Growth Prospects of Indian

Textile Industry – Home

Textile focus

J. N. Singh
Textile Commissioner
Indian Textile Sector - Overview

Key contributor to GDP 2004-05

Textile Mills
 4 percent of GDP Spinning Mills Nos. 2,012
 14 percent of National Industrial Composite Mills Nos. 1,566
production Exclusive weaving mills Nos. 202
Significant forex earner
Capacity Installed
 15 percent of exports Spindles Million Nos. 37.47
Employment generator Looms Lakh Nos.
 Provides direct employment to 35 1.03
million people Powerloom Lakh Nos. 19.03
Handloom Lakh Nos.
38.91

Textile exports $ billion 17.8

Textile imports $ billion 2.2
What is the Indian Market Size (Bn US $)
2005-06

Export Domestic Total % to Total

Apparel 8.64 19.22 27.86 59.28

Textile 9.24 9.99 19.14 40.72

Total 17.88 29.12 47 100

Home Textile Market Globally
 Global Home Textile Market is estimated at
US $12b in 2005, and is expected to grow at
16% CAGR and reach US $22-25b By 2010.
 India ranks 2nd in the global market with a
share of approx. 9-10% of market share.
 India's home textile exports expected to grow
from $1.2 billion now to $5 billion by 2010
Great opportunity to be the market leader.
Our Vision 2010

– Market size of US$95 Bn

• Export Target- US $ 50 Billion
(National Textile Policy, 2000)
• Domestic market - US$ 45 Billion
(CRISIL Study, 2004)

– India’s market share in World textiles trade to grow from

3% to 6%.
– Growth Projections of 20% in exports, 16% domestic
Reasons for Optimism: Growth
in fabric production
14
12
12
10 9
Percentage

8 7
6
4
4
2 1
0
-0.15
-2
2001-02 2002-03 2003-04 2004-05 2005-06 2009-10
(Expected)
Reasons for Optimism: Raw
Materials
 India is now the 2nd largest producer of
cotton

 2nd largest producer of Silk

 Very well placed in Man-made Fibres

too.
Reasons for Optimism: Growth in
Investments in Textile sector
 Investments under TUFS have grown
significantly recently.

Project cost sanctioned under TUFS

35000
30000
30000
25000
20000
15032
(Rs. crore)

15000
10000 7349
3289
5000 1320 1438
0
2 0 0 1-0 2 2 0 0 2 -0 3 2 0 0 3 -0 4 2 0 0 4 -0 5 2 0 0 5 -0 6 2 0 0 6 -0 7
(Es tim a te d)
Reasons for Optimism :Growth in
exports

30
24
25 22
20
15
15
Percentage

9
10
4
5
0
-5
-10
-10
-15
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
(Provisional) (Initial figures)
Winners and Losers in EU Market
2005 over 2004
CHINA
TURKEY
INDIA
INTRA EU
B'DESH
PAKISTAN
RUMAINA
MOROCCO
TUNISIA
INDONESHIA
VIETNAM
THAILAND
SRILANKA

-20 -10 0 10 20 30 40 50

 Gainers: China, India, Turkey

 Losers: Thailand, Pakistan, Indonesia
 EU MARKET VARIATION JAN – JUN
2006/05

Bangladesh

Indonesia

India

Taiwan

Pakistan

USA

China

Turkey

South Korea

Romania

0 5 10 15 20 25 30 35 40
 US IMPORTS OF TEXTILE AND
APPAREL PERCENT VARIATION
2005/04
China

India

Cambodia

Bangladesh

Indonesia

Pakistan

Vietnam

Canada

Mexico

Hong Kong

-20 -10 0 10 20 30 40 50
 US IMPORTS OF TEXTILE AND
APPAREL PERCENTAGE VARIATION
JAN – SEPT. 2006/05
Indonesia

Cambodia

Vietnam

Bangladesh

Pakistan

India

China

Hong Kong

Canada

Mexico

-15 -10 -5 0 5 10 15 20 25 30
 DRIVERS OF DOMESTIC GROWTH :
Demand Side Factors: Increasing Income Levels
Distribution of households by income category
Classification Income class 2001-02 2005-06* 2009-10* CAGR

Deprived <90 135,378 132,250 114,394 -3.6

Aspirers 90-200 41,262 53,276 75,304 9.0

Seekers 200-500 9,034 13,813 22,268 12.7

Strivers 500-1000 1,712 3,212 6,173 17.7
Near rich 1000-2000 546 1,122 2,373 20.6
Clear rich 2000-5000 201 454 1,037 22.9
Sheer rich 5000-10000 40 103 255 25.4
Super rich >10000 20 53 141 27.7
Total 188,193 204,283 221,945 2.1
* - Projections
Note : Income is in Rs.’000 per annum at 2001-02 prices and the households are in ‘000s
Source : NCAER
Favorable Demographics for
Home Tex
– The population of India is expected to increase from 1029 million to 1400 million
during the period 2001-2026.

– The population profile of India is shifting towards a larger composition of people

in the age group 15-59 .India most favourably placed globally. Out of the total
population increase of 371 million between 2001 and 2026, the share of the age-
group 15-59 years in this total increase is 83 percent.

– The low median age of population means a higher current consumption

spending vs savings

– The growth in population is taking place in the urban area. Out of the total
population increase of 371 million during 2001-2026 in the country, the share of
increase in urban population is expected to be 249 million.

– Favourable Demographics- increasing young population and that too in the

urban area- coupled with rising income levels will act as a key growth factor for
the Indian textile and Fashion Industry
Increasing Working Female
Population
Proportion of working female to total female population

30

25
(percent)

20

15

10
1961 1971 1981 1991 2001 2005 (E)

Source : CENSUS
Increased usage of credit cards and availability
of cheap finance

The use of credit cards (plastic money) has increased significantly

in the last 3-4 years. The number of credit cards issued has grown

at 26 per cent per annum in the past 5 years while debit cards have

grown by a whopping 113 per cent. Increase in the number of

installations of electronic data converter machines will provide fillip

to impulse apparel purchases.

Demand Driver- Domestic
Housing Boom
 Asian Development Bank expects that by 2008, the
housing deficit will be 22 mn units and by 2030 India
will be requiring upto 10 mn housing units every year.
A very huge requirement for home tex.
 The Real estate sector has given phenomenal returns
in the last 2-3 years as per the global trend. A
property owner is now more inclined to buy/renovate
his home furnishings etc.
 The domestic housing boom is further enhanced by
the reducing age of Indian borrower- from 43 years in
1995-99 to 33 years in 2005-9.
Drivers of Domestic
Growth:Supply side factor :
Retailing Revolution - Growth so far
240.0 4.0

230.0
3.5 3.5
7.8

220.0
3.0 3.0
USD Billion

Percent
210.0 6.2

2.5
200.0
3.9

2.0 2.0
190.0

196.7 208.1 222.0

180.0 1.5
2003E 2004E 2005P

Total retail industry Organised Penetration

Five year outlook
400.0 8.5

8.0

7.5

24.3 6.5
300.0
USD Billion

5.5

Percent
7.8 4.5

200.0
3.5 3.5

2.5

222.0 304.2
100.0 1.5
2005 P 2010 P

Total retail industtry Organised Penetration

Growth of Mall Space
 From 2 mn sq ft in 2001 , we had 28 mn sq ft
of mall space in 2005 – and by end 2008, the
eight Indian large cities will have a supply of
66 mn sq ft and the next seven large cities
about 13 mn sq. ft.
 The entry of Reliance, Aditya Birla group,
expansion of Futures and now of Bharati-
Walmart is expected to further sizzle Indian
market.
Drivers of Export Growth
 Dismantling of the MFA regime and the full play to
the Indian entrepreneurship.
 Progressive dismantling of the textile and mass
apparel industry from the Western world. India is a
major player to fill this gap. The current quantitative
restriction on China is helping India.
 Buying of several Western brands by Indian industry,
thus facilitating entry in EU and US.
 Increasing modernization of Indian textile and apparel
manufacturing sector in response to the increased
global demand and facilitated by the TUFS scheme.
Global Housing Boom
 According to estimates by The Economist, the total
value of residential property in developed economies
rose by more than $30 trillion over the past five years,
to over $70 trillion, an increase equivalent to 100% of
those countries' combined GDPs .
 The global boom in house prices has been driven by two
common factors: historically low interest rates have
encouraged home buyers to borrow more money; and
households have lost faith in equities after
stockmarkets plunged, making property look attractive .
 Naturally as people buy more property or as their
property becomes costlier , the propensity to
spend on home-textile increases significantly.
Other Export Drivers
 The IMF forecasted a 4th continuous year of
income increase globally at 4.7%- naturally
leading to a more than higher purchase of
textiles including home-tex.
 Also a phenomenon of decline in textile prices
over a continuous period esp in developed
economies- driving higher the worldwide
demand of textiles and clothing.
Real Clothing Prices
Index, 1994=100

120
China
110
Japan
100
Thailand
Germany
90
South Korea

80
United States
70
1995 1996 1997 1998 1999 2000 2001 2002 2003
Strategy of various

Stakeholders
Strategy for the GOVERNMENT
 1.Further investments must continue to be encouraged-
TUFS should be continued (may be with some
modification)
 TUFS help to processing sector – Vital for home tex

Year TUFS all segments (in Processing (in P.c %

crores) crores)

2002-3 1438 210 14.63

2003-4 3289 260 7.91
2004-5 7349 986 13.42
2005-6 15032 1157 7.7
2006-7 (april-sept) 9335 2081 22.30
2. Continuance of textile
infrastructure schemes
SITP ( Scheme for Integrated Textile Parks) has
had a huge success : 26 parks approved.
GOI contribution to be 866 crores with
another 1250 crores to come from private
sector. Estimated investment of Rs.13445Cr.

 Need to continue such schemes on the PPP

model.
3. HRD

 Governments in PPP mode with the

industries must invest heavily in training
in the textile sector because a huge
shortfall of over 40 lakh workers is
expected in the next 5 years.
 4.High Transaction Costs
 Issues:
– According to EXIM Bank Study (2002), transaction cost is
very high in Textile & Garments Sector ranging from 3-10%
– Ownership of exports – less support from State
Governments
– Non-refundable incidence of State Taxes – VAT, Entry Tax,
Luxury Tax, Mandi Tax, Electricity Duty, Octroi, etc.
 Proposal:
– To consider refund of State / Local levies through
appropriate refund mechanism
 5.High Power Cost
Issues:
High power cost:
Cross subsidisation
Frequent power interruption

Competitors’ Edge:

Country Cost Country Cost

(Cent / (Cent /
KWH) KWH)
India 8.87 Indonesia 3.65
China 6.04 Bangladesh 3.49
 High Power Cost

 Proposal:

– Export oriented textile units be exempted from cross

subsidy

– Duty free import of furnace oil to units for captive power

generation

– Uninterrupted power supply for export oriented textile

clusters
Industry’s Strategy
 Integration- Moving up/down the full value chain.
Leading Home-tex players like Welspun, Alok are now
fully integrated, with strong competencies in spinning,
weaving,and finishing.

 Scale- Massive expansion plans of existing as also

new players to take advantage of this unprecedented
opportunity. Smaller companies, some of whom are in
unrelated businesses, are also foraying into home
textiles - Gangotri Textiles, KG Denim, S Kumars
Nationwide, Bannari Amman Spinning, to name a few.
 Brand presence- there has to be greater
shift towards branded products.Realization
that real value addition comes only after
branded sale.
Domestic- Spaces brand of Welspun
Carmichael House of S.Kumars
International- Purchase of Christy by acquiring
CHT Holding by Welspun.
Dan Rivers and Roseby’s by GHCL.
 Designer labels will also have to be
brought in to counter the pull of top
international labels like Tommy Hilfiger,
Zegna, Mark and Spencer and likely
presence of Italian Pozzi Industria
Tessile and Ralph Lauren. Alliance with
Indian designers important over here.
Future ?

 The home-textile sector in India is in for

BOOMING TIMES.
 Save for major implementation
problems, India poised to become a
leader in this sector.
THANK

YOU