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9/25/2010 By Group P1 Savan V Shah Shalabh Srivastava Sudip Kar Umang Sharma Kirti Mishra

ABOUT THE INDUSTRY...................................................................................3 IMPORTANCE....................................................................................................4 DOMESTIC ROLE..............................................................................................4 INTERNATIONAL IMPORTANCE...................................................................7 GOVERNMENT INITIATIVES..........................................................................9 MAJOR PLAYERS............................................................................................12 INDUSTRY STRUCTURE................................................................................14 PRODUCTION FUNCTION & PROFITABILITY ANALYSIS..........16


The Indian textile industry is one of the largest in the world with a massive raw material and textiles manufacturing base. Our economy is largely dependent on the textile manufacturing and trade in addition to other major industries. About 27% of

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the foreign exchange earnings are on account of export of textiles and clothing alone. The textiles and clothing sector contributes about 14% to the industrial production and 3% to the gross domestic product of the country. Around 8% of the total excise revenue collection is contributed by the textile industry. So much so, the textile industry accounts for as large as 21% of the total employment generated in the economy. Around 35 million people are directly employed in the textile manufacturing activities. Indirect employment including the manpower engaged in agricultural based raw-material production like cotton and related trade and handling could be stated to be around another 60 million. A textile is the largest single industry in India (and amongst the biggest in the world), accounting for about 20% of the total industrial production. It provides direct employment to around 20 million people. Textile and clothing exports account for one-third of the total value of exports from the country. There are 1,227 textile mills with a spinning capacity of about 29 million spindles. While yarn is mostly produced in the mills, fabrics are produced in the power loom and handloom sectors as well. The Indian textile industry continues to be predominantly based on cotton, with about 65% of raw materials consumed being cotton. The yearly output of cotton cloth was about 12.8 billion m (about 42 billion ft). The manufacture of jute products (1.1 million metric tons) ranks next in importance to cotton weaving. Textile is one of India’s oldest industries and has a formidable presence in the national economy in as much as it contributes to about 14 per cent of manufacturing value-addition, accounts for around one-third of our gross export earnings and provides gainful employment to millions of people. They include cotton and jute growers, artisans and weavers who are engaged in the organized as well as decentralized and household sectors spread across the entire country. 3| Page

The Textile Sector in India ranks next to Agriculture. Textile is one of India’s oldest industries and has a formidable presence in the national economy in as much as it contributes to about 14 per cent of manufacturing value-addition, accounts for around one-third of our gross export earnings and provides gainful employment to millions of people. The textile industry occupies a unique place in our country. One of the earliest to come into existence in India, it accounts for 14% of the total Industrial production, contributes to nearly 30% of the total exports and is the second largest employment generator after agriculture. Textile Industry is providing one of the most basic needs of people and the holds importance; maintaining sustained growth for improving quality of life. It has a unique position as a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing; it is a major contribution to the country's economy. ROLE OF TEXTILE INDUSTRY IN THE INDIAN ECONOMY Role of Textile Industry in India GDP has been quite beneficial in the economic life of the country. The worldwide trade of textiles and clothing has boosted up the GDP of India to a great extent as this sector has brought in a huge amount of revenue in the country. In the past one year, there has been a massive upsurge in the textile industry of India. The industry size has expanded from USD 37 billion in 2004-05 to USD 49 billion in 2006-07. During this era, the local market witnessed a growth of USD 7

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billion, that is, from USD 23 billion to USD 30 billion. The export market increased from USD 14 billion to USD 19 billion in the same period.

The textile industry is one of the leading sectors in the Indian economy as it contributes nearly 14 percent to the total industrial production. The textile industry in India is claimed to be the biggest revenue earners in terms of foreign exchange among all other industrial sectors in India. This industry provides direct employment to around 35 million people, which has made it one of the most advantageous industrial sectors in the country. Some of the important benefits offered by the Indian textile industry are as follows: • • • • India covers 61 percent of the international textile market India covers 22 percent of the global market India is known to be the third largest manufacturer of cotton across the globe India claims to be the second largest manufacturer as well as provider of cotton yarn and textiles in the world • India holds around 25 percent share in the cotton yarn industry across the globe • India contributes to around 12 percent of the world's production of cotton yarn and textiles The Role of Textile Industry in India GDP had been undergoing a moderate increase till the year 2004 to 2005. But ever since, 2005-06, Indian textiles industry has been witnessing a robust growth and reached almost USD 17 billion during the same 5| Page

period from USD 14 billion in 2004-05. At present, Indian textile industry holds 3.5 to 4 percent share in the total textile production across the globe and 3 percent share in the export production of clothing. The growth in textile production is predicted to touch USD 19.62 billion during 2006-07. USA is known to be the largest purchaser of Indian textiles. Following are the statistics calculated as per the contribution of the sectors in Textile industry in India GDP: • India holds 22 percent share in the textile market in Europe and 43 percent share in the apparel market of the country. USA holds 10 percent and 32.6 percent shares in Indian textiles and apparel. • Few other global countries apart from USA and Europe, where India has a marked presence include UAE, Saudi Arabia, Canada, Bangladesh, China, Turkey and Japan • Ready made garments accounts for 45 percent share holding in the total textile exports and 8.2 percent in export production of India • Export production of carpets has witnessed a major growth of 42.23 percent, which apparently stands at USD 654.32 million during 2004-05 to USD 930.69 million in the year 2006-07. India holds 36 percent share in the global textile market as has been estimated during April-October 2007 • The technical textiles market in India is assumed to touch USD 10.63 billion by 2007-08 from USD 5.09 billion during 2005-06, which is approximately double. It is also assumed to touch USD 19.76 billion by the year 2014-15

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By 2010, India is expected to double its share in the international technical textile market

The entire sector of technical textiles is estimated to reach USD 29 billion during 2005-2010

The Role of Textile Industry in India GDP also includes a hike in the investment flow both in the domestic market and the export production of textiles. The investment range in the Indian textile industry has increased from USD 2.94 billion to USD 7.85 billion within three years, from 2004 to 2007. It has been assumed that by the year 2012, the investment ratio in textile industry is most likely to touch USD 38.14 billion. INTERNATIONAL IMPORTANCE Developed countries' exports declined from 52.2% share in 1990 to 37.8 % in 2002. And that of developing countries increased from 47.8% to 62.2 % in the same period. In 2003 the exports figures in percentage of the world trade in Textiles Group (for select countries) were:

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The above chart clearly shows that export of world trade in textile group. Among world textile group EU occupies 34.80% of export, next China at 15.90%, USA at 6.40%, Republic of Korea at 6.00% Taipei, Ch at 5.50%, India and Japan at 3.80% respectively, Pakistan at 3.40%, turkey at 3.10% and Mexico at 1.20%. In Clothing Sector the figures were as below in 2003 in percentage of total experts globally:

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In this sector the exports have declined for EU (15) from 42% to 26.5% in period 1980-2003 whereas of China increased from 4% to 23% and of India from 1.7% to 2.9% only. We can see that developing countries' share in textiles had declined and in clothing it has increased sharply.

EXPORT SCENARIO: Textiles contributed 20% of India's exports to about US $ 12.5 Billion. The Quota Countries mainly USA, EU (15) and Canada constituted 70 % of total garment exports and 40% of India's textiles exports. In non-quota countries UAE is the largest market with 7% of textile exports and 10% of garment exports from India.

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The exports of readymade garments as per AEPC certification data for the last five years are as follows: **Qty in Million PCs and Value in Million US$.

The above table clearly depicts the export of readymade garments for the last five years. In the year of 2001-2002 the value of export of readymade garment is 395.23 and in the year 2005-2006 the value is 8200.00. From 2001-2002 it started

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increasing and in the year 2004-2005 it declines and again in the year 2005-2006 it increases.

Government Initiative
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 instalment in the year of receipt of such goods and the facility of payment of excise duty in quarterly basis.


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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 Karan’s 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 state’s 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 India’s branded sports apparel and equipment market. The brand, which started its stand-alone retail chain in

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India in 2008, has 31 stand-alone 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.

The Road Ahead
The Synthetic and Rayon Textile Export Promotion Council (SRTEPC) has set a target to more than double the export of man-made textile from the country. Presently, the global man-made fibre (MMF) trade accounts for 60 per cent of the total trade in textiles. SRTEPC plans to increase exports to US$ 6.2 billion by capturing four per cent market share by 2011-12. Exchange rate used: 1 USD = 44.49 INR (as on April 2010) 1 USD = 46.03 INR (as on February 2010)

Following are some major players in the vast field of Indian Textile Industry.

Arvind Mills Arvind Mills is one of the major and fully vertically integrated composite mills player in India. It has large production in denim, shirting and knitted garments. It is now adding value by

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manufacturing denim apparel. Its sales are around US$ 300 million.

Raymonds Raymonds has the large, diversified integrated business model, which is spread across the value chain from yarn to retail. It is specialized in Diversified woolen textiles. ItA already supplies to some US retailers.

Reliance Textiles: Reliance Textiles is one of the major Textile Company that is in business of fully integrated manmade fiber. It has capacity of more than 6 million tones per year. It has joint venture partners like, DuPont, Stone & Webster, Sinco (Italy) etc.

Vardhaman Spinning deals in spinning, weaving and processing segment of the industry. It is planning to double its fabric processing capacity to 50 million meters. It is an approved supplier to global retailers like GaP, Target and Tommy Hilfiger. Its sales are little over US$ 120 millions

 Welspun India (Manufactures terry towels)  Century Textiles (Composite mill, cotton & Man-made)  Morarjee Mills (Fully integrated Composite Mill)  Indo Rama (Cotton and Man-made)  GTN Textiles (Cotton Yarn and Knit Fabrics)  Ginni Filaments Ltd. (Yarn and Fasbric) 14 | P a g e

 LNJ Bhilwara Group (Diversified and vertically integrated denim producer with spinning and weaving capacity)  Mafatlal Textiles (Fully integrated Composite Mill)  Modern Group (Diversified, producer of denim, syntax and thread)  Ashima Syntex (Man-made Fiber)  KG Denim (Fabrics)  Sanghi Polyesters Ltd. (Manmade Fiber)  Nova Petrochemicals (Man-made Fiber)

 S. Kumar Synfabs Ltd. (Home furnishing and Suit Fabrics)
 Bombay Dyeing Ltd. (Composite and fully integrated)  Rajasthan Petro synthetics (Diversified)

 BSL Ltd. (Textiles)
 Garware Polyester (Diversified)  Banswara Syntex (Composite)  National Rayon Corp. (Man-made fiber)  GSL India Ltd. (Threads)  Indian Rayon (Man-Made Fiber)  Alok Textiles (Cotton and Man-made Fiber Textiles)  Sharda Textile Mills (Man-made Fiber)  Birla Group Dormeuil Birla VXL Ltd. (Fully integrated woolen textiles)

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Structure of India’s Textile Industry (Monopolistically Competitive)
Unlike other major textile-producing countries, India’s textile industry is comprised mostly of small-scale, nonintegrated spinning, weaving, finishing, and apparelmaking 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: • 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.” • 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 mid-1980s, spinning is the most consolidated and technically efficient sector in India’s textile industry. Average plant size remains small, however, and technology outdated, relative to other major producers. In 2002/03, India’s 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 yarns into woven or knitted fabrics. India’s 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.

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“Powerlooms” are small firms, with an average loom capacity of four to five owned by independent entrepreneurs or weavers. Modern shuttleless 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).

Regression Statistics

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Multiple R R Square Adjusted R Square Standard Error Observatio ns

0.997585 0.99517 5 0.994885 81.56673 89

ANOVA Significa df Regression Residual Total 5 83 88 Coefficie nts 5.60746 Intercept Capital Employed Cost of Productio n Selling Cost PAT R&D Expen. 4 0.04577 2 0.98029 3 1.69224 7 0.31674 2 8.22446 1 SS 1139011 46.7 552209.9 474 1144533 56.7 Standard Error 15.88493 166 0.018038 915 0.028842 754 0.231507 183 0.069601 318 1.953992 569 t Stat 0.353 01 2.537 4 33.98 75 7.309 7 4.550 81 4.209 05 P-value 0.72497 94 0.01303 85 1.768E50 1.513E10 1.81E05 6.46E05 Lower 95% 25.9870 3 0.00989 33 0.92292 63 1.23178 86 0.17830 79 4.33804 86 Upper 95% 37.201 95 0.0816 51 1.0376 6 2.1527 06 0.4551 76 12.110 87 Lower 95.0% 25.987 03 0.0098 93 0.9229 26 1.2317 89 0.1783 08 4.3380 49 Upper 95.0% 37.201 95 0.0816 51 1.0376 6 2.1527 06 0.4551 76 12.110 87 MS 2.3E+ 07 6653. 13 F 3423.98 58 nce F 1.527E94

As per the data collected from Capitaline, above is the regression analysis done for generating the Production Function. Further the R-Square value has come out to be

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‘0.995’ which showthat this is a good quality regression. None of the variables have come out to be insignificant hence there is no multi-co-linearity.

1) The first variable ‘Capital Employed’ has a coefficient of ‘0.45772’, then its P- Value has come out to be ‘0.0130’ which tells

that it is a significant variable. 2) Then with it all the variables have P-Value much less than 0.1 which tell that are highly significant. Now as per the coefficients, the Production Function comes out to be, Q = 5.61+ (0.046*A) +(0.98*B)+(1.69*C)+(0.32*D)+(8.22*E). Where:- A- Capital Employed. B – Cost Of Production. C – Selling Cost. D – Profit After Tax. E – R & D Expenditure.


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Regression Statistics 0.2656 Multiple R 67 0.0705 R Square 79 Adjusted 0.0124 R Square 9 Standard 0.0832 Error 86 Observati ons 52 ANOVA df Regressio n Residual Total 3 48 51 SS 0.0252 84 0.3329 58 0.3582 42 Standa rd Error 0.0198 29 3.5515 55 0.0951 7 0.0023 18 MS 0.008 428 0.006 937 F 1.215 018 Signific ance F 0.31441 8

Coeffici ents Intercep t Total Exp. Marketi ng R&D Exp. 0.0155 71 6.6793 9 0.0729 2 0.0005

t Stat 0.785 232 1.880 694 0.766 202 0.215 63

Pvalue 0.436 176 0.066 088 0.447 308 0.830 19

Lower 95% -0.0243 0.46149 0.11843 0.00516

Upper 95% 0.055 44 13.82 027 0.264 273 0.004 162

Lower 95.0% 0.024 3 0.461 49 0.118 43 0.005 16

Upper 95.0% 0.055 44 13.82 027 0.264 273 0.004 162

Interpretation: Marketing variable & R & D Expense variable are coming out to be insignificant. Total Expenditure variable alone is significant.

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Where: Total Exp (E) = Total Exp. /Net Sales Marketing Exp. = Mkt. Exp/Net Sales R & D Exp. = R & D Exp. /Net Sales. The Profitability Function thus comes out to be: P = 0.015 + 6.68*(E).

INDUSTRY ANANLYSIS The Indian textile industry is one of the leading textile industries in the world. Though it used to come under unorganized sector few years back, the scenario changed dramatically after the economic liberalization of the Indian economy. Liberalisation gave the much-needed push to the textile industry, which has now successfully become one of the largest in the world.As per the last statistics available from the Annual Report 2009-10 of the Ministry of Textiles, "The Indian textile industry contributes about 14 per cent to industrial production, 4 per cent to the country's gross domestic product (GDP) and 17 per cent to the country's export earnings." Additionally, it provides direct employment to over 35 million people and is the second largest provider of employment after agriculture.

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The report further says "The current domestic market of textile in India is expected to increase up to US$ 60 billion by 2012 from the current US$ 34.6 billion. The share of exports is also expected to increase from 4% to 7% within 2012." Textile Accessories are also an important part of this segment. Strengths of the Indian Textile Industry India's biggest strength lies in its big pool of cheap and talented workforce. However, apart from it there are few other important factors which contributes to its strength like • • Huge Domestic Market consumption (due to its own population). Tremendous Export Potential (Indian products are in great demand among the western importers) • • The new age creative and risk taking entrepreneurs. Use of latest technology which produces high quality multi-fiber raw material. • Supportive government policies.

The Indian Textile Industry has its fair share of weakness like: • • • The increased global competition due to WTO policies. Use of outdated manufacturing technology from the low end suppliers. Inefficient supply chain management.

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Additionally, this sector is still unorganized at many levels and needs a lot of government reforms for further improvisation.

Opportunities The western countries are now setting up their manufacturing units in India which single handedly opens up a wide array of possibilities for all the stakeholders within the textile industry. Experts believe that the golden era of Chinese textile and apparel exports is over and the production base of global textiles is gradually shifting from China to India, Pakistan and other low cost destinations. Threats: Even though experts claim that China is past its glorious days, still one cannot afford to take china lightly and has to keep in mind the capability of Chinese exporters to supply quality products at cheap prices. Indian textile exporters cannot afford complacency and need to be on their toes for any changes within the international trade community.

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CONCLUSION Global textile production has witnessed the growth of an astounding 25 percent (including the Textile Accessories) in the last decade. Asian markets will continue to spearhead the growth of the textile industry in the years to come and the textile industry could go beyond the current $500 billion mark any time soon. The Indian textile industry has a significant presence in the Indian economy as well as in the international textile economy. Its contribution to the Indian economy is manifested in terms of its contribution to the industrial production, employment generation and foreign exchange earnings. The industry also contributes significantly to the world production of textile fibres and yarns including jute. In the world textile scenario, it is the largest producer of jute, second largest producer of silk, third largest producer of cotton and cellulosic fibre\yarn and fifth largest producer of synthetic fibre\yarn. Textile Industry is providing one of the most basic needs of people and the holds importance; maintaining sustained growth for improving quality of life. The Government of India has also included new schemes in the Annual Plan for 2007-08 to provide a boost to the textile sector. These include schemes for Foreign Investment Promotion to attract foreign direct investment in textiles, clothing and machinery etc.

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• www.tradeget.com • www.ibef.org • www.bharattextile.com • texprocil.com • www.economywatch.com • www.marketresearch.com • pd.cpim.org • meaindia.nic.in • ezinearticles.com • www.indialine.com • www.business.mapsofindia.com • www.ibef.org

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