w w w . f ib i b r e 2 f a s h i on on . c o m
Indian Textile Industry: Prospects and Challenges
Source: Textile Review
w w w .f ib r e 2 f a s h i on . c o m
Indian Textile Industry: Pro spects and Challenges By: Dr. Amita Pandya & Kirti Manek Sour ce: Textile Review Indian textile industry is one of the largest in the world fetching about 27% of the foreign exchange from its exports and related products. It has witnessed a para digm increase in the 'total industrial production' factor owing to the globalization, which, presently accounts to 14%. The contribution of textile industry towards the gross domestic product (GDP) of India is around 4% providing employment to over 35 million people. India is fast establishing itself as a global textile and apparel sourcing hub with its abundant multi-fibre raw material base, well-established production bases, design capability and skilled labor force. Yet, infrastructure bottlenecks like the transaction time at ports, inland transportation time, lack of initiative by textile manufacturers to go in for technological upgradation, fragmentation of the industry etc., have been limiting it's growth. However, given the nature and extent of the fragmentation and technology obsolescence in the decentralized sector, it calls for a focused action plan and programmes to accelerate and sustain the growth level of the different segments of the industry. Textile Industry in India is the second largest employment generator after agriculture. It holds significant status in India as it provides one of the most fundamental necessities to the people. It was one of the earliest industries to come into existence in India and accounts for more than 30% of the total exports. In fact, it is the second largest in the world, second only to China. Textile Industry is an independent industry involved in the production of the basic raw materials to the final products, with huge value-addition at every stage of processing. It has vast potential for creation of employment opportunities in the agriculture, industrial, organized and decentralized sectors for both rural and urban areas, particularly for women and the disadvantaged. It constitutes of the following segments: Readymade Garments, Cotton Textiles including Handlooms, Man-made Textiles, Silk Textiles, Woollen Textiles, Handicrafts, Made ups, Coir and Jute. Till the year 1985, development of textile sector in India took place in terms of general policies. In 1985, for the first time the importance of textile sector was recognized and a separate policy statement was announced with regard to development of textile sector. In the year 2000, National Textile Policy was announced. Its main objective was to provide cloth of acceptable quality at reasonable prices for the vast majority of the population of the country, to increasingly contribute to the provision of sustainable employment and the economic growth of the nation and to compete with confidence for an increasing share of the global market. The policy also aimed at achieving the target of textile and apparel exports of US $ 50 billion by 201 0 of which the share of garments will be US $ 25 billion. Structure o f Indian Textile Industry India's textile industry is also significant in a global context, ranking second to China in the production of both cotton yarn and fabric and fifth in the production of synthetic fibers and yarns. Unlike other major textile-producing countries, India's textile industry comprises mostly of small-scale, non-integrated spinning, weaving, finishing and apparel enterprises.
w w w .f ib r e 2 f a s h i on . c o m
Com posite Mills Relatively large-scale mills that integrate spinning, weaving and sometimes, fabric finishing are common in other major textile-producing countries but in India, however, these types of mills now account for about only 3 per cent of output in the textile sector. About 276 composite mills are now operating in India, mostly owned by the public sector and many deemed financially "sick." Spinning Spinning is the process of converting cotton or man made fiber into yarn to be used for weaving and knitting. Largely due to deregulation beginning in the mid-1980s, spinning has become the most consolidated and technically efficient sector in India's textile industry but the average plant size remains small with outdated technology, relative to other major producers. In 2002-03, India's spinning sector consisted of about 1,146 smallscale independent firms and 1, 599 larger scale independent units. W eaving and K nitting Weaving and knitting converts cotton, man made 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 hand looms, 380,000 "power loom" enterprises that operate about 1.7 million hand looms and just 137,000 power looms in the various composite mills. "Power looms" are small firms with an average loom capacity of four to five owned by independent entrepreneurs or weavers and modern shuttle less looms account for less than one 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). This unique structure of the Indian textile industry is due to the legacy of tax, labor and other regulatory policies that have favored small-scale, labor-intensive enterprises, while discriminating against larger scale, more capital-intensive operations. The structure is also due to the historical orientation towards meeting the needs of India's predominately lowincome domestic consumers, rather than the world market. Policy reforms, which began in the 1980s that continued into the 1990s, have led to significant gains in technical efficiency and international competitiveness, particularly in the spinning sector. However, broad scope remains for additional reforms that could enhance the efficiency and competitiveness of India's weaving, fabric finishing, and apparel sectors.
w w w .f ib r e 2 f a s h i on . c o m
SW OT Analysis of Indian Textile Industry Indian textile industry is as old as the word textile itself. Until the economic liberalization of Indian economy, this Industry was predominantly unorganized but the opening up of Indian economy post 1990s led to a stupendous growth of this industry. This industry holds a significant position by providing the most basic need to Indians. Starting from the procurement of raw materials to the final production stage of the actual textile, it works on an independent basis. Strengths
Huge textile production capacity Efficient multi-fiber raw material manufacturing capacity Large pool of skilled and cheap work force Entrepreneurial skills Huge export potential Large domestic market Very low import content Flexible textile manufacturing systems
Weaknesses
Increased global competition in the post 2005 trade regime under WTO Massive fragmentation Lack of trade pact memberships Import of cheap textiles from other Asian neighbours Technology obsolescence Poor supply chain management Huge unorganized and decentralized sector High production cost with respect to other Asian competitors Inadequate research and development Unfavorable labour laws Global logistic disadvantage Inappropriate energy supplies to rural and sub-urban areas
Opportunities
Growth rate of domestic textile industry is 6-8% per annum Large, potential domestic and international market Product development and diversification to cater global needs Elimination of quota restriction leads to greater market development Shift towards branded readymade garment Increased disposable income and purchasing power of Indian customer Emerging Retail Industry and Malls provide huge opportunities for the Apparel, Handicraft and other segments of the industry Greater Investment and FDI opportunities available
Threats
Competition from other developing countries, especially China Continuous quality improvement is need of the hour as there are different demand patterns all over the world
w w w .f ib r e 2 f a s h i on . c o m
Elimination of quota system will lead to fluctuations in export demand Threat for traditional market for power loom and handloom products and their product diversification Geographical Disadvantages International labor and environmental Laws To balance the demand and supply To balance between price and quality
So what are the prospects and challenges for the Textile Industry in the coming years? Indian textile has become a tough industry; it is experiencing strong cyclicality, pervasive pressure across the value chain, overall reduction in price due to overcapacity and immense competition. Yet it is also an industry in emergence, with increasing reputation in global markets, emerging SME's, more foreign direct investments and tremendous strategic production advantage. Surviving, thriving, and being distinct in such an environment is a worthy challenge for any textile manufacturer and success of industry will totally be dependent on how they are handling this slow down. A closer look at the figure of the Textile Industry since the MFA was withdrawn (1 st jan, 2005) and the projected growth till the end of the 11th Five Year Plan (2007 - 2012) presents the glorious prospect that the sector possess within its wrap. The Indian Textile sector grew by more than 8% in the last two fiscal years and is projected to grow at 16% by 2012. Being the second largest employer of Indians after Agriculture, it currently employs 88 Million people and is expected to generate another 17 million jobs by 2012. The gross value is expected to rise from its present $9309.8 millions to a whopping $105 billion Industry. It is the third largest of textile to both USA and EU and exports grew by 24% in last fiscal year. They are likely to grow by 25% in the next 5 years increasing the
2006-2007 (estimated) Above 8%
Capabilities
2005-2006
Growth rate (over the last fiscal year) Employment Gross Value Export Investment Share in World Market
8.2% 88Million $9309.8 Million $17.85 Billion 19.24 Billion Rs. 64,4 7 8 Oores (Between 2004- 2 00 7) 3%
By 2012 (Projected) 16% 105 Million $115 Billion $55 Billion RS.1,50,600 Crores 7%
* Figures as provided by the Ministry of Textiles, Govt. of India
Indian Textile industry's share in world textile market from 3% to 7%. Thus, the facts and figures speak for the prospects and potentials of Textile Industry. However the Textile sector is still in a nascent stage for the world market. The fact can be revealed from the fact that the appreciating Rupee in six months has resulted in the prices falling from $2.00 to $1.96 in the price of per sq. mt of cloth and a loss of 5.79 lakh potential jobs in the year 2007-08 as per the study carried out by CITI. These conditions will cause further problems for an Industry lagging behind technologically in comparison to its prime competitor, China. The Government has continued and introduced a lot of schemes in order to safeguard the Indian Textile Industry.
w w w .f ib r e 2 f a s h i on . c o m
Sr .
1.
Sch em e
Status (continued/introduced) for 2007-08
Changes in pro vision under 2007-08 Union budget
Scheme for Integrated Continued. (26 of the 30 Provision increased from Rs. 189 Crores Textile Park (SITP) sanctioned have been approved) to Rs 450 Crores
Technology Provision increased from Rs. 425 Crores to Continued. for the 11 th Five Year 2. Upgradation Rs. 911 Crores. Handloom sectorwill also be Plan (2007 - 2012 Fund Scheme (TUFS) covered in it. 3.
Cluster Approach (for Continued. (120 cluster adopted, 100 -150 new clusters to betaken up Rs.321 the Handloom sector) 273 yarn deposits opened) Crores fund for social security Schemes * Figures as provided by the Ministry of Textiles, Govt. of India
Apart from the above, a series of progressive measures have been planned to strengthen the textile sector in India:
Technology Mission on Cotton (TMC). Setting up of Apparel Training and Design Centers (ATDCs). 100 per cent Foreign Direct Investment (FDI) in the textile sector under automatic route. Setting up two design centres in Gujarat in collaboration with National Institute of Fashion Technology. Setting up a Handloom Plaza in Ahmedabad with an estimated investment of US$ 24.6 million. 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 upgradation and modernisation of these mills Setting up a handloom mall with an investment of US$ 24.6 million at Jehangir Mill in Ahmedabad.
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; Brand Promotion on Public-Private Partnership (PPP) approach to dev elop global acceptability of Indian apparel brands; Trade Facilitation Centres for Indian image branding; Fashion Hubs for creation of permanent market place for the benefit of Indian fashion industry; Common Compliance Code to encourage acceptability among apparel buyers and Training Centres for Human Resource Development on Public Private Partnership (PPP) mode. It's not just the present that is shinning like a bright start but also the future, as the textile export market of India is expected to reach a high of $50 billion by 201 O. This will eventually make a profit by 300%. In order to attain this target Indian textile industry has already started improving their design skills, including a combination of various fibers. It is all set to meet international standards and is planning to invest $5 billion in machineries very soon. Most of the international brands like Marks & Spencer, JC penny, Gap have started procuring most of their fabrics from India. In fact, Walmart, who had procured textile worth $200 million last year, intends to procure $3 billion worth of textile this year.
w w w .f ib r e 2 f a s h i on . c o m
These schemes will be beneficial for the industry but still more needs to be done. Given the safeguards, it possesses the potential to give any major player in the world market a run for their money and announce its arrival into the world market in a big way. Conclusion The Indian textile industry has a significant presence in the economy as well as in the international textile economy. It enjoys certain favorable factors that contribute in retaining its leading position in national and international scenario that can be utilized to ensure further growth and development. To effectively tackle the critical situations, India needs to invest in research and development to develop new products, reduce per unit costs and finally improve its raw material base. It needs to move from the lower end markets to middle level value for money markets and export high value added products of international standard. Thus, the industry should diversify in design to ensure quality output and technological advancement. References
Vadhani,R.H., 2005, "Changing Scenario of Indian Textile Industry -II", Express Textiles, July Sivakumar, S., 2010, "Indian Textile Industry and its share in GDP", Textile Review, April, Vol.5, Issue 4, Pg.39-41. Gordon,S. and Hsieh,Y.L., "Cotton: Science and Technology", Woodland Publication, Manchester Indian Textile Industry-Dream of Every Mankind, Igmatex News Magazine, 2009, August. Rai, I., 2002,"Textile Industry Problems and Prospects in the 21 st Century", Books Treasure Publication, Jodhpur Sharma, S.K. and Giri, S., 2005 "Strategic Management Practices in Indian Textile Companies," Journal of Textile Association, March-April, VoI.6S, No.6, Pg.261-264 www.ibef.org www.bharattextile.com www.texprocil.com www.economywatch.com www.marketresearch.com www.pd.cpim.org www.ezinearticles.com www.indialine.com www.fibre2fashion.com
O r i g in a l ly P u b l i s h e d i n T e x t i l e R e v i e w , J a n -2 0 11
Dr. Amita Pandya is a Professor & Ms. Kirti Manek is a Ph.D Scholar with Dept. of Clothing & Textile, Faculty of Family & Community Sciences, The M.S.University of Baroda, Vadodara . Image Courtesy: superstock.com
