Professional Documents
Culture Documents
Indian Garment Industry PDF
Indian Garment Industry PDF
INDIAN GARMENT
INDUSTRY
Made by:
Puneet Khurana
Manika Pahwa
Arushi Bansal
Rachit Dhingra
Akanksha Sharma
ACKNOWLEDGEMENT
TABLE OF CONTENTS
Executive Summary
Objective
1.
2.
Major Segments
Men
Women
Kids
3.
4.
5.
Key Players
Brief profile of key players
Differentiation
6.
7.
8.
9.
10.
Retail Scenario
11.
12.
13.
Budgeting implications
Industry Wish List
Sops in Budget
14.
Monetary Policy
15.
16.
SWOT Analysis
17.
Recommendations
18.
Conclusion
References
Annexure
EXECUTIVE SUMMARY
Fashion is serious business, everywhere. Admittedly, India was a latecomer in the
scene, but the pace now is scintillating. This is testified through the escalating
figures of the garment market as also by the growing tally of fashion brands and
retailers who have occupied substantial share of the countrys retail space. Truly,
the clock cannot be turned back now.
Over the past year, the garment industry has been building up on its capacities at
various levels, expanding its product base, incorporating innovative technology,
and engineering newer avenues of business. This sector, being one of the largest
industrial sectors of the country, is a major propellant of the economys growth.
Inherent issues and challenges dominate the industry. With the changing dynamics
of doing business in a rapidly-changing global economic scenario, the sector needs
to identify scopes for potential business ideas and overcome challenges by
converting them into fresh opportunities.
The project aim is to understand how various movements in the economy affect the
garment industry. An in-depth analysis for implications of various government
policies on garment industry has also been done. The project work also highlights
how important is the garment industry to the growth of our economy. The study
also gives insights about the demographics and psychographics of Indian
consumers, the key players in the industry and recent trends in the industry.
OBJECTIVES
History
The history of apparel 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.
25
20
15
15.5
13.6
13.1
10
5
4.2
4.7
2003>2002
2005>2004
5.9
0
2007>2006
Year
Volume
Value
Figure 11
2
M illion Units
6,000
5,000
4,000
4,808 5,034
4,610
4,422
5,332
5,644
5,955
6,270
6,580
3,000
2,000
1,000
0
2002 2003 2004 2005 2006 2007 2008 2009 2010
ex
ex
ex
Year
Volume
Figure 23
The Indian apparel industry (including garment retail, fashion designing and
accessories trade) is booming like never before. The rapid increase in job
opportunities and expanding earning capabilities has resulted in the inculcation of a
brand new mindset amongst Indian consumers. Spending on brands is no longer an
improbability, with shoppers willing to pay for quality and premium products. The
apparel industry has benefited immensely from these new market trends.
1,715
INR Billion
1400
1,555
1,390
1200
1,224
1000
1,060
800
600
400
613
693
777
883
200
0
2002
2003
2004
2005
2006
2007
2008
ex
2009
ex
2010
ex
Year
Value
Figure 34
The clothing and apparel segment is the largest organized retail category,
constituting Rs 21,400 crore of the countrys Rs 55,000 crore organized retail
sector in 2006.only 19% of this segment is organized, with a strong potential for
still further retail penetration. The high level of branding exercises undertaken by
4
10
Considering the countrys present economic preference, fashion retail can only
continue to grow in direct proportion to the rising incomes and spending powers of
Indian consumers. With about 65% of these consumers below 35 years of age,
apparel retail can only reign supreme in the marketplace.
11
MAJOR SEGMENTS
Apparel industry has been broadly classified into three segments:
1. Men
2. Women
3. Kids
Kids' Apparel +
Uniforms
Mens' Apparel
Womens' Apparel
40.2%
Figure 45
In the total apparel market size of Rs 122,400 crore in 2007, among the three major
apparel segments, menswear formed the largest block with 40.2%6 of market share,
while womenswear followed with 34.8% and kidswear/uniforms followed with its
5
6
12
24.9%. Unisex apparel has been apportioned among these broad segments in the
ration of 5: 3.5: 1.5 for men, women and kids, respectively.
SIZE OF MAJOR APPAREL SEGMENTS (VALUE TERMS: INR BILLION)7
2002
2003
2004
2005
2006
2007
MENS
APPAREL
252.0
284.3
317.3
355.3
433.8
492.6
WOMENS
APPAREL
207.8
237.6
269.5
309.5
367.6
426.3
KIDS
APPAREL
153.2
171.4
190.6
218.7
258.3
305.1
TOTAL
613.8
693.3
77.4
883.4
1059.7
1224.0
2005>2004
2007>2006
Segments
Volume
Value
Volume
Value
Volume
Value
MENSWEAR
3.4%
11.7%
3.8%
11.8%
5.9%
13.3%
WOMENSWEAR
5.1%
13.6%
5.5%
15.0%
5.8%
16.0%
UNISEX
APPAREL
3.9%
23.1%
4.2%
13.6%
6.5%
15.7%
KIDSWEAR
3.5%
8.6%
3.8%
11.4%
4.4%
15.6%
UNIFORMS
6.5%
17.2%
8.0%
21.1%
9.3%
22.5%
Total
4.2%
13.1%
4.7%
13.6%
5.9%
15.5%
Growth trends across various apparel segments during the six-year period from
2002 to 2007 shows that menswear which had registered a steady decline in the
7
8
13
growth rate (despite remaining the dominant market segment) since 2002, has
again embarked on an upward curve in 2007. in 2003, volumes in menswear grew
at 3.4% as against 5.1% in womenswear; in 2005, it was 3.8% and 5.5%,
respectively; but in 2007, this has been reversed with menswear volumes growing
at 5.9% as compared to a 5.8% volumes growth in womeswear.
TOTAL
9.30%
Uniforms
Kidswear
15.50%
22.50%
4.40%
15.60%
6.50%
Unisex Apparel
15.70%
Womenswear
5.80%
Menswear
5.90%
0.00%
5.00%
10.00%
16%
13.30%
15.00%
20.00%
25.00%
Growth Rate
Volume
Value
Figure 59
14
Highest volumes as well as value growth are recorded in the uniforms segment,
which is currently valued at rs 11,500 crore. While the segment recorded as 9.3%
volume growth in 2007 over 2006, its value growth was as high as 22.5%, over
21.2% annual growth during 2005.
The next highest volumes growth is in unisex apparel (6.5%), where value growth
was to tune of 15.7% resulting in a market size of Rs 11,980 crore. Volume and
value growth in 2005 were 4.2% and 13,6% respectively. With the menswear
segment coming alive and all other segments also growing faster year after year,
the market is sure on a revival track.
15
9.6%
2007
24.5%
10.0%
28.5%
27.4%
9.3%
2006
24.8%
9.9%
28.6%
27.3%
9.1%
2005
25.2%
9.6%
28.7%
27.4%
8.8%
2004
25.4%
9.7%
28.5%
27.6%
8.6%
2003
25.6%
9.7%
28.2%
27.8%
8.4%
2002
0.0%
25.8%
9.7%
5.0%
10.0%
28.0%
28.1%
15.0%
20.0%
25.0%
30.0%
Kidswear
Uniforms
35.0%
% Market Share
Menswear
Womenswear
Unisex Apparel
Figure 610
With regards to market share of apparel segments, from a 37.3% value in share in
2002, the menswear segment share has steadily declined to 35.4% in 2007.
Womenswear market share, on the other hand, has steadily increased during this
10
16
period, as also the uniforms segments. From 31.2% market share in 2002, the
womenswear segment share has increased marginally to 31.3% in 2006 and further
to 31.4% in 2007. Uniforms segment, which has shown the fastest growth among
all apparel segments, has increased its market share from 7.6% in 2002 to 8.8% in
2006 and further to 9.4% in 2007.
Unisex apparel has maintained a more-or0less plateau market share at 9.8% during
2006 and 2007, although it increased rapidly from 7.7% in 2002 to the present
level. Kidswear too has maintained a more-or-less plateau market share at 14.1%
during 2006 and 2007, but unlike unisex apparel, its market share had steadily
declined from 16.2% in 2002 to the level in 2006.
17
Basic apparel consists of highest volume with moderate demand uncertainty and is
priced relatively low. On the other hand, fashionable attire comprises lowest
volume with volatile demand, but is highly priced. Mass-product is the feature of
basic-product segment and customized merchandise becomes the hallmark of
fashion-product category. Therefore, depending to which demand-segment they
cater to, apparel organization needs to formulate suitable supply strategy.
18
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
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
19
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 million people.
According to our estimate, the total value of production in the garment sector is
around Rs.1,0501,100 billion 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 billion.
20
Cotton
(Farms)
Composite Mills
(spinning, weaving,
processing)
Ginning
Processing/
Finishing
Cloth
Yarn
Jute/Wool/
Silk
(Farms)
Cone
Hank
Stand-Alone
Weaving
(mid-size)
Power looms
(small)
Garments &
Accessories
Distribution
Channel
(Export &
Domestic
Markets)
Cloth
Handlooms
Spinning
Grey
Polymers
(Petrochemic
al Plants)
Man-Made:
Filament
Extrusion
Process
Knitting
Other Textile
Products
21
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
Weaving, using power looms was traditionally done by composite mills that
combined it with spinning and processing operations.
government incentives and demand for low cost, high volume, standard
products (especially sarees and grey cloth) moved the production towards
power loom 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
million. sq. mts. of cloth. Most of these mills are located in Gujarat and
Maharashtra. Most of the woven cloth comes from the power looms (chiefly
at Surat, Bhiwandi, NCR, Chennai). In 2005, there were 425,792 registered
power loom units that produced 26,947 mn. sq. mts of cloth and employed
about 4,757,383 workers.
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.
Spinning
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
Indian Garment Industry
23
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 fibers produced are silk (15742 tonnes), jute (10985000 bales), wool
(50.7 mn kg) and man-made fibers (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 fibers 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.)
24
25
fibers like viscose rayon and acetates are made from organic polymers
derived from natural raw materials, mainly cellulose. Synthetic fibers
including acrylics, polyamides and polyesters are generally derived from
petrochemicals and petroleum products.
47.50
Crop size
310.00
Imports
6.50
Total availability
364.00
Demand
Mill consumption
207.00
Small-mill consumption
23.00
Non-mill consumption
15.00
Total Consumption
245.00
Exports
65.00
Total Disappearance
310.00
Carry forward
54.00
26
KEY PLAYERS
S. no.
Menswear
Womenswear
Kidswear
1.
Lilliput
2.
Raymonds
Arvind Mills
Benetton Kids
3.
Koutons
ITC Wills
Catmos
Esprit
Peter England
Allen Solley
Van Heusen
Louis Philippe
27
Raymond
A 100% subsidiary of Raymond Limited, Raymond
Apparel Ltd. (RAL) ranks amongst India's largest and
most respected apparel companies. RAL entered into
the ready-to-wear business with the introduction of
Park Avenue in 1986 catering to the men's formal wear market. Parx was
launched in 1998 to address the growing trend of smart casuals. In 2000,
Manzoni, a luxury lifestyle brand was launched offering a super-premium
formal range of men's shirts, suits, trousers, jackets, ties and leather
accessories. Raymond identified the vacuum for a high end, casual wear
brand and hence decided to acquire ColorPlus as a part of strategic
expansion plan for their ready-to-wear business. Notting Hill was launched
in 2007 to cater to the popular price segment. In addition to this, Raymond
Apparel has also ventured into the kidswear segment with its exclusive
brand Zapp!
Raymond Brands
28
Koutons
Koutons retail is the leading manufacture of
readymade and stylish fashion wear brand in the
country today. With more than 1365 outlets across 493 cities in India,
Koutons a wide range of apparels in men, women and children wear.
Koutons has positioned itself as a Fashion and Quality at Affordable price
for the middle to high segment.
Koutons got into female segment this is April 2008 by launching their brand
less femme. This brand caters to young women in the age group of 16-34
years and includes apparels like t shirt party wear etc. it also launched their
brands kids junior catering to young boys and girls in the age group 2-14
years.
Koutons further plan to enter the footwear segment in October and add
mens innerwear in its portfolio. Currently Koutons has four brands under it
umbrella Koutons mens wear, les femme. Koutons Junior and Charlie
outlaw.
Koutons Brands:
Koutons Menswear
Charlie Outlaw
Les Femme
Koutons Junior
29
Arvind Mills
Arvind Mills was established in 1931. It was founded
by Kasturbhai Lalbhai, one of the leading families of
Ahmedabad. Arvinds brand portfolio includes: Lee ,
wrangler, nautical, Jansport, Kipling, Tommy, Flying Machine, Excalibur,
Arrow, US Polo , Izod, Pierre Cardin , Palm beach ,Cherokee, Gant, Hart
Schaffner, Marx, Sanabelt. It manufactures denims, shirting, khakhis, knits,
and garments. The company has a turnover of approx $500 million and is a
part of over 100 years old Lalbhai group.
Arvind entered into exports of garments setting up shirts factories in
Bangalore 2001. This modest beginning has quickly grown to a capacity of
around 4.50 million shirts, annum and the list of customers includes dockers,
gap, next, Espirit, FCUK, Osh, Kosh and many others.
The lalbhai group subsidiary Arvind Mills said recently that it temporarily
suspending expansion plans for two apparel brands, Rider and Hero, which
the company had jointly developed with the US based branded lifestyle
apparel player VF Corporation. The two companies had signed the JV
agreement in 2006 establishing the VF Arvind Brands to design market and
distribute VFs branded lifestyle apparel in India.
Flying Machine
Newport
Ruf & Tuf
Excalibur
Arrow
Lee
30
Wills Lifestyle
ITCs lifestyle retailing business
division
has
established
ITC forayed into the youth segment with the launch of john players in
December 2002. The brand available pan India through a network of over
1300 multi brands outlets. The launch of Miss Player is currently available at
select exclusive stores, select John Players stores and multi brand outlets.
31
Aditya Birla
Nuvo
Raymond
Product
Range
Mens,
Womens &
Kidswear
Mens
&
Womenswear
Brands
Esprit
Peter-England
Van Heusen
Allen Solly
Louis-Philippe
Positioning
Presence in all
segments
Tie Ups
Many International
Players- Louis
Philippe, Van
Heusen etc.
Media
Used for
promotion
Park Avenue
ColorPlus
Parx
Notting Hill
Zapp!
Koutons
Arvind
Mills
ITC Wills
Family
Store
Mens,
Womens
&
Kidswear
Mens, &
Womenswe
ar
Lee
Wrangler
Nautica
Jansport
Kipling
Tommy
John Players
Miss Players
Club Wills
Koutons
Charlie Outlaw
Les Femme
Koutons-Junior
Presence in all
segments
High End
All company
hold brands
Many
International
PlayersWrangler,
Nautica, etc.
All Company
hold brands
Print, electronic,
hoardings, In store
Print, electronic,
hoardings, In
store,
Hoardings, print,
POP
Quality
Different quality in
different brands
High Quality
Medium Quality
Loyalty
Program
No
No
High End
Print,
electronic,
hoardings, In
store
Different
quality in
different
brands
For Some
Brands
Print, electronic,
hoardings, In
store
High Quality
Yes
32
The readymade garments segment benefited the most with the abolishment
of the quotas. According to the Apparel Export Promotion Council (AEPC),
readymade garments export from India is expected to reach US$14.5 billion
by 2009-10. Presently, it accounts for 43 percent of total textile exports and
six percent of Indias total export.
33
Though India enjoys the advantage of a host of low costs in textile and
apparel manufacturing, subsidies and supply of cheap labour currently faces
threat from its neighbouring competitors- Bangladesh, Vietnam and Sri
Lanka. These countries with minimal cost, under valued exchanged rates,
low taxes, subsidies and plentiful cheap labour could result in sail of the
industry to these locations.
Unemployment
As per a Confederation of Indian Textile Industry (CITI) study, total
employment generation from exports was at 25.80 lakh in 2004-05. The
CITI study points out that with appreciation of Rupee, the growth rate of
apparel and textile exports decreased from 16.6 percent to 9.2 percent in
2006-07; and this has already reduced employment from the apparel and
textile export trade by about 1.22 lakhs, and can further lead to an overall
loss of over six lakh jobs, unless serious remedial measures are undertaken
to prevent the crisis. Under present circumstances, its estimated that about
2.72 lakh jobs will be lost in direct employment in the textile and apparel
industry in 2007-08.
34
It has also been observed that the textile and apparel sector witnessed more
investment in existing technology than on new technology. Although nanotechnology has helped in developing manmade fibres (and filament yarn),
the industry still lags behind it counterparts in the United States, china,
Europe and Taiwan. Import of new and advanced technology could certainly
compensate for the losses on account of exports due to declining dollar.
35
TOTAL
USA
UK
Germany
France
UAE
Italy
Netherlands
Spain
Canada
Saudi Arabia
Denmark
Belgium
Japan
Sweden
Russia
Mexico
South Africa
Ireland
Singapore
Switzerland
11
Year 2005 Year 2006 Year 2007 Jan-07 Feb-07 Jan-08 Feb-08 2007
2008
8078.05
2678.30
905.58
615.15
582.75
438.57
357.85
258.61
333.69
263.74
193.12
162.17
120.70
106.74
62.58
23.30
49.54
59.28
63.18
44.28
53.78
1877.08
561.06
204.99
171.98
145.79
112.24
97.68
77.07
87.54
49.84
25.66
48.31
39.27
24.07
21.00
12.01
12.24
8.07
8.46
5.96
10.55
8948.44
2937.10
919.39
670.92
683.42
513.17
437.75
342.56
330.96
290.89
196.07
191.02
162.20
127.74
77.63
57.05
61.57
50.88
46.60
50.69
56.67
9218.84
2815.24
1106.62
766.35
668.81
625.65
422.72
338.20
333.71
252.93
209.12
197.92
176.45
101.38
76.23
67.32
66.72
60.74
56.23
52.66
51.10
826.81
263.66
78.21
63.35
69.39
38.63
53.40
37.31
32.39
24.88
10.98
25.21
16.99
10.70
5.44
13.70
7.14
3.73
4.62
3.63
4.65
831.21
278.57
93.68
57.45
67.03
35.12
46.29
30.90
33.69
26.08
11.27
21.73
15.37
13.83
7.66
5.00
5.61
2.94
4.80
4.19
4.86
925.37
279.67
97.86
79.50
74.14
56.53
49.10
37.39
43.77
24.23
14.20
23.27
21.94
9.93
9.67
6.29
6.91
4.05
3.60
2.81
4.89
951.71
281.39
107.13
92.48
71.66
55.71
48.58
39.68
43.77
25.61
11.46
25.04
17.33
14.14
11.33
5.72
5.33
4.03
4.86
3.15
5.66
1658.02
542.24
171.89
120.81
136.42
73.75
99.68
68.21
66.08
50.96
22.25
46.94
32.36
24.54
13.10
18.70
12.75
6.67
9.42
7.82
9.51
%age
%age Share
Change in
in
India's
India's
RMG
RMG
Exports
Exports
Jan-Feb
2007 2008 2008 /JanFeb 2007
100
32.7
10.37
7.29
8.23
4.45
6.01
4.11
3.99
3.07
1.34
2.83
1.95
1.48
0.79
1.13
0.77
0.4
0.57
0.47
0.57
100
29.89
10.92
9.16
7.77
5.98
5.2
4.11
4.66
2.66
1.37
2.57
2.09
1.28
1.12
0.64
0.65
0.43
0.45
0.32
0.56
36
13.21
3.47
19.26
42.36
6.87
52.19
-2.01
13
32.48
-2.2
15.29
2.93
21.35
-1.89
60.28
-35.75
-3.98
21.02
-10.2
-23.78
10.96
2002
2003
2004
2005
Textil
es
496
Appar
el
4084
Textil
es
413
Appar
el
5067
Textil
es
597
Appar
el
6296
Cambodi
a
26
1313
21
1600
26
1981
China
20562
41302
26900
52061
33428
61856
41050
74163
48683
95388
India
6028
6037
6846
6625
7009
6632
8462
9212
9330
10192
Indonesia
2909
3875
2921
4052
2961
4285
3353
4959
3605
5699
Pakistan
4790
2228
5811
2710
6125
3026
7087
3604
7469
3907
Sri
171
2350 161
Banglade
sh
2513 149
Textil
es
696
2006
Appar
el
7751
Textil
es
2193
2776 136
Appar
el
2675
2874 154
3046
Lanka
Labour laws and scale economics: Countries like China have historically
had high labour flexibility in their export oriented units. This has allowed
them to achieve large scale in terms of labour force employed in each
manufacturing facility and reap the benefit of scale economies and use
the latest advanced machinery from developed countries. India, in
12
37
Logistical delays and costs: though the national highways are improving,
this is not true of connectivity to all sources and destinations. The
turnaround time in major ports of India and movement of cargo between
ships and source or destination within India is still plagued by
monopolistic bureaucratic structures with little accountability and
incentives for efficient service delivery to the exporter and importer.
High cost of power in India this is 1.5-2 times higher then in competing
nations.
38
39
GMT
GMT
YEAR
ENDED
Dec 1995
Dec 1996
Dec 1997
Dec 1998
KNITTED
GARMENT
EXPORTS
M Pcs
Bn $
M Pcs
Bn $
43.66
560.2
632.4
682.0
1.16
1.47
1.60
1.63
623.5
644.5
669.0
655.7
3.32
3.32
3.26
3.42
32.01
34.87
36.52
41.27
Dec 1999
Dec 2000
Dec 2001
Mar 2002
758.6
827.7
855.0
610.0
1.88
2.06
2.13
1.23
646.0
679.1
728.4
783.0
3.44
3.72
3.55
3.15
43.05
44.87
47.14
47.72
Mar 2003
983.0
2.37
855.0
3.26
48.56
Mar 2004
Mar 2005
1,113
857
2.66
2.50
711.0
746.0
3.54
3.71
45.86
44.84
Mar 2006
1,148
3.18
1153.0
5.43
44.28
Mar 2007
1315
3.61
1070.0
5.26
45.29
13
EXCG
RATE
REMARK
S.E Asian
currency
crisis
18 % excise
duty
on
woven
garments
(2001
Budget)
16 % Excise
Duty
on
Woven
Garments
(2002
Budget)
a)Excise
made
optional to
Cenvat
b) Dec 04
end of ATC
Mid= Year,
12 % Re
appreciation
UNIT VALUE
Knitted
Woven
2.66
2.62
2.53
2.39
5.32
5.15
4.87
5.22
2.48
2.49
2.49
2.02
5.33
5.48
4.87
4.02
2.41
3.81
2.39
2.92
4.98
4.97
2.77
4.71
2.75
4.48
40
The above table shows garment exports knitted and woven over a decade,
juxtaposed with changes in exchange rate versus US Dollar. The following
points stand out:
1. Until 19877, Knitted garment exports were lower than that of woven
garments; however, while knitted garments advanced by almost 50%
during this period, woven garments expanded by less than 10%.
2. After 1987, knitted garment export exceeded that of woven garments
and hardly ever looked back. Their rise was further aided by levying
of excise duty on woven garment for the first time in the history of the
industry. This led to a deceleration in the expansion of woven
garments until the duty was made optional on CENVAT, whereupon
the woven sector came into its own. But by then, knitted sector had far
outpaced the woven sector.
3. Between 1995 and 2003 ( i.e. in eight years ) exchange rate advanced
by almost 50%. During this period, knitted garment exports have more
than doubled, whereas woven garment exports increased by obly 33%.
Thereafter, the exchange rate steadily declined by about 12%.
4. Competition from Asian suppliers forced reduction in unit value (
dollar / piece ) for both knitted and woven garments. Unit prices for
knitted garments fell from 2.66 USD to 2.39 USD by 2004 i.e. by
about 10% in 10 years, before recovering to 2.75$ by 2007. Unit value
( US dollar / piece ) for woven garments, on the other hand, fluctuated
throughout the period, averaging 5.70$ per/piece during the period.
5. The improvement after 2005 could partly be attributed to the
restrictions placed on Chinese garments by both USA and Europe
which are expected to expire by 2009.
41
6. it is important to note that unit value realization for both knitted and
woven garments are inclusive of accessories like handkerchiefs,
gloves, socks, shawls, scarves etc which are basically low-value
items. Such constitute about 10% of our export value for both knitted
and woven separately. If due note is taken of the above, the unit value
would improve to 2.95 $ and 5.5$ for knitted garments and woven
garments respectively
7. The above performance is despite the fact that the industry is not
refunded state and corporation taxes together aggregating about 6% of
the FOB value, although all of Indias Asian competitors are not only
granted full refund of all taxes/duties, but also, in some case, granted
export rebates.
8. All the above points, specifically for exports, also apply to production
basically, production is scheduled against advanced sales, whether
domestic or export.
42
43
EU GSP Unfair
Europe also put in place Generalized System of Preference (GSP) whereby
certain countries were preferred over others. The current GSP scheme which
will run up to 2015 as three major arrangements:(a) The General arrangement
(b) The arrangement for least developed countries
(c) The GSP plus scheme
Under (a), products are divided into 2 groups viz sensitive and non sensitive.
Sensitive products are those products of EU which require higher and
broader protection from imports while the rest are non-sensitive. About 55%
of the products have been identified as being non-sensitive. Sc\such products
can enter EU duty free while sensitive products are allowed at 3.5% less
than MFN (most favored nation) rates. However, the most important point is
that the concessions apply only to those countries which (i) Protect labor
rights (ii) Contribute to environment protection and trafficking. This is
where policing by EU comes in. protection of labor rights is in accordance
with the labor laws of the supplying country but it is always facile for any
NGO to raise a dispute on non-observation of labor rights or on environment
in which case even pending orders or for goods-in-process can b cancelled
by the EU country and it would require intervention at government level to
remove such infraction.
Under (b), this is a special group carved out of less developed countries.
These least developed countries are officially recognized as such by the
United Nation. Duty concessions are double that of under (a) above. In this
case, the condition is that the raw material ie, yarn or fabric as the case may
be used for a garment should have been manufactured in the supplying
Indian Garment Industry
44
45
RETAIL SCENARIO
This can be sub divided into brand and non-brand. The branded retail sector
is not more than 10 % of the total. A retailer ( whether shop owner or mall)
has to keep a higher margin for branded garments than for unbranded to take
care of returns on his investments as well as discount on end of season sales
or out of fashion stocks and overheads.
The retail mark up is 50% for branded and 25% for non branded garments.
On this basis, the size of the retail market for garments can be estimated to
be around Rs. 4 to 5 trillion or around Rs. 500,000 crore. With malls coming
up all over Indian metros, retail trade in garments is getting better organized
than earlier. Attention is now shifting to B class and C class cities as well
as the rural sector. With the growth of the economy, thanks to economic
liberalization, the result of which is percolating to our farm lands as well as
spread of education in the rural population is fast picking up to the urban
level. Farm produce is being is better organized to reduce wastage and
increase the income of farmers, Rural indebtedness is being better bank
managed than the earlier system of dependence on money-lender sharks.
Better some villages, especially in Maharashtra, the rest can claim a standard
of life about equal, and in some villages, even better than their urban
cousins. In the last six months or so, inflation has been a bug-bear. But this
is due to two factors namely unseasonable weather and strident increase in
global oil prices.
46
India in recent years has been the focal point of continuous growth and
development making it one of the fastest growing economies of the world. It
is the 4th largest economy in terms of Purchasing Power Parity, after USA,
China & Japan, and is rated among the top 10 FDI destinations.
47
The Indian consumer is evolving and driving retail growth due to increased
consumption. Private consumption growth contributes to more than half of
the GDP growth and is growing in double digit figures. Several businesses
are reacting to this evolution positively, both through pull and push
phenomenon.
Following a similar trend, the Indian textile and apparel industry is also
experiencing rapid changes and growth. Apparel today has the largest share
of the modern organized retail in India i.e. 20% of the current market of Rs.
56,000 crore and this is expected to grow at a constant rate of 20% over the
next 4 years.
Retailers are increasingly accepting the widely agreed fact that consumers
love a bargain and always look forward to buying brands at low prices.
Factory outlets have become distinct shopping destinations with distinct
audiences. Apparel companies are focusing on this market to cash in on
consumers converting from stitched apparel to ready-to-wear, further
graduating to branded apparel. India is thus seeing a surge in discount
48
Trend 2
Consumers now desire branded products in all aspects of their life
Traditionally brands that offered formal wear are now extending into casual
wear, accessories, footwear etc. With most brands turning lifestyle brands,
they are opening larger Exclusive Brand Outlets (EBOs) to showcase their
complete range of merchandise and give an international feel, The past few
months has seen brands opening up very large format stores in India.
Trend 3
Designers realize the huge opportunities in ready-to-wear market and
are introducing prt lines
Another trend visible in the Indian designer wear market is corporatisation
i.e. strategic tie-ups with large corporate in related industries to provide the
necessary financial support and expertise in operational management. The
designer wear industry lacks the processes, systems, people and financial
resources to rapidly scale up their operations. The direct advantage of this
would accrue to the designers who would be able to concentrate on the
design and aesthetics rather than on business planning.
Genesis Colors Pvt Ltd., is the forerunner in the corporatisation of the Indian
designer industry. It is the parent company behind the labels Satya Paul,
Deepika Gehani, Tie Bar and Samsaara. These designers enjoy a wide
49
Trend 4
Indian companies see a huge opportunity in partnering with luxury
brands wishing to enter India
Trend 5
Worldwide surge in demand for organic and eco-friendly products
Organic cotton has been able to achieve maximum popularity amongst all
eco-friendly fibers. Global retail sales of organic cotton products are
projected to grow to $2.6 billion by the end of 2008, reflecting a 40%
average annual growth rate. Hence, the demand for organic cotton fiber is
expected to grow to 100,000 metric tons in 2008, an average annual growth
rate of 47%.
Trend 6
Kids and youth are influenced by icons & characters and desire to
possess them in their everyday life
Indian Garment Industry
50
Trend 7
Companies are exploring new' locations to retail in order to increase
visibility of their brand
51
Trend 8
Textile companies are strengthening front and back end operations
through mergers and acquisitions
52
53
need to out think and out perform competition. They have to meet all of the
following quality standards:
Dimensional stability
Seam strength
Abrasion resistance
54
Inventory management
Production management
Quality management
55
Design choices and visual possibilities can be infinite if the designer is given
the time and freedom to be creative and to experiment using the computer.
Today in our country automation is not only used for substituting the labour,
it is also adopted for improving quality and producing quantity in lesser
time. However, a CAD system is only as good (or as bad) as the designer
working on it. Computer only speeds up the process of say repeat making,
color changing, motif manipulation etc. It is actually the CAM aspect of
CAD
that
will
help
reduce
lead
time.
Knitted Fabrics
Some systems specialize in knitwear production and final knitted design can
be viewed on screen with indication of all stitch formation. For instance a
CAD program will produce a pullover graph that will indicate information
Indian Garment Industry
56
on amount of yarn needed by color for each piece. Another example of the
new technology in the industries using a yarn scanner which is attached to
the computer scans a thousand meters of yarn and then simulates a knitted/
woven fabric on-screen. This simulation will show how the fabric will look
like if woven from that yarn.
Printed Fabrics
The process involves use of computers in design, development and
manipulation of motif. The motif can then be resized, recoloured, rotated or
multiplied depending on the designer's goal. Textures and weave structures
can be indicated so that printout either on paper or actual fabric looks very
much the way the final product will look. The textile design system can
show color ways in an instant rather than taking hours needed for hand
painting. New systems are coming which have built-in software to match
swatch color to screen color to printer color automatically i.e. what you see
is what you get.
57
Embroidery Systems
The designs used for embroidery can be incorporated on the fabric for
making garment. For this special computerized embroidery machines are
used. Designers can create their embroidery designs or motifs straight on the
computer or can work with scanned images of existing designs. All they
need to do is assign color and stitch to different parts of the design. This data
is then fed into an embroidery machine with one or multiple heads for
stitching.
Digitising Systems
Digitisers put original patterns into the computer for use and storage. It can
be done by defining the X, Y co-ordinates of series of selected points around
the pattern. These basic patterns can be manipulated with the help of a
computer, for example in case of trousers, darts can be moved, pleats can be
created or flair can be introduced. This way new design can be created on
Indian Garment Industry
58
screen from pre-existing patterns. Today large scanners are also used to
input pattern shapes instead of tracing patterns on a digitizer.
Grading Systems
After a sample size pattern has been put, it has to be graded up and down in
size. Certain points on the pattern are considered as "growth points" or
places at which the pattern has to be increased or decreased to accommodate
changing body size. At each growth point the operator indicates the grade
rule to the computer. The system will then automatically produce the pattern
shapes in all the pre-specified sizes. Say if we define pattern for size 30, it
can be easily graded for size 32/34/36 and so on.
Cutting Operations
Pattern generated by marker making systems can be directed to automated
cutting machines which are operated without the help of human hands.
59
60
BUDGETING IMPLICATIONS
Like other industries, garments sector also has its wish-list for consideration
in the recent union budget. The wish list segregated into segments viz.
a. Policy issue
b. Issues pertaining to domestic industry
c. Issue pertaining to the export industry
d. Procedural issues
Policy Issues
Removal of state and corporation Taxes on export of garments
Export of garments are burdened with taxes and duties levied by :
a) Central government
b) State government
c) Municipal corporation
61
but since textiles have not been included in vat , garments units are not able
to offset taxes and duties paid on inputs. Again, refund take a long time
while payments are immediate, thus affecting adversely the cash flow
positions of exporters and every budget brings with it fresh does of taxation
in one form or the other
So in the forthcoming budget, a provision should to be made to exempt
exports from all direct taxes (rather than pay and later refund)
In case of indirect tax (including state and corporation levies) a find to be set
up from out of the taxes paid by the industry to refund 6 percent FOB on all
exports against realization of the exports against realization of the proceeds
through normal banking channels. Since exports contribute only 25 percent
of production, there is no fear of an outgo exceeding collection by govt. and
corporation
garments
machinery of similar speeds and or stitches per minute and further, since
countervailing is levied with the sole objective of the protecting the domestic
industry, it is hoped that the budget proposals will remove countervailing
duty from all garments machinery entitled to concessional duty.
Labour Reforms
Immediate reforms in labour laws to help improve production and
productivity of garments are called for:
62
These include: Increase in working hours from 48 to 60 per week with suitable
provision for rest period
Female workers to be employed in the entire second shift
In view of the second nature of the garment industry, contract labors
be permitted on condition of a guaranteed employment 100 days in a
year.
The sector did get some sops in the budget, these were:
SEZ- SEZ scheme is likely to continue, as per the assurance given by the
Prime Minister. Six mega clusters are proposed to be developed in power
looms, handlooms and handicrafts. Allocation of Rs.70 crore per cluster.
With an immediate provision of Rs 100 crore this year has been envisaged.
Textile Up gradation Fund (TUF) - Allocation for textiles up gradation
fund (TUF) has been increased from Rs. 911 crore to Rs 1090 crore. The
budget has also maintained the provision for Scheme for Integrated Textile
Parks (SITP) at Rs. 450 crore. However, the schemes would not provide
immediate support to textiles sector, which is need of the hour. Increases in
subsidy under the TUF scheme can hardly be considered a relief package
looking to the outstanding claims pending with the banks. There are already
Rs 600cr plus outstanding according to the banks
Reduction in Excise Duty - The excise duty has been reduced from 16% to
14% under 2008-09 budget but the concession would prove to be highly
elusive for apparel exporters as textile manufacturers, already struggling
63
with stiff margins, may not be able to pass on the benefit down the line to
exporters.
Non Profit Corporations - The FM has proposed to establish a non profit
corporation with intention to garner Rs 15,000 crore as capital from
government, the public and private sector and bilateral and multilateral
sources for establishing training institutes including 300 additional ITIs.
A noticeable thing in budget 2008-09 is its silence about how to arrest the
slump in employment intensive industries like textile, garments, leather and
handicrafts. Apparel exports promotion council estimates that if situation
remains unchanged, the job losses this year would be six lakh.
64
domestic
developments
through
both
conventional
and
unconventional measures.
GDP growth projection for 2008-09 in the range of 8.0- 8.5 per cent.
14
RBI Website
65
Bank Rate
Bank rate is the rate at which central bank of the country lend funds to
national banks. A central bank adjusts the supply of currency within national
borders by adjusting the bank rate. When the central bank reduces the bank
rate, it increases the attractiveness for commercial banks to borrow, thus
increasing the money supply. When the central bank increases the bank rate,
it decreases the attractiveness for commercial banks to borrow, consequently
decreasing the money supply. Considering the current recession situation in
market, RBI is planning to reduce the bank rate. Thus, the interest rates in
market will decrease which will result in cheaper availability of funds for
industry which will again result in increasing the productivity for the
industry.
66
(CRR) of scheduled banks, which is 7.5 per cent at present, was cut by 100
basis points to 6.5 per cent with effect from the current reporting fortnight
that began on October 11, 2008. This measure will release additional
liquidity into the system of the order of Rs.40, 000 crore. Thus that would
result in increase of productivity in Industry.
Repo Rate
Repo Rate is the discount rate at which a central bank repurchases
government securities from the commercial banks, depending on the level of
money supply it decides to maintain in the country's monetary system. To
temporarily expand the money supply, the central bank decreases repo rates
(so that banks can swap their holdings of government securities for cash), to
contract the money supply it increases the Repo rates. Recently RBI has
reduced Repo rate by one percentage point to 8 per cent, as part of its
ongoing efforts to ease the pressure in the credit market.
67
68
15
69
Set Wet Zatak, Raymond Suitings , and Reid & Taylor were in the
top 10 list of brands across both 2006 & 2007.
Top Fashion Brands Advertised on TV
Rank
1
2006
Set Wet Zatak
D'damas Gold
2
Expressions
3
D'damas Collection G
4
Reid & Taylor
5
Koutons Readymades
6
Raymond Suitings
7
Integriti Readymades
8
Axe Click
9
TitanDivision
Quartz
Source:AdEx
India(A
of TAM
Research
10
Siyaram
Note:Figures are based on secondages.
2007
Set Wet Zatak
Forever Mark - DTC
set Wet Zatak Gold
Raymond Suitings
Axe Deodorant
Axe Vice
Rexona Deo Roll On
Wild Stone
Belmonte
Reid & Taylor
70
Print
13% growth in advertising volumes of fashion industry on print
during 2007, over 2006.
Fashion industry used newspapers and magazines in an advertising
ratio of 81:19 during 2007.
Maximum advertising of fashion brands on general-interest
newspapers and women- interest magazines.
Koutons ready-mades maintained its first rank in the top 10 brand list
in print across both
2006 & 2007.
The average ad per day by fashion industry has seen a rise of 27% in
print during 2007.
Radio
Fashion industry advertising saw a growth of 173% on radio during
2007, as compared to 2006.
Radio advertising by fashion industry skewed towards Delhi &
Mumbai.
Pantaloons was the top name in the top 10 brand list on radio during
2007.
Two-time rise in average ads aired per day by fashion brands on radio
during 2007, over 2006.
71
SWOT ANALYSIS
Strengths
Abundant raw material availability
India is one of the leading producers of natural and man made fibers. The
abundance of raw material allows industry to control cost and reduce
over all lead time.
Low cost skilled labour
India has third lowest wage rate as compared to other key garment
manufacturing companies. This provides industry with a distinct
competitive advantage.
Presence across value chain
Indian industry has manufacturing capacity present across complete
product range, that allows garment manufacturers to source raw material
locally and thus reduces the lead time.
Growing domestic market
The Indian domestic market is extremely sensitive to fashion fads and
this has resulted in development of very responsive garment industry.
72
Weaknesses
Fragmented industry
Global buyers prefer to source their requirements from two to three
vendors and Indian garment manufacturers find it difficult to fulfill the
capacity requirements.
Effect of historical government policies
The industries continues to be affected by several historical regulations,
for instance there is still an absence of viable exit options for industry
players. These regulations resulted in complex industry structure, which
is currently an obstacle. In the Pre 2000 era garmenting sector was
reserved for the Small scale Sector, which has resulted in most units
being set up with small capacities. Till now, knitted garment sector is
reserved for the small scale sector.
Though the historical regulations are relaxed now, they continue to be an
impediment to global competitiveness.
Lower productivity & cost competitiveness
Lower cost competitiveness has hampered ability to compete with lower
cost global players because the labour force in India has a much lower
productivity as compared to competing countries like China, Sri Lanka.
Technological obsolescence
73
Opportunities
OPPORTUNITY MATRIX
Success Probability
HIGH
A
t
t
r
a
c
t
i
v
e
n
e
s
s
H
I
G
H
LOW
Rising
Fifth largest
Disposable
consumer
Income
L
O
W
Liberalizing
Sizeable urban
economy
middle class
74
Liberalizing economy
Opening up of Indian economy has presented the players with lots of
opportunities; Indian companies are tying with global brands. They are
leveraging the brand name of global brands.
Growing dual income
With number of working womens increasing the dual incomes are
income thus income available at peoples discrete has also increased.
Rising Disposable Income
According to McKinsey Global Institute (MGI), by 2035 over 23 million
Indians will number among the countrys wealthiest citizens. Forecasts
for Indias real GDP growth rate over the coming two decades generally
range between 6 and 9% per year. MGI forecast real compound annual
growth of 7.3% from 2005-2025. Average real household disposable
income will grow from 113,744 Rs in 2005 to 318,896 Rs by 2005, a
compound annual growth rate of 5.3%. This is significantly more rapid
than the 3.6% annual growth of the last two decades.
75
76
Threats
THREAT MATRIX
Probability of Occurrence
HIGH
S
e
r
i
o
u
s
n
e
sL
s
H
I
G
H
LOW
State of
Competition from
Recession in the
global players
economy
Fluctuation in
L
O
W
rupee value
77
The apparel industry gets severely hit during recession because of less
liquidity in the market. This industry is an export-oriented industry which
lies in doldrums during this stage.
Competition from global players
The major exporters of garments from all over the world are giving tough
competition to India as they are providing higher productivity with lower
costs. Competition is not likely to remain just in the exports space, the
industry is likely to face competition from cheaper imports as well. This
is likely to effect the domestic market and may lead to increased
consolidation.
Ecological & Social Awareness is likely to result in increase pressure
on the industry to follow international labour and environmental laws.
78
RECOMMENDATIONS
After understanding the industrial and economic scenarios we would like to
give following recommendations to Indian companies operating in garment
industry:
More emphasis should be given on the micro and macro level
economic factors. These factors indirectly or sometimes directly
affects each and every business in the economy, marketers should be
proactive enough to foresee the future impact of these factors on their
business.
Look for co-branding: It involves merging two or more well known
brands into a single product. It is an effective way to leverage strong
brands and helps in gaining synergy by having the best combination
of unique strength each brand has. Co-branding can be based on
innovation, ingredient, alliance, supply chain or any other.
Find out new ways of communicating to customers, like sending
information about new products, offers, stocks, etc through sms to cell
phones.
Industrialists shouldnt consider the expenditure on R&D and
technology as a cost, it should be considered as an investment because
it pays rich dividend in future.
Industrialists must emphasize on improving the standard of labors
because garment manufacturing is a labor intensive industry. The
productivity of industry directly depends upon the productivity of
labor.
79
are
under
estimating
the
importance
of
Visual
80
CONCLUSION
The trends discussed above clearly show that the fashion business is
exploring all aspects of expansion i.e. it is bound for a multilateral expansion
rather than only unilateral expansion. Multi lateral expansion is happening at
every part of the value chain as well as for every consumer segment.
81
REFERENCES
www.ncaer.com
www.fibre2fashion.com
www.indiaexports.com
Images Year Book 2008
India Retail Report 2009
Apparel Talk Magazine July 2008 Issue
Apparel Export Promotion Council
Marketing White Book 2007
Marketing Management by Philip Kotler
82
ANNEXURES
Raymonds Balance Sheet16
16
Raymond Website
83
17
Koutons Website
84
Arvind Mills18
18
85
19
ITC Website
86
2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99
737.5
684.1
775.3
814.0
885.9
1,054.6
Investments
Long-term
investments
581.6
415.9
438.8
312.6
229.8
224.7
Other
investments
144.9
160.0
98.4
1.0
31.2
114.3
215.5
Total
investments
741.6
514.3
439.8
343.8
344.2
440.2
318.9
359.8
425.2
438.1
441.4
569.5
Net
assets
375.5
Capital
employed
265.6
81.3
1,127.6 462.7
6,967.5 6,130.5 3,938.9 1,972.61 1,798.0 1,558.2 1,640.3 1,595.9 1,671.4 2,064.3
93.3
83.5
59.9
59.9
59.9
59.9
59.9
59.9
67.5
Net worth
285.3
211.5
197.8
282.7
317.3
320.4
534.0
Short
loans
term 902.2
207.7
194.3
70.1
176.4
150.6
275.7
117.0
Total
funds
405.8
267.9
459.1
467.9
596.2
651.1
127.5
126.4
101.2
962.7
Deferred tax
200.3
Capital
employed
20
174.1
591.1
167.7
125.5
87