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1
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Indian Textile Industry:A Growth Perspective
Mr. Sachit JainVardhman Group
Singapore, March, 2010
2
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Indian Textile Industry: Growth Drivers
o Global Opportunities
o Domestic Policy Frame-Work
o Manufacturing competitiveness
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The consolidation of textile manufacturing in Asia gives impetus to Indian Textile Industry growth
• 70 % of world fiber processing takes place in Asia.
• China, India and Pakistan account for 60% of world fiber consumption.
• Though Bangladesh and Vietnam have been emerging as competing textile economies. They depend on the imported textile inputs.
• Global retailers are preferring single point service helping integrating suppliers of textile and clothing.
World Textile Fiber Processing
Rest of world30%
Asia70%
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Growing world trade in textile and clothing offers significant opportunities for Indian T&C exports
152158
310
157
198
355
203
277
480
250
362
612
280
440
720
0
200
400
600
800
1000
1200
1400
1600
1995 2000 2005 2008 2012
World Trade in Textiles and Cothing(USD bn)
TotalClothingTextile
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World Trade in Textile and Clothing
• With removal of quantitative restrictions especially after 2002, India’s textile and clothing exports grew at a higher rate during 2002-2007 in tandem with growth in world trade in T&C.
• India’s T&C exports growth was lower than China, which registered 23% growth in T&C exports during 2002-2007. China exported $171 bn T&C products against $22 bn from India
• It indicates missed opportunities as well as scope for future growth
Textile Clothing T&C
1995-2002
World 0.2% 4% 2%
India 4% 5% 4%2002 -2007
World 9% 11% 10%
India 11% 11% 11%
*CAGR
Comparative growth rate in World Trade in T&C(%)*
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Growing importance of cotton in world trade in textile and clothing is visible in USA T&C imports
USA: Textile and Clothing Imports( USD bn)
5552
40
24
13
15
20
3237
38
0
10000
20000
30000
40000
50000
60000
1990 1995 2000 2005 2008
Cotton products
Non cottonproducts
4856 58 59
0
10
20
30
40
50
60
1990 2000 2005 2008
USA T&C imports: Percentage share of cotton products
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The Industry Structurally has a Significant Potential to Grow
Growing International demand ,
Large domestic market
Presence in all parts of value chain
Large numbers of producers
Availability of Raw Materials and Workforce
Well developed textile machinery industry
Context for Firm Strategy
and Rivalry
Factor (Input)
Conditions
Demand Conditions
Related & Supporting industries
Attributes of India’s Textile Industry which provides structural advantage to grow -
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India share in world installed capacity of spindles and shuttle-less looms
39
104
212
0
50
100
150
200
250
India China World
Spindles Installed capacity ( mn nos.)
50
370
970
0
200
400
600
800
1000
India China World
Shuttle-less looms installed capacity(in 000 nos.)
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Breaking from the past legacy
Fragmented Industry Structure
Low Level Of Technology
Sub-scale Of Operations
Because of past policy distortion, the
profitability and investments remained
subdued in the past
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Fiscal Policy Framework : From fragmented duty structure to unified approach
Fabric 1993-94 (Rs./sqm) Exemption 2003 2004/2006
Limit(if any) B.E.D. S.E.D. B.E.D.1 FABRIC(WOVEN )
Cotton Fabric Optional Duty12(optional) 10
a) Does not exceeds Rs.10 0.20
Man Made/ Blended Fabric Optional Duty12(optional)
10
FABRIC (KNITTED)
Cotton Optional Duty12(optional)8
Blended & MMF Optional Duty12(optional) 10
2 FABRIC PROCESSINGB.E.D.
A.1
Hand Processing(Without aid of Power/steam)
0 0
e.) Exceeds Rs.100 20% A.2
Hand Processing (with specified 12 power processes for 100% cotton fabric)
0 5 5
2
A.3
Hand Processing (with specified 12 power processes for Blended and 100% non cotton fabric)
0 8
a.)Does not exceeds Rs.40 per sqm. 0.50+5%
A.4
Hand processing(with specified 7 power processes for man made fabric)
0 8
CProcessed fabric -woven 12 10
D Processed fabric knitted-Cotton Optional 12(optional)
8
EProcessed Fabric Knitted-MMF Optional 12(optional)
10
3
4
4% on a cotton fabric
and 8% on blended and non cotton
fabric for all categories
Cotton/Blended/Manmade fabric processed with out aid of power is exempted from duty
India: Trends in Effective Rate of Excise Duty on Fabric and Fabric Processing
c.) Exceeds Rs.100 per
sqm20%
Grey fabric exempted from duty
Blended and man made fabric, whose value per sqm
b.) Exceeds Rs.40 but does not exceeds Rs.100
2.50+ 20% of the value exceeding Rs.40 per
sqm.
d.) Exceeds Rs.40 but does
not exceeds Rs.100
2.50+ 20% of the value exceeding Rs.40 per
sqm.
c.) Exceeds Rs.25 but does
not exceeds Rs.40 0.50+5%
Particulars 2002
1Cotton fabric whose value per sqm.
b.) Exceeds Rs.10 but does
not exceeds Rs.25 0.50
B.E.D.
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Domestic policy frame work-Recent initiatives
Restoration of level playing fieldOrganised vs. unorganized sectorSmall vs. large unitsUnequal fiscal treatment has been abandoned
Duty rationalization
Technology upgradation fund(TUF)
Reduction in import duty on most of textile machinery
Capital subsidy for fabric processing
Development of SEZ and apparel parks are put on fast track.
Fiscal policy reforms refurbish the investment outlook of the industry
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Textile industry committed efforts to harness the fundamental strengths are visible in growing investments
0
2
4
6
8
10
12
14
16
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
Investment approved under TUF( USD 40 bn)
About equal amount of investment is projectedin next 10 years
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Scope for future growth lies in fundamental strengths of the Indian Textile Industry
Well integrated production base
Wide range of Cotton / Spun yarn
Strong base for Cotton , PSF and PFY
Wide range of Cotton and Synthetic fabric
Growing domestic market for high quality textiles
Growing demand for Technical Textiles / Performance Fibres
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India’s share in cotton production in the world is growing( mn tons)
1719
26
2 24 5
23 21%
16%
12%12%
0
5
10
15
20
25
30
1993/94 2000/01 2005/06 2008/090%
5%
10%
15%
20%
25%World
India
% share of India in
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The principle cause for higher cotton production is growing productivity( kg/ha)
Productivity per hectare( kg/ha)
278
524
610
724761
554
478
286
0100200300400500600700800
1993/94 2000/01 2005/06 2008/09
World
India
100
52
100
46
100
66
100
69
0
20
40
60
80
100
1993/94 2000/01 2005/06 2008/09
India recorded higher growth rate in productivity
World
India
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Increasing cotton productivity : Village adoption program
o The cotton yield in Punjab declined to very low level 300 kg/ha in 1999
leading to drop in cotton cultivation
o Best yield award to cotton growers started in 2001
o Village adoption program for increasing cotton productivity by improving
cultivation practices and quality seed started in 2003
o Cotton productivity grew to 700 kg/ha in Punjab
o The model is all set to be replicated in rest of cotton producing States in
India, which will give sustainable increase in productivity and cotton crop
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India: Foreign trade trends in cotton
India: Import and export of cotton fiber( mn tons)
0.0
0.2
0.4
0.6
0.8
1.0
1993/94 2000/01 2005/06 2008/09
Import
Export
•The Indian cotton is attractive to foreign Buyers due to its peculiar characteristics
• Cotton constitutesa major part of
imported cotton for manufacturing Higher counts
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2 0 0 82 0 2 0
A re a u n d e r co tto n cu ltiva tio n - m n h a m n h e c ta re
1 0 1 0
P ro d u c tiv ity kg /h a5 6 0 7 5 0
P ro d u c tio n m n to n s5 .6 7 .5
C o n su m p tio n m n to n s4 6 .2
C o tto n su rp lu s m n to n s1 .6 1 .3
C O T T O N E C O N O M Y O F IN D IA O U T L O O K 2 0 2 0
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Cotton fiber place in Indian textile value chain will remain important
PRODUCTION OF SPUN YARN (IN '000 TONNES)
1510
1894
2267 2272
2948
4500
395646 585 677
2800
107 196 248366 378
800
207
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1990 1995 2000 2005 2008 2020
YEAR
COTTONBLENDED100% N.C.
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67752395TOTAL
3917PPFY
11130NFY
13644VFY
35001336PFY
93PPSF
32091ASF
695223VSF
1965651PSF
20202009
India: MMF consumption projections( mn kg)
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INDIA: TEXTILE FIBER CONSUMPTION OUTLOOK 2020
4
2.7
6.56.7
0
2
4
6
8
2009 2020
Fiber consumption outlook-2020( mn tons)
Cotton
MMF
60
4940
51
0
10
20
30
40
50
60
Cotton MMF
Composition of fiber consumption(% share)
2009
2020
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Size of Indian Textile Industry-Exports
Textile and Clothing exports(USD bn)
13.50 14.0517.50 19.10
21.50 22.0018.36 19.27
21.6424.30
40.00
60.00
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-2011
2011-2012
2012-2013
2014-2015
2019-2020
-15
-10
-5
0
5
10
15
T&C exports growth rate
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3.5
1310
30
0
5
10
15
20
25
30
INDIA CHINA WORLD USA
Scope for growth in domestic market:Per capita fiber consumption(Kg)
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35
2260
37
90
60
0
20
40
60
80
100
120
140
160
2008-09 2014-15 2019-2020
PROJECTED SIZE OF INDIAN TEXTILE INDUSTRY( USD BN)
ExportsDomestic
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SWOT analysis of Indian Textile Industry: Strengths
Independent & Self-Reliant industry.
Availability of Low Cost and Skilled Manpower
Availability of large varieties of cotton fiber and has a fast
growing synthetic fiber industry.
India has great advantage in Spinning Sector and has a
presence in complete textile value chain.
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SWOT analysis of Indian Textile Industry: Weaknesses
The fabric and garmenting sector need modernization, which is under process Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and transportation Time. Unfavorable labor Laws. Lack of Trade Membership, which restrict to tap other potential market. Economies of Scale- average spinning mill-
14000 spindlesHigher Indirect Taxes, Power and Interest Rates.
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SWOT analysis of Indian Textile Industry: Opportunities
Growth rate of domestic Textile Industry is 6-8% per annum.
Large potential in International Market.
Product development and diversification to cater global needs.
Elimination of Quota Restrictions leads to greater Market Access.
Market is gradually shifting towards Branded Readymade Garments.
Emerging Retail Industry and Malls provide huge opportunities for the Apparel, Handicraft and other segments of the industry.
Greater Investment and FDI opportunities are available.
Large scope for technical textile linked with growing industrialization, large infrastructure projects in stream
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SWOT analysis of Indian Textile Industry: Threats( Concerns)
Competition from other developing countries, especially
China in domestic market also –will lead to consolidation
Elimination of Quota system has led to fluctuations in
Export Demand.
Rising prices of inputs-raw material
Formation of trading blocks
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Vibrant Private Sector
• Vardhman Group Bombay Rayon• Nahar Alok• Arvind mills Ahima• Shanmugvel JCT• Madura Welspun• Surya Laxmi Group Trident • Ramlinga Group Gokaldas exports• Lakshmi Group Orient Craft• LNJ Group Bombay Rayon Fashions• Chola Group Raymond• Raja Palayam• Super spinning• Centaury• GTN group
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Thank You