5% in 2014 to 10% by 2025

Strategy for Enhancing India’s Share in Global

Textile and Apparel Trade

Prashant Agarwal
Co-founder and Partner, Wazir Advisors

7th April 2015

Presentation Structure

1. Current Status of the Sector

2. Emerging Trends

3. Strategy to Tap the Opportunity

2
Presentation Structure

1. Current Status of the Sector

2. Emerging Trends

3. Strategy to Tap the Opportunity

3
Indian Textile & Apparel Market is large and growing

Total market size

US$ 108 billion

Domestic consumption Exports

US$ 68 bn. US$ 40 bn.

Apparel Home textiles Tech. textiles Textiles Apparel

US$ 50 bn. US$ 5 bn. US$ 13 bn. US$ 24 bn. US$ 16 bn.

Growth pattern of domestic market Growth pattern of Indian T&A exports

US$ bn US$ bn.

68 40
12% 63
57 13 15%
50 14 32 30
44 13 5 27
39 11 4 24
10 4 20 21
4 18 17
9 3 15
3 50 9 10
40 45
31 35 15.7
27 11 11 12 14 13

2008 2009 2010 2011 2012 2013

2008 2009 2010 2011 2012 2013
Technical Textiles Home Textiles Apparel Total
Apparel Textiles Total

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But the Manufacturing Value Chain is unbalanced

Fibre Yarn Fabric Garments

Cotton fibre - 6.8 bn. Kg Spun Yarn- 5.3 bn. kg

MMF Yarn- 1.1 bn. kg 64 bn. sqm 14.4 bn. pcs
PET fibre - 850 mn. Kg

• Largest producer • Spindles- 50 mn. • 2nd largest no. of • 7th largest apparel
of cotton globally • Leading spun yarn looms globally exporter in the
– 26% share producer in the • Organized mill sector world with a share
• 2nd largest world contributes only 5% of 3.7% of the
producer of man- • Most cost • Low-tech looms total apparel trade
made staple fibre competitive • Outdated processing
producer machinery

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Issues Eroding India’s Global Competitiveness

Industry Level Government Level

• Stringent labour laws

• Lack of scale
• Lengthy approvals and procedures
• Low productivity levels
• Lack of level playing field in major
• Poor delivery and service levels
markets
• Need for technology upgradation,
• High duties on synthetic textiles
specifically in weaving
• Weak processing segment

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As a country India needs to Support growth of Textile Sector
 High employment potential
• Maximum employment generation potential – Rs. 1 crore investment in garment
industry generates direct employment of 50 workers.
• Provides employment to economically weaker and lesser educated strata of the society

 Women empowerment
• The sector opens up some of the biggest job opportunities for the women sector.
• 80% of people employed in the Indian garment Industry are women.

 Shorter Training Cycle for Employability

• Short term training programs is sufficient to train the unskilled workers

 High Export potential

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Benefits of Value Addition in Exports
• Additional investment, production required and benefits obtained by
converting raw material exports into finished product export
Present
Fiber Yarn Fabric
Level of 2,900 mn kg 2,250 mn kg 1,500 mn m
Export

Yarn
2,760 mn kg

Scope of
Fabric Fabric
Value 8,740 mn m 7,140 mn m
Addition
Garment Garment Garment
5,200 mn kg 4,280 mn kg 900 mn pcs

Employment generation – approx. 8 million

Investment required – US$ 60 billion
Net margin gain – US$ 3.5 billion

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Presentation Structure

1. Current Status of the Sector

2. Emerging Trends

3. Strategy to Tap the Opportunity

9
Global apparel consumption will cross US$ 2 trillion mark in 2025

 Currently USA & EU are the largest apparel Apparel market size projections
markets but it is expected that per capita In US$ billion

apparel spend will grow at a faster rate in Region 2013 2025 CAGR
developing countries of BRIC, than their
EU 27 355 450 2%
respective economies, whereas in developed
countries it will be slower. China 165 643 12%
USA 230 413 5%
Japan 110 140 2%
Projected change in per Capita spend on Apparel
India 46 179 12%
1,643
2013
2025 Russia 45 141 10%
1,221
1,087 1,080 Brazil 60 86 3%
856 831 804
673 693
781 740 Canada 30 38 2%
454
377 Australia 25 36 3%
294 284
120 138
40 RoW 80 114 3%
Global 1,146 2,058 5%

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Low Growth of China’s Exports will Create a Huge Trade Gap
Global textile and apparel trade
 China today is the world’s 2nd largest economy with a projections
GDP of ~USD 7 trillion. Projections indicate
US$ 1700 bn.
continuation of high growth over next few decades.
China
 Basic textiles and apparel industry will no longer be the

:
GR
Other 600

CA
exporters

7%
prime focus of Government as it used to be since

:
GR
CA
1990’s for enhancing exports and generating

%
5.8
employment. US$ 760 bn.
 In addition, China’s domestic apparel requirement will 305 :
C AGR 1,100
7.6%
also become very high further putting pressure on the
455
exports.

 The share of Chinese exports in global trade is 2013 2025 (P)

expected to reduce from 40% at present to around 35%
China’s
by 2025. share 40% 35%

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Globally consumption of polyester will increase further

 Till 2000, fibre consumption at global level was majorly cotton focussed.
 By 2030, it is expected that consumption of polyester will be more than double to
that of the cotton fibre.

Global Fibre Consumption Trend

59%
Cotton Polyester Others
50% 52% Widening gap
48% 50%
46% between
43% 44% Polyester and
Cotton fibre
37%
36% 36% 36% consumption
35% 33% 31% 31% 30%
27% 27%
21% 20% 19% 19% 19% 18% 18%
14%

2000 2007 2008 2009 2010 2011 2012 2020 (P) 2030 (P)

12 Date Source: PCI Fibres

Global Developments that Could Challenge India’s Growth

 Trans Pacific Partnership (TPP) – Yarn Forward Rule

 Ever increasing Trade barriers:

• Tariff Protections

• Non Tariff Barriers (NTBs) – Environment and Labour Standard

 Need to Phase out export subsidy in line with WTO requirements

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Presentation Structure

1. Current Status of the Sector

2. Emerging Trends

3. Strategy to Tap the Opportunity

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Investment Required

Target Market Growth

2013 2025
CAGR

12%

Investment
15% required
~US$ 125 bn.

13%

Probable sources of investment

Investment by Indian International investment

entrepreneurs (FDI)
US$ 110 bn US$ 15 bn.

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Strategic Action Plan

Production with good quality at competitive price

with Zero defect — which will come through skilled
manpower, technology and right supervision

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A. Achieving Zero Defect

 ISDS to be reoriented in line with industry needs to make it more effective.

 Textile Research Association’s (TRAs) role to be strengthened

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B. Strengthening and building complete manmade textiles
value chain
 Countries like China, Pakistan, Sri Lanka, Indonesia and Thailand follow fibre neutral
policy.
 Globally MMF textiles constitute 66% of total production. However, in India it is only
34%; whereas cotton constitutes 66%.
 India also does not have complete value chain in MMF i.e. fabric, processing and
apparel making.
 Historically, lower excise on manmade fibres have triggered higher growth levels:
Excise Duty Growth registered
2006-07: 08% 05%
2008-09: 04% 11%
2009-10: 08% 10%
2010-11: 10% 04%
2011-12: 12% 04%
 Since 2012-13 industry is continuously under contraction.
 Achieving fibre neutrality under GST regime will be very important

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C. Strengthening of Existing Initiatives and Export
Benefits
 ISDS

 Mega Textile Parks

 FTAs with major markets

 Non Tariff Barriers

 Attracting FDI

 Export incentives – Addressing the gaps in new Foreign Trade Policy

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D. Make In India

 Partnering with States:

• Making Land available
• Fast tracking approvals and clearances

 Addressing issues related to TUFS

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E. Enhancing Ease of Doing Business

 Simplify advance authorization scheme

 Dispense the requirement of average performance under the EPGC scheme
 Exempt capital goods supplied indigenously under EPGC scheme
 Simplify procedure for fixation of input output norms for developing new
products
 Actual implementation of 24 x 7 clearance at ports
 Allowing 5% tolerance on cotton yarn export
 Online Verification of duty credit scrips
 Labour laws simplification
 Extension in submission time period of export performance certificate
 Allow credit card as export payment mode
 Allow bringing bag of samples of Indian Origin as part of passenger baggage

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 Prashant Agarwal
Co-founder and Partner, Wazir Advisors

prashant@wazir.in
+91 98711 95008

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