Indian Textile And Apparel Industry

(SWOT Analysis)

Sumitted By:

Ruchi Kumari M/FD/09/24 Sem- VI Nift Mumbai

Indian Apparel and Textile Industry:
The apparel and textile industry occupies a unique and important place in India. One of the earliest industries to come into existence in the country, the sector accounts for 14% of the total Industrial production, conduces to about 30% of the total exports and is the second largest employment creator after agriculture. The apparel and textile industry caters to one of the most basic requirements of people and holds importance; maintaining the prolonged growth for improved quality of life. The sector has a unique position as a self-reliant industry, from the production of raw materials to the delivery of end products, with considerable value-addition at every stage of processing. Over the years, the sector has proved to be a major contributor to the nations' economy. The textile industry has witnessed phenomenal growth in recent years and attracted fair amount of foreign direct

investment (FDI). The textile and apparel industry in India is estimated to be about US$ 36 billion. It is the largest foreign exchange earner, contributing to approximately 15% of India’s exports and 14% of industrial output. India’s solid performance and growth in textile sector is fuelled by several key advantages that the country enjoys in terms of abundant availability of raw material a nd cheap labour, large domestic market, presence of supportive industries and supportive policy initiatives by the government. The textile industry is India is highly fragmented. It is vertically integrated across the whole value chain and interconnected with various operations. The organised sector consists of spinning mills and composite mills. The unorganised sector consists of handlooms, power looms and handicrafts. The major sub segments of the textile industry are cotton, blended, silk, wool and manmade. The major products in which Indian textile industry deals is readymade garments, suiting and shirting, shirts and trousers, fabrics, bed linen and embroidery work. Exports have been the major growth driver of the Indian textile industry in the recent years. The export market has grown enormously specially after the removal of quotas under Multi Fibre Agreement (MFA). India’s textile exports have registered a growth of 7.7% in 2006-07 compared to

the previous year. Government of India has a vision to increase India’s share in the global textile trade to 10% by year 2015 from current 3%. To realize its vision, the Government has taken various steps to strengthen the textile sector that include 

Technology Mission on Cotton (TMC) Setting up of Apparel Training and Design Centres (ATDCs) 100% Foreign Direct Investment (FDI) in the textile sector under automatic route. Revival plans of the mills run by National Textiles Corporation (NTC). Already, for the revival of 18 textile mills, US$ 2.21 million worth of machineries has been ordered for the up gradation and modernisation of these mills.

The cotton based products, especially in the readymade garments and home furnishings segment will be the key drivers of growth for the industry. Readymade garment exports were worth US$ 8 bn in FY06 and will cross US$ 16 bn by the end of 2010, assuming a conservative growth of 15% p.a. According to estimates, investments in textiles are expected to touch US$ 31 bn by 2010. As per the Textile Vision 2010, the industry is expected to grow by 12% p.a. and create an additional 12 million jobs.

Indian Exports of Apparel & Textile – Facts & Figures

Exports increased from US$ 14 million (2004-05) to US$ 17 million (2005-06) – 21.77 % increase. With continuing growth, the total exports has increased to – US$ 19.62 billion (2006-07). Current share in world export of textiles – 3.5 - 4 %. Current share in world clothing export – 3 %. Major export market – Europe (22% share in textiles & 43% share in apparel). Single largest buyer – US ( 10% share in textiles and 32.65 share in apparel). Other major export markets include - UAE, Saudi Arabia, Canada, Bangladesh, China, Turkey and Japan. Largest export segment – Readymade Garments (45% share in textile exports and 8.25 share in India's total exports). Readymade garments sector has benefited significantly with the termination of Multi-Fiber Arrangement (MFA in January 2005.

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Exports of readymade garments are expected to touch US$ 14.5 billion with a cumulative annual growth rate of 18-20% (Apparel export Promotion Council).

SWOT Analysis of Indian Textile and Apparel Industry:

Strengths:
1.Indian Textile Industry is an Independent & Self-Reliant industry. 2. Abundant Raw Material availability that helps industry to control costs and reduces the lead-time across the operation. 3. Availability of Low Cost and Skilled Manpower provides competitive advantage to industry. 4. Availability of large varieties of cotton fiber and has a fast growing synthetic fiber industry.

5. India has great advantage in Spinning Sector and has a presence in all process of operation and value chain. 6. India is one of the largest exporters of Yarn in international market and contributes around 25% share of the global trade in Cotton Yarn. 7. The Apparel Industry is one of largest foreign revenue contributor and holds 12% of the country's total export. 8. Industry has large and diversified segments that provide wide variety of products. 9. Growing Economy and Potential Domestic and International Market. 10. Industry has Manufacturing Flexibility that helps to increase the productivity. 11. Raw material base- India has high self sufficiency for raw material particularly natural fibres. India’s cotton crop is the third largest in the world. Indian textile Industry produces and handles all types of fibres. 12. Labour- Cheap labour and strong entrepreneurial skills have always been the backbone of the Indian Apparel and textile Industry. 13. Flexibility- The small size of manufacturing which is predominant in the apparel industry allows for greater flexibility to service smaller and specialized orders.

14. Rich Heritage- The cultural diversity and rich heritage of the country offers good inspiration base for designers. 15. Domestic market- Natural demand drivers including rising income levels, increasing urbanisation and growth of the purchasing population drive domestic demand.

Weaknesses:
1.Indian Textile Industry is highly Fragmented Industry. 2. Industry is highly dependent on cotton. 3. Lower Productivity in various segments. 4. There is Declining in Mill Segment. 5. Lack of Technological Development that affect the productivity and other activities in whole value chain. 6. Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and transportation Time. 7. Unfavourable labor Laws. 8. Lack of Trade Membership, which restrict to tap other potential market. 9. Lacking to generate Economies of Scale. 10. Higher Indirect Taxes, Power and Interest Rates. 11. Lack of professionalism and integration of supply chain

I2. Dependence on quota system 13.Very low investment on R&D 14.Limited exploitation of economies of scale 15. Less attention on man power training. 16. Poor quality standards. 17. Distance of the potential market.

Opportunities:
1. Growth rate of Domestic Textile Industry is 68% per annum. 2. Large, Potential Domestic and International Market. 3. Product development and Diversification to cater global needs. 4. Elimination of Quota Restriction leads to greater Market Development. 5. Market is gradually shifting towards Branded Readymade Garment. 6. Increased Disposable Income and Purchasing Power of Indian Customer opens New Market Development. 7. Emerging Retail Industry and Malls provide huge opportunities for the Apparel, Handicraft and other segments of the industry. 8. Greater Investment and FDI opportunities are available.

9. Market access through bilateral negotiation-The trade is growing between regional trade blocs due to bilateral agreements between participating countries. 10. Integration of Information technology- ‘Supply Chain Management’ and ‘Information Technology’ has a crucial role in apparel manufacturing. Availability of EDI (Electronic Data Interchange), makes communication fast, easy, transparent and reduces duplication. 11. Opportunity in High Value Items- India has the opportunity to increase its UVR’s (Unit Value Realization) through moving up the value chain by producing value added products and by producing more and more technologically superior products.

Threats:
1. Competition from other developing countries, especially China. 2. Continuous Quality Improvement is need of the hour as there are different demand patterns all over the world. 3. Threat for Traditional Market for Powerloom and Handloom Products and forcing them for product diversification.

4. Geographical Disadvantages. 5. International labor and Environmental Laws. 6. To balance the demand and supply. 7. To make balance between price and quality. 8.Decreasing Fashion Cycle- There has been an increase in seasons per year which has resulted in shortening of the fashion cycle. 9. Phasing out of Quota- India will have to open its protected domestic market for foreign players thus domestic market will suffer.

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