreseen
in Indian textile exports from the $17bn attained in 2005-06 to $50bn by 2013-14. The
estimation for the exports in the current financial year is about $19bn. There is substantial
potential in Indian exports of technical textiles and home textiles, as most European
companies want to set up facilities near-by the emerging markets, such as China and India.
The global demand for apparel and woven textiles is likely to grow by 25 percent by year
2014 to over 35mn tons, and Asia will be responsible for 85 percent output of this growth.
The woven products output will also rise in Central and Southern American countries,
however, at a reasonable speed. On the other hand, in major developed countries, the output
of woven products will remain stable. Weaving process is conducted to make fabrics for a
broad range of clothing assortment, including shirts, jeans, sportswear, skirts, dresses,

protective clothing etc., and also used in non-apparel uses like technical, automotive, medical
etc.
It is been forecasted that the woven textile and apparel markets will sustain their growth from
current till 2010. The imports of apparel and textiles will rise from developed economies like
the USA and the western countries of Europe and Japan, along with some newly emerged
economies, such as South Korea and Taiwan. Certainly, import growth has been witnessed
vertical rise in the previous year.
Apparel is the most preferred and important of all the other applications. Woven fabrics are
widely used in apparel assortments, including innerwear, outerwear, nightwear and
underwear, as well as in specialized apparels like protective clothing and sportswear. Home
textile also contributes considerably in woven fabric in products assortments like curtains,
furnishing fabrics, carpets, table cloths etc.
Special kind of woven fabrics are utilized in medical as well as industrial applications. The
medical applications include adhesives, dressing bandages, plasters etc.
The Indian Industry foresees huge demand for industrial woven products for medical and
automotive applications. Demand for woven fabrics is anticipated to be rise vertically in the
sector of home textiles.
Non woven sector has great future in terms of global demand, thus major facilities of cotton
yarn are currently concentrating just on home textiles. It is mandatory, that the peak
management of the cotton yarn manufacturers analyze the future prospect and growing graph
of demand for non woven products.
Anticipating massive growth in medical and automobile sectors, these sectors assures
substantial demand for non woven facilities in India. Albeit, home textiles also will lure
higher demand, there are specific demands for home textile facilities also.
The 7th Five Year Plan has huge consideration on agricultural growth that also includes
cotton textile industry, resulting a prosperous future forecast for the textile industry in India.
Indian cotton yarn manufacturers should rush forward for joint ventures and integrated plans
for establishing processing and weaving facilities in home textiles and technical textiles in
order to meet export target of $50bn, and a total textile production of $85bn.

Expectations are high, prospects are bright, but capitalising on the new emerging
opportunities will be a challenge for textile companies. Some prerequisites to be included in
the globally competing textile industry are:

Imbibing global best practices


Adopting rapidly changing technologies and efficient processes
Innovation
Networking and better supply chain management
Ability to link up to global value chains.

The Indian textiles industry has established its supremacy in cotton based products, especially
in the readymade garments and home furnishings segment. These two segments will be the
key drivers of growth for Indian textiles. The readymade garment segment will be the
principal driver of growth even in the domestic industry. The changing preferences of Indian
consumers -- from buying cloth to readymade garments -- have prompted several companies
to move up the value chain into the finished products segment.
Strategic Initiatives
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 suit with other
majors like Century Textiles and Raymond.
Most of the large textile companies have opted for an inorganic growth strategy to scale up
operations. Acquisition is the most logical step towards integrating operations and building
the value chain. Domestic acquisitions are on the rise, while acquiring foreign assets is yet to
gain traction. Some recent domestic acquisitions that have been executed in 2006 include
KSL & Industries acquisition of Deccan Cooperative, and Ambattur Clothing taking over
Celebrity Fashions. Another growing phenomenon observed among Indian textile companies
is the setting up of manufacturing facilities in strategic regions outside India, where they can
avail of duty concessions and reduce export lead-time. Zodiac and Ambattur Clothing have
set up facilities in the Gulf region to cut down on export delivery schedules to the European
and US markets. Raymond has set up a unit in Bangladesh to avail of the zero duty access to
the EU.

This trend is seen primarily among the large domestic players, who are trying to achieve
sizable scales in order to win orders from the large retailers in the US and EU. Global
retailers prefer large-sized companies that can scale up capacities consistently, keep up with
delivery schedules and meet their growing demand. They have clear preferences for
companies with integrated design, process and manufacturing facilities.
An interesting commonality in countries with successful garment exports is that they have a
much lower level of sub-contracting than India. A study during the 1990s found that apparel
firms Future Outlook XXXIII in India subcontracted 74% of their output, as compared to
only 11% in Hong Kong, 18% in China, 20% in Thailand, 28% in South Korea and 36% in
Taiwan. Consequently, these countries have a wider base of exports and have done very well
in the market for large volumes of uniform products.
Foreign Acquisitions by Indian Textile Companies
Period

Acquirer

Acquired Company

May 01

Arvind Mills

Jun 01

Ambattur Clothing

Sep 01

Raymonds

Sep 03

Jindal Polyester

Rexor Group (France)

Dec 04

JCT Ltd

CNLT Malaysia (Synegal)

May 05

Reliance Group

ICI Pakistan Ltd (Pakistan)

Jun 05

Zodiac Clothing

Dec 05

GHCL

May 06

Malwa Industries

May 06

Malwa Industries

Third Dimension Apparels (Italy)

Jul 06

Welspun India

CHT Holding (UK)

License Of Healthtex Kidswear


Brand Of Vf Corpn (USA)
Colour Plus (UK)
Regency

Texteis

Portuguesa

Limitada (Portugal)

Shirting Company Located In


Alqoze Industrial Area (Dubai)
Dan River (USA)
Emmetre

Tintolavanderie

Industrial (Italy)

Jul 06

Spentex Industries

Jul 06

GHCL

Tashkent-Toyetpa

Tekstil

Ltd

(Uzbek)
Rosebys (UK)

The exports market will remain favourable for India, when quota restrictions on 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 value-added segments of readymade garments, home furnishings
and made-ups will continue to grow.

4. TEXTILE SECTORS IN INDIA

The Man-Made Fiber / Yarn and Powerloom Sector: This part of industry includes fiber
and filament yarn manufacturing units. The Power looms sector is decentralized and plays a
vital role in Indian Textiles Industry. It produces large variety of cloths to fulfill different
needs of the market. It is the largest manufacturer of fabric and produces a wide variety of
cloth. The sector contributes around 62% of the total cloth production in the country and
provides ample employment opportunities to 4.86 million people.
The Cotton Sector: Cotton is one of the major sources of employment and contributes in
export in promising manner. This sector provides huge employment opportunities to around
50 million people related activities like Cultivation, Trade, and Processing. Indias Cotton
sector is second largest producer of cotton products in the world.
The Handloom Sector: The handloom sector plays a very important role in the countrys
economy. It is the second largest sector in terms of employment, next only to agriculture.
This sector accounts for about 13% of the total cloth produced in the country (excluding
wool, silk and Khadi).
The Woolen Sector: The Woolen Textile sector is an Organized and Decentralized Sector.
The major part of the industry is rural based. India is the 7th largest producer of wool, and
has 1.8% share in total world production. The share of apparel grade is 5%, carpet grade is
85%, and coarse grade is 10% of the total production of raw wool. The Industry is highly
dependent on import of raw wool material, due to inadequate production.
The Jute Sector: Jute Sector plays very important role in Indian Textile Industry. Jute is
called Golden fiber and after cotton it is the cheapest fiber available. Indian Jute Industry is
the largest producer of raw jute and jute products in the world. India is the second largest
exporter of jute goods in world.
The Sericulture and Silk Sector: The Silk industry has a unique position in India, and plays
important role in Textile Industry and Export. India is the 2nd largest producer of silk in
world and contributes 18% of the total world raw silk production. In India Silk is available
with varieties such as, Mulberry, Eri, Tasar, and Muga. Sericulture plays vital role in cottage
industry in the country. It is the most labor-intensive sector that combines both Agriculture
and Industry.
The Handicraft Sector: The Indian handicrafts industry is highly labor intensive, cottage
based and decentralized industry. It plays a significant & important role in the countrys

economy. It provides employment to a vast segment of craft persons in rural & semi urban
areas and generates substantial foreign exchange for the country, while preserving its cultural
heritage.
Structure of Indias Cotton Textile Industry
Unlike other major textile-producing countries, Indias textile industry is comprised mostly of
small-scale, non-integrated spinning, weaving, finishing, and apparel-making enterprises.
This unique industry structure is primarily a legacy of government policies that have
promoted labor intensive, small-scale operations and discriminated against larger scale firms:

Cotton farming and harvesting: Cotton is grown in tropical as well as sub tropical
area in India. Mostly the cotton grown in India is from dry lands and crops mostly

depend on the irrigation systems available and not only on the rain water.
Ginning: Ginning is the process where cotton fiber is separated from the cotton seed.
The first step in the ginning process is when the cotton is vacuumed into tubes that
carry it to a dryer to reduce moisture and improve the fiber quality. Then it runs
through cleaning equipment to remove leaf trash, sticks and other foreign matter.
Ginning is accomplished by one of two methods. Cotton varieties with shorter staple
or fiber length are ginned with saw gins. This process involves the use of circular
saws that grip the fibers and pull them through narrow slots. The seeds are too large to
pass through these openings, resulting in the fibers being pulled away from the seed.
Long fiber cottons must be ginned in a roller gin because saw gins can damage their

delicate fibers.
Oil mill: in the operation the oil is extracted from the cotton seeds that are coming
from the ginning process. The cotton seeds coming from the ginning unit are then
passed through the pressing unit and crude cotton oil is produced. The pressed cotton
seed oil cake is supplied as the cattle feed. The crude is further modified as the biodiesel which could be used as the one of the energy source. The refined cotton oil is

also used as the edible oil but it is proved to be unfit for the human health.
Spinning: Spinning is the process of converting cotton or manmade fiber into yarn to
be used for weaving and knitting. Largely due to deregulation beginning in the mid1980s, spinning is the most consolidated and technically efficient sector in Indias
textile industry. Average plant size remains small, however, and technology outdated,
relative to other major producers. In 2002/03, Indias spinning sector consisted of
about 1,146 small-scale independent firms and 1,599 larger scale independent units.

Weaving and Knitting: Weaving and knitting converts cotton, manmade, or blended
yarn into woven or knitted fabrics. Indias weaving and knitting sector remains highly
fragmented, small scale, and labor-intensive. This sector consists of about 3.9 million
handlooms, 380,000 Powerloom enterprises that operate about 1.7 million looms,
and just 137,000 looms in the various composite mills. Power looms are small
firms, with an average loom capacity of four to five owned by independent
entrepreneurs or weavers. Modern shuttle less looms account for less than 1 percent of

loom capacity.
Fabric Finishing: Fabric finishing (also referred to as processing), which includes
dyeing, printing, and other cloth preparation prior to the manufacture of clothing, is
also dominated by a large number of independent, small scale enterprises. Overall,
about 2,300 processors are operating in India, including about 2,100 independent units

and 200 units that are integrated with spinning, weaving, or knitting units.
Clothing: Apparel is produced by about 77,000 small-scale units classified as

domestic manufacturers, manufacturer exporters, and fabricators (subcontractors).


Composite Mills: Relatively large-scale mills that integrate spinning, weaving and,
sometimes, fabric finishing are common in other major textile-producing countries. In
India, however, these types of mills now account for about only 3 percent of output in
the textile sector. About 276 composite mills are now operating in India, most owned
by the public sector and many deemed financially sick.

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 2013. 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. Following are area,
production and productivity of cotton in India during the last six decades:

5. PRESENT SCENARIO OF THE INDUSTRY


Textile Industry is offering one of the most basic requirements of community and it possess
importance; preserve continued growth for developing quality of life. From the

manufacturing of raw materials to the delivery of end products, it has gain its kind of
position, as a self-dependent sector and with considerable value-addition at every stage of
dealing; it is a key input to the countrys economy.
Today the textiles and clothing industry engages an important position in Indias economy.
Being the major foreign exchange earner having about 35% in its torso, contributing to about
30 % of Indias exports and 14% of industrial productions, expecting above 6% GDP in 2005,
and it considered as the second largest vital sector of employment initiator after agriculture
sector.
Under the World Trade Organization (WTO) Agreement on Textiles and Clothing, the textile
quota scheme of quantitative import limitations under the multi-fiber arrangement (MFA)
came to an end on 1st January, 2005, hence developing countries like India will flourish in
the new competitive atmosphere and as a result, the Indian textile industry will have a
stronger place in both their export and domestic markets.
All along with its usual yarn and fabrics, at present India is exporting more than 100 garment
product range. Many worlds leading brands like Tommy Hilfiger, Gap, Liz Claibome, Polo
etc are sourcing products from India.
With huge investments, persistence innovations, latest product mix and planned marketing,
today, India has come out as a flourishing outsourcing centre for textiles and apparel industry
to meet the global requirement of the manufacturing fibers and yarns products. In a view of
the rising rapport with major global brands, dismantling of quota system from 2005 era
would hit upon India as a main global outsourcing hub.
Competitive advantage & possible growth in Synthetic Textiles Sector Indias synthetic
textile sector is relatively modern and has a high growth potential which will help India to
coming out as a major outsourcing hub. With a compounded annual growth rate of more than
22% the exports of MMF textiles have stretched out to a level of US $1.62 billion in 2002-03
starting from small exports in 1954. The export growth in 2002-03 matches up to the
preceding year was in the harmony of 30 percent, and the MMF textile sector is the only
sector where the performance has exceeds by the target fixed for this year by US $ 115
million.
Indian synthetic textiles are more and more accomplishing new markets along with keeping
the market share in the existing markets. At present Indian synthetic textile exports are

targeting more than 175 countries worldwide, where Middle East accounted for over 32
percent of our exports and the share of the extremely quality conscious in European Union,
approximately 23 percent.
Over the years, the Indian MMF textile sector has built-up an export base; and the share of
MMF textile exports in the total Indian textile export has also been raised, the share moved
up from 10.38% in 2000-01 to 11.46% in 2001-02 and more to about 14% in 2002-03.
At present Indian exports of synthetic textiles to USA are rising at more than 90% yearly. It
has also been observed that export growth will be striking for major MMF textile items after
dismantling of quota system from 2005.
Furthermore, Indonesia, Koreas export of synthetic textiles are turning down compared to
previous year. Manufacturing capacity of Korea has declined by more than 30% in the
polyester filament sector in 2002 and in 2003 and it is expected to turn down further more,
which will end with a turn down in their exports of polyester filament fabrics. Due to antidumping duty on the polyester filament fabrics obtained from Taiwan and Korea, countries
like Brazil, gaining of more opportunity for India will exists as a larger synthetic fabrics
exporter.
In the world, synthetic textile trades share of India is also seeing increasing. The export share
of Indian synthetic textiles in worldwide increased from 0.11% in 1971 to 1.12% in 1991 and
more to about 3% in 2002. This suggests the rising performance of Indian synthetic textile
items in the worldwide market.
Still there is an opportunity to explore new market segments like Latin America and Africa all
along with maintaining the share in the established markets like European Union and USA.
At this stage an annual growth expected to 15% for synthetic textiles and exports are
expected to touch US$ 2.5 billion in 2005-05 and US$ 4.3 billion in 2009-10.

6. Recent Trends
The mood in the Indian textile industry given the phase-out of the quota regime of the MultiFibre Arrangement (MFA) is upbeat with new investment flowing in and increased orders for
the industry as a result of which capacities are fully booked up to April 2005. As a result of

various initiatives taken by the government, there has been new investment of Rs.500 billion
in the textile industry in the last five years. Nine textile majors invested Rs.26 billion and
plan to invest another Rs.64 billion. Further, India's cotton production increased by 57% over
the last five years; and 3 million additional spindles and 30,000 shuttles-less looms were
installed.
The industry expects investment of Rs.1,400 billion in this sector in the post-MFA phase. A
Vision 2012 for textiles formulated by the government after intensive interaction with the
industry and Export Promotion Councils to capitalise on the upbeat mood aims to increase
India's share in world's textile trade from the current 4% to 8% by 2012 and to achieve export
value of US $ 50 billion by 2012 Vision 2012 for textiles envisages growth in Indian textile
economy from the current US $ 37 billion to $ 85 billion by 2012; creation of 12 million new
jobs in the textile sector; and modernisation and consolidation for creating a globally
competitive textile industry. The textile industry is undergoing a major reorientation towards
non-clothing applications of textiles, known as technical textiles, which are growing roughly
at twice rate of textiles for clothing applications and now account for more than half of total
textile production. The processes involved in producing technical textiles require expensive
equipments and skilled workers and are, for the moment, concentrated in developed
countries. Technical textiles have many applications including bed sheets; filtration and
abrasive materials; furniture and healthcare upholstery; thermal protection and bloodabsorbing materials; seatbelts; adhesive tape, and multiple other specialized products and
applications.

7. FUTURE OF TEXTILE INDUSTRY IN INDIA


The textile industry in India is one of the flourishing sectors of Indian economy. It contributes
more than 13% to industrial output, 16.63% to export revenues and 4% to the nations GDP.
In the year 2013, the industry is estimated to produce 12 million jobs with an investment of

US$ 6 billion in the fields of textiles equipments and structure, and garment manufacturing
by the end of 2015.
Union Ministry of Textiles certified Apparel Export Promotion Council (AEPC) has taken the
responsibility to motivate the foreign investors to invest in Indian Textile industry by
exhibiting it massive unexplored domestic market. It has also formulated and endorsed the
motto of come, invest, produce and sell in India. Under this the ministry has decided to
send it representatives to Germany, Switzerland, France, Italy and US. The objective is to
trigger the foreign investment towards instituting textile units in India by offering numerous
allowances to global investor like low-priced workforce and intellectual right fortification.
The government of India has also taken few initiatives to promote the textile industry by
permitting 100% Foreign Direct Investment in the market. Owing to the upright and straight
incorporated textiles price chain, the Indian textile industry symbolizes a strong existence in
the complete value chain from raw commodities to finished products. The Synthetic and
Rayon Textile Export Promotion Council (SRTEPC) has taken all the required steps to meet
the target of doubling the synthetic textile exports in India to US$ 6.2 billion by seizing 4%
of market share by FY 2011-12.

8. GOVERNMENT INITIATIVE FOR THE INDUSTRY


According to the Ministry of Textiles, investment under the Technology Upgradation Fund
Schemes (TUFS) has been increasing steadily. During the year 2009-10, 1896 applications
have been sanctioned at a project cost of US$ 5.23 billion. The cumulative progress as on

December 31, 2009, includes 27,477 applications sanctioned, which has triggered investment
of US$ 45.5 billion and amount sanctioned under TUFS is US$ 18.9 billion of which US$
16.4 billion has been disbursed so far till the end of April, 2010.
Moreover, in May 2010, the Ministry of Textiles informed a parliamentary panel that it
proposes to allocate US$ 785.2 million for the modernization of the textile industry.
The Scheme for Integrated Textile Park (SITP) was approved in July 2005 to facilitate setting
up of textiles parks with world class infrastructure facilities. 40 textiles park projects have
been sanctioned under the SITP. According to the Minister of State for Textiles, Panabaaka
Lakshmi, under the SITP, a cumulative expenditure of US$ 204.3 million has been incurred
against allocation of US$ 220.7 million in the last three years.
In the Union Budget 2010-11 presented in February 2010, the Finance Minister made the
following announcements to benefit the textile industry:

The central plan outlay for the industry has been enhanced to US$ 1.03 billion. Of this
US$ 521.4 million is for TUFS, US$ 76 million for SITP, US$ 80.2 million for
handlooms, US $ 69.3 million for handicrafts and US$ 98.4 million for sericulture.

Allocation for textiles and jute industry is US$ 713.4 million.

The total allocation for village and small enterprises sector which include handicrafts
and handlooms is US$ 210.3 million.

US$ 31.5 million has been provided for development of mega clusters in handlooms,
handicrafts and powerloom sectors.

Customs duty at 4 per cent for import of readymade garments for retail sales has been
withdrawn.

The micro small medium enterprises in textiles sector have been given full CENVAT
credit on capital goods in one installment in the year of receipt of such goods and the
facility of payment of excise duty in quarterly basis.

GOVERNEMENT POLICIES

The Multi-Fibre Agreement (MFA)


The Multi-Fibre Agreement (MFA), that had governed the extent of textile trade between
nations since 1962, expired on 1 January 2005. It is expected that, post-MFA, most tariff
distortions would gradually disappear and firms with robust capabilities will gain in the
global trade of textile and apparel. The prize is the $360 bn market which is expected to grow
to about $600 bn by the year 2010 barely five years after the expiry of MFA.
National Textile Policy 2000
Faced with new challenges and opportunities in a changing global trade environment, the
GOI unveiled its National Textile Policy 2000 (NTP 2000) on November 2, 2000. The NTP
2000 aims to improve the competitiveness of the Indian textile industry in order to attain $50
billion per year in textile and apparel exports by 2010.86 The NTP 2000 opens the countrys
apparel sector to large firms and allows up to 100 percent FDI in the sector without any
export obligation.
National Jute Policy-2005:
The objectives of the policy are to:

Enable millions of jute farmers to produce better quality jute fibre for value added
diversified jute products and enable them to enhance per hectare yield of raw jute

substantially;
Facilitate the Jute Sector to attain and sustain a pre-eminent global standing in the

manufacture and export of jute products;


Enable the jute industry to build world class state-of-the-art manufacturing
capabilities in conformity with environmental standards, and, for this purpose, to
encourage Foreign Direct Investment, as well as research and development in the

sector;
Sustain and strengthen the traditional knowledge, skills, and capabilities of our
weavers and craftspeople engaged in the manufacture of traditional as well as

innovative jute products;


Expand productive employment by enabling the growth of the industry;
Make Information Technology (IT), an integral part of the entire value chain of jute
and the production of jute goods, and thereby facilitate the industry to achieve
international standards in terms of quality, design, and marketing;

Increase the quantity of exports of jute and jute products by achieving a CAGR of

15% per annum;


Involve and ensure the active co-operation and partnership of State Governments,
Financial Institutions, Entrepreneurs, and Farmers Organizations in the fulfilment of
these objectives.

Export Promotion Capital Goods (EPCG) scheme


To promote modernization of Indian industry, the GOI set up the Export Promotion Capital
Goods (EPCG) scheme, which permits a firm importing new or Second-hand capital goods
for production of articles for export to enter the capital goods at preferential tariffs, provided
that the firm exports at least six times the c.i.f. value of the imported capital goods within 6
years. Any textile firm planning to modernize its operations had to import at least $4.6
million worth of equipment to qualify for duty-free treatment under the EPCG scheme.
Export-Import Policy
The GOIs EXIM policy provides for a variety of largely export-related assistance to firms
engaged in the manufacture and trade of textile products. This policy includes fiscal and other
trade and investment incentives contained in various programs
Duty Entitlement Passbook Scheme (DEPS)
DEPS is available to Indian export companies and traders on a pre- and post-export basis.
The pre-export credit requires that the beneficiary firm has exported during the preceding 3
year period. The post-export credit is a transferable credit that exporters of finished goods can
use to pay or offset customs duties on subsequent imports of any unrestricted products.
The Agreement on Textiles and Clothing (ATC)
The Agreement on Textiles and Clothing (ATC) promises abolition of all quota restrictions in
international trade in textiles and clothing by the year 2005. This provides tremendous scope
for export expansion from developing countries.
Guidelines of the revised Textile Centres Infrastructure Development Scheme (TCUDS)
TCIDS Scheme is a part of the drive to improve infrastructure facilities at potential Textile
growth centres and therefore, aims at removing bottlenecks in exports so as to achieve the
target of US$ 50 billion by 2010 as envisaged in the National Textile Policy, 2000. Under the

Scheme funds can be given to Central/ State Government Departments/ Public Sector
Undertakings/ Other Central /State Governments agencies/recognized industrial association
or entrepreneur bodies for development of infrastructure directly benefiting the textile units.
The fund would not be available for individual production units.
Technology Upgradation Fund Scheme (TUFS)
At present, the only scheme through which Government can assist the industry is the
Technology Upgradation Fund Scheme (TUFS) which provides for reimbursing 5% interest
on the loans/finance raised from designated financial institutions for bench marked projects
of modernisation. IDBI, SIDBI, IFCI have been designed as nodal agencies for large and
medium small scale industry and jute industry respectively. They have co-opted 148 leading
commercial banks/cooperative banks and financial institutions like State Finance
Corporations and State Industrial Development Corporation etc.
Scheme for Integrated Textile Parks (SITP)
To provide the industry with world-class infrastructure facilities for setting up their textile
units, Government has launched the Scheme for Integrated Textile Parks (SITP) by
merging the Scheme for Apparel Parks for Exports (APE) and Textile Centre Infrastructure
Development Scheme (TCIDS). This scheme is based on Public-Private Partnership (PPP)
and envisages engaging of a professional agency for project execution. The Ministry of
Textiles (MOT) would implement the Scheme through Special Purpose Vehicles (SPVs).

9. INVESTMENTS

According to the Minister for Textiles, Mr Dayanidhi Maran, around US$ 5.35 billion of
foreign investment is expected to be made in India in the textile sector over the next five
years.
The textiles industry has attracted foreign direct investment (FDI) worth US$ 817.26 million
between April 2000 and March 2010, according to data released by the Department of
Industrial Policy and Promotion.

S Kumars Nationwide has formed a joint venture (JV) with Donna Karan
International to design, produce and distribute the entire range of DKNY menswear
apparel across the world except Japan for 10 years. The new venture will invest US$
25 million for expansion of Donna Karans menswear brand and expects to record
sales of about US$ 140 million in the next three years.

The Andhra Pradesh government has allocated over 1000 acres of land for the
Brandix India Apparel City (BIAC) in the states special economic zone (SEZ), which
was inaugurated in May 2010. The apparel city is expected to attract an investment of
US$ 1.2 billion (around Rs 5,400 crore).

Private equity firms TPG and Bain Capital have picked up stakes in children apparel
retailer Lilliput Kidswear for US$ 27 million and US$ 60.7 million respectively.

Italian sportswear maker Lotto is planning to invest US$ 10 million over the next five
years to capture 7 per cent of Indias branded sports apparel and equipment market.
The brand, which started its stand-alone retail chain in India in 2008, has 31 standalone stores across the country and plans to open 200 more such stores by 2015.

World's leading lingerie brand, Germany-based, Triumph International, plans to invest over
US$ 217 million in India to open 12 more flagship outlets and 30 additional EPS (Exclusive
Partner Stores) during 2010.

10. Environmental Analysis and Concerns of Indian Textile Industry.


If we analyze the textile industry, the major determinants of competitiveness are both policy
and politics in the international trade and commerce. Further, the industry performance is
influenced by domestic institutional, policy, infrastructure and managerial dynamics.
In textile industry, voluntary initiatives such as Worldwide Responsible Apparel Production
(WRAP) and Apparel Industry Initiative (AIP) are attempting to instill social and
environmental standards in textile and clothing sectors. It is in this buyer-driven global
commodity chain that India has to position itself.
Based on our experience of working with the textile industry, this article is an attempt to
briefly outline the environmental concerns and identify ways to enhance internal and external
competitiveness of textile sector.
Like every product, clothes and other textiles products affect the environment to varying
degrees throughout their life cycles, through use of chemicals, solvents and huge quantities of
water. This apart, use of energy, solid waste and effluent discharge, emit dust, fumes, etc. to
the atmosphere are major environmental concerns of textile industry.
Before textiles reach the consumer, they go through many different physical and chemical
processes. For example they may be treated with chemicals to dye, make them more hardwearing or wrinkle-resistant, or less flammable.
Studies have shown that some of the chemicals used in textile industry are carcinogenic and
others may trigger allergic reactions. Some flame retardants that are used in certain textiles
contain organic bromine compounds that are persistent (break down very slowly in the
environment). Textile industry is known to use restricted chemicals such as azo dyes and
formaldehyde.
Manufacturing of all variants of textiles have an impact on the environment. Usage of raw
material and other natural resource inputs such as water etc have not only resource depleting
impacts but release of effluents or emissions have natural resource degrading impacts. The
industry is known to use large quantities of water during its processing.

For example, to grow the fiber for one cotton diaper requires 105.3 gallons of water, one Tshirt needs 256.6 gallons of water, one bath towel needs 401.4 gallons of water, a mans dress
shirt requires 414.5 gallons of water, and 987 gallons of water are required for one pair of
jeans.
An average integrated textile mill produces 15 tons of finished cloth per day. It uses a total of
approximately 3,840 cubic meters of water per day, including 1,680 cubic meters for
finishing and processing, another 960 cubic meters for steam generation, and an equivalent
volume for serving the workers colony and other domestic uses of water. The water used for
finishing and processing results in contaminated liquid effluent of approximately 1,500 cubic
meters per day.
In Tirupur of Tamilnadu, India, annually the textile industries alone utilize around 28.8 billion
liters of ground water.
Further, usage of synthetic dyes puts environmental limitation because production of these
dyes requires strong acids, alkalis, solvents, high temperatures, and heavy metal catalysts.
Since production of these dyes need very toxic and hazardous chemicals.
Environmental issues can no longer be ignored by the textiles industry and the Government.
Indian textile industry needs to realize that to remain competitive, operating costs have to be
reduced and environmental compliance has to be enhanced. Government should not only
strive to integrate environmental goals into the national textile policy but also in the plans and
programmes. Textile sector cannot have independent growth strategies that are bereft of
environmental concerns arising at various points of value chain because environmental costs
are proving to be a drag on its own long term growth and development.
To drive home the criticality of integrating environmental concerns Tirupur industrial cluster
in Tamilnadu, India is being used as illustration.
The textile industry in Tirupur was expected to achieve the targeted export of US$ 50 Billion
by the year 2010. But, such growth is now greatly hampered due to immense environmental
damage due to the effluents released from the textile units to cause to the Noyyal river,
ground water system and agricultural fields mainly due to the textile wet processing

industries in Tirupur. Textile manufacturers use energy as a raw material input to the
manufacturing process or for some other purpose usually referred to as non-fuel use.
Electricity consumption is increasing in textile mills. Textile manufacturers have to deal with
rising energy and other supply costs. For e.g. Dow Chemical Co. and DuPont both raised
prices on nearly everything they sell, from chemicals used in bathroom cleaners to freezer
bags and kitchen counter tops, because of high raw materials costs.
Understanding the value chain of textile industry will enable identifying and addressing all
sources of environmental impacts in a life cycle process. Such an integrated approach has not
been undertaken in India on environmental impacts of textile manufacturing. A
comprehensive analysis of the environmental impact of textile manufacturing activity is a
critical need of the hour and it needs to be initiated at the earliest, which includes an analysis
of the degradation by air pollution, wind, water and other agents.
A complete survey of how developments in the textile industry and consumers of its products
have affected the environment in the past needs to be taken up. This should also cover the
most recent solutions adopted by the industry to alleviate the problems. This is important
given the high textile production targets post 2005, and the ways in which the industry is
responding to the environmental challenges.
Fortunately, unlike any other country in the world, India has hand-loom sector, where
production is relatively environmentally benign. Thus, for Indian textile sector, the main
drivers for environmentally benign growth can be:

Growth of hand-loom sector


Competition
Pressure exerted down the supply chain by the consumer
Reducing production costs
Meeting current and anticipated legislative requirements
Concern for the global and local environment

Professionals at Green Stratos are currently part of several initiatives in the textile sector such
as promoting organic cotton and creating market linkages for handloom sector, use of
environment friendly dies and promotion of energy efficiency in the textile sector.
11. The Textile and Apparel Supply Chain

The Textile and Apparel Supply Chain comprises diverse raw material sectors, ginning
facilities, spinning and extrusion processes, processing sector, weaving and knitting factories
and garment (and other stitched and non-stitched) manufacturing that supply an extensive
distribution channel. This supply chain is perhaps one of the most diverse in terms of the raw
materials used, technologies deployed and products produced.
This supply chain supplies about 70 per cent by value of its production to the domestic
market. The distribution channel comprises wholesalers, distributors and a large number of
small retailers selling garments and textiles. It is only recently that large retail formats are
emerging thereby increasing variety as well as volume on display at a single location.
Another feature of the distribution channel is the strong presence of agents who secure and
consolidate orders for producers. Exports are traditionally executed through Export
Houses or procurement/commissioning offices of large global apparel retailers.
It is estimated that there exist 65,000 garment units in the organized sector, of which about 88
per cent are for woven cloth while the remaining are for knits. However, only 3040 units
are large in size (as a result of long years of reservation of non-exporting garment units for
the small scale sectors a regulation that was removed recently). While these firms are
spread all over the country, there are clusters emerging in the National Capital Region (NCR),
Mumbai, Bangalore, Tirupur/Coimbatore, and Ludhiana employing about 3.5 mn people.
According to our estimate, the total value of production in the garment sector is around
Rs.10501100 bn of which about 81 per cent comes from the domestic market. The value of
Indian garments (e.g. saree, dhoti, salwar kurta, etc.) is around Rs.200250 bn. About 40 per
cent of fabric for garment production is imported a figure that is expected to rise in coming
years.
The weaving and knits sector lies at the heart of the industry. In 2004-05, of the total
production from the weaving sector, about 46 per cent was cotton cloth, 41 per cent was
100% non-cotton including khadi, wool and silk and 13 per cent was blended cloth. Three
distinctive technologies are used in the sector handlooms, powerlooms and knitting
machines. They also represent very distinctive supply chains. The handloom sector
(including khadi, silk and some wool) serves the low and the high ends of the value chain
both mass consumption products for use in rural India as well as niche products for urban &
exports markets. It produces, chiefly, textiles with geographical characterization (e.g., cotton
and silk sarees in Pochampally or Varanasi) and in small batches. Handloom production in

2003-04 was around 5493 mn.sq.meters of which about 82 per cent was using cotton fibre.
Handloom production is mostly rural (employing about 10 million, mostly, household
weavers) and revolves around master-weavers who provide designs, raw material and often
the loom.
Weaving, using powerlooms was traditionally done by composite mills that combined it with
spinning and processing operations. Over the years, government incentives and demand for
low cost, high volume, standard products (especially sarees and grey cloth) moved the
production towards powerloom factories and away from composite mills (that were
essentially full line variety producers). While some like Arvind Mills or Ashima transformed
themselves into competitive units, others gradually closed down. In 2003-04, there remained
223 composite mills that produced 1434 mn. sq. mts. of cloth. Most of these mills are located
in Gujarat and Maharashtra. Most of the woven cloth comes from the powerlooms (chiefly at
Surat, Bhiwandi, NCR, Chennai). In 2005, there were 425,792 registered powerloom units
that produced 26,947 mn. sq. mts of cloth and employed about 4,757,383 workers.

Weaving

sector is predominantly small scale, has on an average 4.5 power looms per unit, suffers from
outdated technology, and incurs high co-ordination costs. Knits have been more successful
especially in export channels. Strong production clusters like Tirupur and Ludhiana have led
to growth of accessories sector as well, albeit slowly. The hosiery sector, on the other hand,
has largely a domestic focus and is growing rapidly.
The spinning sector is perhaps most competitive globally in terms of variety, unit prices and
production quantity. Though cotton is the fibre of preference, man-made fibre (polyster fibre
and polyster filament yarn) is also produced by about 100 large and medium size producers.
Spinning is done by 1566 mills and 1170 Small and Medium Enterprises (SME). Mills,
chiefly located in North India, deploy 34.24 mn. spindles and 0.385 mn rotors while the SME
units produce their yarn on 3.29 mn spindles and 0.119 mn. rotors producing 2270 mn kg of
cotton yarn, 950 mn kg of blended yarn and about 1106 mn kg of man-made filament yarn
every year. Worsted and non-worsted spindles (producing woolen yarn) have also
progressively grown to 0.604 mn and 0.437 mn respectively. Spinning sector is technology
intensive and productivity is affected by the quality of cotton and the cleaning process used
during ginning.

The processing sector, i.e., dyeing, finishing and printing is mostly small in scale. The largest
amongst these would dye and finish about 5000 m/day. The remaining are independent
process houses (or part of composite mills) that use automated large batch or continuous
processing and have an average scale of about 20,000 m of cloth daily. About 82.5 per cent or
10,397 units are hand processors who dye cloth or yarn manually and dry in open sunshine.
Of the remaining (and these use automated and semi-automated equipment), 2076 are
independent process houses.
Cotton remains the most significant raw material for the Indian textile industry. In 2003-04,
3009 mn kg of cotton was grown over 7.785 mn acres. Other fibres produced are silk (15742
tonnes), jute (10985000 bales), wool (50.7 mn kg) and man-made fibres (1100.65 mn kg).
Cotton grows mostly in western and central India, silk in southern India, jute in eastern and
wool in northern India. Significant qualities of cotton, silk and wool fibres are also imported
by the spinning and knitting sectors. (Except for garments, all data in this section was
obtained from OTC 2004 and Texmin 2005.)
Managing such a complex supply chain requires coordination through excellent managerial
practices, technology and facilitating policies.

12. Competitiveness of Indian Textile Industry


India is one of the few countries that own the complete supply chain in close proximity from
diverse fibres to a large market. It is capable of delivering packaged products to customers
comprising a variety of fibres, diverse count sizes, cloths of different weight and weave, and
panoply of finishes. This permits the supply chain to mix and match variety in different
segments to deliver new products and applications. This advantage is further accentuated by
cost based advantages and diverse traditions in textiles.
Indian strength in spinning is now well established on unit costs on ring yarn, open-ended
(OE) yarn as well as textured yarn, Indian firms are ahead of their global competitors
including China. Same is true on some woven OE yarn fabric categories (especially grey
fabrics) but is not true for other woven segments. India contributes about 23 per cent of world
spindles and 6 per cent of world rotors (second highest in the world after China). Fifty five
per cent of total investment in technology in the last decade has been made in the spinning
sector. Its share in global shuttleless loom, however, is only about 2.8 per cent of world
looms (and is ranked 9th in the world). The competitiveness in the weaving sector is adversely
affected by low penetration of shuttleless looms (i.e., 1.69 % of Indian looms), the
unorganized nature of the sector (i.e., fragmented, small and, often, un-registered units, low
investment in technology & practices especially in the powerloom, processing, handloom and
knits) and higher power tariffs. There is, however, a recent trend of investment in setting up
hi-tech, stand-alone mid-size weaving companies focusing on export markets. India also has
the highest deployment of handlooms in the world (handlooms are low on productivity but
produce specialized fabric). While production and export of man-made fibre (and filament
yarn) has increased over the years, Indian industry still lags significantly behind US, China,
Europe, Taiwan etc. (Texmin, 2005.)
Indian textile industry has suffered in the past from low productivity at both ends of the
supply chain low farm yields affecting cotton production and inefficiency in garment sector
due to restriction of size and reservation. Add to this, contamination of cotton with
consequent increase in cost (as it affects quality and requires installation of additional
process to clean and open cotton fibres before carding operations), poor ginning (most
equipment dates back to 1940s), high average defect rates in production process (which also
leads to increase in effective labor and power costs), hank yarn requirement, etc. and its
competitiveness gets compromised severely. Similarly, processing technology is primarily

manual and small batch oriented with visual color matching and sun drying. This leads to
inconsistency in conformance quality. Lead times across the sector continue to be affected
by variability in the supply chain defect rates average over 5%, average % of orders on time
is about 80%, variance in order size across firms is high (e.g., the coefficient of variability of
average order size for spinning firms is about 2.6), and on an average, 16 days of sales as
work-in-process inventory (the highest for garment firms) and an average of 30 days of sales
in raw material inventory (the highest for spinning firms) (Chandra 2004). Some of the
hurdles (e.g., reservation in the garment sectors) including tariff distortions between the
organized and unorganized sectors have now been systematically removed by policy
initiatives of Government of India and have opened avenues for firms to compete on the basis
of their capabilities.
Trade data of post-MFA performance reveals some interesting trends Indian firms registered
a 27 per cent growth in exports to US (against Chinas 52 per cent) during the Jan-April 2005
time period. Most of this growth has been in textiles while apparels show marginal gains.
Apparels & accessories constituted 78% of global exports to USA (FICCI 2005). (India is
still a relatively small yet growing player in the global apparel market.) It is expected that
India will soon replace Mexico as the second largest apparel supplier to the US.

13. SWOT analysis of the textile industry


Strengths

India enjoys benefit of having plentiful resources of raw materials. It is one of the
largest producers of cotton yarn around the globe, and also there are good resources of

fibres like polyester, silk, viscose etc.


There is wide range of cotton fibre available, and has a rapidly developing synthetic

fibre industry.
India has great competitiveness in spinning sector and has presence in almost all

processes of the value chain.


Availability of highly trained manpower in both, management and technical. The
country has a huge advantage due to lower wage rates. Because of low labor rates the

manufacturing cost in textile automatically comes down to very reasonable rates.


The installed capacity of spindles in India contributes for 24% share of the world, and
it is one of the biggest exporters of yarns in the global market. Having modern
functions and favourable fiscal policies, it accounts about 25% of the world trade in

cotton yarn.
The apparel industry is largest foreign exchange earning sector, contributing 12% of

the country's total exports.


The garment industry is very diverse in size, manufacturing facility, type of apparel
produced, quantity and quality of output, cost, requirement for fabric etc. It comprises
suppliers of ready-made garments for both, domestic or export markets.

Weakness
Massive Fragmentation:
A major loop-hole in Indian textile industry is its huge fragmentation in industry structure,
which is led by small scale companies. Despite the government policies, which made this
deformation, have been gradually removed now, but their impact will be seen for some time
more. Since most of the companies are small in size, the examples of industry leadership are
very few, which can be inspirational model for the rest of the industry.
The industry veterans portrays the present productivity of factories at half to as low as onethird of levels, which might be attained. In many cases, smaller companies do not have the
fiscal resources to enhance technology or invest in the high-end engineering of processes.

The skilled labor is cheap in absolute terms; however, most of this benefit is lost by small
companies.
The uneven supply base also leads barriers in attaining integration between the links in
supply chain. This issue creates uncontrollable, unreliable and inconsistent performance.
Political and Government Diversity:
The reservation of production for very small companies that was imposed with an intention to
help out small scale companies across the country, led substantial fragmentation that distorted
the competitiveness of industry. However, most of the sectors now have been de-reserved,
and major entrepreneurs and corporate are putting-in huge amount of money in establishing
big facilities or in expansion of their existing plants.
Secondly, the foreign investment was kept out of textile and apparel production. Now, the
Government has gradually eliminated these restrictions, by bringing down import duties on
capital equipment, offering foreign investors to set up manufacturing facilities in India. In
recent years, India has provided a global manufacturing platform to other multi-national
companies that manufactures other than textile products; it can certainly provide a base for
textiles and apparel companies.
Despite some motivating step taken by the government, other problems still sustains like
various taxes and excise imbalances due to diversification into 35 states and Union
Territories. However, an outline of VAT is being implemented in place of all other tax
diversifications, which will clear these imbalances once it is imposed fully.
Labour Laws:
In India, labour laws are still found to be relatively unfavorable to the trades, with companies
having not more than ideal model to follow a 'hire and fire' policy. Even the companies have
often broken their business down into small units to avoid any trouble created by labour
unionization.
In past few years, there has been movement gradually towards reforming labour laws, and it
is anticipated that this movement will uphold the environment more favourable.

Distant Geographic Location:

There are some high-level disadvantages for India due to its geographic location. For the
foreign companies, it has a global logistics disadvantage due the shipping cost is higher and
also takes much more time comparing to some other manufacturing countries like Mexico,
Turkey, China etc. The inbound freight traffic has been also low, which affects cost of
shipping - though, movement of containers are not at reasonable costs.
Lack of trade memberships:
India is serious lacking in trade pact memberships, which leads to restricted access to the
other major markets. This issue made others to impose quota and duty, which put scissors on
the sourcing quantities from India.
Opportunities
It is anticipated that India's textile industry is likely to do much better. Since the consumption
of domestic fibre is low, the growth in domestic consumption in tandem is anticipated with
GDP of 6 to 8 % and this would support the growth of the local textile market at about 6 to 7
% a year.
India can also grab opportunities in the export market. The industry has the potential of
attaining $34bn export earnings by the year 2010. The regulatory polices is helping out to
enhance infrastructures of apparel parks, Specialized textile parks, EPZs and EOUs.
The Government support has ensured fast consumption of clothing as well as of fibre. A
single rate will now be prevalent throughout the country.
The Indian manufacturers and suppliers are improving design skills, which include different
fabrics according to different markets. Indian fashion industry and fashion designers are
marking their name at international platform. Indian silk industry that is known for its fine
and exclusive brocades, is also adding massive strength to the textile industry.
The industry is being modernized via an exclusive scheme, which has set aside $5bn for
investment in improvisation of machinery. International brands, such as Levis, Wal-Mart, JC
Penny, Gap, Marks & Spencer and other industry giants are sourcing more and more fabrics
and garments from India. Alone Wal-Mart had purchased products worth $200mn last year
and plans to increase buying up to $3bn in the coming year. The clothing giant from Europe,
GAP is also sourcing from India.

Threats
1. Decreasing Fashion Cycle

There has been an increase in seasons per year which has resulted in shortening
of the fashion cycle.
II. Formation of Trading Blocks
Formation of Trading blocks like NAFTA, SAPTA, etc; has resulted in a change in
the world trade scenario. Existence of bilateral agreements would result in
significant disadvantage for Indian exports.
III. Phasing out of Quotas
India will have to open its protected domestic market for foreign players thus
domestic market will suffer.

14. Challenges facing Indian Textile Industry

Textile supply chains compete on low cost, high quality, accurate delivery and flexibility in
variety and volume. Several challenges stand in the way of Indian firms before they can own
a larger share of the global market:
Scale: Except for spinning, all other sectors suffer from the problem of scale. Indian firms are
typically smaller than their Chinese or Thai counterparts and there are fewer large firms in
India. Some of the Chinese large firms have 1.5 times higher spinning capacity, 1.25 times
denim (and 2 times gray fabric) capacity and about 6 times more revenue in garment than
their counterparts in India thereby affecting the cost structure as well as ability to attract
customers with large orders. The central tendency is to add capacity once the order has been
won rather than ahead of the demand. Customers go where they see both capacity and
capabilities. Large capacity typically goes with standardized products. These firms need to
develop the managerial capabilities required to manage large work force and design an
appropriate supply chain. For the size of the Indian economy, it will have to have bigger firms
producing standard products in large volumes as well as small and mid size firms producing
large variety in small to mid size batches (the tension between the organized and unorganized sectors will have to be addressed first, though). Then there is the need for
emergence of specialist firms that will consolidate orders, book capacities, manage
warehouses and logistics of order delivery.
Skills : Three issues must be mentioned here : (a) there is a paucity of technical manpower
there exist barely 30 programmes at graduate engineering (including diploma) levels
graduating about 1000 students this is insufficient for bringing about technological change
in the sector; (b) Indian firms invest very little in training its existing workforce and the skills
are limited to existing processes (Chandra 1998); (c) there is an acute shortage of trained
operators and supervisors in India. It is expected that Indian firms will have to invest close to
Rs. 1400 bn by year 2010 to increase its global trade to $ 50 bn. This kind of investment
would require, by our calculations, about 70,000 supervisors and 1.05mn operators in the
textile sector and at least 112,000 supervisors and 2.8mn operators in the apparel sector
(assuming a 80:20 ratio of investment between textiles and apparel). The real bottleneck to
growth is going to be availability of skilled manpower.
Cycle Time: Cycle time is the key to competitiveness of a firm as it affects both price and
delivery schedule. Cycle time reduction is strongly correlated with high first pass yield, high
throughput times, and low variability in process times, low WIP and consequently cost.

Indian firms have to dramatically reduce cycle times across the entire supply chain which is
currently quite high (Chandra, 2004). Customs must provide a turnaround time of day for
an order before Indian firms can they expect to become part of larger global supply chains.
Indian firms need a strong deployment of industrial engineering with particular emphasis on
cellular manufacturing, JIT and statistical process control to reduce lead times on shop
floors. Penetration of IT for improving productivity is particularly low in this sector.
Innovation & Technology: A review of the products imported from China to USA during
JanuaryApril 2005 reveals that the top three products in terms of percentage increase in
imports were Tire Cords & Tire Fabrics (843.4% increase over the previous year), Nonwoven fabrics (284.1% increase) and Textile/Fabric Finishing Mill Products (197.2%
increase) (FICCI, 2005). None of these items, however, figure in the list of imports from
India that have gained in these early days of post-MFA. Entry into newer application
domains of industrial textiles, Nano-textiles, home furnishings etc. becomes imperative if we
are to grow beyond 56% of global market share as these are areas that are projected to grow
significantly. Synthetic textiles comprise about 50 per cent of the global textile market.
Indian synthetic industry, however, is not well entrenched. The Technology Upgradation
Fund of the government is being used to stimulate investment in new processes.
However, there is little evidence that this deployment in technology has accompanied
changes in the managerial regimes a necessary condition for increasing productivity and
order winning ability.
Domestic Market: The Indian domestic market for all textile and apparel products is
estimated at $26 bn and growing. While the market is very competitive at the low end of the
value chain, the mid or higher ranges are overpriced (i.e., dollar pricing). Firms are not
taking advantage of the large domestic market in generating economies of scale to deliver
cost advantage in export markets. The Free Trade Agreement with Singapore and Thailand
will allow overseas producers to meet the aspirations of domestic buyers with quality and
prices that are competitive in the domestic market. Ignoring the domestic market, in the long
run, will peril the export markets for domestic producers. In addition, high retail property
prices and high channel margins in India will restrict growth of this market. Firms need to
make their supply chain leaner in order to overcome these disadvantages.
Institutional Support: Textile policy has come long ways in reducing impediments for the
industry sometimes driven by global competition and, at other times, by international trade

regulations. However, few areas of policy weakness stand out labor reforms (which is
hindering movement towards higher scale of operations by Indian firms), power availability
and its quality, customs clearance and shipment operations from ports, credit for large scale
investments that are needed for upgradation of technology, and development of manpower for
the industry. These are problems facing several sectors of industry in India and not by this
sector alone.
In conclusion, competitive strategies are developed by sector level firms and its their
individual and collective initiatives that secure higher market share in global trade. While one
has to be ever vigilant of non-tariff barriers in the post MFA world, the new market will be
won on the basis of capabilities across the supply chain. Policy will need to facilitate this
building of capabilities at the firm level and the flexible strategies that firms will need to
devise periodically.

15. STRATEGY FOR GROWTH OF THE INDIAN TEXTILE INDUSTRY

The Indian textile industry is in a stronger position now than it was in the last six
decades. The industry which was growing at 3 4 percent during the last six decades

has now accelerated to an annual growth rate of 9 10 percent. There is a sense of

optimism in the industry and textiles sector has now become a sunrise sector.
The catalysts which have placed the industry on this trajectory of exponential growth
are a buoyant domestic economy, a substantial increase in cotton production, the
conducive policy environment provided by the Government, and the expiration of the

Multi Fibre Agreement (MFA) on 31st December2004.


The buoyant Indian economy, growing at the rate of 8 percent, has resulted in higher
disposable income levels. The disposable income of Indian consumers has increased
steadily. The proportion of the major consuming class (population that has an annual
income of more than US$ 2000) has risen from 20 percent in 1995-96 to 28 percent in
2001-02. This is expected to move up to 35 percent by 2005-06, and to 48 percent by
2009-10. This translates into a growth of 9.3 percent over the next 8 years, and will
result in higher spending capacity, manifesting itself in the greater consumption of

textiles.
The Indian textile industry consumes a diverse range of fibres and yarn, but is
predominantly cotton based.

A significant increase in cotton production during the

last two three years has increased the availability of raw cotton to the domestic
textiles industry at competitive prices, providing it with a competitive edge in the

global market.
The Government has also provided industry a conducive policy environment and
initiated schemes which have facilitated the growth of the industry. The Technology
Mission on Cotton has increased cotton production and reduced contamination levels.
The Technology Upgradation Fund Scheme (TUFS) has facilitated the installation of
the state-of-the-art / near state-of-the-art machinery at competitive capital cost. The
rationalization of fiscal duties has provided a level playing field to all segments,

resulting in the holistic growth of the industry.


Quotas which have restrained the export growth of the Indian textile industry for over
four decades were eliminated with effect from 01.01.2005. This has unshackled
Indian exports, and this is evident from the growth registered in the quota markets.
Apparel exports to USA during 2005 have increased by 34.2 percent, while textiles
exports have increased by 16 percent. Similarly, in Europe, apparel exports have
increased by 30.6 percent and textiles exports by 2.2 percent, during the
corresponding period.

In 2006 also the export growth in these two markets is

continuing with the same trend. This increasing trend in exports is expected to
continue as major global players are not inclined to source exclusively from China.

India is considered as the second most preferred destination for major global retailers

due to its strength of vertical and horizontal integration.


At this juncture, a strong foundation for industry has been laid on which world class
manufacturing units can realize their full potential and make a mark in the
international economy.

BIBLIOGRAPHY

www.ibef.org

www.Fibre2fashion.com

www.amritt.com

www.economictimes.com

www.ndtvupdates.com

www.textilesofindia.com

www.yarnsandfibres.com

www.technotexindia.com

www.indiainbusiness.com

Recent trends in Textile Sector Raj Mehrotra

Government Intervence in Textile Industry Shankar Iyer