Study on Impact of Economic slowdown on Indian Textile · PDF filePolicy approach towards Textile and Clothing industry Impact of economic slowdown on ... Indian Textile and Clothing

Study on Impact of Economic slowdown on Indian

Textile and Clothing Industry

June, 2009

© IMaCS 2009

Printed 12-Jun-092

Project background & Approach to the study

Policy approach towards Textile and Clothing industry

Impact of economic slowdown on the demand of textile and

clothing

Analysis of Indian Textile and Clothing industry

Section-5

Section-1

Section-2

Section-3

Section-4 Analysis of cost competitiveness of Indian Textile and Clothing

industry vis-à-vis competing countries

RecommendationsSection-6

Table of Contents

4

14

29

193

242

275

Table of Contents

© IMaCS 2009

Printed 12-Jun-093

Assumptions about the traded goods for the Doing Business

study

Annexure V

Annexure I

Annexure II

Annexure III

Annexure IV

Annexure VI

Table of Contents

293

334

340

342

344

346

Table of Contents

Annexure VII 348

Annexure VIII350

Indian Textile & Clothing industry

List of companies analysed for the financial performance

Average IIP for Textiles and Textile products

Calculation of Effective Taxes and Duties

Recent trade defense measures by certain markets

Rigidity of Employment Index by "Doing Business "

Snapshot of T&C industry of the Competing countries

© IMaCS 2009

Printed 12-Jun-094

Table of Contents

Analysis of Indian Textile and Clothing industry and

key issues

Impact of economic slowdown on the demand of textile

and clothing

Analysis of cost competitiveness of Indian Textile and

Clothing industry vis-à-vis competing countries


Recommendations

Background to the study

© IMaCS 2009

Printed 12-Jun-095

Scope of the work

The scope of this engagement is to assess the impact of the global and domestic economic

crisis on the Textile and Clothing industry in India.

The study covers Spinning, Weaving, Knitting, Processing/Finishing, Made-ups and

Clothing segments of Textile and Clothing industry.

© IMaCS 2009

Printed 12-Jun-096

Terms of Reference

Based on the scope of work, the terms of reference for this engagement are:

1. Conduct a sector analysis of the Indian Textile and Clothing industry.

2. Analyse the effect of economic slowdown on demand of Textile and Clothing in

domestic markets and major export markets i.e. USA, EU, UK and Japan.

3. Evaluate the cost competitiveness of Indian Textile and Clothing Industry vis-à-vis

competing countries viz. China, Bangladesh, Sri Lanka, Vietnam and Turkey.

4. Analyse the fiscal incentives provided by Governments in the competing countries (as

in point 3).

5. Recommend short term and long term action plans for government and industry for

achieving sustained growth of Textile and Clothing industry and its exports.

© IMaCS 2009

Printed 12-Jun-097

Approach to the study

Phase 1

Diagnostic analysis

Phase 2

Assessment of future challenges for the industry

Phase 3

Recommendations

© IMaCS 2009

Printed 12-Jun-098

Phase 1: Diagnostic analysis

Module 1

Analysis of demand trends of Textile and Clothing

Module 2

Analysis of the competitiveness of Indian Textile and Clothing sector vis-a-vis competing countries

© IMaCS 2009

Printed 12-Jun-0999

Module 2: Analysis of competitiveness of Indian Textile and Clothing industry

• Analysis of past performance of Textile and Clothing industry to assess the impact of economic slowdown

Work stream 1:

Analysis of Indian Textile and Clothing industry

• Competitiveness assessment of Indian Textile and Clothing industry to understand its strengths and weaknesses vis-à-vis competing countries

Work stream 2:

Analysis of the competitive landscape

• Comparative analysis of the trade policies/incentives to understand its impact on the industry

Work stream 3:

Analysis of the Trade environment

© IMaCS 2009

Printed 12-Jun-0910

SWOT analysis for the Indian T&C Industry

SWOT analysis of

Indian Textile and Clothing

Industry

Analysis of Textile and Clothing industry

Competitive assessment of

Indian industry vis-a-vis other

countriesAnalysis of

trading environment in

competing nations

© IMaCS 2009

Printed 12-Jun-0911

Forecast the possible economic developments in T&C markets and project the Textile and Clothing demand for 2015

Assess the challenges for Indian Textile and Clothing industry

Phase 2: Assessment of future challenges for the industry

© IMaCS 2009

Printed 12-Jun-0912

Phase 3: Recommendations

Recommend interventions by both the industry as well as the Government that

are WTO compatible and focus on measures to :

Achieve sustainable growth of Textile and Clothing industry in India

Increase the share of Textile and Clothing in the global markets

© IMaCS 2009

Printed 12-Jun-0913

• Questionnaire based survey of the industry players to get feedback on present condition

• Discussions with industry experts and key industry players in each product category

• Discussions with Industry associations

• Discussions with officials in Export promotion councils of Textile and Clothing sector

Primary

Research

• Information available in the public domain and from sources considered reliable

Secondary Research

Methodology

© IMaCS 2009

Printed 12-Jun-0914

Table of Contents

Analysis of Indian Textile and Clothing industry*

and key issues


and clothing




Recommendations


*Refer Annexure I for details

© IMaCS 2009

Printed 12-Jun-0915

Contribution of T&C industry to

India’s GDP

4%


India’s Industrial Production

14%


export earnings

12%

Fig: Textile and Clothing industry (2007-08)

12.7

9.7

3.1

0.1

0 5 10 15

Textile*

Ready

Made

Garment

US $ billion

Imports Exports

Fig: Indian T&C trade in 2007-08

• T&C industry is one of the largest and most important sectors in the Indian economy in terms of

output, foreign exchange earnings and employment.

• The industry contributes 4% to the country’s GDP and 14% to the country’s industrial

production.

• With US $ 12.7 billion of Textile exports and US $ 9.7 billion of Garment exports in 2007-08, the

industry contributed 12% to the foreign exchange earnings.

• As of March 2006, the industry provided direct employment to 33.17 million# people.

Indian Textile and Clothing (T&C) industry is one of the most important

sectors in terms of output, foreign exchange earnings and employment

Source: Office of Textile Commissioner

*Textile includes Made-ups articles#This also includes employment in Handloom, Sericulture, Handicraft and Jute industry


© IMaCS 2009

Printed 12-Jun-0916

• T&C industry is the second largest employment generating sector in India, after

agriculture.

• In addition to direct employment, the industry generates significant employment

through forward and backward linkages, both in traditional activities like

production of cotton and other natural fibers and in modern industries like textile

design and fashions.

• Apart from the employment potential, the large number of skilled and unskilled

activities in the industry makes the sector extremely important from the perspective

of inclusive growth.

T&C industry is the second largest employment generating sector with

significant employment opportunities for both skilled and unskilled labour

© IMaCS 2009

Printed 12-Jun-0917

Fig: Year-wise trend in Indian T&C exports

52% 54%57%

48%46%

43%

0

5

10

15

20

25

2005-06 2006-07 2007-08

US

$ b

illi

on

Textile Garment

Export

market

35%

Domestic

market

65%

Fig: Indian T&C market (2007-08)

• With exports accounting for 35% (by value) of the total market size, the Indian T&C industry has

significant dependence on export market.

• T&C exports have increased at a CAGR of 12% from 2005-06 to 2007-08 with textile exports

registering 17% growth and garment exports registering 9% growth.

• Value-wise share of textiles in total T&C exports has increased over the years from 52% in 2005-

06 to 57% in 2007-08.

Total market size#: Rs. 2.55 trillion

#Market size has been computed on the basis of retail prices and excludes Technical Textiles

Indian T&C industry has significant dependence on exports

Source: ICRA reportSource: Office of Textile Commissioner

17.8 19.4

22.4

© IMaCS 2009

Printed 12-Jun-0918

Indian T&C exports have significant dependence on EU27 and US which

together accounted for 54% of total T&C export value during 2007-08

Fibre

12%

Yarn

14%

Fabric

14%Garment

43%

Made-

ups

16%

Others

1%

Fig: Value-wise share of various products

in total T&C exports by India (2007-08)

Total Exports: US $ 22.4 billion

EU27

33%

US

21%UAE

6%Italy

4%

China

5%

Bangladesh

3%

Japan

1%

Others

27%

Fig: Value-wise share of major export markets

in total T&C exports by India (2007-08)

• Garment is the major export product of Indian T&C industry, constituting 43% by value of the total

T&C exports in 2007-08, followed by Made-ups (16%), Yarn (14%) and Fabric (14%).

• EU27 is the largest export market for Indian T&C products, with a share of 33% by value of the total

T&C exports in 2007-08; UK alone accounts for 7.5% of India’s total T&C export value.

• US is the second largest export market with a share of 21% by value of total T&C exports in 2007-08.

• Other important export markets are UAE, China, Italy, Bangladesh and Japan.


© IMaCS 2009

Printed 12-Jun-0919

• EU27, US and Japan are major import markets for T&C products in the world

accounting for 46% of world textile imports and 76% of world clothing imports in

2007.

• Recent economic slowdown has significantly impacted the T&C market of these

three large importers of textile and clothing.

• India being one of the major exporters of textile and clothing products to these

markets, the Indian T&C industry has also witnessed a downward impact.

Recent economic slowdown has impacted the major T&C import

markets thus, negatively impacting the Indian T&C industry

© IMaCS 2009

Printed 12-Jun-0920

21%

9%

15%

-4%

7%

0.2%

-5%

0%

5%

10%

15%

20%

25%

Exports of Textiles Exports of

Garments

Total T&C

Exports

Annual growth rate achieved in 2007-08

Annual growth rate achieved in 2008-09*

Fig: Annual Growth of Indian T&C exports

Source : Office of Textile Commissioner, DGCIS

Fig: Value-wise monthly total exports of Cotton

yarn, fabric and made-ups

• Growth of Indian T&C exports stagnated during Apr – Dec 2008 as compared to a growth of 15% y-

o-y in FY08.

• During Apr – Dec 2008, garment exports grew by 7% (y-o-y) as against a growth of 9% (y-o-y) in

FY08 whereas Textile exports declined by 4% (y-o-y) as against a growth of 21% (y-o-y) in FY08.

• Decline in exports was observed in all major categories of T&C industry during Aug – Dec 2008.

• During 2008, exports of cotton yarn, fabric and made-ups declined significantly in September (by

16% y-o-y), October (by 15% y-o-y) and November (by 26% y-o-y).

Growth of Indian T&C exports stagnated during Apr – Dec 2008 as

compared to a growth of 15% (y-o-y) in FY08

*Refers to Apr – Dec 2008

250

300

350

400

450

Aug Sep Oct Nov Dec

US

$ m

illi

on

20072008

© IMaCS 2009

Printed 12-Jun-0921

• Indian T&C industry has witnessed a significant impact with the major T&C importing markets

undergoing an economic slowdown.

• The Index of Industrial Production (IIP) for Cotton textiles declined by 3.7% (y-o-y) in Dec 2008 (as

against an increase of 2% y-o-y in Dec 2007), 6.2% (y-o-y) in Jan 2009 (as against an increase of

4% y-o-y in Jan 2008) and 12.1% in Feb 2009 (as against an increase of 5.1% y-o-y in Feb 2008).

• IIP for Textile products including apparel declined by 2.3% (y-o-y) in Feb 2009.

-20%

-10%

0%

10%

20%

30%

40%

50%

Jan-05 Jul-05 Feb-06 Aug-06 Mar-07 Sep-07 Apr-08 Nov-08

Cotton Textiles

Wool, Silk and man-made fibre

textiles

Textile Products (including

Wearing Apparel)

Fig: Year-on-year growth in IIP

Indian T&C industry witnessed a slowdown in production with the Index of Industrial

Production (IIP) for Cotton textiles declining by 2.6% (y-o-y) in Apr-Feb FY09

Source: CSO, IMaCS analysis

© IMaCS 2009

Printed 12-Jun-0922

Fig: Year-on-year growth in filament yarn

production

Fig: India’s monthly spun yarn production in million kgs

• Spun yarn production has declined since July

2008, with the decline continuing in each

successive month.

• During Apr-Feb, FY09 spun yarn production

declined by 2.9% (y-o-y) to 3.6 million MT.

• Production of Manmade Filament Yarn

(MMFY) declined by 6% (y-o-y) in

FY09, compared to a growth of 10.1% in

FY08.

• Production of Polyester Filament Yarn (PFY)

declined by 6% (y-o-y) in FY09, as against an

increase of 12% (y-o-y) in FY08.

During Apr - Feb FY09, spun yarn production declined by 3% (y-o-y)

and MMFY production declined by 6% (y-o-y)

Source: Office of the Textile Commissioner

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

0

50

100

150

200

250

300

350

400

Jan

-04

May

-04

Sep

-04

Jan

-05

May

-05

Sep

-05

Jan

-06

May

-06

Sep

-06

Jan

-07

May

-07

Sep

-07

Jan

-08

May

-08

Sep

-08

Jan

-09

Production (mkg) Growth (yoy)

-30%

-20%

-10%

0%

10%

20%

30%

40%

PFY VFY

© IMaCS 2009

Printed 12-Jun-0923

• Total fabric production declined by 1.4% y-o-y during Apr –Feb, FY09 and by 2% y-o-y

during Feb, 2009 as against a 3-year CAGR of 7.3% from FY05 to FY08;

• Fabric production by handloom, power loom and hosiery decreased by around 7% y-o-y , 1%

y-o-y and 2% y-o-y respectively during Feb, 2009.

Fig: Year-on-year growth in fabric production

Fabric production declined by 1.4% (y-o-y) during Apr - Feb, FY09

-5%

0%

5%

10%

15%

20%

2005 2006 2007 2008 Apr - Feb

FY09

Mills Powerloom Hosiery Total

Source: Office of Textile Commissioner, IMaCS analysis

© IMaCS 2009

Printed 12-Jun-0924

Fig: Operating profit margins for a sample

of Indian companies*

12%

-2%

20%20%

14%

9%

18%

12%

-3%

2%

7%

12%

17%

22%

Q2

FY08

Q3

FY08

Q4

FY08

Q1

FY09

Q2

FY09

Q3

FY09

Spinning

Weaving

Garment

Made-ups

-1%

-18%

7% 3%

7%

1%4%

-2%

-20%

-15%

-10%

-5%

0%

5%

10%

Q2

FY08

Q3

FY08

Q4

FY08

Q1

FY09

Q2

FY09

Q3

FY09

Fig: Net profit margins for a sample of

Indian companies*

• Operating profit margin of the analsyed Spinning and Garment companies have dropped

significantly from Q3FY08 to Q3FY09.

• Net profit margin for the analyzed companies of all sectors declined significantly in Q3FY09

with Made-ups and Spinning companies registering a loss.

Decline in production has negatively impacted the profit margin of

Indian T&C companies

*Analysis based on a sample of companies.

Refer Annexure II for details

© IMaCS 2009

Printed 12-Jun-0925

Fig: D/E ratio for a sample of Indian companies

• D/E ratio of the analysed Spinning, Weaving and Made-ups companies has increased

significantly from FY04 to FY08, indicating leveraged capacity expansion.

• Recent drop in production has resulted in under utilisation of capacities, inadequate absorption of

fixed costs and weak debt coverage indicators; the interest coverage ratio for the analyzed

companies of all sectors has declined significantly in Q3FY09.

Fig: Quarterly interest coverage ratio for a

sample of Indian companies*

0.9

-1.2

2.8

1.8

5.0

1.62.3

0.7

-1.5

-0.5

0.5

1.5

2.5

3.5

4.5

5.5

Q2

FY08

Q3

FY08

Q4

FY08

Q1

FY09

Q2

FY09

Q3

FY09

Highly leveraged capacity expansion combined with drop in production

has resulted in weak debt coverage indicators

1.7

3.1

1.6

3.53.4

1.2

0.8

2.6

0.5

1.0

1.5

2.0

2.5

3.0

3.5

FY04 FY05 FY06 FY07 FY08

Spinning

Weaving

Garment

Made-ups

*Analysis based on a sample of companies.

Refer Annexure II for details

© IMaCS 2009

Printed 12-Jun-0926

• Cost of the projects sanctioned under TUFS have declined significantly from Rs. 66,233

crore in FY07 to Rs.19,917 crore in FY08 and Rs. 31,672 crore during 9MFY09.

• This is indicative of reduction in expansion and modernisation plans of the T&C industry

which would be counter productive in the current competitive scenario.

Investments for technology up gradation have significantly decreased

in FY08 and 9MFY09

0

10000

20000

30000

40000

50000

60000

70000

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

(9M)

Rs

cro

re

Fig: Year-wise project cost of applications sanctioned

under TUFS


© IMaCS 2009

Printed 12-Jun-0927

Source: CSO, IMaCS analysis

-5%

-3% -4%

3%

-5%

7%

3%

-1%

-8%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Jun Jul Aug Sep Oct Nov Dec Jan Feb

Fig: Month on month change in average IIP* for

Textiles and Textile products (2008-09)

Decline in production in the T&C industry is estimated to have resulted

in a job loss of 5 – 6 lakh

• Since June, 2008 average IIP for Textiles and Textile products has witnessed a decline in

majority of months with an average month-on-month drop of 1.44% from June, 2008 to

February, 2009 indicating a drop in production.

• Considering the fact that T&C industry as a whole has not witnessed any major technological

change over the nine-month period under discussion, loss in production of 1.44% would lead to

an equivalent loss in jobs.

• Thus, decline in production is estimated to have resulted in a loss of 5 – 6 lakh jobs.

*Refer Annexure III for details of methodology

© IMaCS 2009

Printed 12-Jun-0928

Order book status

• Majority of surveyed T&C manufacturers reported to have an order book status

of 15 days to a month.

Issues faced in global markets

• ‘Less price realisation’ and ‘Shift of order to competing countries’ were ranked

as the most severe issues faced in the global markets.

Major business constraints faced by the T&C industry

• Majority of the domestic manufacturers ranked ‘lack of power’ as the most

severe business constraint.

• ‘Shortage of skilled labour’ and ‘working capital issues’ were ranked as the

second most severe business constraints by the industry.

• ‘High interest rates’ and ‘delay in refund’ were also mentioned as the key

business constraints impacting the industry.

Major issues faced by T&C manufacturers

Source: Primary Survey

© IMaCS 2009

Printed 12-Jun-0929

Table of Contents


key issues

Impact of economic slowdown on the demand of

textile and clothing




Recommendations


© IMaCS 2009

Printed 12-Jun-0930

Top importers of Textile Value in US $

billion

% annual

change

% share in world

textile imports

European Union (27) 84.21 10 33.7

United States 24.09 3 9.6

China 16.64 2 6.7

Hong Kong, China 13.56 -3 5.4

Japan 6.30 2 2.5

• EU27 is the largest importer of textile and clothing accounting for 33.7% of world textile imports

and 45.5% of world clothing imports in 2007, followed by US.

• China ranks third in world textile imports with a share of 6.7% while Japan is world’s third

largest importer of clothing with a share of 6.7% in world clothing imports in 2007.

World T&C trade has significant dependence on EU27 and US, which together

account for 43% of world textile exports and 69% of world clothing exports by value

Table: World’s top five textile importers (2007)

Source: WTO Trade Statistics

Top importers of Clothing Value in US $

billion

% annual

change

% share in

world imports

European Union (27) 162.8 13 45.5

United States 84.9 2 23.7

Japan 24.0 1 6.7

Hong Kong, China 19.1 2 5.4

Russian Federation 14.5 79 4.1

Table: World’s top five clothing importers (2007)76% of

the world

clothing

imports

43% of

the world

textile

imports

© IMaCS 2009

Printed 12-Jun-0931

• EU27, US and Japan are major import markets for T&C products accounting for 46% of

world textile imports and 76% of world clothing imports in 2007.

• EU27 entered an economic slowdown phase from Q3,2008 with its GDP declining by

0.2% (quarter on quarter) in Q3,2008, followed by a reduction of 1.5% in the final quarter

of the year.

• Economic growth in US fell by 0.3% between June and September, 2008.

• Japan's economy is witnessing economic slowdown after shrinking by 0.1% in the third

quarter of 2008; the economy had shrunk by 0.9% in the April to June, 2008.

• Recent economic slowdown has significantly impacted the T&C market of these three

large importers of textile and clothing.

World’s major T&C importers are facing economic slowdown which

has impacted the T&C demand

© IMaCS 2009

Printed 12-Jun-0932

Impact of economic slowdown on the imports of textile and clothing

Impact of economic slowdown on T&C imports by EU27

Impact of economic slowdown on T&C imports by UK

Impact of economic slowdown on T&C imports by US

Impact of economic slowdown on T&C imports by Japan

Projected T&C imports in identified global markets for 2015

© IMaCS 2009

Printed 12-Jun-0933

• EU27 is the largest importer of T&C accounting for 33.7% of the world textile imports and

45.5% of the world clothing imports by value.

• Garments account for the largest share of EU’s T&C import volume with their share increasing

over the years from 36% in 2005 to 43% in 2008.

• Share of made-ups in EU’s T&C import volume has also increased over the years whereas share

of yarn and fabric has decreased.

Fig: Volume-wise share of products in total T&C imports by EU27

EU27 is the largest importer of T&C accounting for 33.7% of world

textile imports and 45.5% of world clothing imports

Jan – Dec 2005Total imports: 17.9 million MT

Jan – Dec 2008Total imports: 21.1 million MT

Yarn

16%

Fabric

11%

Made-ups

10%

Garments

43%

Other

yarns and

fabrics

19%

Yarn

21%

Fabric

14%

Made-ups

10%

Garments

36%

Other

yarns and

fabrics

19%

Source: Eurostat, IMaCS Analysis

© IMaCS 2009

Printed 12-Jun-0934

140

145

150

155

160

165

170

175

180

15

17

19

21

2002 2003 2004 2005 2006 2007 2008

Bil

lion

Eu

ros

Mil

lion

MT

Volume in million MT Value in billion Euros

Fig: Total T&C imports by EU27

• Value-wise T&C imports in 2008 witnessed a drop of 2.9% (y-o-y) as against an increase at a 5-

year CAGR of 3% from 2002 to 2007.

• Though import value decreased, the import volume in 2008 increased by 12.8% (y-o-y).

-10%

-5%

0%

5%

10%

15%

2003 2004 2005 2006 2007 2008

% increase in volume % increase in value

Fig: Year-wise growth in total T&C imports

During 2008, total T&C import value by EU27 decreased by 2.9% (y-

o-y)


© IMaCS 2009

Printed 12-Jun-0935

Yarn imports

Fabric imports

Garment imports

Made-ups imports







© IMaCS 2009

Printed 12-Jun-0936

8

9

10

11

12

13

14

3

3.5

4

4.5

5

2002 2003 2004 2005 2006 2007 2008

Bil

lion

Eu

ros

Mil

lion

MT

Volume in million MT Value in billion Euro

Fig: Yarn imports by EU27

-16%

-12%

-8%

-4%

0%

4%

8%

2003 2004 2005 2006 2007 2008

% increase in Volume % increase in Value

Fig: Year-wise growth in imports of yarn

• Value-wise yarn imports by EU27 declined by 13.4% (y-o-y) in 2008 as against an increase of

1.2 % (y-o-y) in 2007.

• Volume-wise yarn imports in 2008 declined by 12.9% (y-o-y) as against an increase of 2.5% in

2007.

During 2008, yarn imports by EU27 declined 13.4% (y-o-y) by value

and 12.9% (y-o-y) by volume


© IMaCS 2009

Printed 12-Jun-0937

6%2% 2% 0.3%

-6%-8%

-13%

-26%-30%

-20%

-10%

0%

10%

Q1 Q2 Q3 Q4

y-o-y % increase in yarn import volume (2007 over 2006)


Fig: Year-on-year increase in volume-wise

yarn imports by EU27

5%

0%2%

-2%

-8% -10%

-15%

-21%

-30%

-20%

-10%

0%

10%

Q1 Q2 Q3 Q4

y-o-y % increase in yarn import value (2007 over 2006)


Fig: Year-on-year increase in value-wise


• Yarn imports by EU27 witnessed a significant impact of the economic slowdown with imports

declining 13% y-o-y by volume and 15% y-o-y by value in Q3,2008.

• The decline in imports continued in Q4,2008 with a reduction of 26% y-o-y by volume and 21%

y-o-y by value.

EU27 yarn imports witnessed a significant impact of economic slowdown with

volume-wise imports declining by 13% (y-o-y) in Q3,2008 and 26% (y-o-y) in Q4,2008


© IMaCS 2009

Printed 12-Jun-0938

Fig: Volume-wise monthly yarn imports

(‘000 MT)

150

200

250

300

350

400

450

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Th

ou

san

d M

T

2006 2007 2008

500

600

700

800

900

1000

1100

1200

1300

Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec

Mil

lion

Eu

ros

2006 2007 2008

Fig: Value-wise monthly yarn Imports

(million Euros)

• Volume-wise yarn imports in 2008 registered a decline since March, 2008 with significant

decline in the month of October (21.7% y-o-y), November (27.3% y-o-y), and December (29.7%

y-o-y).

• Value-wise yarn imports in 2008 registered a decline in each month with a significant decline in

the months of October (18.6% y-o-y), November (22.2% y-o-y), and December (24.2% y-o-y).

Imports of yarn declined significantly in October, November, and

December 2008


© IMaCS 2009

Printed 12-Jun-0939

EU

Intra

59%

EU

Extra

41%

Jan – Dec 2007

EU

Intra

57%

EU

Extra

43%

Jan –Dec 2008 • During 2008, EU Extra countries gained share in EU27 yarn imports from 40.8% in

2007 to 43.1% in 2008.

• Amongst the EU Extra countries, China is the leading exporter of yarn to EU27

followed by Turkey and India.

• Share of China in EU’s yarn import volume increased from 8.2% in 2007 to 10.7% in

2008.

• Both India and Turkey maintained their market share in EU’s yarn import volume

during 2008.

Fig: Volume-wise share of EU

Intra and EU Extra in total


4.3% 5.5%8.2% 10.7%

5.3%5.7%

6% 6%6.6%6.9%

6.2% 6.1%

0

200

400

600

800

1000

1200

1400

1600

2002 2003 2004 2005 2006 2007 2008

Th

ou

san

d M

T

Other EU Extra

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

China is the leading exporter of yarn to EU27 followed by Turkey and

India


Fig: Yarn imports by EU27 from EU Extra countries

© IMaCS 2009

Printed 12-Jun-0940

China

(+ 14%)

India

(- 13%)

Turkey

(- 15%)

Other EU

Extra

(- 13%)

EU Intra

(- 16%)*

Demand

Shrinkage

- 13%

Fig: Volume-wise imports from competing countries in 2008 as compared to 2007

• Volume-wise yarn imports by EU27 declined by 12.9% (y-o-y) in 2008.

• In spite of drop in imports, volume-wise yarn imports from China increased by 14.3% y-o-y

during 2008 resulting in increase in market share of China from 8.2% in 2007 to 10.7% in

2008.

• Though India maintained its market share in EU27 yarn import volume during 2008, volume-

wise yarn imports from India dropped by 13.2% (y-o-y).

• Volume-wise yarn imports from Turkey also decreased by 15.2% (y-o-y)

Though yarn import volume decreased by 12.9% (y-o-y)during

2008, the volume-wise imports from China increased by 14% (y-o-y)


*Indicates y-o-y increase/decrease in import volume during 2008

© IMaCS 2009

Printed 12-Jun-0941

• During 2008, value-wise yarn imports by EU27 declined by 13% (y-o-y).

• Amongst the analysed countries, China, India and Turkey are the major suppliers of yarn to

EU27.

• During 2008, though India maintained its market share in EU27 yarn imports, value-wise yarn

imports from India declined by 15% y-o-y.

• Yarn imports from China increased by 5% y-o-y resulting in increase in its market share to 7% in

2008 from 6% in 2007.

• Yarn imports from Turkey declined by 15% y-o-y during 2008 however, it maintained its market

share at 5%.

During 2008, value-wise yarn imports from India declined by 15% (y-

o-y) whereas that from China increased by 5% (y-o-y)


Increase/decrease in imports

India China Turkey

2008 -15% 5 % -15%

2007 4.5% 35% -5%4.4%

7%

5%

4.5%

6%

5%

0% 2% 4% 6% 8%

India

China

Turkey2007

2008

Fig: Value-wise share of key competing

countries in the yarn imports by EU27

Table: Value-wise annual change in yarn

imports from key competing countries

© IMaCS 2009

Printed 12-Jun-0942

1.7

1.9

2.1

2.3

2.5

2.7

2.9

Jan

-07

Feb

-07

Mar

-07

Apr-

07

May

-07

Jun

-07

Jul-

07

Aug-0

7

Sep

-07

Oct

-07

Nov-0

7

Dec

-07

Jan

-08

Feb

-08

Mar

-08

Apr-

08

May

-08

Jun

-08

Jul-

08

Aug-0

8

Sep

-08

Oct

-08

Nov-0

8

Dec

-08

Eu

ros/

kg

Fig: Unit Value realisation for yarn for the competing countries

• Unit value realisation for Chinese yarn export to EU27 is the least amongst the key competing

countries which explains the increase in share of China in EU27 yarn imports during 2008.

• Price realisation of India decreased from 2.28 Euro/kg in Feb 2008 to 2.16 Euro/kg in Jun 2008

however, there was an increase in price realisation in later months to 2.43 Euro/kg in Nov 2008. This

decreased again in December 2008 to 2.34 Euro/kg.

China supplies yarn at the most competitive prices which explains its

strengthening position in yarn import during 2008


India

China

Turkey

© IMaCS 2009

Printed 12-Jun-0943

• During 2008, yarn imports by EU27 declined 13.4% (y-o-y) by value and 12.9% (y-o-y) by volume.

• Volume-wise imports declined by 13% y-o-y in Q3,2008 (as against an increase of 2% y-o-y in

Q3,2007) and 26% y-o-y in Q4,2008 (as against stagnated imports in Q4,2007) indicating a

significant impact of economic slowdown.

• Decline in yarn import volume during 2008 was significant in the month of October (21.7% y-o-

y), November (27.3% y-o-y) and December (29.7% y-o-y).

• Amongst the countries under consideration, China is the leading supplier of yarn to EU27 followed

by Turkey and India.

• Though India maintained its market share of 6% in the total yarn import volume during 2008, yarn

import volume from India declined by 13% y-o-y.

• Yarn import volume from China increased by 14% y-o-y during 2008 resulting in increase in market

share of China from 8.2% of EU27 total yarn import volume in 2007 to 10.7% in 2008.

• Though Turkey maintained its market share of 6% in EU27 total yarn import volume in 2008, the

import volume from Turkey decreased by 15% y-o-y.

• Amongst the countries under consideration, China supplies yarn at the most competitive prices to

EU27 followed by India and Turkey.

Yarn imports by EU27 - Key findings

© IMaCS 2009

Printed 12-Jun-0944

Yarn imports

Fabric imports

Garment imports

Made-ups imports







© IMaCS 2009

Printed 12-Jun-0945

14

18

22

26

1.5

2

2.5

3

3.5

2002 2003 2004 2005 2006 2007 2008

Bil

lion

Eu

ros

Mil

lion

MT


Fig: Total Fabric imports by EU27

-30%

-20%

-10%

0%

10%

20%

2003 2004 2005 2006 2007 2008


Fig: Year-wise growth in Fabric imports

• During 2008, fabric import volume increased by 7.8% y-o-y as against an increase of 7.9% y-o-y

in 2007.

• Though fabric import volume registered an increase, the fabric import value declined by 13.1%

y-o-y in 2008 as against a 0.2% y-o-y decline in 2007.

Value-wise total fabric imports by EU27 declined by 13.1% y-o-y

during 2008


© IMaCS 2009

Printed 12-Jun-0946

7%12%

7% 5%

-2%

28%

15%

-13%-20%

-10%

0%

10%

20%

30%

40%

Q1 Q2 Q3 Q4

y-o-y % increase in fabric import volume (2007 over 2006)



fabric imports by EU27

3%

0%

0%

-4%

-9%

-13% -12%

-18%-20%

-10%

0%

10%

Q1 Q2 Q3 Q4

y-o-y % increase in fabric import value (2007 over 2006)



fabric imports by EU27

• Fabric imports by EU27 witnessed an impact of economic slowdown in Q4,2008 with import

volume declining by 13% y-o-y as against a growth of 5% y-o-y in Q4,2007.

• Fabric import value also registered a decline of 12% y-o-y in Q3,2008 and 18% y-o-y in

Q4,2008.

EU27 fabric imports witnessed an impact of economic slowdown with

volume-wise imports declining by 13% in Q4,2008


© IMaCS 2009

Printed 12-Jun-0947

Fig: Volume-wise monthly fabric imports

(‘000 MT)

100

150

200

250

300

350


Th

ou

san

d M

T

2006 2007 2008

500

700

900

1100

1300

1500

1700

1900


Mil

lion

Eu

ros

2006 2007 2008

Fig: Value wise monthly fabric imports

(million Euros)

• During 2008, fabric import volume increased in the second quarter though there was a drop in

imports after August, with significant decline in the month of October (11.6% y-o-y), November

(20.1% y-o-y), and December (5% y-o-y).

• Value-wise imports during 2008 decreased in each month with a significant decline in the month

of October (15.5% y-o-y), November (21.4% y-o-y), and December (16% y-o-y).

Fabric imports by EU27 declined significantly in the month of

October and November, 2008


© IMaCS 2009

Printed 12-Jun-0948

12.6% 17.3% 19% 18.1%

3% 3.9%3.7% 3.1%6.5%

9.2%9.2% 7.6%

0

200

400

600

800

1000

1200

2002 2003 2004 2005 2006 2007 2008

Th

ou

san

d M

T Other EU Extra

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

EU

Intra

44%EU

Extra

56%

Jan – Dec 2007

EU

Intra

52%

EU

Extra

48%

Jan – Dec 2008

Fig: Volume-wise share of

EU Intra and EU Extra in

total fabric imports by EU27

• Share of EU Intra in the total fabric import volume has increased from 44.5% in

2007 to 51.8% in 2008.

• Amongst the EU Extra countries, China is the key exporter of fabric to EU27


• Share of China in fabric import volume increased from 12.6% in 2005 to 19% in

2007 however, there was a drop in 2008 (to 18.1%).

• Share of Turkey in fabric import volume increased from 6.5% in 2005 to 9.2% in

2007 however, there was a significant drop in 2008 to 7.6%.

• Share of India increased marginally from 3% in 2005 to 3.7% in 2007 though the

market share declined to 3.1% in 2008.

Amongst the EU Extra countries, China is the major exporter of fabric

to EU27 followed by Turkey and India


Fig: Fabric imports by EU27 from EU Extra countries

© IMaCS 2009

Printed 12-Jun-0949

China

(+ 3%)India

(- 8.5%)

Turkey

(- 11.2%)

Other EU

Extra

(- 11.3%)

EU Intra

(+ 25%)

• Volume-wise fabric imports from EU Intra countries increased by 25% y-o-y resulting in

gain in market share.

• Though China lost market share marginally, fabric import volume from China increased by

3% (y-o-y) during 2008.

• Fabric import volume from India declined by 8.5% y-o-y.

• Volume-wise fabric imports from Turkey also decreased by 11.2% y-o-y.

Volume-wise fabric imports from India declined by 8.5% (y-o-y)

whereas that from China increased by 3% (y-o-y)



© IMaCS 2009

Printed 12-Jun-0950

• During 2008, fabric imports by EU27 declined by 13.1% (y-o-y) in value terms.

• Amongst the analysed countries, China, India and Turkey are the major suppliers of fabric to

EU27.

• During 2008, though India maintained its market share in EU27 fabric imports, value-wise fabric


• Fabric imports from China increased by 1.9% y-o-y resulting in increase in its market share to

10% in 2008 from 9% in 2007.

• Fabric imports from Turkey declined by 14% y-o-y during 2008 though it maintained its market

share at 7%.

During 2008, value-wise fabric imports from India declined by 7% (y-

o-y) whereas that from China increased by 1.9% (y-o-y)



India China Turkey

2008 -7% 1.9% -14%

2007 -3.2% 8% 5%2.1%

10%

7%

2%

9%

7%

0% 5% 10% 15%

India

China

Turkey2007

2008


countries in the fabric imports by EU27

Table: Value-wise annual change in fabric


© IMaCS 2009

Printed 12-Jun-0951

2.5

3.5

4.5

5.5

6.5

7.5

Jan

-07

Feb

-07

Mar

-07

Ap

r-0

7M

ay-0

7Ju

n-0

7Ju

l-07

Aug-0

7S

ep-0

7O

ct-0

7N

ov-0

7D

ec-0

7Ja

n-0

8F

eb-0

8M

ar-0

8A

pr-

08

May

-08

Jun

-08

Jul-

08

Aug-0

8S

ep-0

8O

ct-0

8N

ov-0

8D

ec-0

8

Eu

ros/

kg

Fig: Unit Value realisation for fabric for the competing countries

• Unit value realisation for Chinese fabric is the least amongst the key competing countries.

• Unit value realisation of India decreased from 5.2 Euro/kg in Jan 2008 to 4.5 Euro/kg in Aug 2008

however, there was an increase in later months to 5.15 Euro/kg in Nov and 5.21 Euro/kg in Dec

2008.

China supplies fabric at the most competitive prices which explains its

strengthening position in fabric import during 2008


India

China

Turkey

© IMaCS 2009

Printed 12-Jun-0952

• During 2008, though fabric imports by EU27 increased 7.8% y-o-y by volume, the import value

declined by 13.1% y-o-y.

• Volume-wise fabric imports declined by 13% y-o-y in Q4,2008 as against an increase of 5% y-o-y in

Q4,2007 indicating an impact of economic slowdown.

• Decline in fabric import volume during 2008 was significant in the month of October (11.6% y-o-

y), November (20.1% y-o-y) and December (5% y-o-y).

• Amongst the countries under consideration, China is the leading supplier of fabric to EU27 followed

by Turkey and India.

• Fabric import volume from India declined by 8.5% y-o-y in 2008 resulting in drop in market share in

EU27 total fabric import volume from 3.7% in 2007 to 3.1% in 2008.

• Fabric import volume from China increased by 3% y-o-y during 2008 though the market share of

China declined marginally from 19% in 2007 to 18.1% in 2008.

• Market share of Turkey in EU27 total fabric import volume declined significantly from 9.2% in 2007

to 7.6% in 2008.

• Amongst the countries under consideration, China supplies fabric at the most competitive prices to

EU27 followed by India and Turkey.

Fabric imports by EU27 - Key findings

© IMaCS 2009

Printed 12-Jun-0953

Yarn imports

Fabric imports

Garment imports

Made-ups imports







© IMaCS 2009

Printed 12-Jun-0954

80

90

100

110

120

4

5

6

7

8

9

10

2002 2003 2004 2005 2006 2007 2008

Bil

lion

Eu

ros

Mil

lion

MT

Volume in million MT

Value in billion Euros

Fig: Garment imports by EU27

-10%

0%

10%

20%

30%

40%

50%

2003 2004 2005 2006 2007 2008


Fig: Year-wise growth in imports

• Garment imports by EU27 increased at a 5-year CAGR of 5.3% by volume and 4.6% by value

from 2002 to 2007.

• During 2008 garment import volume increased by 39% y-o-y whereas the import value remained

almost constant.

• Garment imports from EU Extra countries grew by only 2.5% y-o-y in 2008, whereas imports

from EU Intra countries grew by 161% during the same period.

During 2008, volume-wise garment imports by EU27 increased significantly

however, the imports from EU Extra countries grew by only 2.5% y-o-y.


© IMaCS 2009

Printed 12-Jun-0955

7% 2% 4% 0%

95%

8%20%

34.4%

-5%

15%

35%

55%

75%

95%

Q1 Q2 Q3 Q4

y-o-y % increase in garment import volume (2007 over 2006)



garment imports by EU27

6% 5% 5%4%

-0.6%

0.3% 0.8% 0.6%

-5%

5%

15%

Q1 Q2 Q3 Q4

y-o-y % increase in garment import value (2007 over 2006)




• Volume-wise garment imports by EU27 witnessed a sharp increase in Q1,2008 however, the

growth slowed down after September, 2008.

• In Q1,2008 EU Extra imports grew by only 2% (y-o-y) in volume terms, whereas EU Intra

imports grew by 4 times (y-o-y) in the same period.

• Q4,2008 witnessed a decline of 1.9% (y-o-y) in garment import volume from EU Extra

countries, whereas EU Intra imports grew by 1.5 times (y-o-y) in the same period, thus

accounting for the significant growth in garment import volume.

• Value-wise garment imports stagnated in 2008 as compared to increase in each quarter of the

previous year.

Volume-wise garment imports by EU27 witnessed a drastic increase on account of

growth in imports from EU Intra countries however, value-wise imports stagnated


© IMaCS 2009

Printed 12-Jun-0956

Fig: Volume wise monthly Garment

Imports by EU27

400

600

800

1000

1200

1400


Th

ou

san

d M

T

2006 2007 2008

7000

8000

9000

10000

11000

12000


Mil

lion

Eu

ros

2006 2007 2008

Fig: Value wise monthly Garment

Imports by EU27

• Garment import volume by EU27 registered a moderate growth of 6.5% y-o-y in September 2008

followed by a decline of 4.3% y-o-y in October 2008. December 2008 saw a dramatic increase in

the volume of garments imported (117% y-o-y).

• Growth in garment import volume can be attributed to increase in EU Intra imports since imports

from EU Extra countries grew by only 5.9% (y-o-y) in December 2008,

• Garment import value registered a decline of 0.7% y-o-y in October 2008 and 3.8% y-o-y in

November 2008, although it grew by 7.2% y-o-y in December 2008.

Garment import value registered a decline of 0.7% (y-o-y) in October, 3.8%

(y-o-y) in November, although it grew by 7.2% (y-o-y) in December, 2008


© IMaCS 2009

Printed 12-Jun-0957

EU

Intra

23%

EU

Extra

77%

EU

Intra

44%EU

Extra

56%




• EU Extra is the major supplier of garments to EU27.

• Share of EU Extra countries increased from 68% in 2005 to 77% in 2007 though there was a

significant decline in their share during 2008 to 56% with EU Intra gaining market share.

• China is the major supplier of garments to EU27 followed by Bangladesh and Turkey.

• Share of China in EU27 garment import volume increased from 30% in 2005 to 34% in

2007 however, there was a decline in 2008 to 27.8%.

• Share of Turkey in EU27 garment import volume also declined during 2008 to 4.6% from

7.3% in 2007 .

• Bangladesh also witnessed a decline in its market share in EU27 garment import volume

from 8.3% in 2007 to 6.4% in 2008.

• India’s share in EU27 garment import volume was 4% in 2007 which declined to 3% in

2008.

7% 8.6% 8.3% 6.4%

30% 31% 34% 27.8%

3.6% 3.9%4%

3%7.3% 7.3%

7.3%4.6%

0

1000

2000

3000

4000

5000

6000

2002 2003 2004 2005 2006 2007 2008

Th

ou

san

d M

T

Other ExtraVietnamTurkeySri LankaIndiaChinaBangladesh

China is the major supplier of garments to EU27 followed by

Bangladesh and Turkey


Jan – Dec 2007

Jan – Dec 2008

Fig: Garment imports by EU27 from EU Extra countries

© IMaCS 2009

Printed 12-Jun-0958

Bangladesh

(+ 7.1%)

China

(+ 12.2%)

India

(+ 3.9%)

Turkey

(- 12.1%)

Other EU

Extra

(- 6.9%)

EU Intra

(+161%)


• Though China lost market share in EU27 garment import volume during 2008, volume-wise

garment imports from China increased by 12.2% y-o-y.

• Garment import volume from Bangladesh has also increased by 7.1% y-o-y whereas that from

Turkey dropped by 12.1% y-o-y.

• Garment import volume from India increased by 3.9% y-o-y during 2008.


During 2008, garment import volume from Bangladesh increased by

7.1% (y-o-y) whereas that from India increased by 3.9% (y-o-y)

© IMaCS 2009

Printed 12-Jun-0959

• Garment imports by EU27 in value terms remained almost constant during 2008.

• During 2008, India maintained its market share in EU27 garment imports however, value-wise imports

from India increased by 3.2% y-o-y.

• Garment imports from China increased by 14% y-o-y resulting in an increase in its market share to 24%

in 2008 from 21% in 2007.

• During 2008, value-wise garment imports from Bangladesh increased by 7% y-o-y.

• Imports from Sri Lanka and Vietnam also increased by 7% y-o-y and 10% y-o-y respectively in 2008.

• Imports from Turkey declined by 11% y-o-y during 2008 resulting in a drop in its market share to 7% in

2008 from 8% in 2007.

During 2008, value-wise garment imports from India increased by

3.2% (y-o-y) whereas that from China increased by 14% (y-o-y)



India Bangladesh China Sri Lanka Turkey Vietnam

2008 3.2% 7% 14% 8% -11% 10%

2007 1.1% -4.6% 14% 7% 8% 11%

3.8%

4.2%

24%

1%

7%

1.2%

3.7%

3.9%

21%

1%

8%

1%

0% 5% 10% 15% 20% 25%

India

Bangladesh

China

Sri Lanka

Turkey

Vietnam 2007

2008


countries in the garment imports by EU27

Table: Value-wise annual change in garment imports

from key competing countries

© IMaCS 2009

Printed 12-Jun-0960

4

9

14

19

24

Jan

-07

Feb

-07

Mar

-07

Apr-

07

May

-07

Jun

-07

Jul-

07

Aug-0

7

Sep

-07

Oct

-07

Nov-0

7

Dec

-07

Jan

-08

Feb

-08

Mar

-08

Apr-

08

May

-08

Jun

-08

Jul-

08

Aug-0

8

Sep

-08

Oct

-08

Nov-0

8

Dec

-08

Eu

ros/

kg

Fig: Unit Value realisation for garment for the competing countries

• Unit value realisation for garments imported from Bangladesh is the least amongst the key

competing countries, followed by China.

• Unit value realisation of Indian garments decreased from 17.54 Euro/kg in Feb 2008 to 14.42

Euro/kg in Oct 2008 however, there was a marginal increase in Nov 2008 to 15.19 Euro/kg , and a

further increase to 16.18 Euro/kg in December 2008 .

Amongst the countries under consideration, Bangladesh supplies

garments at the most competitive prices followed by China


India

China

Turkey

Bangladesh

© IMaCS 2009

Printed 12-Jun-0961

• Volume-wise garment imports by EU27 registered a dramatic increase in Q4,2008 with import

volume increasing by 34% y-o-y; the import value declined by 0.6% y-o-y as against an increase of

4% in Q4,2007.

• Increase in garment import volume has been on account of surge in EU Intra imports which

increased by 1.5 times during Q4, 2008 whereas imports from EU Extra countries witnessed a

decline of 1.9% y-o-y.

• Amongst the countries under consideration, China is the leading supplier of garments to EU27

followed by Bangladesh and Turkey.

• India’s share in EU27 garment import volume was 4% in 2007 which declined to 3% in 2008 though

there was an increase of 3.9% y-o-y in garment import volume from India.

• Garment import volume from China increased by 12.2% y-o-y in 2008 though there was a drop in its

market share in EU27 total garment import volume from 34% in 2007 to 27.8% in 2008.

• Garment import volume from Bangladesh increased by 7.1% y-o-y during 2008 though the market

share of Bangladesh declined from 8.3% of EU27 total fabric import volume in 2007 to 6.4% in

2008.

• EU27 garment imports from Turkey declined by 12.1% y-o-y resulting in a drop in market share of

Turkey in EU27 total garment import volume from 7.3% in 2007 to 4.6% in 2008.

• Amongst the countries under consideration, Bangladesh supplies garments at the most competitive

prices to EU27 followed by China, India and Turkey.

Garment imports by EU27 - Key findings

© IMaCS 2009

Printed 12-Jun-0962

Yarn imports

Fabric imports

Garment imports

Made-ups imports







© IMaCS 2009

Printed 12-Jun-0963

6

7

8

9

10

11

12

1

1.4

1.8

2.2

2.6

2002 2003 2004 2005 2006 2007 2008

Bil

lion

Eu

ros

Mil

lion

MT


Fig: Imports of Made-ups by EU27

-4%

0%

4%

8%

12%

16%

20%

2003 2004 2005 2006 2007 2008



• Made-ups imports by EU27 increased at a 5-year CAGR of 11.1% by volume and 7% by value

from 2002 to 2007.

• During 2008 imports declined for the first time in last six years; made-ups import volume

declined by 1.4% y-o-y whereas the decline was 2% y-o-y in terms of value.

During 2008, imports of made-ups declined 2% (y-o-y) by value and

1.4% (y-o-y) by volume


© IMaCS 2009

Printed 12-Jun-0964

18%17% 15% 16%

7%

-5%

1%

-8%-10%

0%

10%

20%

Q1 Q2 Q3 Q4

y-o-y % increase in made-ups import volume (2007 over 2006)



made-ups imports by EU27

10%

4%

10%

5%

-3%

-1%

0.4%

-4%-8%

-3%

2%

7%

12%

Q1 Q2 Q3 Q4

y-o-y % increase in made-ups import value (2007 over 2006)



made-ups imports by EU27

EU27 made-ups imports witnessed an impact of economic slowdown with

imports declining 8% (y-o-y) by volume and 4% (y-o-y) by value in Q4,2008

• Made-ups imports by EU27 witnessed an impact of economic slowdown with growth in import

volume moderating in Q3,2008 to 1% y-o-y as against a growth of 15% y-o-y in Q3,2007.

• Made-ups import volume declined by 8.1% y-o-y in Q4,2008 as against an increase of 16% in

Q4, 2007.

• The import value also registered a decline of 4% y-o-y in Q4,2008.


© IMaCS 2009

Printed 12-Jun-0965

Fig: Volume wise monthly made-up

imports by EU27

120

140

160

180

200

220

240

260

280


Th

ou

san

d M

T

2006 2007 2008

700

750

800

850

900

950

1000

1050


Mil

lion

Eu

ros

2006 2007 2008

Fig: Value wise monthly made-up

imports by EU27

• Made-ups import volume witnessed a significant decline in the month of October (by 6.5% y-o-

y) and November (by 15.3% y-o-y.

• Imports in value terms also declined in October (by 2.9% y-o-y) and in November (by 9.6% y-o-

y.

Imports of made-ups declined significantly in the month of October

and November, 2008


© IMaCS 2009

Printed 12-Jun-0966

25.7% 27.6%27.6% 30.1%

9%9.1%

8.9%8.9%

11.2%10.4%

9.1% 8.6%

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2002 2003 2004 2005 2006 2007 2008

Mil

lion

MT

Other EU Extra

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

EU

Intra

34%

EU

Extra

66%

Jan – Dec 2007

EU

Intra

31%

EU

Extra

69%

Jan – Dec 2008



made-up imports by EU27

• EU Extra is the major supplier of made-ups to EU27 with its share increasing over the

years from 66% in 2007 to 69% in 2008.

• Amongst the EU Extra countries, China is the major supplier of made-ups to EU27


• Share of China in EU27 made-ups import volume has increased to 30.1% in 2008 from

27.6% in 2007.

• India’s share in EU27 made-ups import volume remained stagnant during 2008 at

8.9%.

• Share of Turkey in EU27 made-ups import volume declined over the years from 11.2%

in 2005 to 8.6% in 2008.

China is the major supplier of made-ups to EU27 followed by India

and Turkey


Fig: Made-ups imports by EU27 from EU Extra countries

© IMaCS 2009

Printed 12-Jun-0967

Bangladesh

(+ 15.8%)

China

(+ 7.8%)

India

(- 1.8%)

Turkey

(- 7.1%)

Other EU

Extra

(+ 2.9%)

EU Intra

(- 10.3%)

Demand

Shrunk

- 1.4%


• Volume-wise made-ups imports have declined by 1.4% y-o-y in 2008.

• Despite decline in demand, imports from China increased by 7.8% y-o-y during 2008.

• Imports from India declined by 1.8% y-o-y whereas that from Turkey declined by 7.1% y-o-y.

• Bangladesh, though having a small share in EU27 imports witnessed an increase in import volume

by 15.8% (y-o-y) during 2008.

Though total made-ups import volume declined by 1.4% (y-o-y), imports from China

and Bangladesh increased by 7.8% (y-o-y) and 15.8% (y-o-y) respectively


© IMaCS 2009

Printed 12-Jun-0968

• During 2008, value-wise imports of made-ups by EU27 declined by 2% (y-o-y).

• During 2008, though India maintained its market share in EU27 made-ups imports at 7%, the

value-wise imports from India decreased by 6% y-o-y.

• Made-ups imports from China increased by 6% y-o-y resulting in an increase in its market share

to 23% in 2008 from 21% in 2007.

• In 2008, value-wise made-ups imports from Bangladesh increased by 8% y-o-y whereas that

from Turkey and Vietnam declined by 7% y-o-y and 6% y-o-y respectively.

During 2008, value-wise made-ups imports from India decreased by

6% (y-o-y) whereas that from China increased by 6% (y-o-y)



India Bangladesh China Turkey Vietnam

2008 -6% 8% 6% -7% -6%

2007 11% 19% 9% 2.5% 8%

7%

2.1%

23%

10%

0.9%

7%

1.9%

21%

10%

0.9%

0% 5% 10% 15% 20% 25%

India

Bangladesh

China

Turkey

Vietnam 2007

2008


countries in made-ups imports by EU27

Table: Value-wise annual change in made-ups


© IMaCS 2009

Printed 12-Jun-0969

2.5

3

3.5

4

4.5

5

5.5

6

Jan

-07

Feb

-07

Mar

-07

Apr-

07

May

-07

Jun-0

7

Jul-

07

Aug-0

7

Sep

-07

Oct

-07

Nov-0

7

Dec

-07

Jan

-08

Feb

-08

Mar

-08

Apr-

08

May

-08

Jun-0

8

Jul-

08

Aug-0

8

Sep

-08

Oct

-08

Nov-0

8

Dec

-08

Eu

ros/

kg

Fig: Unit Value realisation for made-ups for the competing countries

• Unit value realisation for made-ups imported from Bangladesh is the least amongst the key

competing countries

• Unit value realisation of India decreased from 4.02 Euro/kg in Feb 2008 to 3.60 Euro/kg in Jun

2008 however there was an increase in price realisation in later months to 4.34 Euro/kg in Nov

and 4.11 Euro/kg in Dec 2008.

• Though imports from India were relatively higher priced in early 2007, the unit value realisation

of imports from India closely matched that of China from May 2008 onwards.

Bangladesh supplies made-ups at the most competitive prices followed

by China and India


IndiaChina

Turkey

Bangladesh

© IMaCS 2009

Printed 12-Jun-0970

• During 2008, imports of made-ups by EU27 declined 1.4% y-o-y by volume and 2% y-o-y by value.

• Volume-wise made-ups imports declined by 8% y-o-y in Q4,2008 as against an increase of 16% y-o-

y in Q4,2007 indicating an impact of economic slowdown.

• Decline in made-ups import volume during 2008 was significant in the month of October (6.5% y-o-

y), November (15.3% y-o-y), and December (1.3% y-o-y).

• Amongst the countries under consideration, China is the leading supplier of made-ups to EU27

followed by India and Turkey.

• Though India maintained its market share at 8.9% of total made-ups import volume, the import

volume from India declined by 1.8% y-o-y in 2008.

• Made-ups import volume from China increased by 7.8% y-o-y during 2008 resulting in increase in

the market share of China from 27.6% in 2007 to 30.1% in 2008.

• Market share of Turkey in EU27 total made-ups import volume declined from 9.1% in 2007 to 8.6%

in 2008.

• Bangladesh, though having a small share in EU27 made-ups import volume witnessed an increase in

import volume by 15.8% (y-o-y) during 2008.

• Amongst the countries under consideration, Bangladesh supplies made-ups at the most competitive

prices to EU27 followed by India and China.

Made-ups imports by EU27 - Key findings

© IMaCS 2009

Printed 12-Jun-0971







© IMaCS 2009

Printed 12-Jun-0972

Yarn

11% Fabric

9%

Garment

42%

Made-ups

11%

Other

special

yarns and

fabrics

27%

Yarn

8%

Fabric

7%

Garment

50%

Made-ups

13%

Other

special

yarns and

fabrics

22%

• UK is one of the largest importer of textile and clothing amongst the EU27 countries with

imports of textile and clothing worth 23.6 billion Euros in 2007, accounting for 13.6% of the

total EU27 countries’ T&C import value.

• Garment is the major import product constituting 76% of the total T&C imports by value and

50% of total T&C imports by volume.

• Share of garments and made-ups in the import basket has increased over the years whereas that

of yarn and fabric has decreased.

Fig: Volume wise share of products in total T&C imports by UK

UK is one of the largest importer of textile and clothing amongst the EU27

countries, accounting for 13.6% of the total EU27 countries’ T&C import value

Jan – Dec 2005 Jan – Dec 2008


© IMaCS 2009

Printed 12-Jun-0973

-20%

-10%

0%

10%

20%

30%

40%

2003 2004 2005 2006 2007 2008


Fig: Total T&C imports by UK

• Total T&C imports by UK increased at a 5-year CAGR of 1.1% in value terms from 2002 to

2007.

• During 2008, the import value decreased by 10% y-o-y as against a marginal increase of 1% y-o-

y in 2007.

• During the same period, total T&C import volume decreased by 11% (y-o-y) as against an

increase of 9% (y-o-y) in 2007.

Fig: Year-wise growth in total T&C imports

During 2008, T&C imports by UK decreased 10% (y-o-y) by value and

11% (y-o-y) by volume


19

21

23

25

2200

2600

3000

3400

2002 2003 2004 2005 2006 2007 2008

bil

lion

Eu

ros

'000 M

T

Volume in '000 MT Value in billion Euros

© IMaCS 2009

Printed 12-Jun-0974

Yarn imports

Fabric imports

Garment imports

Made-ups imports







© IMaCS 2009

Printed 12-Jun-0975

500

600

700

800

900

1000

1100

1200

150

250

350

450

550

mil

lio

n E

uro

s

'00

0 M

T

Volume in '000 MT Value in million Euros

Fig: Yarn Imports by UK

• Total yarn imports by UK decreased at a compounded annual rate of 9.7% in volume terms and

7.4% in value terms from the year 2002 to 2007.

• Value-wise yarn imports by UK declined by 17.2% (y-o-y) in 2008 as against a decline of 6.5 %

(y-o-y) in 2007.

• Volume-wise yarn imports in 2008 declined by 13.1% (y-o-y) as against a decline of 8.2% in

2007.

Fig: Year-wise growth in imports of yarn

-45%

-25%

-5%

15%

35%

55%

2003 2004 2005 2006 2007 2008


During 2008, yarn imports by UK declined 17.2% (y-o-y) by value and

13.1% (y-o-y) by volume


© IMaCS 2009

Printed 12-Jun-0976

-7% -7% -8%

-11%-13%

-8%

-14%

-19%-20%

-10%

0%

Q1 Q2 Q3 Q4




yarn imports by UK

-4%-6%

-5%

-11%

-16%

-12%

-21% -20%-25%

-15%

-5%

Q1 Q2 Q3 Q4

y-o-y % increase in yarn import value (2007 over 2006)y-o-y % increase in yarn import value (2008 over 2007)


yarn imports by UK

• Yarn imports by UK witnessed an impact of the economic slowdown with imports during H2

2008 declining at a faster pace than that witnessed in H2 2007.

• In Q3,2008 yarn imports declined 14% y-o-y by volume and 21% y-o-y by value.

• The decline in imports continued in Q4,2008 with a reduction of 19% y-o-y by volume and 20%

y-o-y by value.

UK yarn imports witnessed the impact of economic slowdown with volume-wise

imports declining by 14% (y-o-y) in Q3,2008 and 19% (y-o-y) in Q4,2008


© IMaCS 2009

Printed 12-Jun-0977


10

12

14

16

18

20

22

24

26


'00

0 M

T

2006 2007 2008

30

40

50

60

70

80

90


mil

lion

Eu

ros

2006 2007 2008

Fig: Value-wise monthly yarn Imports

• Volume-wise yarn imports in 2008 registered significant decline in September (15.9%

y-o-y), October (13.1% y-o-y), November (23.2% y-o-y) and December, 2008 (21.2% y-o-y).

• Yarn imports by value also registered a decline in each month with a significant decline in the

month of September (22.2% y-o-y), October (13.2% y-o-y), November (23% y-o-y), and

December 2008 (26.3% y-o-y).

Volume-wise yarn imports in 2008 registered a significant decline post

September as compared to the imports in same period, previous year


© IMaCS 2009

Printed 12-Jun-0978

• Share of EU Intra in the total yarn import volume has decreased from 66% in

2005 to 56% in 2007 and 52% in 2008.

• Amongst the EU Extra countries, China is the leading exporter of yarn to UK


• Share of China in UK yarn import volume has increased from 5.4% in 2005 to

9.6% in 2007 and 11.3% in 2008.

• Share of Turkey in UK yarn import volume had stagnated at around 7.5% till

2007 however there was an increase in its share to 10.2% in 2008.

• India’s share in UK yarn import volume increased from 2.8% in 2005 to 4.2% in

2007 and 4.8% in 2008.

EU

Intra

56%

EU

Extra

44%

EU Intra 52%

EU Extra 48%

5.4% 6.4% 9.6% 11.3%2.8% 3.5%

4.2% 4.8%7.7% 7%

7.8% 10.2%

0

20

40

60

80

100

120

140

2002 2003 2004 2005 2006 2007 2008

„000 M

T

Other EU Eextra

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

Jan – Dec 2007

Jan – Dec 2008

China is the leading exporter of yarn to UK followed by Turkey and

India


Fig: Yarn imports by UK from EU Extra countries



yarn imports by UK

© IMaCS 2009

Printed 12-Jun-0979

China

(2.3%)

India

(- 1.2%)

Turkey

(14.6%)

Other EU

Extra

(- 14.8%)

EU Intra

(- 19.5%)

Demand

Shrunk

- 13.1%

• Volume-wise yarn imports by UK declined by 13.1% (y-o-y) in 2008.

• In spite of drop in imports, yarn import volume from Turkey increased significantly (by 14.6% y-o-

y) during 2008 resulting in increase in market share of Turkey from 7.7% in 2007 to 10.2% in

2008.

• Yarn import volume from China also increased by 2.3% (y-o-y) resulting in increase in market share

of China from 9.7% in 2007 to 11.3% in 2008.

• Though India’s market share in UK yarn import volume increased marginally during 2008, the

import volume from India declined by 1.2%

Though yarn import volume decreased by 13.1% during 2008, the

imports from Turkey increased by 14.6% y-o-y



© IMaCS 2009

Printed 12-Jun-0980

• Value-wise yarn imports by UK declined by 17.2% (y-o-y) in 2008 as against a decline of 6.5 %

(y-o-y) in 2007.

• Amongst the analysed countries, China, India and Turkey are the major suppliers of yarn to UK.

• During 2008, though India marginally increased its market share in UK yarn imports, value-wise

yarn imports from India declined by 2.9% y-o-y.

• Yarn imports from China fell by 4.5% y-o-y, though it maintained its market share at 5% in 2008.

• Yarn imports from Turkey increased by 1.6% y-o-y during 2008 resulting in increase in its

market share to 9% in 2008 from 7% in 2007.

During 2008, value-wise yarn imports from India declined by 2.9% (y-

o-y) whereas that from Turkey increased by 1.6% (y-o-y)



India China Turkey

2008 -2.9% -4.5% 1.6%

2007 19% 4.1% -3.8%5%

5%

9%

4.3%

4.6%

7%

0% 2% 4% 6% 8% 10%

India

China

Turkey

2007

2008


countries in yarn imports by UK



© IMaCS 2009

Printed 12-Jun-0981

• During 2008, yarn imports by UK declined 13.1% y-o-y by volume and 17.2% y-o-y by value.

• Volume-wise imports declined 14% y-o-y in Q3,2008 and 19% y-o-y in Q4,2008 as against a decline

of 8% y-o-y in Q3,2007 and 11% y-o-y in Q4,2007 indicating an impact of economic slowdown.

• Decline in yarn import volume during 2008 was significant in the month of October (13.1% y-o-

y), November (23.2% y-o-y) and December, 2008 (21.2% y-o-y).

• Amongst the countries under consideration, China is the leading supplier of yarn to UK followed by

Turkey and India.

• Though India’s market share in UK yarn import volume increased marginally from 4.2% in 2007 to

4.8% in 2008, yarn import volume from India declined by 1.2% y-o-y.

• Yarn import volume from China increased by 2.3% y-o-y during 2008 resulting in an increase in

market share of China from 9.6% in 2007 to 11.3% in 2008.

• Yarn import volume from Turkey increased by 14.6% y-o-y during 2008 resulting in increase in

market share of Turkey from 7.8% in 2007 to 10.2% in 2008.

Yarn imports by UK - Key findings

© IMaCS 2009

Printed 12-Jun-0982

Yarn imports

Fabric imports

Garment imports

Made-ups imports







© IMaCS 2009

Printed 12-Jun-0983

1000

1200

1400

1600

1800

2000

2200

2400

150

190

230

270

310

350

2002 2003 2004 2005 2006 2007 2008

Mil

lion

Eu

ros

„000 M

T


Fig: Total Fabric Imports by UK

-25%

-15%

-5%

5%

2003 2004 2005 2006 2007 2008


Fig: Year-wise growth in fabric imports

• Total fabric imports by UK decreased at a compounded annual rate of 9.3% by volume and 9.7%

by value from the year 2002 to 2007.

• During 2008, value-wise fabric imports by UK declined by 18.8% (y-o-y) as against a marginal

increase of 0.5% (y-o-y) during 2007.

• Volume-wise fabric imports in 2008 declined by 13.7% (y-o-y) as against an increase of 2.5% (y-

o-y) in 2007.

Total fabric imports by UK declined 13.7% (y-o-y) by volume and

18.8% (y-o-y) by value during 2008


© IMaCS 2009

Printed 12-Jun-0984

-3%

33%

-12%-7%

-0.3%

-23%

-9%

-19%-25%

-15%

-5%

5%

15%

25%

35%

Q1 Q2 Q3 Q4




fabric imports by UK

-1%

7%3%

-6%

-11%

-19%-22%

-24%-30%

-20%

-10%

0%

10%

Q1 Q2 Q3 Q4




fabric imports by UK

• Fabric imports by UK witnessed an impact of economic slowdown with import value declining

by 22% y-o-y in Q3,2008 as against an increase of 3% y-o-y in Q3,2007. Import value further

declined in Q4,2008 by 24% (y-o-y) as against a decline of 6% (y-o-y) in Q4,2007.

• Fabric import volume also declined by 9% y-o-y in Q3,2008 and 19% y-o-y in Q4,2008 as

against a decline of 12% in Q3,2007 and 7% y-o-y in Q4, 2007.

UK fabric imports witnessed an impact of economic slowdown with value-wise

imports declining by 22% (y-o-y) in Q3,2008 and by 24% (y-o-y) in Q4,2008


© IMaCS 2009

Printed 12-Jun-0985

Fig: Volume wise monthly fabric Imports

5

10

15

20

25

30

35


'00

0 M

T

2006 2007 2008

Fig: Value wise monthly Fabric Imports

Fabric imports by UK declined significantly in the month of

November and December, 2008

• During 2008, fabric import volume registered a decline since March, 2008 with a significant

decline in November (27.1% y-o-y) and December (25.9% y-o-y).

• Value-wise imports in 2008 registered a decline in each month with a significant decline in

the month of September (20.5% y-o-y), October (19.8% y-o-y), November (27.1%

y-o-y), and December (26% y-o-y).


60

70

80

90

100

110

120

130

140

150


Mil

lion

Eu

ros

2006 2007 2008

© IMaCS 2009

Printed 12-Jun-0986

• Share of EU Intra in total fabric import volume has decreased from 49.7% in 2005 to

46% in 2007 and 44% in 2008.

• Amongst the EU Extra countries, China is the leading exporter of fabric to UK

followed by India and Turkey.

• Share of China in UK fabric import volume has increased from 10.1% in 2005 to

11.8% in 2007 however, there was a marginal decline to 11.5% in 2008.

• Share of Turkey has increased from 4.8% in 2005 to 7.1% in 2007 though there was a

decline in share to 6.3% in 2008.

• Share of India in UK fabric import volume has remained stagnant for the last few years

(2007 and 2008).

10.1% 11.2% 11.8% 11.5%

7.8% 8.9% 7.6% 7.6%

4.8% 6.9% 7.1%6.3%

0

20

40

60

80

100

120

140

160

180

200

2002 2003 2004 2005 2006 2007 2008

„000 M

T

Other EU Extra

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

37 38.1

16.7

3.9

EU

Intra

46%

EU

Extra

54%

Jan – Dec 2007

Jan – Dec 2008

EU

Intra

45%EU

Extra

55%

Amongst the EU Extra countries, China is the leading exporter of

fabric to UK followed by India and Turkey


Fig: Fabric imports by UK from EU Extra countries

Fig: Volume-wise share of

EU Intra and EU Extra in

total fabric imports by UK

© IMaCS 2009

Printed 12-Jun-0987

China(-16.1%)

India(- 13.4%)

Turkey(- 23.3%)

Other EU Extra

(- 4.4%)

EU Intra(-16.2%)

Demand

Shrunk

-13.7%

• Volume-wise fabric imports decreased by 13.7% (y-o-y) during 2008.

• Volume-wise fabric imports from Turkey decreased by 23.3% (y-o-y) during 2008 resulting in

drop in market share of Turkey from 7.1% in 2007 to 6.3% in 2008.

• During 2008, fabric import volume from China declined by 16.1% (y-o-y) and from India

declined by 13.4% (y-o-y).

• Sri Lankan fabric imports by UK surged during 2008, increasing by 56.8% (y-o-y) though the

share of Sri Lanka in total UK fabric imports remained very small (0.1%).

Fabric imports from all major origins witnessed a decline during 2008



© IMaCS 2009

Printed 12-Jun-0988

• Fabric imports by UK declined by 18.8% (y-o-y) in value terms during 2008.

• Amongst the analysed countries, China, India and Turkey are the major suppliers of fabric to UK.

• During 2008, though India increased its market share in UK fabric imports to 8% in 2008 from

7% in 2007, value-wise fabric imports from India declined by 11% y-o-y.

• During 2008, fabric imports from China decreased by 18% y-o-y but it was able to maintain its

market share at 8%.

• Fabric imports from Turkey declined by 23% y-o-y during 2008 thus, its market share declined to

8% in 2008 from 9% in 2007.

During 2008, value-wise fabric imports declined from India (by 11% y-

o-y), China (by 18% y-o-y) and Turkey (by 23% y-o-y)



India China Turkey

2008 -11% -18% -23%

2007 -1.7% 7% 9%8%

8%

8%

7%

8%

9%

0% 5% 10%

India

China

Turkey

2007

2008


countries in the fabric imports by UK



© IMaCS 2009

Printed 12-Jun-0989

• During 2008, fabric imports by UK declined 13.7% y-o-y by volume and 18.8 % y-o-y by value.

• Volume-wise fabric imports declined by 19% y-o-y in in Q4,2008 as against a decline of 7% y-o-y in

Q4,2007 indicating an impact of economic slowdown.

• Decline in fabric import volume during 2008 was significant in the month of November (27.1% y-o-

y) and December (25.9% y-o-y).

• Amongst the countries under consideration, China is the leading supplier of fabric to UK followed by

India and Turkey.

• Though India maintained its market share in total fabric import volume by UK, volume-wise fabric

imports from India declined by 13.4% y-o-y in 2008.

• Fabric import volume from China declined by 16.1% y-o-y during 2008 resulting in marginal drop in

market share of China from 11.8% of UK total fabric import volume in 2007 to 11.5% in 2008.

• Market share of Turkey in UK total fabric import volume declined from 7.1% in 2007 to 6.4% in

2008 with a drop of 23.3% (y-o-y) in fabric import volume from Turkey.

Fabric imports by UK- Key findings

© IMaCS 2009

Printed 12-Jun-0990

Yarn imports

Fabric imports

Garment imports

Made-ups imports







© IMaCS 2009

Printed 12-Jun-0991

-10%

0%

10%

20%

2003 2004 2005 2006 2007 2008


• Total garment imports by UK increased at a 5-year CAGR of 5% by volume and 2.5% by value

from the year 2002 to 2007.

• During 2008, garment imports increased 4.4% (y-o-y) by volume as against an increase of 8% (y-

o-y) during 2007.

• UK garment imports from EU Intra countries grew by 24.4% (y-o-y) whereas imports from EU

Extra countries almost stagnated.

• Value-wise garment imports in 2008 declined by 8.5% (y-o-y) as against an increase of 1.5% (y-

o-y) in 2007.

During 2008, garment imports by UK increased by 4.4% (y-o-y) in

volume terms though, value-wise imports declined by 8.5% (y-o-y)


14

15

16

17

18

900950

1000105011001150120012501300

2002 2003 2004 2005 2006 2007 2008

Bil

lion

Eu

ros

„000 M

T

Volume in '000 MT Value in billion Euros

Fig: Garment imports by UK Fig: Year-wise growth in imports

© IMaCS 2009

Printed 12-Jun-0992


garment imports by UK

1%

4%3%

-1%

-11%-13%

-7%

-3%

-15%

-10%

-5%

0%

5%

Q1 Q2 Q3 Q4

y-o-y % increase in garment import value (2007 over 2006)y-o-y % increase in garment import value (2008 over 2007)



• Garment import value witnessed a sharp decline in Q1,2008 (by 11.4% y-o-y) and Q2,2008

(by 12.7% y-o-y) though the decline moderated in Q3,2008 (to 7.1% y-o-y) and Q4, 2008 (to

3.2% y-o-y).

• Garment import volume also declined significantly in Q1,2008 (by 5.5%) and Q2,2008 (by

9.8%) though the decline moderated in Q3,2008 (to 1.6% y-o-y).

• Q4,2008 witnessed a 33.4% y-o-y increase compared to Q4,2007. Imports from EU Extra

countries grew by 1.2% y-o-y in Q4,2008, whereas EU Intra imports grew by 2 times y-o-y

in the same quarter.

Garment imports declined significantly in Q1,2008 and Q2,2008 with the rate

of decline moderating in Q3,2008

8%

20%

7%

0%

-6%-10%

-2%

33%

-10%

0%

10%

20%

30%

Q1 Q2 Q3 Q4


y-o-y % increase in garment import volume (2008 over 2007)Source: Eurostat, IMaCS Analysis

© IMaCS 2009

Printed 12-Jun-0993

50

70

90

110

130

150

170


Th

ou

san

d M

T

2006 2007 2008

Fig: Volume wise monthly garment imports

1000

1150

1300

1450

1600

Jan Feb Mar AprMay Jun JulyAug Sep Oct NovDec

Mil

lio

n E

uro

s

2006 2007 2008

Fig: Value wise monthly garment imports

During 2008, value-wise garment imports declined by 7.6% (y-o-y)

in November and 0.5% (y-o-y) in December

• Value-wise imports in 2008 witnessed a significant decline in May (by 16.2% y-o-y), June (by

16.7% y-o-y), Aug (by 10% y-o-y) and November (by 7.6% y-o-y), 2008.

• Volume-wise imports in 2008 witnessed a dramatic increase in November (32.8% y-o-y) and

December 2008 (80.6% y-o-y).

• In November 2008, imports from EU Extra countries fell by 2.3% y-o-y, while EU Intra imports

increased by 2 times y-o-y. Similarly, in December 2008, imports from EU Extra countries grew

by only 3.3% y-o-y, whereas EU Intra imports grew by 5 times y-o-y in the same month.


© IMaCS 2009

Printed 12-Jun-0994

• EU Extra is the major supplier of garments to UK and its share has increased over the

years from 80.5% in 2005 to 82.1% in 2007 but declined to 78.7% in 2008.

• China is the leading supplier of garments to UK followed by Bangladesh, Turkey and

India.

• Share of China in UK garment import volume has increased over the years from 28%

in 2005 to 34.6% in 2008.

• Share of Bangladesh in UK garment import volume has increased from 8.2% in 2005

to 8.7% in 2008 and that of India has decreased from 5.7% in 2005 to 5.5% in 2008.

• During 2008, Sri Lanka had a share of 3.7% in UK garment import volume whereas

Vietnam maintained a share of 2%.

EU Intra 18%

EU Extra 82%

EU Intra 21%

EU Extra 79%

China is the major supplier of garments to UK followed by Bangladesh

and Turkey

Jan – Dec 2007

Jan – Dec 2008


Fig: Garment imports by UK from EU Extra countries




8.2% 9.6% 8.8% 8.7%

28% 28% 32% 35%5.7% 5.0%

5.7%5.5%

10.1% 9.1%8.7%%

6.5%

0

200

400

600

800

1000

1200

2002 2003 2004 2005 2006 2007 2008

Th

ou

san

d M

Ts

Other EU Extra

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

© IMaCS 2009

Printed 12-Jun-0995


• Volume-wise garment imports by UK have increased by 4.4% (y-o-y) in 2008.

• Volume-wise imports from China increased by 14.3% y-o-y resulting in increase in market share of China in

UK garment import volume from 31.6% in 2007 to 34.6% in 2008.

• Volume-wise imports also increased from Bangladesh, India and Sri Lanka by 3.6% (y-o-y), 1.5% (y-o-y)

and 8.9% (y-o-y) respectively.

• Garments imports from Turkey have dropped by 22.2% y-o-y resulting in drop in market share from 8.8% in

2007 to 6.5% in 2008.

During 2008, garment import volume from China increased by 14% (y-

o-y) whereas that from India increased by 1.5% (y-o-y)


Bangladesh

(+ 3.6%%)

China

(+ 14.3%)

India

(+ 1.5%)Sri Lanka

+8.9%

Turkey

(- 22.2%)

Vietnam

(+ 2.4%)

Other EU

Extra

(- 15.1%)

EU Intra

(+24.4%)

© IMaCS 2009

Printed 12-Jun-0996

• During 2008, value-wise garment imports by UK declined by 8.5% (y-o-y) as against an increase

of 1.5% (y-o-y) in 2007.

• During 2008, though India maintained its market share in UK garment imports at 6%, value-wise

imports from India decreased by 6% y-o-y.

• Garment imports from China increased by 17% y-o-y resulting in an increase in its market share

to 33% in 2008 from 26% in 2007.

• During 2008, value-wise garment imports from Bangladesh reduced by 1.1% y-o-y.

• Imports from Turkey also declined by 27% y-o-y during 2008 resulting in a drop in its market

share to 10% in 2008 from 12% in 2007.

• Imports from Sri Lanka and Vietnam increased by 6% y-o-y and 10% y-o-y respectively in 2008.

During 2008, value-wise garment imports from India declined by 6%

(y-o-y) whereas that from China increased by 17% (y-o-y)




2008 -6% -1.1% 17% 6% -27% 10%

2007 14% -2.7% 12% 0.3% 9% 9%

6%

6%

33%

3.9%

10%

1.5%

6%

5%

26%

3.3%

12%

1.3%

-5% 5% 15% 25% 35%

India

Bangladesh

China

Sri Lanka

Turkey

Vietnam 2007

2008


countries in garment imports by UK



© IMaCS 2009

Printed 12-Jun-0997

• During 2008, garment imports by UK increased 4.4% (y-o-y) by volume but import value declined

by 8.5% (y-o-y).

• Increase in garment import volume has been on account of surge in EU Intra imports which

increased by 2 times during Q4, 2008 whereas imports from EU Extra countries grew by 1.2% y-o-y.

• Amongst the countries under consideration, China is the leading supplier of garments to UK

followed by Bangladesh and Turkey.

• India’s share in UK garment import volume was 5.7% in 2007 which decreased to 5.5% in 2008

though import volume from India increased by 1.5% y-o-y.

• Garment import volume from China increased by 14.3% y-o-y in 2008 resulting in increase in its

market share in UK total garment import volume from 31.6% in 2007 to 34.6% in 2008.

• Garment import volume from Bangladesh increased by 3.6% y-o-y during 2008 whereas that from

Turkey declined by 22.2% y-o-y resulting in a drop in market share of Turkey in UK total garment

import volume from 8.7% in 2007 to 6.5% in 2008.

• Volume-wise garment imports from Sri Lanka increased by 8.9% (y-o-y).

Garment imports by UK - Key findings

© IMaCS 2009

Printed 12-Jun-0998

Yarn imports

Fabric imports

Garment imports

Made-ups imports







© IMaCS 2009

Printed 12-Jun-0999

1200

1300

1400

1500

1600

1700

200

240

280

320

360

2002 2003 2004 2005 2006 2007 2008

Mil

lio

n E

uro

s

'00

0 M

T


Fig: Imports of Made-ups by UK

• Total made-ups imports by UK increased at a 5-year CAGR of 9% by volume and 4% by value

from 2002 to 2007.

• During 2008, made-ups imports declined 1.5% y-o-y by volume as against an increase of 4% y-

o-y in 2007.

• Value-wise imports of made-ups in 2008 declined by 11.7% y-o-y as against an increase of 2% y-

o-y in 2007.

-15%

-5%

5%

15%

25%

35%

2003 2004 2005 2006 2007 2008



During 2008, made-ups imports declined 1.5% (y-o-y) by volume

though the decline was much higher in value terms i.e. 11.7%(y-o-y)


© IMaCS 2009

Printed 12-Jun-09100

10%

2%

-1%

5%

-4%

0%

2%

-4%-5%

0%

5%

10%

Q1 Q2 Q3 Q4




made-ups imports by UK13%

2%4%

-10%-12% -11%

-15%

-9%

-25%

-15%

-5%

5%

15%

Q1 Q2 Q3 Q4




made-ups imports by UK

UK made-ups import volume witnessed a decline of 4% (y-o-y) in Q4, 2008 as

against an increase of 5% (y-o-y) in Q4, 2007

• Made-ups import volume witnessed a declined of 4% y-o-y in Q4,2008 as against an increase

of 5% (y-o-y) in Q4, 2007.

• Decline in made-ups import value was significantly higher than the decline in import volume

in each quarter of 2008 indicating a shift towards low-priced products.


© IMaCS 2009


Fig: Volume wise monthly made-ups Imports

20

22

24

26

28

30

32

34


'00

0 M

T

2006 2007 2008

100

120

140

160

180

Jan Feb Mar Apr MayJun JulyAug Sep Oct NovDec

Million

Eu

ros

2006 2007 2008

Fig: Value wise monthly Made-ups imports

Imports of made-ups declined significantly from the month of

November, 2008

• Volume-wise made-ups imports in 2008 registered a significant decline in September (by

11.7% y-o-y), November (by 4.7% y-o-y) , and December (by 3.8% y-o-y).

• Made-ups imports by value registered a decline in each month with a significant decline in

the month of September (14% y-o-y), October (10.2% y-o-y), November (9.5% y-o-y), and

December (7.3% y-o-y) 2008.


© IMaCS 2009


• EU Extra is the major supplier of made-ups to UK with its share increasing over the years

from 82.3% in 2005 to 85% in 2007 and 87% in 2008.

• Amongst the EU Extra countries, China is the leading supplier of made-ups to UK followed

by India, Bangladesh and Turkey; the share of Sri Lanka and Vietnam being negligible.

• Share of China in UK made-ups import volume has increased over the years from 29.2% in

2005 to 34.5% in 2008.

• India had a share of 14.4% in UK made-ups import volume in 2007 though there was a

decline in its share to 13.2% in 2008.

• Share of Bangladesh in made-ups import volume has increased from 5.5% in 2005 to 6.7% in

2008 whereas share of Turkey has decreased from 8.8% in 2005 to 5.7% in 2008.

EU Intra 15%

EU Extra 85%

Jan – Dec 2007

EU

Intra

13%

EU

Extra

87%

Jan – Dec 2008

China is the leading exporter of made-ups to UK with its share

increasing over the years


Fig: Made-ups imports by UK from EU Extra countries



made-up imports by UK

5.5% 6.6% 6.6% 6.7%

29.2%28.8% 32.9% 34.5%

14.3%13.4%

14.3% 13.2%8.6%7.7%

6.6% 5.7%

0

50000

100000

150000

200000

250000

300000

350000

2002 2003 2004 2005 2006 2007 2008

Other EU Extra

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

© IMaCS 2009


China(+ 3.3%)

India(- 9.2%)

Turkey(- 16.3%)

Other EU Extra

(+ 9%)

EU Intra(-14.4%)

Demand

Shrunk- 1.5%


• Volume-wise made-ups imports by UK declined by 1.5% (y-o-y) in 2008.

• In spite of decline in total imports, the import volume from China increased by 3.3% y-o-y during

2008 resulting in increase in its market share from 33% in 2007 to 34.5% in 2008 .

• Volume-wise imports from India declined by 9.2% y-o-y resulting in drop in its markets share

from 14.3% in 2007 to 13.2% in 2008.

• During 2008, import volume from Bangladesh was maintained as the previous year whereas

imports from Turkey declined by 16.3% (y-o-y).

• Though Sri Lanka has a very small share (0.3% in 2007) in UK made-ups import volume, the

import volume surged by 18.4% (y-o-y) in 2008.

Though total made-ups import volume declined during 2008,

import from China increased by 3.3% y-o-y


© IMaCS 2009


• Value-wise imports of made-ups by UK declined by 11.7% y-o-y in 2008 as against an increase

of 2% y-o-y in 2007.

• During 2008, though India maintained its market share in UK made-ups imports at 11%, the

value-wise imports from India decreased by 12% y-o-y.

• Made-ups imports from China fell marginally by 0.2% y-o-y, resulting in an increase in its


• In 2008, Bangladesh and Vietnam maintained their market share, but value-wise imports from

these countries fell by 11% y-o-y and 17% y-o-y respectively.

• Made-ups imports from Turkey fell drastically by 25% y-o-y, resulting in fall in its market share

to 8% in 2008 from 9% in 2007.

During 2008, value-wise made-ups imports from India decreased by

12% (y-o-y)




2008 -12% -11% -0.2% -25% -17%

2007 10% -3% 2.1% -7% 0%11%

5%

35%

8%

0.7%

11%

5%

31%

9%

0.7%

0% 10% 20% 30% 40%

India

Bangladesh

China

Turkey

Vietnam 2007

2008


countries in made-ups imports by UK



© IMaCS 2009


• During 2008, imports of made-ups by UK declined 1.5% y-o-y by volume and 11.7% y-o-y by value.

• This indicates a drop in demand as well as shift of demand towards low-priced products on account

of economic slowdown.

• Decline in made-ups import volume during 2008 was significant in the month of November (4.7% y-

o-y) and December (3.8% y-o-y).

• Amongst the countries under consideration, China is the leading supplier of made-ups to EU27

followed by India and Bangladesh.

• Made-ups import volume from India declined by 9.2% y-o-y during 2008 resulting in drop in the

market share of India from 14.3% in 2007 to 13.2% in 2008.

• Made-ups import volume from China increased by 3.3% y-o-y during 2008 resulting in increase in

the market share of China from 32.9% in 2007 to 34.5% in 2008.

• Market share of Turkey in UK total made-ups import volume declined from 6.6% in 2007 to 5.7% in

2008 whereas Bangladesh maintained the same share as previous year.

Made-ups imports by UK - Key findings

© IMaCS 2009








© IMaCS 2009


• US is the second largest importer of T&C after EU27 with imports worth US $ 96 billion during

Jan – Dec 2007, up 3.4% from Jan – Dec 2006.

• Garments are the major import product constituting 76.7% of the total T&C import value and

45% of the total T&C import volume.

• Fabric and yarn imports form a smaller share of the US total T&C imports; their share in

imports has declined over the years, while the share of made-ups has increased

Apparel

43.3%

Yarn

7.1%

Fabric

18.7%

Made-

ups

30.8%

Fig: Volume wise share of products in total T&C imports by US

Apparel

45.1%

Yarn

5.8%

Fabric

15.5%

Made-

ups

33.6%

Jan – Dec 2005 Jan – Dec 2008

Source: Otexa, IMaCS Analysis

US is the second largest importer of T&C accounting for 9.6% of world

textile imports and 23.7% of world clothing imports

© IMaCS 2009


60

70

80

90

100

30

40

50

60

2002 2003 2004 2005 2006 2007 2008

US

$ b

illi

on

Bil

lion

SM

E

Volume in billion SME Value in US $ billion

-8%

-4%

0%

4%

8%

12%

2003 2004 2005 2006 2007 2008


Fig: Total T&C imports by US Fig: Year-wise growth in total T&C imports

• US T&C imports witnessed a sharp decline in Jan – Dec 2008 as against a growth in each

preceding year.

• Though value-wise imports declined by 3.3% y-o-y during 2008, the drop in volume terms was

5.2% (y-o-y).

During Jan – Dec 2008, T&C imports by US declined 3.3% (y-o-y) by

value and 5.2% (y-o-y) by volume

* SME refers to square meter equivalents


© IMaCS 2009


Yarn imports

Fabric imports

Garment imports

Made-ups imports







© IMaCS 2009


1000

1500

2000

2000

2500

3000

3500

4000

2002 2003 2004 2005 2006 2007 2008

US

$ m

illi

on

Mil

lion

SM

E

Volume in million SME Value in US $ million

• Volume-wise yarn imports by US declined by a 3-year cumulative annual rate of 7% from 2005

to 2008.

• Volume-wise yarn imports in Jan – Dec 2008 declined by 11.1% (y-o-y) as against a decline of

9.7% (y-o-y) in 2007.

• During the same period, yarn imports in value terms declined by 9% (y-o-y) as against a decline

of 9.5% (y-o-y) in 2007.

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

2003 2004 2005 2006 2007 2008


During 2008, yarn imports by US declined 11.1% (y-o-y) by volume

and 9% (y-o-y) by value

Fig: Import of yarn by US Fig: Year-wise growth in imports of yarn


© IMaCS 2009


-8%

-13%

-7%-9%

-16%-18%

-2%

-8%

-20%

-10%

0%

Q1 Q2 Q3 Q4




yarn imports by US

-11%

-12%

-10%

-4%

-9%

-10%

-4%

-13%-15%

-5%

Q1 Q2 Q3 Q4




yarn imports by US

• Yarn imports by US witnessed a significant decline in each quarter of 2008.

• Decline in yarn imports during Jan – Dec 2008 was in line with the decline observed in Jan – Dec

2007 with the exception of Q4,2008 when the yarn import value declined by 13% (y-o-y) as

against a drop of 4% (y-o-y) in Q4,2007.

US yarn imports during 2008 witnessed a significant decline in each quarter

of the year in line with the decline observed in 2007


© IMaCS 2009



150

190

230

270

310

350


mil

lion

SM

E

2006

2007

2008

2009

Fig: Value wise monthly Yarn Imports

70

90

110

130

150


US

$ m

illi

on

• Volume-wise yarn imports in 2008 registered a significant decline in the month of June (23% y-

o-y) and December (15% y-o-y); the trend continued in January 2009 with a decline of 23.5% y-

o-y and in February 2009 with a decline of 24.6% y-o-y.

• Value-wise yarn imports in 2008 registered a significant decline in the month of November (12%

y-o-y) and December (19% y-o-y); the trend continued in January 2009 with a decline of 26.5%

y-o-y and also in February 2009 with a decline of 28.5% y-o-y.

Yarn imports declined significantly in December, 2008 and the trend continued in

January 2009 and February 2009


© IMaCS 2009


3%5.8%

9.7% 11.4%2.5%

5.2%

6% 6%

2.2%

1.7%

2 % 2.5%

0.6%

0.7%

1 %0.9%

0

100

200

300

400

500

600

700

2002 2003 2004 2005 2006 2007 2008

mil

lion

SM

E

• During Jan – Dec 2008, US imported only 21% of the total yarn import volume from the six countries under

consideration; the other countries that account for significant share of US yarn import volume were Korea Rep

(18%), Mexico (13%), Canada (12.5%), Indonesia (11%), Thailand and Pakistan (4% each).

• Amongst the countries under consideration, China, India and Turkey are the leading yarn exporters to US; the

share of Sri Lanka, Bangladesh and Vietnam being negligible.

• India’s share in US yarn import volume has increased over the years from 2.5% in 2005 to 5.9% in 2007 thereafter

showing a stagnation. Share of China has increased at a faster pace from 3% in 2005 to 11.4% in 2008.

• In Jan 2009, China has gained a significant share in US yarn import volume (16.2% ) while the share of India and

Turkey has remained almost stagnant. However the share of all these three countries has fallen in Feb 2009.

China is a leading supplier of yarn to US with its share increasing

over the years


16.2% 15.2%

5.7%

3.7%

2.44%

2.4%

0.9%

1%

0

10

20

30

40

50

60

Jan-09 Feb-09

mil

lion S

ME

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

Fig: Yarn imports by US from the six competing countries

© IMaCS 2009


Others

(-13%)

China

(+4%)

India

(-11%)

Turkey

(+8%)

Vietnam

(-17%)

Demand

shrunk

-11%


• Volume-wise yarn imports by US declined by 11% (y-o-y) in Jan – Dec 2008.

• Though India maintained its market share in US yarn import volume in 2008, volume-

wise imports from India declined by 11% (y-o-y).

• US yarn imports from China increased by 4% (y-o-y) in Jan – Dec 2008 increasing its

market share from 9.7% in 2007 to 11.4% in 2008.

• Imports from Turkey increased by 8% (y-o-y) whereas that from Vietnam decreased by

17% (y-o-y).

Yarn imports from India declined by 11% (y-o-y) whereas that from

China and Turkey increased by 4% (y-o-y) and 8% (y-o-y) respectively


© IMaCS 2009


• During 2008, US yarn imports in value terms declined by 9% (y-o-y) as against a decline of 9.5%

(y-o-y) in 2007.

• Amongst the analysed countries, China, India and Turkey are the major suppliers of yarn to US.

• During 2008, though India maintained its market share in US yarn imports, value-wise yarn


• Yarn imports from China increased by 2.2% y-o-y resulting in increase in its market share to 7%

in 2008 from 6% in 2007.

• Yarn imports from Turkey increased by 20% y-o-y during 2008 resulting in increase in its market

share to 3.9% in 2008 from 3% in 2007.

During 2008, value-wise yarn imports from India declined by 8% (y-o-

y) whereas that from Turkey increased by 20% (y-o-y)



India China Turkey

2008 -8% 2.2% 20%

2007 9% 24% 9%4.8%

7%

3.9%

4.7%

6%

3%

0% 2% 4% 6% 8%

India

China

Turkey2007

2008


countries in the yarn imports by US



© IMaCS 2009


0.2

0.4

0.6

0.8

1

Jan

-07

Feb

-07

Mar

-07

Apr-

07

May

-07

Jun

-07

Jul-

07

Aug-0

7

Sep

-07

Oct

-07

Nov-0

7

Dec

-07

Jan

-08

Feb

-08

Mar

-08

Apr-

08

May

-08

Jun

-08

Jul-

08

Aug-0

8

Sep

-08

Oct

-08

Nov-0

8

Dec

-08

Jan

-09

Feb

-09

US

$/S

ME

China India Turkey World

Fig: Unit Value realisation for yarn for the competing countries

• Unit value realisation for Chinese yarn is the least amongst the key competing countries

followed by India.

• Unit value realisation of Indian yarn decreased from 0.39 US $/SME in February 2008 to 0.35

US $/SME in August 2008; there was an increase in realisation in October 2008 to 0.41 US

$/SME however, the prices declined in January 2009 to 0.37 US $/SME.

• In February 2009 the unit value realisation further declined for India to 0.33 US $/SME

China supplies yarn at the most competitive prices to US followed by

India


© IMaCS 2009


• During 2008, yarn imports by US declined 11.1% y-o-y by volume and 9% y-o-y by value.

• Yarn imports declined both volume and value-wise in each quarter of 2008 in line with the decline

observed in 2007; the trend continued in 2009 with volume-wise yarn imports declining 23.5% y-o-

y and 24.6% y-o-y by volume and 26.5% y-o-y and 28.5% y-o-y by value in January and February

respectively.

• During Jan – Dec 2008, US imported only 21% of the total yarn imports from the six countries under

consideration; the other countries that account for significant share of US yarn imports were Korea

Rep (18%), Mexico (13%), Canada (12.5%), Indonesia (11%), Thailand and Pakistan (4% each).

• Amongst the countries under consideration, China is the leading supplier of yarn to US followed by

India and Turkey.

• Though India maintained its market share of 6% in the total yarn import volume during 2008, yarn

import volume from India declined by 11% y-o-y.

• Yarn import volume from China increased by 4% y-o-y during 2008 resulting in increase in market

share of China from 9.7% of US total yarn import volume in 2007 to 11.4% in 2008.

• Yarn import volume from Turkey increased by 8% y-o-y during 2008 resulting in increase in market

share of Turkey from 2% of US total yarn import volume in 2007 to 2.5% in 2008.

• Amongst the countries under consideration, China supplies yarn at the most competitive prices to US

followed by India.

Yarn imports by US - Key findings

© IMaCS 2009


Yarn imports

Fabric imports

Garment imports

Made-ups imports







© IMaCS 2009


5000

5200

5400

5600

5800

7000

8000

9000

10000

2002 2003 2004 2005 2006 2007 2008

US

$ m

illi

on

Mil

lion

SM

E

Volume in million SME Value in US $ million

Fig: Fabric imports by US

• Fabric imports by US declined at a 3-year cumulative annual rate of 6% by volume and 4% by

value from 2005 to 2008.

• Volume-wise imports in Jan – Dec 2008 declined by 9.3% (y-o-y) as against a decline of 3% (y-

o-y) in Jan – Dec 2007.

• Value-wise imports in Jan – Dec 2008 declined by 7% (y-o-y) as against an increase of 1% (y-o-

y) in Jan – Dec 2007.

-12%

-8%

-4%

0%

4%

8%

2003 2004 2005 2006 2007 2008


Fig: Year-wise growth in fabric imports

During 2008, fabric imports by US declined 9.3% (y-o-y) by volume

and 7% (y-o-y) by value


© IMaCS 2009


-7% -6%

1% 1%

-6% -8% -8%

-16%-20%

-10%

0%

10%

Q1 Q2 Q3 Q4




fabric imports by US

-2%

0%

3% 4%

-0.04%

-5% -6%

-19%-20%

-10%

0%

10%

Q1 Q2 Q3 Q4




fabric imports by US

• Fabric imports by US witnessed an impact of economic slowdown with fabric import volume

declining by 8% y-o-y in Q3,2008 as against a growth of 1% y-o-y in Q3,2007.

• Fabric import volume continued to decline in Q4,2008, by 16% y-o-y as against an increase of

1% y-o-y in Q4, 2007.

• Fabric import value also registered a decline of 6% y-o-y in Q3,2008 and 19% y-o-y in Q4,2008

as against an increase of 3% y-o-y in Q3,2007 and 4% y-o-y in Q4,2007

US fabric imports witnessed an impact of economic slowdown with imports

declining 16% (y-o-y) by volume and 19% (y-o-y) by value in Q4,2008


© IMaCS 2009


Fig: Volume wise monthly fabric imports

500

600

700

800

900


mil

lion

SM

E

2006

2007

2008

2009

Fig: Value wise monthly fabric imports

250

300

350

400

450

500

550


US

$ m

illi

on

• Volume-wise fabric imports in Jan – Dec 2008 registered a decline in each month with

significant decline in the month of October (14.5% y-o-y), November(14.9% y-o-y) and

December (17.9% y-o-y).

• Value-wise imports also declined significantly in October (12.8% y-o-y), November (20.9% y-o-

y) and December (22.4% y-o-y)

• Decline in fabric imports continued in 2009, with import volume declining by 11.5% and by

12.9% y-o-y in Jan and Feb respectively; the decline in import value was steeper, at 25.2% and

31.5%y-o-y in Jan and Feb respectively.

Fabric imports by US declined significantly in December 2008; the trend continued

in January 2009 with a decline of 11.5% (y-o-y) by volume and 25.2% (y-o-y) by value


© IMaCS 2009


17.4% 16.8% 18% 21.6%

3.1%4.4% 4.6%

6.5%2.1%

1.6%1.9%

1.7%0.4%0.5%

1 %1.5%

0

500

1000

1500

2000

2500

2002 2003 2004 2005 2006 2007 2008

mil

lion

SM

E

• During Jan – Dec 2008, US imported only 31% of the total fabric import volume from the six countries under

consideration; the major share of imports were from Korea Rep (14.3%), Canada (9.4%), Mexico (6.5%), Israel

(5.5%) and Japan (3.6%).

• Amongst the countries under consideration, China is the leading exporter of fabric to US, followed by India and

Turkey; the share of Sri Lanka, Bangladesh and Vietnam being negligible.

• India’s share in US fabric import volume has increased over the years from 3% in 2005 to 6.5% in 2008.

• Share of China in US fabric import volume has increased from 17.3% in 2005 to 21.6% in 2008 whereas that of

Turkey declined from 2% in 2005 to 1.7% in 2008.

• Vietnam, though having a small market share, has witnessed a significant increase in share from 0.4% in 2005 to

1.5% in 2008.

• During January 2009, share of India, China and Vietnam in US fabric import volume increased whereas that of

Turkey declined; In February however only the share of Vietnam has increased while the rest have declined

China is the leading supplier of fabric to US followed by India and

Turkey


23.3%22.1%

7.4%

5.3%

1.5%

1.42%

3%

4.9%

0

50

100

150

200

250

Jan-09 Feb-09

mil

lion

SM

E

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

Fig: Fabric imports by US from the six competing countries

© IMaCS 2009


China

(+8%)

India

(+27%)

Turkey

(-16%)

Vietnam

(+34%)

Demand

shrunk

-9.3%

Others

(-16%)

• Volume-wise fabric imports by US declined by

9.3% (y-o-y) in Jan – Dec 2008.

• Volume-wise fabric imports from India

increased by 27% (y-o-y) in 2008 resulting in

increase in market share of India from 4.6% in

2007 to 6.5% in 2008.

• US fabric imports from China increased by 8%

(y-o-y) in Jan – Dec 2008 increasing its market

share from 18% in 2007 to 21.6% in 2008.

• US fabric imports from Vietnam registered a

significant increase, by 34% (y-o-y) during

2008; the trend continued in January 2009

resulting in increase in Vietnam’s share in US

fabric import volume to 3% (January 2009).

• US fabric imports from Turkey witnessed a

decline of 16% (y-o-y) in 2008.

Volume-wise fabric imports from India increased by 27% (y-o-y) resulting

in increase in market share from 4.6% (2007) to 6.5% (2008)

Fig: Volume-wise imports from competing

countries in 2008 as compared to 2007


© IMaCS 2009


• During 2008, fabric imports by US declined by 7% (y-o-y) in value terms.

• Amongst the analysed countries, China, India and Turkey are the major suppliers of fabric to US.

• Fabric imports from India increased by 23% y-o-y resulting in increase in its market share to

4.2% in 2008 from 3.2% in 2007.

• Fabric imports from China increased by 11% y-o-y resulting in increase in its market share to

22% in 2008 from 18% in 2007.

• Fabric imports from Turkey declined by 5% y-o-y during 2008 however, it maintained its market

share.

During 2008, value-wise fabric imports from India increased by 23%

(y-o-y) whereas that from Turkey declined by 5% (y-o-y)



India China Turkey

2008 23% 11% -5%

2007 1.5% 10% 6%4.2%

22%

2.5%

3.2%

18%

2.4%

0% 5% 10% 15% 20% 25%

India

China

Turkey2007

2008


countries in fabric imports by US



© IMaCS 2009


0.15

0.35

0.55

0.75

0.95

1.15

Jan

-07

Feb

-07

Mar

-07

Apr-

07

May

-07

Jun

-07

Jul-

07

Aug-0

7

Sep

-07

Oct

-07

Nov-0

7

Dec

-07

Jan

-08

Feb

-08

Mar

-08

Apr-

08

May

-08

Jun

-08

Jul-

08

Aug-0

8

Sep

-08

Oct

-08

Nov-0

8

Dec

-08

Jan

-09

Feb

-09

US

$/S

ME

China

India

Turkey

Vietnam

World

Fig: Unit Value realisation for fabric for the competing countries

• US fabric imports from India are at a price lower than average price and more competitive than

China which explains the increase in share of India in US fabric imports during Jan – Dec 2008.

• Unit value realisation of India increased from 0.39 US $/SME in September 2008 to 0.45 US

$/SME in November 2008 however there was a decline in January 2009 to 0.32 US $/SME.

• In February 2009 the unit value realisation increased for India to 0.35 US $/SME

• Vietnam is emerging as a low cost supplier of fabric to US; the share of Vietnam in US fabric

imports has increased by 34% y-o-y during Jan – Dec 2008

US fabric imports from India are at competitive prices though Vietnam

is emerging as a low cost supplier


© IMaCS 2009


• During 2008, fabric imports by US declined 9.3% y-o-y by volume and 7% y-o-y by value.

• Fabric imports declined 16% y-o-y by volume and 19% y-o-y by value in Q4,2008 as against an

increase of 1% y-o-y and 4% y-o-y respectively in Q4,2007 indicating an impact of economic

slowdown.

• Decline in fabric import volume during 2008 was significant in the month of October (14.5% y-o-

y), November(14.9% y-o-y) and December (17.9% y-o-y).

• Decline in fabric imports continued in 2009, with import volume declining by 11.5% y-o-y and by

12.9% y-o-y in Jan and Feb respectively; the decline in import value was steeper, at 25.2% y-o-y and

31.5% y-o-y in Jan and Feb respectively.

• Amongst the countries under consideration, China is the leading supplier of fabric to US followed by

India and Turkey.

• Despite drop in total fabric imports, the fabric import volume from India increased by 27% y-o-y in

2008 resulting in increase in market share in US total fabric import volume from 4.6% in 2007 to

6.5% in 2008.

• Fabric import volume from China increased by 8% y-o-y during 2008 increasing its market share

from 18% in 2007 to 21.6% in 2008; the trend continued in January 2009 with China’s share in US

fabric import volume increasing to 23.3% but falling to 22.1% in February 2009.

Fabric imports by US - Key findings…(1)

© IMaCS 2009


• US fabric imports from Vietnam registered a significant increase of 34% (y-o-y) during 2008; the

trend continued in January 2009 resulting in increase in Vietnam’s share in US fabric import volume

to 3% in January 2009 from 1.5% in 2008. Share of Vietnam again showed a drastic increase to 4.9%

in February 2009

• Market share of Turkey in US total fabric import volume declined from 1.9% in 2007 to 1.7% in

2008 on account of decline in fabric import volume from Turkey by 16% y-o-y; the trend continued

in 2009.

• Amongst the countries under consideration, Vietnam supplies fabric at the most competitive prices to

US followed by India.

Fabric imports by US - Key findings …(2)

© IMaCS 2009


Yarn imports

Fabric imports

Garment imports

Made-ups imports







© IMaCS 2009


• US retail sales of clothing and accessories witnessed a decline of 1.5% (y-o-y) in Jan – Dec 2008

after an increase of 5.3% (y-o-y) in 2007.

• Sales started declining in September 2008 with a significant decline in November (by 8% y-o-

y), December (by 10% y-o-y) of 2008 and January, 2009 (by 10% y-o-y).

• This can be attributed to the economic slowdown and resulting drop in expenditure.

16

17

18

19

20


US

$ b

illi

on

2006

2007

2008

* Estimates are adjusted for seasonal variations and holiday and trading-day differences, but not for price

changes.

Fig: US retail sales* of clothing and

accessories

Jan

2009

Fig: Year-wise growth in US retail sales

Retail sales of clothing and clothing accessories in US have declined

sharply after September, 2008

Source: US Census, IMaCS Analysis

-12%

-8%

-4%

0%

4%

8%


2007 over 2006 2008 over 20072009 over 2008

© IMaCS 2009


Fig: End of month retail inventories of US

clothing and clothing accessories storesFig: Inventory to Sales ratio of US clothing

and clothing accessories stores

40

42

44

46

48

50


US

$ b

illi

on

2006 2007 2008

2.20

2.30

2.40

2.50

2.60

2.70

2.80


2006 2007 2008

• Clothing and clothing accessories’ retail stores have reduced their inventories during Jan –

Dec, 2008.

• On account of reduced sales, the inventory to sales ratio of the stores has increased significantly

post September 2008.

• This is likely to result in drop in garment orders for the garment exporting countries.

Drop in retail sales and piled up inventory at US retailers is resulting in

drop in orders for garment exporting countries

Source: US Census, IMaCS Analysis

© IMaCS 2009


40

50

60

70

80

14

16

18

20

22

24

2002 2003 2004 2005 2006 2007 2008

US

$ b

illi

on

Bil

lion

SM

E


Fig: Garment imports by US

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2003 2004 2005 2006 2007 2008

% increase in volume % increase in Value

• During Jan – Dec 2008, volume-wise garment imports by US declined by 2.7% (y-o-y) as against

an increase at a 5-year CAGR of 6.2% from 2002 to 2007.

• Value-wise garment imports in Jan – Dec 2008 also declined by 3.2% (y-o-y) as against an

increase at a 5-year CAGR of 5.4% from 2002 to 2007.

Fig: Year-wise growth in garment imports

During Jan – Dec 2008, US garment imports witnessed a decline of

2.7% (y-o-y) by volume and 3.2% (y-o-y) by value


© IMaCS 2009


9%

5%

2%

-0.9%

-5%-3%

-2%-1.1%

-5%

0%

5%

10%

Q1 Q2 Q3 Q4




garment imports by US10%

4%

1%

-1%

-5%

-3% -2%-3%

-6%

-1%

4%

9%

Q1 Q2 Q3 Q4




garment imports by US

• Garment imports by US witnessed a significant decline since Q1,2008 however the decline

moderated in each quarter.

US garment imports witnessed a decline since Q1,2008 in both volume and

value terms


© IMaCS 2009


Fig: Volume wise monthly garment imports

1300

1550

1800

2050

2300


Mil

lion

SM

E

2006

2007

2008

2009

Fig: Value wise monthly garment imports

4000

4500

5000

5500

6000

6500

7000

7500

8000


Mil

lion

US

$

• Garment import volume declined by 6% y-o-y in November and 1% y-o-y in December, 2008;

the trend continued in 2009 witnessing a decline of 7% y-o-y in January and in February of

14.8% y-o-y

• Garment import value also declined by 10% y-o-y in November and 1% y-o-y in

December, 2008; the trend continued in 2009 witnessing a decline of 6.3% y-o-y in January and

of 16.5% y-o-y in February.

Decline in garment imports by US continued in January 2009 with

imports declining 7% (y-o-y) by volume and 6.3% (y-o-y) by value


© IMaCS 2009


5.1% 5.8% 5.8% 6.3%

26.7%28.9%

34.4% 34.3%

3.6%3.7%

3.7% 3.9%3.6%

4.2%

5.5% 6.7%

0

2

4

6

8

10

12

14

2002 2003 2004 2005 2006 2007 2008

bil

lion

SM

E

• During Jan – Dec 2008, US imported 53% of the total garment import volume from the six countries under

consideration.

• China is the leading exporter of garment to US followed by Vietnam, Bangladesh and India; share of Sri Lanka in

US garment import volume is mere 2%.

• Share of China in US garment import volume has increased over the years from 26.7% in 2005 to 34.3% in 2008; the

trend continued in January 2009 with marginal gain in share to 35.7%, however it fell in February 2009 to 31.7%

• Share of Bangladesh in US garment import volume has increased over the years from 3.6% in 2005 to 6.3% in 2008

and 7.8% in January 2009. Its share fell marginally in February 2009 to 7.4%

• Share of Vietnam has increased over the years from 4.2% in 2005 to 6.7% in 2008 and 8% in February 2009.

• India’s share in US garment imports has increased marginally over the years from 3.6% in 2005 to 3.9% in 2008

though their was a significant increase in January 2009 to 5%. It further increased to 5.4% in February 2009

China is the leading supplier of garments to US followed by Vietnam

and Bangladesh


7.8% 7.4%

35.7%31.7%

5%

5.4%

8.5%

8%

0

200

400

600

800

1000

1200

Jan-09 Feb-09

mil

lion

SM

E

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

Fig: Garment imports by US from the six competing countries

© IMaCS 2009


Bangladesh

(+6%)

China

(-3%)

India

(+2%)

Vietnam

(+20%)

Demand

shrunk

(-3%)

Others

(-6%)

• Volume-wise garment imports by US declined by

2.7% (y-o-y) in Jan – Dec 2008.

• Garment imports from Bangladesh increased by 6%

(y-o-y) thus, increasing its market share from 5.8%

in 2007 to 6.3% in 2008.

• Imports from Vietnam increased by 20% (y-o-y)

thus, increasing its share in US garment import

volume from 5.5% in 2007 to 6.7% in 2008.

• Though India’s share in garment import volume

remained stagnant in 2008, the volume-wise imports

from India increased by 2% (y-o-y).

• Volume-wise garment imports from China decreased

by 3% (y-o-y) in Jan – Dec 2008 though China

maintained its share at 34.3%.

Despite drop in total garment import volume in 2008, imports from Bangladesh

increased by 6% (y-o-y) and that from Vietnam increased by 20% (y-o-y)




© IMaCS 2009


• During Jan – Dec 2008, value-wise garment imports by US declined by 3.2% (y-o-y).

• India maintained its market share in US garment imports at 4.3% in 2008 however, value-wise

imports from India decreased by 3% y-o-y.

• Garment imports from Vietnam increased by 20% y-o-y resulting in an increase in its market

share to 7% in 2008 from 6% in 2007.

• Imports from China grew marginally by 0.8% y-o-y during 2008 resulting in a marginal increase

in its market share to 32% in 2008 from 31% in 2007.

• Garment imports from Bangladesh increased by 11% y-o-y whereas imports from Sri Lanka and

Turkey declined by 7% y-o-y and 28% y-o-y respectively in 2008.

During 2008, value-wise garment imports from India decreased by 3%

(y-o-y) whereas that from Vietnam increased by 20% (y-o-y)




2008 -3% 11% 0.8% -7% -28% 20%

2007 -0.5% 7% 23% -7% -23% 35%

4.3%

4.8%

32%

2.1%

0.6%

7%

4.3%

4.2%

31%

2.1%

0.8%

6%

-5% 5% 15% 25% 35%

India

Bangladesh

China

Sri Lanka

Turkey

Vietnam 2007

2008


countries in garment imports by US



© IMaCS 2009


2

2.2

2.4

2.6

2.8

3

3.2

3.4

3.6

3.8

4

Jan

-07

Feb

-07

Mar

-07

Apr-

07

May

-07

Jun

-07

Jul-

07

Aug-0

7

Sep

-07

Oct

-07

Nov-0

7

Dec

-07

Jan

-08

Feb

-08

Mar

-08

Apr-

08

May

-08

Jun

-08

Jul-

08

Aug-0

8

Sep

-08

Oct

-08

Nov-0

8

Dec

-08

Jan

-09

Feb

-09

US

$/S

ME

Bangladesh

China

India

Vietnam

World

Fig: Unit Value realisation for garment for the competing countries

• US imports from Bangladesh are at the most competitive prices which explains the increase in share

of Bangladesh in US garment exports.

• In early 2007, unit value realisation of Indian garment imports was highest amongst the four

competing countries though the prices declined after June 2008.

• In January 2008, the unit value realisation of India was the highest amongst the analysed countries at

3.89 US $/SME however, the realisation dropped to 3.07 US $/SME in November 2008. There was a

marginal increase in realisation to 3.27 US $/SME in January 2009.

• In February 2009 the unit value realisation increased for India to 3.39US $/SME

Bangladesh supplies garments at the most competitive prices to US

followed by China


© IMaCS 2009


• US retail sales of clothing and accessories witnessed a significant decline in November (by 8% y-o-

y), December (by 10% y-o-y) of 2008 and January, 2009 (by 10% y-o-y) owing to the economic

slowdown and resulting drop in expenditure.

• On account of reduced sales, the inventory to sales ratio of the stores has increased from 2.55 in

September to 2.73 in December 2008.

• Garment imports by US declined 2.7% (y-o-y) by volume and 3.2% (y-o-y) by value during Jan –

Dec 2008.

• Garment imports registered a decline since Q1,2008 with import volume declining in each

subsequent quarter of 2008.

• Decline in garment imports continued in January 2009 and February 2009 with import value

declining by 6.3% (y-o-y) and 16.5% y-o-y respectively.

• Amongst the countries under consideration, China is the leading supplier of garments to US

followed by Vietnam and Bangladesh. .

• India’s share in US garment import volume was 3.7% in 2007 which increased marginally to 3.9% in

2008 on account of 2% (y-o-y) increase in import volume however, India gained a significant share

in US garment import volume (5%) in January 2009 and (5.4%) in February 2009.

Garment imports by US - Key findings

© IMaCS 2009


• Garment import volume from China decreased by 3% (y-o-y) in Jan – Dec 2008 though China

maintained its share in US garment import volume at 34.3% ; there was a marginal increase in share

of China to 35.7% in January 2009, which fell to 31.7% in February 2009.

• Garment import volume from Bangladesh increased by 6% y-o-y during 2008 resulting in increase in

its market share from 5.8% in 2007 to 6.3% in 2008; Bangladesh further gained market share in

January 2009 to 7.8% but lost marginally in February 2009 to 7.4%.

• US garment imports from Vietnam increased by 20% (y-o-y) in 2008 thus, increasing its share in US

garment import volume from 5.5% in 2007 to 6.7% in 2008; the market share of Vietnam further

increased in January 2009 to 8.5% which fell marginally to 8% in February 2009.

• Amongst the countries under consideration, Bangladesh supplies garments at the most competitive

prices to US followed by China.

Garment imports by US - Key findings …(2)

© IMaCS 2009


Yarn imports

Fabric imports

Garment imports

Made-ups imports







© IMaCS 2009


4

6

8

10

12

14

16

18

7

9

11

13

15

17

19

2002 2003 2004 2005 2006 2007 2008

US

$ b

illi

on

Bil

lion

SM

E


Fig: Imports of made-ups by US

• Made-ups imports by US increased at a 5-year CAGR of 14% by volume and 13% by value from

2002 to 2007.

• During Jan – Dec 2008, imports of made-ups declined for the first time in last five years.

• In 2008, import volume declined by 5.4% (y-o-y) as against an increase of 4.6% (y-o-y) in Jan –

Dec 2007.

• Likewise, import value in 2008 declined by 2.1% (y-o-y) as against an increase of 6.4% (y-o-y)

in Jan – Dec 2007.

Fig: Year-wise growth in made-ups imports

During Jan – Dec 2008, US imports of made-ups witnessed a decline of

5.4% (y-o-y) by volume and 2.1% (y-o-y) by value

-6%

-1%

4%

9%

14%

19%

24%

29%

2002 2003 2004 2005 2006 2007 2008



© IMaCS 2009


5% 4% 4% 5%

-1%

-6% -5%

-9%-10%

-6%

-2%

2%

6%

Q1 Q2 Q3 Q4




made-ups imports by US

7%5%

7%7%

1%

-0.3%

-3%

-6%-8%

-4%

0%

4%

8%

Q1 Q2 Q3 Q4




made-ups imports by US

US made-ups imports witnessed an impact of economic slowdown with

imports declining 9% (y-o-y) by volume and 6% (y-o-y) by value in Q4,2008

• Made-ups imports by US witnessed an impact of economic slowdown with import volume

declining by 5% y-o-y in Q3,2008 as against a growth of 4% y-o-y in Q3,2007.

• Decline in made-ups import volume continued in Q4,2008 by 9% y-o-y as against an increase of

5% in Q4, 2007.

• Made-ups import value also registered a decline of 3% y-o-y in Q3,2008 and 6% y-o-y in

Q4,2008 as against an increase of 7% y-o-y each in Q3 and Q4 of 2007.


© IMaCS 2009


Fig: Value wise monthly made-ups imports

900

1000

1100

1200

1300

1400

1500


US

$ m

illi

on

• Though value-wise imports registered a significant decline in the months of June, July and

August, but recovered to zero growth in October.

• There was a huge decline in import value in the months of November (9% y-o-y) and

December (10% y-o-y), 2008.

• Import volume also declined significantly in November (by 15% y-o-y) and December (by

10% y-o-y), 2008.

• Decline in imports continued in 2009 with made-ups import value declining by 10.7% y-o-y

and 23.6% y-o-y in January and February respectively.

Volume-wise made-ups imports declined by 15% (y-o-y) in November and by

10% (y-o-y) in December, 2008 with decline continuing in January 2009


Fig: Volume wise monthly made-ups imports

900

1000

1100

1200

1300

1400

1500

1600

1700


mil

lion

SM

E

2006

2007

2008

2009

© IMaCS 2009


29.9%

45.3%54.3% 58.1%

60.8%64.1% 63.8%

9.2%

8.2%

7.7%

7.4%7.2%

7%7.5%

0

2

4

6

8

10

12

14

16

2002 2003 2004 2005 2006 2007 2008

Bil

lion

SM

E

• During Jan – Dec 2008, US imported 75% of the total made-ups import volume from the six

countries under consideration.

• Amongst the analysed countries under consideration, China is the leading exporter of made-ups to

US with around 64% share in total made-ups import volume.

• Share of China in US made-ups import volume increased from 58% in 2005 to 63.8% in 2008 and

64.2% in January 2009. Its share fell drastically in February 2009 to 57.4%

• In 2008, India had a share of 7.5% in US made-ups import volume (up from 7% in 2007); the

share of India increased in January 2009 to 8.4%. India’s share further increased in February 2009

to 9.1%

China is the largest supplier of made-ups to US with a share of 63.8%

in 2008


64.2%

57.4%

8.4%

9.1%

0

200

400

600

800

1000

1200

Jan-09 Feb-09

mil

lion

SM

E

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

Fig: Made-ups imports by US from the six competing countries

© IMaCS 2009


Others

(-7%)

Bangladesh

(+14%)

China

(-6%)

India

(+1.2%)

Turkey

(-14%)

Vietnam

(+29%)

Demand

shrunk

-5%



• Volume-wise made-ups imports by US

declined by 5.4% in Jan – Dec 2008.

• Despite decline in imports, volume-wise

imports from India increased by 1.2%

resulting in increase in market share from 7%

in 2007 to 7.5% in 2008; share of India in US

made-ups import volume further increased to

8.4% in January 2009.

• Volume-wise imports from Vietnam and

Bangladesh also registered an increase during

Jan – Dec 2008 by 29% (y-o-y) and 14% (y-

o-y) respectively.

• Imports from China fell by 6% (y-o-y) in Jan

– Dec 2008 whereas that from Turkey fell by

14% (y-o-y).

Made-ups import volume from India increased by 1.2% (y-o-y) whereas that

from China declined by 6% (y-o-y)


© IMaCS 2009


• During Jan – Dec 2008, US imports of made-ups witnessed a decline of 5.4% (y-o-y) by value.

• During 2008, value-wise imports from India increased by 2.1% y-o-y whereas that from China

increased by 0.7% y-o-y.

• Though Bangladesh has a small market share, made-ups imports from Bangladesh increased by 9%

y-o-y in 2008.

• Value-wise made-ups imports from Turkey and Vietnam fell by 15% y-o-y and 1.8% y-o-y

respectively.

During 2008, value-wise made-ups imports from India increased by

2.1% (y-o-y)




2008 2.1% 9% 0.7% -15% -1.8%

2007 5% 7% 12% -2.1% 8%11%

0.6%

56%

2.3%

1.1%

11%

0.6%

55%

2.7%

1.1%

0% 10% 20% 30% 40% 50% 60%

India

Bangladesh

China

Turkey

Vietnam 2007

2008


countries in made-ups imports by US



© IMaCS 2009


0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

Jan

-07

Feb

-07

Mar

-07

Apr-

07

May

-07

Jun

-07

Jul-

07

Aug-0

7

Sep

-07

Oct

-07

Nov-0

7

Dec

-07

Jan

-08

Feb

-08

Mar

-08

Apr-

08

May

-08

Jun

-08

Jul-

08

Aug-0

8

Sep

-08

Oct

-08

Nov-0

8

Dec

-08

Jan

-09

Feb

-09

US

$/S

ME

Bangladesh

China

India

Vietnam

World

Fig: Unit Value realisation for made-ups for the competing countries

• US imports from Bangladesh are at the most competitive prices which explains the increase in share

of Bangladesh in US made-ups exports.

• In March 2008, unit value realisation of Indian made-ups was the highest amongst the analysed

countries at 1.48 US $/SME however, it declined to 1.26 US $/SME in December 2008. There was

an increase in realisation in January 2009 to 1.32 US $/SME.

• In February 2009 the unit value realisation declined marginally for India to 1.3 US $/SME

US made-ups imports from Bangladesh are at the most competitive

prices


© IMaCS 2009


• During 2008, imports of made-ups by US declined 5.4% (y-o-y) by volume and 2.1% (y-o-y) by

value.

• Volume-wise made-ups imports declined by 9% y-o-y in Q4,2008 as against an increase of 5% y-o-y

in Q4,2007 indicating an impact of economic slowdown.

• Decline in made-ups import volume during 2008 was significant in the month of November (15% y-

o-y) and December (10% y-o-y).

• Decline in imports continued in 2009 with made-ups import value declining by 10.7% y-o-y and

23.6% y-o-y in January and February respectively.

• Amongst the countries under consideration, China is the leading supplier of made-ups to US with a

share of around 64% in the US made-ups import volume.

• Imports from China fell by 6% (y-o-y) in Jan – Dec 2008.

• Despite decline in total made-ups import volume in 2008, volume-wise imports from India increased

by 1.2% (y-o-y) resulting in increase in market share from 7% in 2007 to 7.5% in 2008; share of

India in US made-ups import volume further increased to 8.4% in January 2009 and 9.1% February.

• Though Bangladesh has a very small share in US made-ups import volume (1.3% in 2008), volume-

wise imports from Bangladesh registered an increase during Jan – Dec 2008 of 14% (y-o-y).

• Vietnam has a very small share in US made-ups import volume (0.8% in 2008), however, volume-

wise imports from Vietnam registered an increase during Jan – Dec 2008 by 29% (y-o-y).

Made-ups imports by US - Key findings

© IMaCS 2009








© IMaCS 2009


• Japan is the third largest importer of clothing with imports worth US $ 24 billion in

2007, accounting for 6.7% of the world clothing imports by value.

• The country is also the fourth largest importer of textile with imports worth US $ 6.3

billion in 2007, accounting for 2.5% of the world textile imports by value.

• Japan's economy witnessed economic slowdown after shrinking by 0.1% in the third

quarter of 2008. The economy had shrunk by 0.9% in the April to June, 2008.

Japan is the third largest importer of clothing accounting for 6.7%

share of world clothing imports

© IMaCS 2009






Yarn imports

Fabric imports

Garment imports

Made-ups imports



© IMaCS 2009


80

85

90

95

100

105

110

250

260

270

280

290

300

310

2002 2003 2004 2005 2006 2007 2008

Bil

lion

Yen

Mil

lion

kgs

Volume Value

-10%

-5%

0%

5%

10%

15%

2003 2004 2005 2006 2007 2008


Fig: Yarn imports by Japan Fig: Year-wise growth in imports of yarn

• Value-wise yarn imports by Japan declined by 5.4% (y-o-y) in 2008 as against an increase of

11.2% (y-o-y) in 2007.

• Volume-wise yarn imports in 2008 declined by 1.4% (y-o-y) as against an increase of 2.4%

(y-o-y) in 2007.

During 2008, yarn imports by Japan declined 5.4% (y-o-y) by value


Source: Ministry of Finance, Japan

IMaCS Analysis

© IMaCS 2009


0.8%

4.7%

-1.3%

-9.8%-10%

-6%

-2%

2%

Q1 Q2 Q3 Q4



yarn imports by Japan

-2%-1%

-2%

-17%-20%

-15%

-10%

-5%

0%

Q1 Q2 Q3 Q4



yarn imports by Japan

Yarn imports witnessed an impact of economic slowdown with volume-wise

imports declining by 9.8% (y-o-y) in Q4,2008

• Yarn imports by Japan declined significantly in Q4,2008 witnessing a significant impact of

economic slowdown.

• Volume-wise yarn imports by Japan declined by 9.8% (y-o-y) in Q4,2008 whereas imports in

value terms declined by 17.2% (y-o-y).


IMaCS Analysis

© IMaCS 2009


15

17

19

21

23

25

27


Mil

lion

kgs

2007

2008

2009

6

7

8

9

10

11


Bil

lio

n Y

en

Yarn imports declined significantly in the month of November and

December, 2008 with the trend continuing in January, 2009

Fig: Volume-wise monthly yarn imports Fig: Value-wise monthly yarn Imports

• Volume-wise yarn imports in Jan – Dec 2008 registered a significant decline in the month of

November (11% y-o-y) and December (16.7% y-o-y).

• Value-wise imports in Jan – Dec 2008 registered a significant decline in the month of October

(by 9.7% y-o-y), November (by 19.9% y-o-y) and December (by 23.5% y-o-y).

• Decline in imports continued in January 2009 with import volume declining by 19.6% y-o-y (as

against a marginal increase of 0.1% y-o-y in January 2008) and import value declining by 31.6%

y-o-y (as against an increase of 1.4% y-o-y in January 2008).


IMaCS Analysis

© IMaCS 2009


• Bangladesh, China, India, Sri Lanka, Turkey and Vietnam together accounted for 26.4% of total

yarn import volume of Japan in 2008; other countries with significant share in Japan yarn import

volume are Taiwan (21.2%) and Indonesia (18.6%).

• China is the leading exporter of yarn, with a share of 18.3% (by volume) in 2008.

• Share of China increased from 16% of Japan’s total yarn import volume in 2005 to 19.2% in 2007

however there was a marginal decline in 2008 to 18.3%.

• India had 6.2% share in Japan’s total yarn import volume in 2008.

• In January 2009, share of China in Japan’s total yarn import volume was 19.7% whereas that of

India was 7.1%.

Fig: Yarn imports by Japan from the six competing countries

19.7%

7.1%

0

1

2

3

4

5

6

7

Jan-09

Mil

lion

kgs

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

China is the leading supplier of yarn to Japan

17.8% 19.2% 18.3%

6.4%6% 6.2%

0

10

20

30

40

50

60

70

80

90

2002 2003 2004 2005 2006 2007 2008

Mil

lion

kgs


IMaCS Analysis

© IMaCS 2009


Bangladesh

(+ 7.5%)

China

(- 5.7%)

India

(+ 2.3%)

Others

(- 0.7%)

Demand

Shrunk

-1.4%


• Volume-wise total yarn imports by Japan declined by 1.4% (y-o-y) in 2008.

• Volume-wise yarn imports from India increased by 2.3% (y-o-y) during 2008 resulting in

marginal increase in its share from 6% in 2007 to 6.2% in 2008.

• Yarn import volume from China declined by 5.7% (y-o-y) in 2008 resulting in drop in market

share of China to 18.3% from 19.2% in 2007.

Though yarn import volume decreased by 1.4% (y-o-y) during

2008, import volume from India increased by 2.3%


IMaCS Analysis

© IMaCS 2009


• During 2008, yarn imports by Japan declined by 5.4% (y-o-y) in value terms.

• Amongst the analysed countries, China and India are the major suppliers of yarn to Japan.

• During 2008, though India maintained its market share in Japan yarn imports, value-wise yarn


• Yarn imports from China declined by 8% y-o-y resulting in a marginal fall in its market share to

21% in 2008 from 22% in 2007.

During 2008, value-wise yarn imports declined from India by 10% (y-

o-y) and from China by 8% (y-o-y)

Source: Ministry of Finance, Japan , IMaCS Analysis

Increase/decrease in

imports

India China

2008 -10% -8%

2007 -1% 16%

9%

21%

9%

22%

0% 5% 10% 15% 20% 25%

India

China

2007

2008


countries in yarn imports by Japan



© IMaCS 2009


• During 2008, yarn imports by Japan declined 5.4% (y-o-y) by value and 1.4% (y-o-y) by volume.

• Volume-wise yarn imports by Japan declined by 9.8% (y-o-y) in Q4,2008 whereas imports in value

terms declined by 17.2% (y-o-y) indicating a significant impact of economic slowdown.

• Decline in yarn import volume during 2008 was significant in the month of November (11% y-o-y)

and December (16.7% y-o-y), 2008.

• Decline in imports continued in January 2009 with import volume declining by 19.6% y-o-y (as

against a marginal increase of 0.1% y-o-y in January 2008) and import value declining by 31.6% y-

o-y (as against an increase of 1.4% y-o-y in January 2008).

• Bangladesh, China, India, Sri Lanka, Turkey and Vietnam together accounted for 26.4% of total yarn

import volume of Japan in 2008; other countries with significant share in Japan yarn import volume

are Taiwan (21.2%) and Indonesia (18.6%).

• Amongst the countries under consideration, China is the leading exporter of yarn to Japan, with a

share of 18.3% (by volume) in 2008; yarn import volume from China declined by 5.7% (y-o-y) in

2008 resulting in drop in market share of China from 19.2% in 2007.

• Volume-wise yarn imports from India increased by 2.3% (y-o-y) during 2008 resulting in marginal

increase in its share from 6% in 2007 to 6.2% in 2008.

• In January 2009, share of China in Japan’s total yarn import volume has increased to 19.7% whereas

that of India has increased to 7.1%.

Yarn imports by Japan - Key findings

© IMaCS 2009






Yarn imports

Fabric imports

Garment imports

Made-ups imports



© IMaCS 2009


70

80

90

100

120

125

130

135

140

145

2002 2003 2004 2005 2006 2007 2008

Bil

lion

Yen

Mil

lion

Kgs

Volume Value

-5%

-1%

3%

7%

11%

15%

2003 2004 2005 2006 2007 2008


Fig: Fabric imports by Japan Fig: Year-wise growth in Fabric imports

• Volume-wise fabric imports by Japan registered a decline since 2006; the import volume declined

by 3.1% (y-o-y) in 2007 and 0.2% (y-o-y) in 2008.

• Value-wise imports declined by 4.7% (y-o-y) in 2008 as against a decline of 2.5% (y-o-y) in

2007.

During 2008, fabric imports by Japan declined 4.7% (y-o-y) by value



IMaCS Analysis

© IMaCS 2009


3%

1%

6%

-10%

-10%

-5%

0%

5%

10%

Q1 Q2 Q3 Q4



fabric imports by Japan

-3%-5%

5%

-14%

-15%

-10%

-5%

0%

5%

Q1 Q2 Q3 Q4



fabric imports by Japan

Fabric imports witnessed an impact of economic slowdown with imports

declining 10% by volume and 14% by value in Q4,2008

• Fabric imports by Japan witnessed an impact of economic slowdown with import volume

declining by 10% y-o-y in Q4,2008.

• Fabric import value also registered a decline of 14% y-o-y in Q4,2008.


IMaCS Analysis

© IMaCS 2009


8

9

10

11

12

13

14


Mil

lion

kgs

2007

2008

2009

5

6

7

8

9


Bil

lion

Yen

Fabric imports declined significantly in November and

December, 2008 with decline continuing in January, 2009

• Volume-wise fabric imports in 2008 witnessed a significant decline in November (by 11.7% y-o-y)

and December (by 13.3% y-o-y). The trend continued in January 2009 with a decline in fabric import

volume by 12.3% y-o-y as against an increase of 1.6% (y-o-y) in January 2008.

• Value-wise imports in 2008 also witnessed a significant decline in November (by 18.8% y-o-y) and

December (by 17.4% y-o-y).

• In January 2009, value-wise fabric imports declined by 22.4% (y-o-y) as against a decline of 2.1% y-

o-y in January 2008.

Fig: Volume-wise monthly fabric imports Fig: Value wise monthly fabric imports


IMaCS Analysis

© IMaCS 2009


50.3% 50% 48.4%

2.2%2.7% 2.9%

0

10

20

30

40

50

60

70

80

90

2003 2004 2005 2006 2007 2008

Mil

lion

kgs

Fig: Fabric imports by Japan from the six competing countries

• Bangladesh, China, India, Sri Lanka, Turkey and Vietnam together accounted for 55.2% of

total fabric imports by Japan in 2008.

• China is the leading exporter of fabric to Japan, with a share of 48.4% (by volume) in total

fabric imports of 2008. Share of China in total fabric import volume declined marginally

from 50.3% in 2006

• India’s share in Japan fabric imports has increased marginally from 2.2% in 2006 to 2.9% in

2008.

China is the leading supplier of fabric to Japan with a share of 48.4%

in total fabric import volume in 2008

45%

2.3%

0

1

2

3

4

5

6

Jan-09

Mil

lion

kgs

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh


IMaCS Analysis

© IMaCS 2009


China

(- 3.4%)

India

(+ 8.4%)Vietnam

(+ 6.1%)

Others

(+ 1.9%)

Demand

Shrunk

- 0.2%


• Volume-wise total fabric import by Japan declined marginally by 0.2% (y-o-y) in 2008.

• During 2008, fabric imports from India increased by 8.4% (y-o-y) and those from Vietnam

increased by 6.1% (y-o-y).

• Fabric imports from China decreased by 3.4% (y-o-y) in 2008 resulting in drop in its market

share to 48.4% from 50% in 2007.

During 2008, fabric imports from India increased by 8.4% (y-o-y)

whereas that from China declined by 3.4% (y-o-y)


IMaCS Analysis

© IMaCS 2009


• During 2008, fabric imports by Japan declined by 4.7% (y-o-y) in value terms.

• Amongst the analysed countries, China, India and Vietnam are the major suppliers of fabric to

Japan.

• During 2008, though India maintained its market share in Japan fabric imports, value-wise fabric

imports from India declined by 0.5% y-o-y.

• Fabric imports from China declined by 3.1% y-o-y although there was a slight increase in its


• Fabric imports from Vietnam increased by 9% y-o-y during 2008.

During 2008, value-wise fabric imports from India declined by 0.5%

(y-o-y) whereas that from Vietnam increased by 9% (y-o-y)


India China Vietnam

2008 -0.5% -3.1% 9%

2007 29% 2.1% 12%1.4%

42%

1.3%

1.4%

41%

1.1%

0% 10% 20% 30% 40% 50%

India

China

Vietnam2007

2008


countries in fabric imports by Japan




© IMaCS 2009


• During 2008, fabric imports by Japan declined 4.7% (y-o-y) by value and 0.2% (y-o-y) by volume.

• Fabric imports by Japan declined by 10% y-o-y in volume terms and 14% y-o-y in value terms

during Q4,2008 owing to economic slowdown.

• Volume-wise fabric imports in 2008 witnessed a significant decline in November (by 11.7% y-o-y)

and December (by 13.3% y-o-y). The trend continued in January 2009 with a decline in fabric import

volume by 12.3% y-o-y as against an increase of 1.6% (y-o-y) in January 2008.


fabric imports by Japan in 2008.

• China is the leading exporter of fabric, with a share of 48.4% (by volume) in total fabric imports of

2008; fabric imports from China decreased by 3.4% (y-o-y) in 2008 resulting in drop in its market

share from 50% in 2007.

• India had a share of 2.7% in total fabric import volume of Japan in 2007; fabric imports from India

increased by 8.4% (y-o-y) in 2008 resulting in marginal increase in share of India to 2.9%.

Fabric imports by Japan - Key findings

© IMaCS 2009






Yarn imports

Fabric imports

Garment imports

Made-ups imports



© IMaCS 2009


2000

2100

2200

2300

2400

2500

2600

2700

850

900

950

1000

1050

1100

2002 2003 2004 2005 2006 2007 2008

Bil

lion

Yen

Mil

lion

kgs

Volume Value

-8%

-4%

0%

4%

8%

12%

16%

2003 2004 2005 2006 2007 2008


Fig: Garment imports by Japan Fig: Year-wise growth in imports

• Garment imports by Japan increased at a 5-year CAGR of 5.1% by value and 2.7% by volume

from 2002 to 2007.

• Volume-wise garment imports by Japan declined by 2.3% y-o-y in 2007 and 1.3% y-o-y in 2008.

• Garment import value declined by 5.6% y-o-y in 2008 as against an increase of 1.8% y-o-y in

2007.

During 2008, garment imports by Japan declined 5.6% (y-o-y) by value



IMaCS Analysis

© IMaCS 2009


-4% -4%

-0.4%

3%

-5%

-2%

1%

4%

Q1 Q2 Q3 Q4



garment imports by Japan

-7%

-10%

-3% -3%

-12%

-10%

-8%

-6%

-4%

-2%

0%

Q1 Q2 Q3 Q4

y-o-y % increase in Garment import value (2008 over

2007)


garment imports by Japan

Volume-wise garment imports increased by 2.6% (y-o-y) in Q4,2008 though

the import value declined by 3% (y-o-y)

• Garment import volume by Japan witnessed a significant decline in H12008 though the decline

moderated in Q3,2008 and the imports increased in Q4,2008 by 3% y-o-y.

• Garment import value also declined significantly in H12008 however, the decline moderated in

Q3and Q4 of 2008.


IMaCS Analysis

© IMaCS 2009


50

60

70

80

90

100

110

120

130


Mil

lion

kgs

200720082009

150

180

210

240

270

300


Bil

lion

yen

Volume-wise garment imports increased by 8.3% (y-o-y) in December

2008 and the trend continued in January 2009

• Volume-wise garment imports in 2008 majorly followed the same trend as of 2007 imports, with

the exception of February, May and August with import volume declining by 22.7% y-o-

y, 12.6% y-o-y and 11.8% y-o-y respectively.

• Value-wise imports in 2008 were significantly lower than in 2007, in months of February (by

24.5% y-o-y) May (by 16.8% y-o-y) and June (by 13.2% y-o-y).

• In January 2009, garment imports increased 19.4% y-o-y by volume (as against a decline of

2.2% y-o-y in January 2008) and 7.5% y-o-y by value (as against a decline of 2.5% y-o-y in

January 2008).

Fig: Volume wise monthly Garment

Imports by Japan

Fig: Value wise monthly Garment

Imports by Japan


IMaCS Analysis

© IMaCS 2009


Fig: Garment imports by Japan from the six competing countries

• The six countries under consideration together accounted for 95% of total garment import

volume of Japan during 2008.

• China is the largest exporter of garments to Japan, with a share of 91% (by volume) in total

garment imports of 2008.

• Amongst the six countries, Vietnam ranks as the second largest exporter of garments to

Japan with a share of 2.9% in garments import volume in 2008, up from 2.5% in 2007; share

of Vietnam increased to 3.5% in January 2009.

• India’s share in Japan garment import volume was 0.5% in 2008, up marginally from 0.4%

in 2007.

China is the largest supplier of garment with a share of 91% in total

garment import volume of Japan

91.1%

3.5%

0

20

40

60

80

100

Jan-09

Mil

lion

kgs

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh

0.4%


IMaCS Analysis

91.8% 91.8% 91.3%

2.2% 2.5% 2.9%

0

200

400

600

800

1000

1200

2002 2003 2004 2005 2006 2007 2008

Mil

lion

kgs

0.5% 0.4%0.5%

© IMaCS 2009


China

(- 1.9%)

India

(+ 1.2%)

Vietnam

(+ 15.3%)

Others

(- 0.8%)

Demand

Shrunk

- 1.3%


• Volume-wise total garment import volume by Japan declined by 1.3% (y-o-y) in 2008.

• During 2008, volume-wise garment imports from India marginally increased (by 1.2% y-o-y).

• Garment import volume from China decreased by 1.9% (y-o-y) in 2008 whereas that from

Vietnam increased by 15.3% (y-o-y).

Garment import volume from India increased by 1.2% (y-o-y) whereas

that from China declined by 1.9% (y-o-y) during 2008


IMaCS Analysis

© IMaCS 2009


• During 2008, garment imports by Japan declined by 5.6% y-o-y in value terms as against an

increase of 1.8% y-o-y in 2007.

• Amongst the analysed countries, China, India and Vietnam are the major suppliers of garment to

Japan.

• Though India has a small market share in garment imports by Japan, value-wise garment imports

from India increased by 5% y-o-y in 2008.

• Garment imports from China declined by 5% y-o-y in value terms during 2008 though, China

maintained its market share in Japan garment imports.

• Garment imports from Vietnam increased by 7% y-o-y during 2008.

During 2008, value-wise garment imports from India increased by 5%

(y-o-y) whereas that from China declined by 5% (y-o-y)


India China Vietnam

2008 5% -5% 7%

2007 -10% 2.5% 13%0.8%

84%

3.5%

0.7%

84%

3.1%

0% 20% 40% 60% 80% 100%

India

China

Vietnam2007

2008


countries in garment imports by Japan

Table: Value-wise annual change in garment



© IMaCS 2009


• Garment imports by Japan declined 5.6% (y-o-y) by value and 1.3% (y-o-y) by volume.

• Volume-wise garment imports by Japan witnessed a significant decline in H12008 though the decline

moderated in Q3,2008 with imports increasing in Q4,2008.

• The trend continued in January 2009 with garment imports increasing 19.4% y-o-y by volume (as

against a decline of 2.2% y-o-y in January 2008) and 7.5% y-o-y by value (as against a decline of

2.5% y-o-y in January 2008).

• The six countries under consideration together accounted for 95% of total garment imports by Japan

during 2008.

• China is the largest exporter of garments to Japan, with a share of 91% (by volume) in total garment

imports of 2008. Though China maintained its market share in total garment import volume of

Japan, import volume from China decreased by 1.9% (y-o-y) in 2008.

• Amongst the six countries, Vietnam ranks as the second largest exporter of garments to Japan with a

share of 2.9% in garments import volume in 2008, up from 2.5% in 2007 on account of increase in

garment imports by 15.3% y-o-y; share of Vietnam increased to 3.5% in January 2009.

• India’s share in Japan garment import volume was 0.5% in 2008, up marginally from 0.4% in 2007

on account of marginal increase (1.2% y-o-y) in volume-wise garment imports from India.

Garment imports by Japan - Key findings

© IMaCS 2009






Yarn imports

Fabric imports

Garment imports

Made-ups imports



© IMaCS 2009


150

190

230

270

310

250

290

330

370

410

450

2002 2003 2004 2005 2006 2007 2008

Bil

lion

Yen

Mil

lion

kgs

Volume Value

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

2003 2004 2005 2006 2007 2008


Fig: Imports of made-ups by Japan Fig: Year-wise growth in imports

• Imports of made-ups by Japan increased at a 5-year CAGR of 6% by value and 5.3% by volume

from 2002 to 2007.

• During 2008, value-wise made-ups import by Japan witnessed an increase of 0.8% (y-o-y) as

against an increase of 1.5% y-o-y in 2007.

• Volume-wise made-ups import in 2008 also increased by 2.2% y-o-y as against a decline of 1.4%

in 2007.

During 2008, made-ups imports by Japan increased 0.8% (y-o-y) by

value and 2.2% (y-o-y) by volume


IMaCS Analysis

© IMaCS 2009


2%

2%

4%

1%

0%

1%

2%

3%

4%

5%

Q1 Q2 Q3 Q4

y-o-y % increase in made-up import volume (2008 over

2007)


made-ups import by Japan

-3%-4%

7%

3%

-5%

-3%

-1%

1%

3%

5%

7%

9%

Q1 Q2 Q3 Q4

y-o-y % increase in made-up import value (2008 over

2007)


made-ups import by Japan

Japan made-ups imports increased 1% (y-o-y) by volume and 3% (y-o-y) by

value in Q4,2008

• Volume-wise made-ups imports by Japan increased in each quarter of 2008 with the growth

moderating in Q4,2008.

• Made-ups import value witnessed an increase in Q3,2008 (by 7% y-o-y) after a decline of 3% y-

o-y in Q1,2008 and 4% y-o-y in Q2,2008. Increase in import value continued in Q4,2008 though

the rate of growth moderated to 3% y-o-y.


IMaCS Analysis

© IMaCS 2009


25

30

35

40

45


Mil

lion

kgs

2007

2008

2009

15

18

21

24

27

30


Mil

lio

n y

en

Made-ups imports increased in Dec 2008 and the trend continued in Jan, 2009 with

imports increasing 14.4% (y-o-y) by volume and 10.9% (y-o-y) by value

• Volume-wise made-up imports in 2008 largely followed the same trend as 2007, with exception of

February and November when the imports declined by 12.5% y-o-y and 6.2% y-o-y respectively.

• Value-wise imports in 2008 registered a decline in months of February (by 18.3% y-o-y) and May (by

10.6% y-o-y), but recovered in September and October (with an increase of 19.7% y-o-y and 7.3% y-

o-y respectively).

• In January 2009, made-ups imports registered an increase of 14.4% y-o-y by volume (as against an

increase of 1.7% y-o-y in January 2008) and of 10.9% y-o-y by value (as against a decline of 0.8% y-

o-y in January 2008).

Fig: Volume wise monthly made-up

imports by Japan

Fig: Value wise monthly made-up

imports by Japan


IMaCS Analysis

© IMaCS 2009


85.1% 86.1% 85.8%

0.8% 0.8%0.9%

4.5% 4.6% 4.6%

0

100

200

300

400

2002 2003 2004 2005 2006 2007 2008

Mil

lion

kgs

Fig: Made-ups imports by Japan from the six competing countries

• Bangladesh, China, India, Sri Lanka, Turkey and Vietnam together accounted for

92.2% of total made-ups import volume by Japan in 2008.

• China is the largest exporter of made-ups, with a share of 85.8% (by volume) in total

made-ups imports of 2008, down from 86.1% in 2007.

• Amongst the six countries under consideration, Vietnam has the second largest share

at 4.6% of the total made-up import volume of Japan.

• India’s share in Japan made-ups import volume was 0.9% in 2008, marginally up from

0.8% in 2007.

China is the largest supplier of made-ups to Japan with a share of 86%

in total made-ups import volume of Japan

86.6%

0.8%

4.4%

0

5

10

15

20

25

30

35

40

Jan-09

Mil

lion

kgs

Vietnam

Turkey

Sri Lanka

India

China

Bangladesh


IMaCS Analysis

© IMaCS 2009


China

(+1.8%)

India

(+ 14%)

Vietnam

(+ 2%)

Others

(+ 3.2%)


• Volume-wise made-ups imports by Japan increased by 2.2% (y-o-y) in 2008.

• Made-ups imports from India increased by 14.1% (y-o-y) during 2008 and that from Vietnam

increased by 2% y-o-y.

• Made ups imports from China also increased by 1.8% (y-o-y) in 2008.

During 2008, made-ups import volume from India increased by 14%

(y-o-y)


IMaCS Analysis

© IMaCS 2009


• During 2008, value-wise made-ups import by Japan witnessed an increase of 0.8% (y-o-y) as

against an increase of 1.5% y-o-y in 2007.

• Amongst the analysed countries, China, India and Vietnam are the major suppliers of made-ups to

Japan.

• During 2008, value-wise made-ups imports from India increased by 1.9% y-o-y and India

maintained its market share at 1.2%.

• China maintained its market share in Japan made-ups imports however, value-wise made-ups

imports from China increased by 1.3% y-o-y.

• Made-ups imports from Vietnam also increased by 4.5% y-o-y during 2008 though, the growth

moderated as compared to 2007.

During 2008, value-wise made-ups imports from India increased by

1.9% (y-o-y) whereas that from Vietnam increased by 4.5% (y-o-y)


India China Vietnam

2008 1.9% 1.3% 4.5%

2007 -0.5% 3.4% 9%1.2%

84%

3.4%

1.2%

84%

3.2%

0% 20% 40% 60% 80% 100%

India

China

Vietnam2007

2008


countries in made-ups imports by Japan




© IMaCS 2009


• During 2008, imports of made-ups by Japan increased 0.8% (y-o-y) by value and 2.2% (y-o-y) by

volume.

• Volume-wise made-ups imports by Japan increased in each quarter of 2008 with the growth

moderating in Q4,2008.

• Increase in imports continued in January 2009 with imports increasing 14.4% (y-o-y) by volume (as

against an increase of 1.7% y-o-y in January 2008) and 10.9% (y-o-y) by value (as against a decline

of 0.8% y-o-y in January 2008).


made-ups imports by Japan in 2008.

• China is the largest exporter of made-ups, with a share of 85.8% (by volume) in total made-ups

imports of 2008, down from 86.1% in 2007 though import volume from China increased by 1.8% (y-

o-y) in 2008.

• Amongst the six countries under consideration, Vietnam has the second largest share at 4.6% of the

total made-up import volume of Japan; volume-wise made-ups imports from Vietnam increased by

2% y-o-y in 2008.

• India’s share in Japan made-ups import volume was 0.9% in 2008, marginally up from 0.8% in 2007

on account of increase in made-ups import volume from India by 14% y-o-y.

Made-ups imports by Japan - Key findings

© IMaCS 2009








© IMaCS 2009


• The past trend of imports individually for each category i.e. apparel, fabric, made-ups and

yarn has been analysed along with the total textile and clothing imports.

• Key parameters considered for the analysis are the GDP per capita, six-month LIBOR

rate, Industrial production index, Import price production index, Retail sales in month of

December and Final consumption expenditure.

On the basis of changing dynamics of different markets, IMaCS has

estimated their textile and clothing demand during 2010 – 2015

Econometric modeling to forecast the

size of imports in 2015

Past trend of imports

Key demand drivers and

market dynamics

© IMaCS 2009







US Textile and Clothing imports in 2015

EU Textile and Clothing imports in 2015


© IMaCS 2009


Fig: GDP per capita at current prices

• The Congressional Budget Office has revised GDP estimates for US, according to which we

arrive at a GDP per capita estimate of around US$ 45.63 thousand in the year 2009 and then

again a gradual growth till 2015.

• The LIBOR rates have been very volatile; year 2009 estimates of the same are around 1.5%.

GDP per capita and six-month LIBOR rates have been considered as

the key economic indicators for the US economy

Source: World Economic Indicators, IMF

34.8

35.5

36.337.7

39.8

41.9 44.1

45.746.7

30

32

34

36

38

40

42

44

46

48

2000 2001 2002 2003 2004 2005 2006 2007 2008

000‟s

US

$

6.6

3.7

1.91.2

1.8

4

5.3

5.3

3.2

0

1

2

3

4

5

6

7

2000 2001 2002 2003 2004 2005 2006 2007 2008

LIB

OR

rate

(%

)

Fig: Six-month LIBOR rate

© IMaCS 2009


Fig: Index of Industrial Production (IIP)

• Garment production in US has declined more significantly as compared to decline in

production of total Textile and Textile products.

• The import prices of cotton apparel have more or less remained stable over the years while

that for textile and related products have increased.

The Index of Industrial Production (IIP) in US has gradually declined

over the years

Source: www.federalreserve.gov, The Bureau of Economic Analysis

147

139

101

97

8478

7677

75

116

105

97

98 97 9794

8375

70

80

90

100

110

120

130

140

150

160

2000 2001 2002 2003 2004 2005 2006 2007 2008

Clothing IIP Textile & products IIP

Fig: Import Price Index (IPI)

99 10099

100 9999 99

10099

99

94

96

100

105 106

110

113

116

90

95

100

105

110

115

120

2000 2001 2002 2003 2004 2005 2006 2007 2008

Cotton Clothing IPI Textile supplies IPI

© IMaCS 2009


• Apparel retail sales in December, 2008 have declined compared to the same period in

previous years.

• Total consumption expenditure on clothing and footwear category has also stagnated in 2008

as compared to increase in each proceeding year.

Apparel retail sales in the US have declined significantly in

December, 2008

298 298304

311325

342 360

374

374

250

270

290

310

330

350

370

390

2000 2001 2002 2003 2004 2005 2006 2007 2008

88

86

88

92 97

103

106

103

90

80

85

90

95

100

105

110

2000 2001 2002 2003 2004 2005 2006 2007 2008

US

$

Fig: Per capita apparel retail sales in the

month of December

Fig: Private Consumption Expenditure on

Clothing and Footwear

Source: The Bureau of Economic Analysis

© IMaCS 2009


53 50.4 49.259

65

0

10

20

30

40

50

60

70

2007 2008 2009 (P) 2012 (P) 2015 (P)

Volu

me

in b

illi

on

SM

E

• During 2009, volume-wise total T&C imports by US are expected to decline by around 2.3% (y-o-

y), as against a decline of 5.2% (y-o-y) during 2008.

• Total T&C imports are expected to increase again with a CAGR of 3.9% from 2010 to 2015

thus, the overall CAGR of volume-wise T&C imports by US from 2009 to 2015 is estimated at

4.74%.

T&C imports by US are expected to witness a decline during 2009

however, would recover in further years

Fig: Projected total T&C imports by US in

volume terms

Source: IMaCS Analysis

© IMaCS 2009







US Textile and Clothing imports in 2015

EU Textile and Clothing imports in 2015


© IMaCS 2009


Fig: GDP per capita at current prices

GDP per capita was the key criteria in estimating the T&C imports by

EU

Source: National accounts indicator, Eurostat

19,10019,800

20,500 20,700

21,600

22,50023,600

24,900

25,100

15,000

17,000

19,000

21,000

23,000

25,000

27,000

2000 2001 2002 2003 2004 2005 2006 2007 2008

Eu

ros

15,000

15,600

16,20016,400

17,100

17,80018,600

19,400

19,700

10,000

12,000

14,000

16,000

18,000

20,000

22,000

2000 2001 2002 2003 2004 2005 2006 2007 2008

Eu

ros

Fig: Final consumption Expenditure per capita

• According to the GDP estimates for EU provided by Eurostat, GDP per capita for the year 2009 is

estimated at Euros 25,700.

• A gradual growth based on IMF estimates has been considered till 2015.

© IMaCS 2009


• Total T&C imports by EU from the EU Extra countries are expected to increase at a CAGR of 6.3%

from 2009 to 2015.

• The increase in imports from EU Extra countries can also be associated with the shift of orders

from EU Intra to EU Extra countries, apart from the growth in imports by EU.


Fig: Projected total T&C import volume by

EU from the EU Extra countries

5,183 5,019 5,2466,225

7,562

0

1000

2000

3000

4000

5000

6000

7000

8000

2007 2008 2009 (P) 2012 (P) 2015 (P)

Volu

me

in m

illi

on

Kgs

Total T&C imports by EU from the EU Extra countries are expected to

grow at a CAGR of 6.3% from 2009 to 2015

© IMaCS 2009


Table of Contents


key issues


and clothing




Recommendations


© IMaCS 2008

Printed 12-Jun-09

To

tal

Co

st o

f p

roce

ssin

g

in I

nd

ia:

10

0

36

10

20

61

Others

Interest

Salary

Depreciation

Raw Material

DB

CE

A

To

tal

Co

st o

f p

roce

ssin

g

in C

ou

ntr

y A

: X

Others

InterestSalaryDepreciation

Raw Material

Cost drivers


• Certain cost drivers of competitiveness have been identified

• For each segment the cost break-up of Indian companies has been considered as the base and the

same has been derived for the companies of other countries by factoring in the cost drivers.

• Sum of all the individual cost heads has been then taken to arrive at the total cost advantage /

disadvantage for India.

Comparing Costs - Our Approach

© IMaCS 2008

Printed 12-Jun-09

Key drivers of Cost Competitiveness

Duties

and Taxes

Labour

• Import duties on raw materials

• Corporate tax rates

• Local taxes and duties and their cascading impact

• Labour costs

• Labour productivity

Other Costs• Power cost and availability of power

• Finance costs

Infrastructure

Cost

• Infrastructure issues (delays in port clearance, high

freight rates, etc.)

IMaCS has analysed these key drives of cost competitiveness for this exercise

Preferential market

access

• Trade agreements with the global markets

© IMaCS 2009


Cost Heads Cotton

Spinning

Industry

Manmade

Spinning

Industry

Weaving

Industry

Garment

Industry

Made-ups

industry

Raw Materials 57.0% 59.9% 60.2% 49.9% 46.6%

Power & Fuel Cost 8.9% 10.2% 3.6% 1.7% 8.7%

Employee Cost 8.7% 7.2% 3.8% 8.6% 8.8%

Selling and Administration

Expenses

5.1% 5.3% 9.0% 11.0% 9.1%

Other Manufacturing Expenses 5.9% 5.7% 7.1% 19.7% 12.8%

Miscellaneous Expenses 1.6% 1.1% 2.5% 1.1% 0.9%

Interest 6.5% 5.8% 7.4% 3.4% 5.4%

Depreciation 6.2% 4.7% 5.0% 2.7% 7.4%

Tax 0.1% 0.1% 1.4% 1.9% 0.4%

Table: Typical cost break-up* of Indian industry

Typical Cost Break-up of Indian companies

*This has been used to assess the cost competitiveness of manufacturing in India vis-a-vis other

countries

© IMaCS 2009


Import Duties for raw material

0% 10% 20% 30% 40% 50%

Raw cotton

Nylon fibre

Other manmade

fibres

0% 10% 20%

Cotton yarn

Nylon yarn

Other manmade

yarns

0% 10% 20%

Cotton fabric

Manmade fabric

Vietnam Turkey

Sri Lanka Bangladesh

China India

Fig: Import duty on fibres Fig: Import duty on yarns Fig: Import duty on fabrics

Source: Market Access Map, International trade Centre

HS Codes: Raw cotton (5201), Cotton yarn (520511), Cotton fabric (520811), Nylon fibre (550110), other MMF fibre (550120), Nylon yarn

(550911), Other MMF yarn (55021), MMF fabric (551211)

Note: For calculation of cost competitiveness we have considered preferential import tariff for ASEAN countries i.e. 5% in

case of Vietnam and duty free imports in case Bangladesh

© IMaCS 2009


Labour cost

Source - EmergingTextiles.com

India China Bangladesh Sri Lanka Turkey Vietnam

Labor Cost

(USD/hour)0.51 0.55 0.22 0.43 2.44 0.38

• India has higher labour cost as compared to

Bangladesh, Vietnam and Sri Lanka.

• Moreover, India has a lower labour productivity as

compared to other countries.

Fig: Index of labour productivity

Source: Werner International

100

90

90

75

65

65

50

40

0 50 100 150

Germany

Hong Kong

US

China

S. Korea

Thailand

Indonesia

India

© IMaCS 2009


Power cost and availability of power

0.11

0.080.08

0.09

0.11

0.05

0

0.02

0.04

0.06

0.08

0.1

0.12

India China Bangladesh Sri Lanka Turkey Vietnam

US

$ /

Kw

h

Fig: Power Cost in US $ / Kwh

• Power cost in India is the highest amongst the low cost countries

• Further, manufacturing in India suffers from both non availability of power and poor quality of

power.

• Owing to power shortage in major Textile producing states, captive power generation is the

only alternative to sustain production.

• Liquid Fuels such as furnace oil and diesel used for captive power generation attract 10% basic

customs duty and 14% excise duty; with current fuel prices, captive power is more than twice

as expensive as grid power.

Source: EIA

Fig: Percent power deficit from April 2008

to March 2009

10.8%

16%

7.5%

4.6%

13.5%

11%

0 5 10 15 20

Northern Region

Western Region

Southern Region

Eastern Region

North-Eastern Region

All India

Source: Central Electricity Authority, IMaCS Analysis.

© IMaCS 2009


Interest cost

India , 13%

China , 7%

Bangladesh , 14%

Sri Lanka , 17%

Turkey , 13%

Vietnam , 16%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Fig: Prime Lending rate

• Interest rate in India is high as compared to China but is lesser than

other competing countries

Source: Central Banks of respective countries

© IMaCS 2009


Corporate Tax

34%

33%

30%

35%

20%

28%

0% 5% 10% 15% 20% 25% 30% 35% 40%

India

China

Bangladesh

Sri Lanka

Turkey

Vietnam

• Corporate tax in India is higher as compared to Bangladesh, Turkey and Vietnam

Fig: Corporate Tax in various countries (2007)

Source: KPMG's Corporate and Indirect Tax Rate Survey 2007

© IMaCS 2009


Summary of Trade Agreements with EU27

Country Description of agreement Current Tariff

structure

India Generalized System of Preferences Reduced Tariffs

China Generalized System of Preferences Reduced Tariffs

Bangladesh Generalized System of Preferences- Everything

But Arms Initiative

Zero Tariff

Sri Lanka Generalized System of Preferences Plus- Special

Incentive Arrangement for Sustainable

Development and Good Governance

Zero Tariff

Turkey Preferential Trade access due to membership in

European Customs Union

Zero Tariff

Vietnam Generalized System of Preferences Reduced Tariffs

© IMaCS 2009


Summary of Trade Agreements with US

Country Description of agreement Impact

India Generalized System of Preferences Does not extend to most textile and

apparel products

China Generalized System of Preferences Does not extend to most textile and

apparel products

Bangladesh Generalized System of Preferences

Least Developed Beneficiary

Developing Country (LDBDC)

Does not extend to most textile and

apparel products

Sri Lanka Generalized System of Preferences Does not extend to most textile and

apparel products

Turkey Generalized System of Preferences Does not extend to most textile and

apparel products

Vietnam Generalized System of Preferences Does not extend to most textile and

apparel products

© IMaCS 2009


Summary of Trade Agreements with Japan

Country Description of agreement Impact

India Generalized System of

Preferences

Reduced tariffs for most textile products

China Generalized System of

Preferences


Bangladesh Generalized System of

Preferences - Least Developed

Country

Zero tariffs

Sri Lanka Generalized System of

Preferences


Turkey Generalized System of

Preferences


Vietnam* Generalized System of

Preferences


*Economic Partnership Agreement between Vietnam and Japan is under negotiation which

would change this tariff structure

© IMaCS 2009


Comparative analysis

of various costs

© IMaCS 2009


Comparison of competing countries is based on ‘Product-country’

matrix to facilitate a meaningful and focussed analysis

• It is observed that each of the peer countries is competitive in certain product segments

due to presence of certain factors while they are not a key player in certain other product

segments.

• Hence, instead of comparing all countries for all products, a product-country matrix is

devised to facilitate a meaningful and focused comparison.

• To devise product-country matrix, India’s share in total product import of identified export

markets has been set as benchmark.

• Countries having a market share equal to or higher than that of India have been considered

for comparison.

Sub-sector

Product – country matrix

China Bangladesh Sri Lanka# Vietnam Turkey

Yarn

Fabric

Apparel &

Made-ups

#Though Sri Lanka’s market share in identified global markets is less than that of India, the country is gaining share in

garment imports of EU27 and UK thus, it has been included in comparative analysis

© IMaCS 2009


India has a cost disadvantage in cotton yarn manufacturing vis-à-vis

China

China Turkey

Total Cost advantage/(disadvantage) for

India in cotton yarn manufacturing

- 3.58% 32.7%

Fig: % Cost competitiveness vis-a-vis China Fig: % Cost competitiveness vis-a-vis Turkey

32.73

33.00

0.03

0.00

0.25

32.5 33 33.5

Total

Corporate Tax

Finance Cost

Power & Fuel Cost

Raw Materials

Employee Cost

* This does not factor the market access advantages and logistics cost differentials because of proximity to market

2.24

3.58

3.18

0.68

1.16

0 2 4 6

Total

Corporate Tax

Finance Cost

Employee Cost

Raw Materials

Power & Fuel Cost

Advantage for India Disadvantage for India

© IMaCS 2009


Export to EU27* China (GSP) Turkey (PTA)

Manufacturing cost competitiveness for India - 3.58% 32.7%

Import by EU27– duty differential 0% -3%

Net export competitiveness for India - 3.58% 29.7%

Export to US** China (MFN) Turkey (MFN)


Import by US – duty differential 0% 0%


Export to Japan*** China (GSP) Turkey (GSP)


Import by Japan – duty differential 0% 0%


* The calculation corresponds to the HS code 52051200

** The calculation corresponds to the HS code 52051210

*** The calculation corresponds to the HS code 520512010

India has a cost disadvantage vis-à-vis China in exports of cotton yarn to the

identified global markets because of high manufacturing cost

© IMaCS 2009


China Turkey


India in manmade yarn manufacturing

-6.43% 26.17%

India has significant cost disadvantage in manmade yarn

manufacturing vis-à-vis China

Fig: % Cost competitiveness* vis-a-vis China Fig: % Cost competitiveness* vis-a-vis Turkey

1.60

6.43

2.83

0.56

2.56

-2 1 3 5 7

Total

Corporate Tax

Finance Cost

Employee Cost

Power & Fuel Cost

Raw Materials


26.17

27.07

0.04

0.00

0.28

0.57

0 10 20

Total

Corporate Tax

Finance Cost

Power & Fuel Cost

Raw Materials

Employee Cost



© IMaCS 2009


India has a cost disadvantage vis-à-vis China in exports of manmade filament yarn

to the identified global markets because of high manufacturing cost


Manufacturing cost competitiveness for India -6.43% 26.17%


Net export competitiveness for India -6.43% 23.17%


Manufacturing cost competitiveness for India -6.43% 26.17%


Net export competitiveness vis-à-vis India -6.43% 26.17%


Manufacturing cost competitiveness vis-à-vis India -6.43% 26.17%


Net export competitiveness vis-à-vis India -6.43% 26.17%

* The calculation corresponds to the HS code 54020000

** The calculation corresponds to the HS code 54025210

*** The calculation corresponds to the HS code 54025201

© IMaCS 2009


China Turkey


India in cotton fabric manufacturing

- 7.04% 10.6%

India has significant cost disadvantage in cotton woven fabric

manufacturing vis-à-vis China


7.04

2.73

0.04

3.66

0.30

0.91

0.00 2.00 4.00 6.00 8.00

Total

Corporate Tax

Finance Cost

Employee Cost

Power & Fuel Cost

Raw Materials


10.60

14.54

0.56

0.00

0.10

3.28

0 5 10 15 20

Total

Corporate Tax

Finance Cost

Power & Fuel Cost

Raw Materials

Employee Cost



© IMaCS 2009


India has a cost disadvantage vis-à-vis China in exports of cotton fabric to

the identified global markets because of high manufacturing cost













*The calculation corresponds to the HS code 5208 1216

** The calculation corresponds to the HS code 5208 1240

*** The calculation corresponds to the HS code 5208 12010

© IMaCS 2009


China Turkey


India in manmade fabric manufacturing

- 4.31% 13.31%

India has significant cost disadvantage in manmade woven

fabric manufacturing vis-à-vis China


0.00

4.31

0.04

3.66

0.30

0.91

0 1 2 3 4 5

Total

Corporate Tax

Finance Cost

Employee Cost

Power & Fuel Cost

Raw Materials


13.31

14.54

0.56

0.00

0.10

0.57

0 5 10 15

Total

Corporate Tax

Finance Cost

Power & Fuel Cost

Raw Materials

Employee Cost



© IMaCS 2009


India has a cost disadvantage vis-à-vis China in exports of manmade fabric

to the identified global markets because of high manufacturing cost










Manufacturing cost competitiveness vis-à-vis India - 4.31% 13.31%



*The calculation corresponds to the HS code 5407 6110



© IMaCS 2009


China Turkey Bangladesh Vietnam Sri Lanka


India in cotton garment manufacturing

- 1.49% 30.96% -10.06% -4.97% -6.04%

India has significant cost disadvantage in Cotton garment

manufacturing vis-à-vis Bangladesh, Vietnam, China and Sri Lanka

0.00

1.49

0.06

0.42

0.68

1.69

0.0 0.5 1.0 1.5 2.0

Total

Corporate Tax

Power & Fuel Cost

Employee Cost

Finance Cost

Raw Materials



30.96

32.71

0.79

0.00

0.05

0.91

0 5 10 15 20 25 30

Total

Corporate Tax

Finance Cost

Power & Fuel

Cost

Raw Materials

Employee Cost



© IMaCS 2009


4.97

0.34

0.73

2.20

0.89

2.27

0 5 10

Total

Corporate Tax

Finance Cost

Employee Cost

Power & Fuel

Cost

Raw Materials

Overall cost competitiveness of India in cotton garment

manufacturing vis-à-vis Bangladesh, Vietnam and Sri Lanka

Fig: % Cost competitiveness*

vis-a-vis BangladeshFig: % Cost competitiveness*

vis-a-vis Vietnam

10.06

0.23

0.13

4.91

0.52

4.54

0 5 10 15

Total

Corporate Tax

Finance Cost

Employee Cost

Power & Fuel Cost

Raw Materials


6.04

4.23

0.01

1.66

1.38

2.10

0 5 10

Total

Corporate Tax

Finance Cost

Employee Cost

Power & Fuel

Cost

Raw Materials

Advantage for India

Fig: % Cost competitiveness*

vis-a-vis Sri Lanka

© IMaCS 2009


India has a cost disadvantage vis-à-vis Bangladesh, Vietnam, China

and Sri Lanka in garment exports to EU27 and US

Export to EU27* China

(GSP)

Turkey

(PTA)

Bangladesh

(PTA LDC)

Vietnam

(GSP)

Sri Lanka

(PTA)

Manufacturing cost

competitiveness for India

- 1.49% 30.96% -10.06% -4.97% -6.04%

Import by EU27– duty

differential

0% -9.6% -9.6% 0% -9.6%

Net export competitiveness for

India

-1.49% 21.36% -19.66% -4.97% -15.64%

Export to US** China

(MFN)

Turkey

(MFN)

Bangladesh

(MFN)

Vietnam

(MFN)

Sri Lanka

(MFN)

Manufacturing cost


- 1.49% 30.96% -10.06% -4.97% -6.04%

Import by US – duty

differential

0% 0% 0% 0% 0%


India

-1.49% 30.96% -10.06% -4.97% -6.04%

* The calculation corresponds to the HS code 6205 200090


© IMaCS 2009


Export to Japan*** China

(GSP)

Turkey

(GSP)

Bangladesh

(PTA LDC)

Vietnam

(GSP)

Sri Lanka

Manufacturing cost


- 1.49% 30.96% -10.06% -4.97% -6.04%

Import by Japan – duty

differential

0% 0% -7.4% 0% 0%


India

-1.49% 30.96% -17.46% -4.97% -6.04%

***The calculation corresponds to the HS code 6205 200000

India has a cost disadvantage vis-à-vis Bangladesh, Vietnam, Sri

Lanka and China in garment exports to Japan

© IMaCS 2009


China Turkey Bangladesh Vietnam Sri Lanka


India in cotton made-ups manufacturing

- 4.15% 31.98% -11.76% -7.92% -5.18%

India has cost disadvantage in Cotton made-ups manufacturing vis-à-

vis China, Bangladesh, Vietnam and Sri Lanka

0.00

4.15

0.01

2.17

0.69

2.65

0.0 1.0 2.0 3.0 4.0 5.0

Total

Corporate Tax

Power & Fuel Cost

Employee Cost

Finance Cost

Raw Materials


Fig: % Cost competitiveness vis-a-vis China Fig: % Cost competitiveness vis-a-vis Turkey

31.98

33.22

0.15

0.00

0.24

0.85

31 32 33 34

Total

Corporate Tax

Finance Cost

Power & Fuel Cost

Raw Materials

Employee Cost



© IMaCS 2009


Fig: % Cost competitiveness

vis-a-vis Bangladesh


vis-a-vis Vietnam

11.76

0.04

0.21

4.99

2.70

4.23

0 10 20

Total

Corporate Tax

Finance Cost

Employee Cost

Power & Fuel

Cost

Raw Materials

7.92

0.06

1.14

2.24

4.64

2.12

0 5 10

Total

Corporate Tax

Finance Cost

Employee Cost

Power & Fuel Cost

Raw Materials

Overall cost competitiveness of India in cotton made-ups

manufacturing vis-à-vis Bangladesh, Vietnam and Sri Lanka

5.18

4.54

0.06

1.06

1.36

0.40

0 5 10

Total

Corporate Tax

Finance Cost

Employee Cost

Power & Fuel

Cost

Raw Materials

Advantage for India

Disadvantage for India


vis-a-vis Sri Lanka

© IMaCS 2009


Export to EU27* China

(GSP)

Turkey

(PTA)

Bangladesh

(PTA LDC)

Vietnam

(GSP)

Sri Lanka

(PTA)

Manufacturing cost competitiveness

for India

- 4.15% 31.98% -11.76% -7.92% -5.18%

Import by EU27– duty differential 0% -9.6% -9.6% 0% -9.6%

Net export competitiveness for India - 4.15% 22.38% -21.36% -7.92% -14.78%

Export to US** China

(MFN)

Turkey

(MFN)

Bangladesh

(MFN)

Vietnam

(MFN)

Sri Lanka

(MFN)

Manufacturing cost


- 4.15% 31.98% -11.76% -7.92% -5.18%

Import by US – duty

differential

0% 0% 0% 0% 0%


India

- 4.15% 31.98% -11.76% -7.92% -5.18%

*The calculation corresponds to the HS code 6304191090



Lanka and China in made-ups exports to EU27 and US

© IMaCS 2009


Export to Japan*** China

(GSP)

Turkey

(GSP)

Bangladesh

(PTA LDC)

Vietnam

(GSP)

Sri Lanka

(GSP)

Manufacturing cost

competitiveness vis-à-vis India

- 4.15% 31.98% -11.76% -7.92% -5.18%

Import by Japan – duty differential 0% 0% -5.9% 0% 0%

Net export competitiveness vis-à-

vis India

- 4.15% 31.98% -17.66% -7.92% -5.18%



Lanka and China in made-ups exports to Japan

© IMaCS 2009


Transaction costs

© IMaCS 2009


0 100 200 300 400

India

Bangladesh

China

Srilanka

Turkey

Viet Nam

Transaction cost in US $

Customs clearance and technical control

Documents preparation

Source: World Bank*, IMaCS Analysis.

Fig: EXIM procedural costs in the competing countries

• Documents preparation and Customs clearance take around 10-12 days for Indian companies.

• EXIM procedural costs in India are high as compared to other competing countries which

further affects the competitive position.

Transaction costs on account of EXIM procedures are amongst the

highest for Indian companies…(1)

*Refer Annexure IV for details

© IMaCS 2009


0 100 200 300 400 500

India

Bangladesh

China

Srilanka

Turkey

Viet Nam

Costs in US $

Fig: Port and terminal handling costs

Source: World Bank, IMaCS Analysis.

0 2 4 6 8

Bangladesh

China

India

Sri Lanka

Turkey

Vietnam

Number of documents

Fig: Number of export documents required

• Port handling charges for Indian companies are almost twice than that for Chinese companies.

• Indian custom procedures require comparatively higher number of documents which further

adds to the time and costs of EXIM procedures.

Transaction costs on account of EXIM procedures are amongst the

highest for Indian companies…(2)

© IMaCS 2009


0 50 100 150 200 250 300

India

Bangladesh

China

Srilanka

Turkey

Viet Nam

Costs in US $

Fig: Inland transportation and handling costs in India

Source: World Bank, IMaCS Analysis.

• Inland transportation costs for Indian companies are more than three times than that for

Chinese companies.

• Inadequate road and rail infrastructure coupled with barriers to inter-state transport of goods

add up avoidable costs for the Indian companies.

• On account of high geographical spread, Indian T&C industry involves significant inter-state

movement of raw material and finished goods; high inland transportation further affects the

competitive position of the T&C industry.

Inland transportation costs are the highest for the Indian companies

© IMaCS 2009


Cascading impact of

taxes and duties

© IMaCS 2009


Objective of analysing the impact of Indirect Taxes

• In India, multiple indirect taxes are levied on the manufacturers, importers and exporters. The

objective of this section is to understand the overall impact of indirect taxes on the competitiveness

of manufacturers (and exporters) of textiles and clothing and identify the anomalies that exist.

• For understanding the impact of indirect taxes and duties, IMaCS has considered the following :

Customs Duty

Excise Duty

Value Added Tax (VAT)

Central Sales Tax (CST)

Octroi

Duty draw-back on indirect taxes

© IMaCS 2009


Methodology adopted to assess the impact of Indirect Taxes

Raw Material Purchase

Imports

Custom Duty

Domestic

Inter-state Intra-state

VATCST

Finished Goods Sale

Exports

Duty Drawback

Domestic

Inter-state

CST

Intra-state

VAT

Indirect Taxes paid while purchase of

Raw Materials

Indirect Taxes collected during sale of

Finished Goods

• Various taxes and duties paid at the raw material purchase stage are then set-off against

corresponding collections at the finished goods sale stage.

• Besides the taxes mentioned above, a similar calculation is done for net excise payable

depending on the value of production.

Octroi

© IMaCS 2009


Customs duty applicable on imports of different textile articles

Duty typeRaw

Cotton

Cotton

Yarn

Manmade*

Fibre

Manmade

Yarn

Cotton

Fabric

Manmade

Fabric

Basic duty 0% 10% 5% 5% 10% 10%

Preferential duty 0% 0% 0% 0% 0% 0%

CVD 0% 4% 4% 4% 4% 4%

Central Excise

Education Cess0% 3% 3% 3% 3% 3%

Customs

Education Cess3% 3% 3% 3% 3% 3%

Special CVD 4% 4% 0% 0% 0% 0%

Total 4.04% 19.76% 14.13% 14.13% 15.12% 15.12%

* Manmade fibre / yarn refers primarily to polyester

• Only recently the import duty on raw cotton was made 0% while that on polyester fibre and yarn

was made 5% from the earlier level of 10%

© IMaCS 2009


Excise duty applicable on production of various textile articles

Duty typeRaw

Cotton

Cotton

Yarn

Manmade*

Fibre

Manmade

Yarn

Cotton

Fabric

Manmade

Fabric

Cotton

Garment

Excise duty 0% 0% 4% 4% 0% 4% 0%

Additional

duty of

excise

0% 0% 0% 0% 0% 0% 0%

Total excise

duty0% 0% 4% 4% 0% 4% 0%

Education

Cess3% 3% 3% 3% 3% 3% 3%

Effective

Excise Duty0% 0% 4.12% 4.12% 0% 4.12% 0%


• Excise duty applicable has been reduced across all textile products

© IMaCS 2009


Other Indirect Taxes applicable on intra-state and inter-state

transactions

Duty typeRaw

Cotton

Cotton

Yarn

Manmade*

Fibre

Manmade

Yarn

Cotton

Fabric

Manmade

Fabric

Cotton

Garment

CST 2% 2% 2% 2% 2% 2% 2%

VAT 4% 4% 4% 4% 0% 0% 4%

Octroi* 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5%

* Octroi duty considered refers to that of Mumbai and Ahmadabad ; all states do not have Octroi duty.


• VAT is applicable on intra-state transactions while CST is applicable on inter-state transactions.

• Octroi is charged as an entry tax by certain states in India

© IMaCS 2009


Duty Drawback available on exports

Drawback

Rates

Cotton

Yarn

Manmade^

Fibre

Manmade

Yarn

Cotton

Fabric

Manmade

Fabric

Cotton

Garment

Grey 4% 2.4% 10.2% 4.6% 9.2% 8.8%

Dyed 5% 2.4% 12.1% 5.5% 10.3% 8.8%

^The drawback rates for manmade yarn and fabric are for those belonging to HS code 55

• When a manufacturer exports his produce, he is eligible for a drawback on the customs duty paid

by him for the imports.

• This drawback is also available on excise duty paid for the purchase of raw materials

Note: For our calculations we have considered the drawback rates on grey and not dyed for all articles

© IMaCS 2009


Criteria for forming different scenarios for indirect taxes calculation

• There are two key factors which have a significant impact on the amount of indirect taxes paid by a

manufacturer:

Location of raw material (RM) purchase

Destination of finished goods (FG) sale

• To assess the impact of the above factors in the amount of indirect taxes paid, IMaCS has

considered four cases as stated below:

Case (I) : 100% Domestic purchase of RM and 100% Exports of FG

Case (II) : 100% Imports of RM and 100% Exports of FG

Case (III) : 100% Domestic purchase of RM and 100% Domestic sale of FG

Case (II) : 100% Import of RM and 100% Domestic sale of FG

© IMaCS 2009


Break-up of the inter-state and intra-state transactions in case of

domestic purchase/sale

• IMaCS has arrived at certain assumptions about the inter and intra state transactions of various

textile articles based on the following:

Location of major raw material suppliers

Location of the markets

Textile Article Intra-state Transaction Inter-state Transaction

Cotton Fibre 25% 75%

Cotton Yarn 30% 70%

Manmade Fibre 25% 75%

Manmade Yarn 30% 70%

Cotton Fabric 50% 50%

Manmade Fabric 50% 50%

Cotton Garments 40% 60%

© IMaCS 2009


Summary of Effective Duties Paid

CASE I II III IV

Purchase of Raw

Material100% Domestic 100% Imported 100% Domestic 100% Imported

Sale of Finished

Goods100% Exports 100% Exports 100% Domestic 100% Domestic

Cotton Yarn 3.29% Nil 1.89% 2.26%

Manmade Yarn 1.03% Nil 1.99% 8.33%

Cotton Fabric 3.25% 6.56% 2.46% 11.16%

Manmade Fabric 0.92% Nil 2.46% 7.98%

Cotton Garments 1.52% Nil 1.05% 7.07%

Note: Duties as a percentage of ex-factory price

• On account of anomaly in tax structure, T&C manufacturers pay duties and taxes that are not

refunded.

*Refer Annexure V for details

© IMaCS 2009


Anomalies in the Indian Tax and Duty structure

• VAT and CST are not adjustable: If a manufacturer while purchasing raw-materials has paid VAT

and while selling collects CST, he cannot avail a credit.

• Exporter does not get credit for VAT / CST paid during raw material purchase: When a

manufacturer exports all his goods he does not get any credit for the VAT or CST paid at the raw

material purchase stage.

• Customs paid while purchase and Excise collected while sale are not adjustable: If a

manufacturer imports raw material and pays customs duty on it, he is unable to adjust it against the

excise that he collects while selling.

• VAT on fabric is Nil: A fabric manufacturer pays VAT while buying the raw material but cannot

collect the same while selling his product.

• Anomaly in duty drawback rates: Duty drawback rates are not as high as effective duties as a

result T&C exporters pay excessive duties.

© IMaCS 2009


SWOT Analysis

of

Indian Textile and Clothing industry

© IMaCS 2009


SWOT analysis of Indian T&C industry…(1)

STRENGTHS

• Strong domestic textile presence across the entire value chain.

• Abundant availability of raw material, both cotton and manmade.

• Increasing modernization of Indian T&C manufacturing sector facilitated by the TUFS.

© IMaCS 2009


WEAKNESSES

• High dependence of T&C trade on EU27 and US.

• Large number of small scale units in the garment industry on account of reservation under

SSI till recently thus, lacking benefits of economies of scale.

• Weaving, garmenting and processing sectors of the industry are still not fully modernized.

• High dependence of Indian T&C industry on Cotton as against the world T&C industry

which is dominated by manmade fibre.

• Lack of trained manpower.

• Restrictive labour laws as compared to other competing countries.

• High cost of labour as compared to Bangladesh, Sri Lanka and Vietnam, coupled with low

labour productivity.

• High power cost and lack of availability of power.

• High finance cost as compared to China.

• High transaction costs as compared to other competing countries.

• Lack of any free trade agreements with the major T&C global markets resulting in high

import tariffs as compared to Bangladesh, Sri Lanka and Turkey.

• Lack of proximity to key global markets.


© IMaCS 2009


OPPORTUNITIES

• Favourable demographics in the domestic market; increasing young population coupled

with rising income levels in the domestic market is likely to act as a key growth factor for

the Indian textile Industry.

• Increasing production costs in China resulting in China becoming non-competitive.

• FTA with EU (under negotiation) which not only aims to eliminate tariffs and quotas, but

also non-tariff barriers to trade. This FTA is expected to be implemented by end of 2009.

THREATS

• Removal of US and EU quotas on imports from China from December 31, 2008.

• Emerging low cost garment manufacturers i.e. Bangladesh, Vietnam and Sri Lanka.

• Trade defense measures been taken by certain major export markets of India^.


^Refer Annexure VI for details

© IMaCS 2009


Table of Contents


key issues


and clothing




Recommendations


© IMaCS 2009


Particulars Details

Modernisation of Technology

• Technology Up gradation Fund Scheme has been

extended till 2012.

• With Rs 57878 crore of disbursement as on December,

2008, TUFS has facilitated technological up gradation

and expansion in the T&C industry.

• Additional funds of Rs. 1400 crore have been sanctioned

for TUFS

Raw material for Spinning

Industry• Import duty on cotton fiber has been reduced to zero

Sales Tax • Central Sales Tax has been reduced from 3% to 2%

Excise Duty

• CENVAT applicable to non-petroleum products has been

reduced by 4%

• CENVAT on cotton textiles and textile articles has been

reduced from 4% to zero as a measure to stimulate the

economy in the context of global economic slowdown

Indian Government has taken some measures to support the industry

during the economic slowdown …(1)

© IMaCS 2009


Particulars Details

Export Incentives

• 2% duty credit scrip under Market-Linked Focus

Product Scheme for garment exports (both knitted

and woven) to the U.S and EU27 from 1.4.2009 to

30.9.2009. The scrip, which is a cash substitute, can

be used by exporters to pay for duties on imported

inputs.

• Relaxations in the Duty Entitlement Passbook

scheme (DEPB) without waiting for realisation of

export proceeds.

• Extension of export obligation period against

advance authorisation.

• Reinstating interest subvention of 2% for export

credit.

Service tax

• Service tax on foreign agents’ commission will be

refunded upto 10% of FOB value of exports instead

of 2% allowed earlier.

• Refund of Service Tax on output services will be

available to units availing duty drawback also.

Indian Government has taken some measures to support the industry

during the economic slowdown …(2)

© IMaCS 2009


Policy approach impacting the Indian

T&C industry

Delay in disbursement of refunds

Policy approach towards Cotton fibre

Policy approach towards Manmade fibre

Stringent labour laws

Other issues

© IMaCS 2009


TUFS has supported modernisation and expansion in the T&C industry however, delay

in disbursement of interest compensation under TUFS has been a major deterrent.

Analysis reveals that there has been on an average one year backlog in the disbursement

of interest compensation.

This is a significant cost to the industry and has compounded the current working capital

problems of the industry.

Though TUFS has supported modernisation and expansion in T&C

industry, delay in disbursement of TUFS assistance has been a deterrent

© IMaCS 2009



T&C industry





Other issues

© IMaCS 2009


India is the second-largest producer of cotton in the world, accounting

for around 20% of the world production

• India is the second-largest producer of cotton (behind China) in the world with production

of around 5.36 million MT in CY2008, accounting for around 20% of world production.

• Since the launch of ‘Technology Mission on Cotton’ by the Government of India (GoI) in

February 2000, significant achievements have been made in increasing cotton production

and yields.

0

50

100

150

200

250

300

350

0

100

200

300

400

500

600

Pro

du

ctio

n i

n l

ak

h b

ale

s

Yie

ld (

kgs

per

hec

tare

)

Yield (kgs per hectare)

Production in lakh bales

Fig: Year-wise production and yield of cotton in India

Source: Cotton Corporation of India, IMaCS analysis

*as per CAB dated 13th February 2009

© IMaCS 2009


Policy approach towards Cotton fibre in India

• Cotton has a special significance to Indian textile

industry since it accounts for nearly 60% of

India’s total fibre consumption as compared with

the world average of 37%.

• In 2008-09, import duty on Cotton was reduced to

zero.

• Imports accounted for 2 – 3% of the total cotton

consumption during 2005-06 to 2008-09. With a

very small share of imports, the import duty

exemption of cotton has not supported the industry

to a great extent.

• Cotton prices in India are controlled by policy intervention through Minimum Support Price (MSP).

• MSP for cotton has been increased from Rs 2055 per quintal in CY2007-08 to Rs 2850 per quintal in

CY2008-09.

• On 17th February 2009, Central Government has introduced 5% export incentive for raw

cotton, through the Vishesh Krishi aur Gramodyog Yojana. The incentive is effective from 1st April

2008 to 30th June 2009.

0%

20%

40%

60%

80%

100%

0

50

100

150

200

250

300

FY

97

FY

98

FY

99

FY

00

FY

01

FY

02

FY

03

FY

04

FY

05

FY

06

FY

07

FY

08

FY

09*

Lak

h b

ale

s

Total Consumption Imports

% of imports

Fig: Share of imports in total

consumption of cotton

Source: Cotton Advisory Board, IMaCS analysis

© IMaCS 2009


Fig: Minimum Support Price of

Cotton in Rs/quintal

2055

2850

0

500

1000

1500

2000

2500

3000

2007-08 2008-09

40%

Fig: Cotton prices in US cents/lb – World vs India

• In CY2008-09 the Minimum Support Price (MSP) for cotton was hiked by 40%.

• Cotton prices in India were higher compared to international prices during July 2008 to December

2008.

• In December 2008, S-6 variety of cotton was priced at Rs 21,950 per candy as against Rs 19,800

per candy in December 2007. This hike in cotton price is estimated to result in 6.2% increase in

cost of yarn, 3.7% increase in cost of fabric and 1.9% increase in cost of garment.

• Increase in raw material cost in light of diminishing demand and intensifying competition

impacted the profitability of the cotton spinning industry.

• This also resulted in increase in working capital requirement for cotton procurement.

Cotton prices in India have increased which has resulted in significant

increase in cost of various textile products


40

50

60

70

80

90

US

cen

ts/l

b

India World

Source: Cotton Corporation of India, Emerging Textiles

© IMaCS 2009


Fig: Procurement of Kapas by Cotton Corporation of

India (CCI) up to January, 20th

7.88

57.99

0

10

20

30

40

50

60

70

Cotton procured by CC I

Lak

h b

ale

s of

170 k

gs

CY2007-08 CY2008-09

Under

MSP

99.91%

Normal

0.09%

+ 636%

3.15

47.92

0

10

20

30

40

50

60

Stock as on January 20th

Lak

h b

ale

s of

17

0 k

gs

CY2007-08 CY2008-09

Fig: Stock of Kapas by CCI as on

January, 20th

+ 1421%

• Cotton advisory board (CAB) has estimated a cotton crop of around 322 lakh bales (of 170

kg) for CY2009, up 2.17% over the previous year.

• As on 20th January, 2009 CCI procured 57.99 lakh bales of cotton on account of high MSP.

• High level of stocks were build-up at CCI because of reluctance to sell at low prices

thus, resulting in artificial shortage of cotton in domestic market.

In spite of high cotton production, high MSP resulted in artificial

shortage of cotton in domestic market


© IMaCS 2009


China

47%

Bangladesh

12%Indonesia

5%

Pakistan

20%

Vietnam

4%

Turkey

2% Others

10%

Fig: Major export markets for raw cotton

• Exports of cotton have increased significantly in the recent years from 47 lakh bales in FY06 to 85

lakh bales in FY08.

• Majority of raw cotton from India is exported to China, Bangladesh and Pakistan who are the key

competitors to the Indian T&C industry.

• Export of cotton at competitive prices to these countries is likely to hamper the competitiveness of

Indian T&C industry vis-à-vis these countries.

• Recent government policy for 5% export incentive for raw cotton is likely to boost cotton fibre

exports at competitive prices.

Export incentives are supporting raw material supply to the countries

who are key competitors in value added T&C products

Source: DGCIS

© IMaCS 2009


40%

49%

49%

48%

47%

50%

11%

35%

21%

16%

13%

17%

0% 10% 20% 30% 40% 50% 60%

2004

2005

2006

2007

2008

2009

Cotton stock to use ratio-India Cotton stock to use ratio-World

• Cotton Stock-to-Use ratio plays an important role in ensuring stable cotton prices.

• Cotton Stock-to-Use ratio in India is very low compared to the world average and that of

competing countries.

• During CY2008, China, Pakistan and Turkey had Cotton Stock-to-Use ratio of 34%, 35%

and 31% respectively which was much higher than that of India (13%).

Fig: Cotton Stock-to-Use ratio of India as compared with the world average

Cotton Stock–to-Use ratio in India is much lesser than the world

average resulting in high price volatility

© IMaCS 2009



T&C industry





Other issues

© IMaCS 2009


• India is one of the largest producers of manmade fibres in the world with a production of 1.24

million MT of manmade staple fibre and 1.5 million MT of manmade filament yarn in 2007-08.

• The country accounted for 7% of the total manmade fibre production in the world in FY06.

• Polyester is the most common fibre/filament; polyester staple fibre accounts for 71% of the total

manmade staple fibre production while polyester filament yarn accounts for 94% of the total

filament yarn production in India.

Viscose

Staple

fibre

22%

Polyester

Staple

fibre

71%

Acrylic

Staple

fibre

7%

Fig: Share of various varieties in total synthetic

staple fibre production in India (2007-08)

Total synthetic fibre production:1.24 million MT

Source: Office of textile commissioner, IMaCS analysis

Viscose

Filament

yarn

3%

Polyester

Filament

yarn

94%

Nylon

Filament

yarn

2%

Poly

propylene

Filament

yarn

1%

Fig: Share of various varieties in total synthetic

filament yarn production in India (2007-08)

Total filament yarn production:1.5 million MT

India is the one of the largest producers of manmade fibres in the

world with polyester being the most popular fibre/filament

© IMaCS 2009


• Polyester accounted for 82% of the total manmade fibre exports (by volume) and 90% (by volume)

of the total filament yarn exports of India in FY08.

• With 1.39 lakh MT of exports and 0.18 lakh MT of imports in FY08, India is a net exporter of

polyester staple fibre.

• Exports of polyester staple fibre have increased at a CAGR of 44% from FY04 to FY08 though the

imports have stagnated over the years.

• India is also a net exporter of polyester manmade filament yarn with exports of 2.22 lakh MT and

imports of 0.85 lakh MT in FY08.

• Exports of polyester filament yarn increased at a CAGR of 33% from FY04 to FY08.

32

50

43

124

139

77

12

15

16

14

18

7

0 50 100 150

FY04

FY05

FY06

FY07

FY08

FY09(H1)

„000 MT

ImportsExports

71

96

106

175

222

107

94

115

93

91

85

43

-50 50 150 250

FY04

FY05

FY06

FY07

FY08

FY09(H1)

„000 MT

Fig: Volume-wise import and

export of polyester staple fibre

Fig: Volume-wise import and

export of polyester filament yarn

India is a net exporter of polyester staple fibre and filament yarn with

exports increasing significantly over the years

Source: ICRA report

© IMaCS 2009


• In 2007, Cotton fibre accounted for 62% by volume of India’s total fibre consumption as against

37% of world fibre consumption.

• Despite a significant base in manmade fiber production, cotton T&C accounts for substantially

higher share of India’s total T&C export value indicating significant dependence of Indian T&C

trade on cotton.

Fig: Fibre-wise share in total fibre consumption

(2007)

Cotton

62% Cotton

37%

Manmade

36%Manmade

61%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

India World

Sh

are

of

vari

ou

s fi

bre

s in

tota

l

fib

re c

on

sum

pti

on

Source: ICRA report

Despite a strong base in manmade fibre production, Indian textile

trade has significant dependence on cotton

© IMaCS 2009


• Empirical studies have shown a negative relationship between cotton consumption and the price

ratio of cotton to polyester i.e. if polyester is relatively lower priced, then fibre substitution may

occur and less cotton is likely to be consumed.

• Thus, fibre (natural and synthetic) demand is dictated to some extent by relative prices.

However, other factors such as the durability of synthetic fibres also explain the substitutability

between fibres.

• In India, polyester prices are relatively higher than cotton as against that in China which is one

of the reasons for the preference in consumption of cotton.

China

India

-0.4

-0.2

0

0.2

0.4

0.6

Jun

-07

Jul-

07

Aug'0

7

Sep

t'07

Oct

-07

Nov-0

7

Dec

-07

Jan

-08

Feb

-08

Mar

-08

Ap

r-08

May

-08

Jun

-08

Jul-

08

Aug-0

8

Sep

-08

Oct

-08

Nov-0

8

Dec

-08

Jan

-09

Feb

-09

Mar

-09

US

$/k

g

Source: Emerging Textiles

Fig: Cotton – polyester price differential* (US $/kg)

*Refers to cotton price less polyester price

Unlike China, polyester prices in India are higher than cotton prices

© IMaCS 2009


Anomaly in excise duty structure

• Manmade fibres and textiles attract high excise duty (4.12%) as compared to cotton (nil).

• Polyester intermediate MEG attracts a higher excise duty (8.24%) than polyester which results

in accumulation of CENVAT credit.

• Higher excise duty structure of polyester as compared to cotton is likely to affect the domestic

consumption of polyester.

Import duty on manmade fibres

• Manmade fibres attract a 5% import duty as against cotton fibre on which the import duty has

been recently reduced to zero.

• As a result, Indian T&C industry is unable to procure manmade fibres/filaments at globally

competitive prices.

Policy related issues are partly responsible for high domestic prices of Manmade fibres/filaments

resulting in their reduced consumption.

Anomaly in duty structure of manmade fibres/filaments in adversely

affecting their domestic consumption

© IMaCS 2009


Import duty on manmade fibre intermediates

• PTA, MEG and DMT are the key raw materials for polyester fibre/filament production.

• These polyester fibre intermediates attract a basic import duty of 5%*.

• Import duty on intermediates is likely to raise polyester prices thus, adversely affecting its

domestic consumption.

Export incentives for manmade fibres

• Man made staple fibres like Polyester, Acrylic are allowed a Duty draw back of 2.4 % with a

drawback cap of 1.4 Rs per kg; polyester staple fibre exports have a DEPB rate of 5% subject

to a cap value of Rs 55 per kg under the Duty Entitlement Passbook scheme.

• Export incentive for polyester, which is a key raw material for the Indian T&C industry is

likely to affect the availability of the fibres and filaments for the domestic T&C industry at

competitive prices.

*Source: Office of Textile Commissioner

Policy changes are required to ensure domestic availability of

fibres/filaments at competitive prices

© IMaCS 2009



T&C industry





Other issues

India ranks high on the 'Rigidity of Employment index' among the

competing countries on account of stringent labour laws

Ranking of economies by “Doing Business 2009”*

CountryDifficulty of

Hiring Index

Rigidity of

Hours Index

Difficulty of

Firing Index

Rigidity of

Employment Index

Firing costs

(weeks of salary)

India 0 20 70 30 56

China 11 20 50 27 91

Bangladesh 44 20 40 35 104

Sri Lanka 0 20 60 27 169

Turkey 44 40 30 38 95

Vietnam 11 20 40 24 87

• India ranks highest on the ‘Difficulty of Firing index’ amongst the key competing countries.

• India also ranks high on the ‘Rigidity of Employment index’ amongst the key competing

countries.

• This indicates the high rigidity in labour laws in the country

*Refer Annexure VII for details

Source: World Bank

© IMaCS 2009


T&C industry comes under the purview of Contract Labour Act, 1970 which

prohibits contract labour for the work that is perennial in nature

• Contract Labour Act, 1970 prohibits contract labour for the work that is perennial in

nature, incidental to and necessary for the work of the factory and is being done in most

concerns through regular workmen.

• The Act applies to every establishment in which 20 or more workmen are employed or were

employed on any day on the preceding 12 months as contract labour. Though, it does not

apply to establishments where the work performed is of intermittent or seasonal nature, such

an establishment will be covered by the Act if the work performed is more than 120 days and

60 days in a year respectively.

• T&C industry comes under the purview of Contract Labour Act.

• T&C industry, especially the Export Oriented Units have to deal with highly uncertain market

dynamics and thus, need the flexibility of contract labour to face stiff competition from other

countries. The recent economic turmoil has made the industry more vulnerable.

• Competing countries like China and Bangladesh do not have such restrictions on Contract

labour in Textiles.

Restrictive labour laws affect the competitiveness of Indian T&C

industry…(1)

© IMaCS 2009


Indian Labour laws introduce unfair discrimination against large companies

• Indian Labour laws introduce unfair discrimination amongst large companies and the smaller

ones and thus, are partly responsible for lack of economies of scale and poor competitiveness of

Indian T&C industry.

• Units employing over 100 people currently fall under the purview of the Industrial Disputes

Act, 1947 (IDA, 1947). The Act stipulates that employers must obtain necessary regulatory

approvals for lay-offs. As a result, Indian manufacturers often set up several plants instead of a

single large one.

Restrictive labour laws affect the competitiveness of Indian T&C

industry…(2)

The Factories Act, 1948 poses restrictions on the maximum working hours which

further affects the competitiveness of industry

• The act stipulates that no adult worker shall be required or allowed to work in a factory for

more than forty-eight hours in any week. Also, women workers are not to be employed in night

shifts on account of safety issues.

• The restrictive working hours are detrimental to the T&C industry as it restricts the ability of

the units to meet the peak season demand. The problem is compounded on account of

restrictions on contract labour.

© IMaCS 2009



T&C industry





Other issues

© IMaCS 2009


Indian T&C exporters do not have duty free access to the key global

markets

Global Market Trade agreement

EU27

• Reduced duties applied on T&C products

• India and the EU commenced talks on the creation of a Free Trade

Agreement in 2006. FTA not only aims to eliminate tariffs and

quotas, but also non-tariff barriers to trade. This FTA is expected

to be implemented by end of 2009

US • MFN duties applied on majority of T&C products

Although India is currently a beneficiary of the US GSP, textiles

produced with cotton, wool, manmade fiber, and other vegetable

fiber are prohibited from receiving GSP treatment.

Japan

• Reduced tariffs for textile products

Under Japan’s GSP, India qualifies for reduced tariffs for T&C

products

© IMaCS 2009


Other policy related issues…(1)

• No duty credit scrip for yarn, fabric and made-ups

Yarn, Fabric and Made-ups together account for around 44% of the total T&C export

earnings. The sector has been significantly affected by the economic slowdown.

However, the 2% duty credit scrip under Market-Linked Focus Product Scheme does not

provide any incentive for made-ups, fabric and yarn exports.

• Interest subvention partially re-instated

An interest subvention of 4% on export credit was withdrawn by the Government in October

2008 of which 2% has been reinstated. Effectively, this has resulted in a reduction in interest

subvention of 2% for the T&C exporters.

• Delay in disbursement of various refunds

Majority of incentives provided to the T&C sector are in the form of refunds. Delay in

disbursement of funds by the government and non-payment of interest on the pending funds

results in additional cost to the industry.

© IMaCS 2009


• Hank Yarn Obligation (HYO), initiated in 1974 was a measure to ensure

adequate yarn at competitive prices for the handloom weavers.

• HYO is an implicit subsidy given to the handloom sector at the expense of yarn

producers. Under the HYO, over 25% of the production for domestic sales has to

be sold in the hank form for the handloom sector at a significant discount to the

prevailing yarn prices thereby constraining profitability.

• This obligation impacts the competitiveness of T&C sector as

Yarn producers are forced to produce a fixed proportion of their yarn of

below 40s count, which fetches them lower margins.

The obligation prevents yarn producers from upgrading their product

portfolio.

Other policy related issues…(2)

© IMaCS 2009


Interventions by Governments in the

competing countries

© IMaCS 2009


Particulars Details

Tax Credits and Rebates

• Chinese government has raised the export rebate rate for

textiles and apparel thrice, from 11% at the beginning of

2008, to 15% by Feb 2009, the highest in 10 years.

• 1% increase in export rebate is estimated to distribute

7.6 billion yuan (US $ 1.11 billion) to exporting

companies*

Reduction in lending rates• Government is forcing state-owned banks to approve

low-interest loans for the T&C industry

Textile plan for revamping

T&C industry

The Textile plan focuses on the following:

• Developing new markets like Russia, Brazil, India and

Africa as well as domestic market with focus on rural

markets

• Investing in updated technology and developing brands

• Saving energy

• Providing financial support in terms of credit guarantees

with focus on SME.

Chinese government has taken several initiatives to drive the growth of

T&C industry

*Source: Emerging Textiles

© IMaCS 2009


Particulars Details

Reduction in taxes

• Vietnamese government has announced plans to halve

the value-added tax on cotton imports from 10% to 5%.

• With the country importing virtually all cotton used in

Vietnamese mills, this move could have a positive

impact on both cotton share and demand in coming

months.

Export subsidies

• Vietnamese government has agreed to provide support to

the country’s T&C industry at a ratio of forty Vietnamese

dong per one dollar in exports value i.e. exports valued

at US $ 1 million would be given support of VND 40

million from the government.

• With Vietnamese textile and apparel exports in 2008

exceeding US $ 9 billion, this equates to roughly US $

21 million in export subsidies.

Reduction in lending rates

• Vietnamese government has assigned the State Bank of

Vietnam to grant low-interest loans to Vietnam Textile

Corporation (VTC) in order to import cotton.

Vietnamese government has taken several initiatives to drive the

growth of T&C industry

* Details of the support plan, including how the subsidy payments may be made have not been disclosed.

© IMaCS 2009


Particulars Details

Lending rates

• In order to push industrial output, the government has

reduced lending rates by 3.75% over the period of

October to December 2008.

Protection for domestic yarn

industry

• Government has taken anti-dumping sanctions to protect

the spun and filament yarn manufactures from Asian

competition

Turkish government has taken initiatives to drive the growth of T&C

industry

© IMaCS 2009


Particulars Details

Industry supportive import

duty structure

• No import duty for export oriented industry

• For other industry, it is @ 5% ad valorem

Reduction in taxes

• Tax holiday facilities for 5 or 7 years depending on

location of the industrial enterprise

• Industrial undertakings not getting tax holiday enjoy

accelerated depreciation allowance at the rate of 100% of

the cost of machinery

• Entire export earning from handicrafts and cottage

industries is exempted from income tax.

• For all other industries, income tax rebate on export

earning is given at 50%

Incentives for the development

of backward linkages

• 15% cash subsidy of the fabric cost to exporters sourcing

fabrics locally.

• Incentives extended to the "deemed exporters" supplying

indigenous raw materials to export-oriented industries.

Bangladesh government has been responsive to its industry needs and

has taken initiatives to drive growth

© IMaCS 2009


Particulars Details

Export incentive program

based on maintaining revenues

and employment

• Sri Lanka's government is giving a 5% incentive

payment in domestic currency to any exporter who

shows 5% increase in export proceeds remitted to the

country over the same quarter last year. Such exports are

required to have prescribed minimum domestic value

addition. The payments will be free of tax.

Other incentives to Textile

Industry

• Companies which meet certain qualifying criteria set by

the government get the following incentives :

• Concessionary tax

• Import duty exemption on capital goods as well as

raw materials

Depreciation of Rupee

• In order to limit the slowdown in export sales, the

Central Bank accepted a depreciation of the rupee which

fell about 7% in 2008 against the dollar.

Textile-processing zones• Establishment of three textile-processing zones in order

to enhance the value addition in apparel export

Sri Lankan government has taken initiatives to drive the growth of

T&C industry

© IMaCS 2009


Table of Contents


key issues


and clothing




Recommendations


© IMaCS 2009


• Ministry of Textiles has targeted the growth of Indian textile industry at 16% per annum (in value

terms), to US$ 115 billion, by the end of Eleventh Five Year Plan.

• It was also targeted to secure a 7% share in global textile trade by the end of the Eleventh Five

Year Plan.

• It was estimated that the T&C industry would require an investment of Rs. 1,50,600 crore to

achieve the targeted growth.

SECTOR INCREMENTAL

CAPACITY

INVESTMENT

(Rs crore)

Spinning 29.25 million Spindles (8.25)* 50,200

Weaving 1,97,000 looms 20,200

Knitting 9,400 machines 2,400

Processing 38 billion square meters 56,000

Garment 14.5 lakh machines 21,800

Total 1,50,600

*Including replacement of machinery

Fig: Investment required during eleventh five year plan to achieve the targeted growth

Source : Ministry of Textiles, Report of the Working Group on Textiles & Jute

Industry for the Eleventh Five Year Plan (2007- 2012)

Ministry of Textiles has targeted an export turnover of US$ 55 billion and a domestic

market of US$ 60 billion for Indian Textile industry by the end of eleventh plan

© IMaCS 2009


Employment potential of T&C industry

• As on March 2006, the Textile sector provided employment to 33.17 million* people.

• Provided the growth targeted during the Eleventh Five Year Plan is achieved, the industry has

potential to provide employment to 45 million* people by 2012.

Export potential of T&C industry

• As of 2007-08, exports of T&C industry amount to US $ 22.4 billion, contributing 12% to the country’s total foreign exchange earnings.

• Provided the growth targeted during the Eleventh Five Year Plan is achieved, the exports are expected to surge to US $ 55 billion.

T&C industry has a significant employment and export potential in

case the targeted growth is realised

* This also includes employment in Handloom, Sericulture, Handicraft and Jute industry

Source : Ministry of Textiles, Report of the Working Group on Textiles & Jute Industry for

the Eleventh Five Year Plan (2007- 2012)

© IMaCS 2009


17%

27%

22%21%

9%

15%

-4%

7%

0.2%

-5%

0%

5%

10%

15%

20%

25%

30%

Exports of

Textiles

Exports of

Garments

Total Exports

9% 10%12% 12%

9%10%

5% 5%

-15%

-7%

-3%-1%

-16%

-12%

-8%

-4%

0%

4%

8%

12%

Production

of manmade

fibre

Production

of Manmade

filament

yarn

Production

of Spun yarn

Production

of fabric

Assumed annual growth rate during the eleventh plan

Annual Growth rate achieved in 2007-08

Annual growth rate achieved in 2008-09*

•Refers to Apr – Feb FY09 for production and to

Apr – Dec 2008 for exports.

Source : Office of Textile Commissioner

• Production of majority of textile products could not achieve the expected growth target in 2007-08;

the trend worsened during Apr – Feb, FY09 with decline in production of manmade fibre (by 15%

y-o-y), manmade filament yarn (by 7% y-o-y), Spun yarn (by 3% y-o-y) and fabric (by 1% y-o-y).

• Exports of T&C also missed the target during Apr – Dec 2008 with Garment exports increasing by

7% (y-o-y) as against a target of 27% (y-o-y) and Textile exports declining by 4% (y-o-y).

• Under these circumstances, the T&C industry is unlikely to achieve the envisioned target unless the

sector weaves a strategic shift in the coming year.

During Apr - Feb, FY09 production and exports of T&C have missed the expected

growth targets thus, requiring a strategic intervention to realise the envisioned targets

Fig: Achieved growth rates as against the expected growth rate during the eleventh plan

© IMaCS 2009


Current issues

arising because of recent

economic slowdown

• Decline in demand from

global markets

• Liquidity crisis

Issues

affecting long term growth

of industry

• Lack of skilled labour

• Significant dependence on

Cotton products

Major issues faced by the T&C industry

© IMaCS 2009


Decline in

demand from

global markets

Lack of cost competitiveness in majority of T&C products

as compared to China, Bangladesh, Vietnam and Sri

Lanka*

High dependence of T&C trade on EU27 and US markets

Liquidity crisis Delay in disbursement of TUFS assistance and other

assistance

High working capital interest

Current issues affecting the T&C industry

Issues Major impediments to growth

*Based on the analysis of identified competing countries

© IMaCS 2009


Efforts by the industry

Facilitation by the

government

Strategic interventions

required for the

Textile and Clothing industry

Strategic interventions are required at two levels to ensure the growth

of T&C industry

282

High power cost

High labour cost

Anomalies in taxes and duties

High transaction cost

High import tariffs by global markets

Government should take steps to reduce the cost disadvantage of

Indian T&C manufacturers

Major factors that have caused cost disadvantage in T&C industry

© IMaCS 2009


High power cost*

Shortage of grid power^

High cost of captive

power generation

*Power cost in India is on an average around 40% higher than that in the analysed competing countries.

^ Tamil Nadu which accounts for around 40% of India’s spinning activity and over 25% of total T&C activities

has a declared power cut of 40%.

Power

related issues Government should allow exemption of

excise and customs duty paid for liquid

fuels used for captive power generation

Government should support captive power generation in the regions

suffering from acute power shortage

© IMaCS 2009


Increase labour flexibility

1. Permit Contract labour*

2. Consider routing the National Rural Employment Guarantee Programme (NREGA) through T&C industry^

Extend labour working hours

- increase weekly working hours limit from 48 to 60 hours and daily working hours limit from 8 to 12 hours

Relax the norms of Industrial Disputes Act, 1947

-by increasing the limit pertaining to the number of workers

*With the condition that T&C units provide employment to contract labourers for a fixed tenure (say 150 days)

as well as provide protection of rights of these labourers in terms of health, safety, welfare, social security, etc.

^ If labour flexibility is permitted, T&C industry will be able to provide a longer employment period and

higher wage rate as compared to that promised under NREGA.

Government should increase labour flexibility especially for the

labour intensive sectors of the T&C industry

© IMaCS 2009


Current Status

State level taxes and duties are not refunded

Duty drawback rates are insufficient to neutralize the

incidence of all duties

Delay in disbursal of duty drawback claims to the level

of 40 – 60 days

Implication

Additional incidence of

2% to 6% of ex-factory

price

Central Government should make provisions to refund the State level taxes and

duties, the incidence of which is on an average 4%* of the ex-factory price.

Government should revise duty drawback rates to completely neutralize the incidence of

duties and disbursal of duty drawback claims should be expedited.

Government should take measures to streamline the anomalies in

taxes and duties

*Government levies an additional customs duty of 4% on imported goods to countervail the sales tax, value added

tax, local taxes and other charges leviable on sale or purchase or transportation of like goods in India.

Similarly a refund of 4%, equivalent to the incidence of state level taxes and duties should be provided to the T&C

exporters to bring them at par with the global players.

© IMaCS 2009


Government should allocate sufficient funds to clear the back log of TUFS till date

Mills should be permitted to pay interest net of interest compensation to the banks*

Government should take immediate steps to clear TUFS backlog and

revise TUFS procedures for future applications

*Government should arrange to remit interest compensation amounts directly to banks

concerned

Delay in disbursement of TUFS assistance results in significant additional cost

© IMaCS 2009


T&C manufacturers pay working capital interest at the rate of 11 – 13%.

Working capital requirement of the Cotton textile industry has increased on account

of hike in cotton prices.

Government should take following measures for the working capital loan for cotton

Reduce interest rate for working capital loan to 7%

Reduce margin money requirement to 10%

Increase the duration of working capital loan for cotton to 9 months

Government should take measures to overcome the working capital

related problems of the industry

© IMaCS 2009


Government should support the industry to reduce the other costs of

doing business

Negotiate better trade terms with global T&C markets including Japan

• Indian T&C trade faces comparative disadvantage on account of free market access available to Bangladesh, Sri Lanka and Turkey.

• Ministry of Commerce should negotiate better trade terms with the global T&C markets including Japan*.

Streamline EXIM procedures to reduce the transaction costs

• Simplify documentary procedures at the ports to reduce transaction costs.

• Increase port capacity and improve rail/road connectivity to ports.

*Japan intends to reduce the share of Chinese textile and clothing in its total T&C imports to around 50%

from the current 77%. This is likely to generate significant business opportunity for the other Asian garment

exporters.Source: Japan’s International T&C Trade Office at Japan’s Ministry of Economy

© IMaCS 2009


• Abolish customs duty on manmade fibres and their intermediates.

• Abolish excise duty on manmade fibres and their intermediates.

• Withdraw export incentives for various fibres

Short Term measures

• Formulate comprehensive Fibre Policy to :

• Ensure availability of raw material (especially cotton and polyester) to the domestic T&C industry at competitive prices

• Reduce the dependence of Indian T&C industry on Cotton which is an agricultural product

Long term measures

Government should support the industry to reduce its dependence on

cotton

© IMaCS 2009


Joint Working Group comprising of members from the Government and the T&C

industry, should be formulated to periodically review the performance of industry

• Joint Working Group (JWG) comprising of members from the Ministry of

Textiles, the Ministry of Finance, the Ministry of Commerce and members from

T&C industry associations, should be formulated to periodically review the

performance of T&C industry.

• The Working Group should periodically review the dynamics of the T&C export

markets and examine the factors affecting the competitiveness of the T&C

industry.

• The findings of the Working Group should support the Government to make

necessary policy interventions in order to ensure long term growth of the

industry.

© IMaCS 2009


Fabric and Garment sectors of the industry should improve cost competitiveness by upgrading technology and achieving economies of scale

• Weaving, Processing and Garment sectors of the industry are fragmented thus, lackingeconomies of scale.

• Of the total TUFS disbursement upto December 2008, Weaving industry accounted for only7.7% and Garment industry accounted for only 5% as against 34% of Spinning industry. Thisindicates limited efforts in technology up gradation in these sectors.

• Fabric industry and Garment industry should undertake technology up gradation as well asachieve economies of scale to achieve cost competitiveness.

Garment industry should explore new markets to reduce trade dependence on EU27 and US

• Japan which is the third largest garment importer with a share of 6.7% in world clothingimports in 2007, accounts for only 1.1% of India’s total garment export value.

• Similarly, Russia which is the fifth largest garment importer with a share of 4.1% in worldclothing imports in 2007, accounts for only 0.6% of India's total garment export value.

• Garment industry should make efforts to develop business in these markets in order to reduceits trade dependence on EU27 and US.

Industry should make efforts to ensure long term growth

© IMaCS 2009


Industry associations should make focused efforts to ensure the

availability of skilled labour for the industry

• Non-availability of trained labour is impeding the long term growth of the T&C industry.

• Associations should establish Skill Development centres to ensure availability of skilled

labour to the industry.

• Skill Development centres should run Certified training courses focusing on the specific

skills required by the industry.

• Registration of skilled workers should be done at the Skill Development centres to maintain

a databank of skilled labour.

• Skill Development centres should provide human resource service to the industry with the

support of databank.

© IMaCS 2009


Annexure – IIndian Textile and Clothing industry

© IMaCS 2009


Analysis of Indian Textile and Clothing industry and key issues

Indian Spinning Industry

Indian Weaving and Knitting Industry

Indian Garment Industry

Indian Made-ups Industry

Findings from the primary survey

© IMaCS 2009


Snapshot of Indian Spinning industry

Number of spinning mills 2816

Total installed capacity

Spindles 39.5 million

Rotors 6,01,000

Fig: Structure of Indian Spinning industry

2007-08

SSI,

1219

Non

SSI,

1597

Fig: Number of spinning mills

• Spinning is considered as the most consolidated and technically efficient sector in India’s

textile industry largely because of deregulation beginning in the mid-1980s.

• 43% of the mills in the Spinning industry belong to SSI which together account for 12% of

the installed capacity and 8% of the employment.


© IMaCS 2009


• In FY08 Indian Spinning industry produced 5.5 million MT of total yarn of which spun yarn

accounted for 72.7%.

• Indian spun yarn production increased at a 5-year CAGR of 5.4% to 4 million MT in FY08.

• Cotton yarn constituted 74% of total spun yarn production followed by blended (17%) and

non-cotton (9%).

• In FY08, India produced 1.5 million MT of manmade filament yarn (MMFY).

• Polyester Filament yarn (PFY) is by far the most popular synthetic fibre/yarn in

India, accounting for 94% of MMFY production in FY08.

Cotton

74%

Blended

17%

Non

cotton

9%

Viscose

3%

Polyester

94%

Nylon

2%

Total spun yarn production: 4 million MT Total MMFY production: 1.5 million MT

Cotton spun yarn is the major product of Indian spinning industry

accounting for 74% of total yarn production in FY08

Source: Office of Textile

Commissioner, IMaCS analysis

Fig: Share of various varieties in total spun yarn

production in India (2007-08)Fig: Share of various varieties in total synthetic

filament yarn production in India (2007-08)

© IMaCS 2009


EU

17%

Bangladesh

12%

Turkey

10%

Korea

7%Egypt

6%Peru

3%

China

3%

Japan

2%

Taiwan

2%

Mauritius

2%

Brazil

6%

Sri Lanka

2%

U S A

2%

Other

26%

• In FY08, Indian Spinning Industry exported US $ 3.1 billion of yarn, accounting for 14% of the total

T&C export earnings.

• Yarn exports from India increased at a CAGR of 18% from FY06 to FY08; cotton yarn accounted

for 61% of total yarn exports in FY08.

• EU is the largest export market for Indian yarn accounting for 17% of the total yarn export value in

2007-08 followed by Bangladesh (12%) and Turkey (10%).

• Other key export markets are Korea, Egypt, Peru and China.

• USA and Japan account for 2% each of the total yarn export value of India and UK accounts for

1.5%.

65%64%

61%

35% 36%39%

2,2702,638

3,149

0

500

1000

1500

2000

2500

3000

3500

2005-06 2006-07 2007-08

US

$ M

illi

on

Cotton Non Cotton Total

Fig: Year-wise total yarn export by India

Spinning industry accounts for 14% of India’s total T&C export

earnings with exports worth US $ 3.1 billion in FY08


Fig: Key export markets for yarn (2007-08)

Source: DGFT,

IMaCS analysis

© IMaCS 2009


-60%

-40%

-20%

0%

20%

40%

60%


-40%

-20%

0%

20%


y-o-y % increase in Volume (Kgs)y-o-y % increase in Value (Euros)y-o-y % increase in Price realisation (Euros/kg)

• During 2008, yarn exports to EU27 declined 13.2%

(y-o-y) by volume (as against an increase of 8.2%

(y-o-y) in 2007) and 14.7% (y-o-y) by value as

against an increase of 4.5% (y-o-y) in 2007).

• Exports in value terms declined significantly in the

month of August (34% y-o-y), October (27% y-o-y)

and November (31%).

• Price realisation in terms of Euros/kg of yarn also

declined between March and June 2008 with

average price realisation in 2008 being 1.4% lower

than that in 2007.

• Exports to UK during 2008 declined 1.2% (y-o-y)

by volume (as against an increase of 9.6% (y-o-y) in

2007) and 2.9% by value (as against an increase of

19.4% (y-o-y) in 2007),.

• Average price realisation during 2008 was 2.2% (y-

o-y) lower than that in 2007.

During 2008, India’s yarn export to EU27 declined significantly combined

with drop in price realisation

Source: Eurostat, IMaCS analysis

Fig: Yarn export to EU27 in 2008 as

compared to 2007

Fig: Yarn export to UK in 2008 as

compared to 2007

© IMaCS 2009


• India’s yarn exports to US during 2008 declined 11% (y-o-y) by volume and 7.5% (y-o-y) by

value.

• The decline was significant in December 2008 with export volume dropping by 34% (y-o-y)

and export value dropping by 28% (y-o-y).

During 2008, India’s yarn exports to US decreased 11% (y-o-y) by

volume and 7% (y-o-y) by value

-40%

-20%

0%

20%

40%

60%


y-oy % increase in Volume (SME)

y-o-y % increase in Value (US $)

y-o-y % increase in Price realisation (US $/SME)

Fig: Yarn export to US in 2008 as compared to 2007

Source: OTEXA, IMaCS analysis

© IMaCS 2009


Fig: Year-on-year growth in filament yarn

production

Fig: India’s monthly spun yarn production in million kgs

• Spun yarn production has declined since July

2008, with the decline continuing in each

successive month.

• During Apr-Feb, FY09 spun yarn production

declined by 2.9% (y-o-y) to 3.6 million MT.

• Production of Manmade Filament Yarn

(MMFY) declined by 6% (y-o-y) in

FY09, compared to a growth of 10.1% in

FY08.

• Production of Polyester Filament Yarn (PFY)

declined by 6% (y-o-y) in FY09, as against an

increase of 12% (y-o-y) in FY08.

During Apr-Feb FY09, spun yarn production declined by 3% (y-o-y)

and MMFY production declined by 6% (y-o-y)

Source: Office of the Textile Commissioner

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

0

50

100

150

200

250

300

350

400

Jan

-04

May

-04

Sep

-04

Jan

-05

May

-05

Sep

-05

Jan

-06

May

-06

Sep

-06

Jan

-07

May

-07

Sep

-07

Jan

-08

May

-08

Sep

-08

Jan

-09

Production (mkg) Growth (yoy)

-30%

-20%

-10%

0%

10%

20%

30%

40%

PFY VFY

© IMaCS 2009


200

300

400

500

33

34

35

36

37

38

FY

2004

FY

2005

FY

2006

FY

2007

FY

2008

By Jan

2009

(P)

Th

ou

san

d R

oto

rsMil

lion

Sp

ind

les

Million Spindles Thousand Rotors

Fig: Increase in Spinning capacity over

the years (Non SSI)

• Indian Spinning industry has undergone capacity expansion in anticipation of increased demand.

• With spinning industry accounting for 33% of the total disbursement under TUFS till

September, 2008, the capacity build-up has been highly leveraged, primarily driven by interest

compensation under TUFS.

Indian Spinning industry has undergone capacity expansion in recent

years with high leverage

33%

20%11%

13%

6%

17%

Spinning

Composite

Upgradation

Weaving / Knitting

Processing/Fabric

Embroidery

Garment/Made-up

Others

Fig: Composition of disbursement under

TUFS (up to Sep 2008)


© IMaCS 2009


14% 15%15%

16%

10%

-3%

3% 4%5%

-4%-5%

0%

5%

10%

15%

20%


Operating Profit Margin Net Profit Margin

12%

11% 5%

9%

5%

-2%-1% -3%

-8%

-5%

-9%

-18%-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Q2

FY08

Q3

FY08

Q4

FY08

Q1

FY09

Q2

FY09

Q3

FY09

Fig: Profit margins for a sample of Indian Spinning companies*

Annual performance Quarterly performance

• Operating margins of the sample of companies dropped significantly from a profit of 11% in

Q3FY08 to a loss of 2% in Q3FY09.

• The analysed companies have made a loss in each of the three quarters of FY09.

Profit margins of Indian Spinning Industry have declined during FY09

Source: Capitaline, IMaCS analysis

* Analysis of a sample of 35 cotton spinning companies

© IMaCS 2009


1.7

1.5

1.6

3.3 3.1

1.6

3.03.1

3.4

1.4

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0


D/E ratio Interest coverage ratio

Fig: D/E and interest coverage ratio for a

sample of Indian Spinning companies*

• D/E ratio of the analysed spinning companies has increased significantly from 1.6 in FY04 to 3.1

in FY08, indicating leveraged capacity expansion.

• Recent drop in production has resulted in under utilisation of capacities, inadequate absorption of

fixed costs and weak debt coverage indicators.

• The interest coverage ratio declined to below one in Q3FY08 with the performance further

deteriorating in succeeding quarters.

0.9

0.6

-0.4

0.3

-0.2

-1.2

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

Q2

FY08

Q3

FY08

Q4

FY08

Q1

FY09

Q2

FY09

Q3

FY09

inte

rest

cover

age

rati

o

Fig: Quarterly interest coverage ratio for a

sample of Indian Spinning companies*

In conditions of reducing demand, highly leveraged capacity build-up

is affecting the financial profile of the industry

* Analysis of a sample of 35 Indian cotton spinning companies


© IMaCS 2009








© IMaCS 2009


EU

13%USA

6%

Saudi Arabia

4%

Bangladesh

5%

Turkey

2%

Srilanka

6%

UAE

17%

Afganistan

3%

Benin, 2% Togo, 2%Senegal, 2%

Egypt, 2%

Others

36%Other

44%

Fig: Year-wise trend of fabric exports

• India’s fabric production has increased at a 3-year CAGR of 7.3% from FY05 to FY08, to 56,031

million square metres (msm) in FY08 of which woven fabric accounted for 79% of total production.

• India is net exporter of fabric with exports worth US $ 3.13 billion in FY08, accounting for 14% of

the total T&C export earnings.

• Fabric exports by India have increased at a CAGR of 12% from FY06 to FY08; woven fabrics

accounted for 97% by value of total fabric exports.

• UAE and EU are the major export markets for fabric with a share of 17% and 13% respectively.

• US accounts for 6% of India’s total fabric export value.

98% 97%97%

2505 25373139

0

500

1000

1500

2000

2500

3000

3500

2005-06 2006-07 2007-08

US

$ m

illi

on

Woven Knitted


*Woven fabrics include special fabrics

Fig: Key export markets for fabric

(2007-08)

Fabric industry accounts for 14% of India’s total T&C export earnings

with exports worth US $ 3.1 billion in FY08

© IMaCS 2009


• Weaving industry accounts for 79% of total fabric production (by volume) and 97% of total

fabric exports (by value) of India.

• India’s weaving sector is small scale and highly fragmented.

• In FY08, power loom sector accounted for 62% of fabric production and was the primary

supplier of fabrics to domestic apparel producers and consumers.

Number of power loom units 4,69,563

Installed capacity 2.11 million power

looms

Size of typical power loom

unit

12 to 44 looms

Fig: Structure of Indian Weaving industry

(2007-08)

Indian Weaving industry accounts for 97% of the total fabric exports

by value

Source: Office of Textile Commissioner, ICRA report

© IMaCS 2009


Cotton

49%Non

cotton

38%

Blended

12%

Khadi,

Wool,

Silk

1%

• India’s woven fabric production has increased at a 3-year CAGR of 6.9% to 43,464 million

square meters (msm) in FY08 of which cotton fabric accounted for 49% of total production.

• Woven fabric exports* increased at a CAGR of 11% from FY06 to FY08 to a value of US $

2823 million in FY08.

• In FY08, woven fabric exports were dominated by Manmade woven fabrics (47% by value)

followed by cotton fabrics (37%).

Fig: Volume-wise share of various varieties in

total woven fabric production $(2007-08)

Total woven fabric production 43,464 msm

Cotton

37%

Man

made

47%

Others

16%

Fig: Value-wise share of various varieties in

total woven fabric exports (2007-08)

Total woven fabric exports*: US $ 2823 million

*Excluding Special fabrics

Cotton fabrics have the highest share in woven fabric production

whereas exports are dominated by Manmade woven fabrics


© IMaCS 2009


Indian Knitting industry accounts for 21% of India’s total fabric production

(by volume) however, its share in total fabric exports value is only 3%

• Knit fabrics account for 21% of India’s total fabric production (by volume) however, their

share in total fabric exports value is only 3%.

• India’s knit fabric production has increased at a 3-year CAGR of 9% to 11,804 msm in

FY08 of which cotton fabrics accounted for 84% followed by blended (12%).

• Knit fabric exports increased at a CAGR of 35% from FY06 to FY08 to a value of US $

90.31 million in FY08.

Fig: Year-wise trend in production of

Hosiery fabric (million msm)

0

2000

4000

6000

8000

10000

12000

2004 2005 2006 2007 2008

mil

lion

msm

Cotton Blended 100% NC TotalSource: Office of Textile Commissioner, IMaCS analysis

0

10

20

30

40

50

60

70

80

90

100

2006 2007 2008

US

$ m

illi

on

Fig: Year-wise trend in exports of Hosiery

fabric (US $ million )

© IMaCS 2009


-40%

-20%

0%

20%

40%


y-o-y % increase in Volume (Kgs)

y-o-y % increase in Value (Euros)

y-oy % increase in Price realisation (Euros/kg)

-60%

-40%

-20%

0%

20%

40%


• During 2008, India’s fabric exports to EU27

declined 8.5% (y-o-y) by volume, whereas

exports in 2007 grew by 2.1% (y-o-y).

• Exports declined significantly in the month of

November, 2008 (32% y-o-y by volume).

• India’s fabric exports to UK during 2008

declined 13.4% y-o-y by volume, whereas in

2007 exports declined by 12.6% (y-o-y).

• Fabric export volume declined significantly in

the month of September (35% y-o-y), November

(49% y-o-y) and December (28% y-o-y).

India’s fabric exports to EU27 were severely hit during 2008 with a drop

of 8.5% (y-o-y) in export volume


Fig: Fabric export to EU27 in 2008 as

compared to 2007

Fig: Fabric export to UK in 2008 as

compared to 2007

© IMaCS 2009


-40%

-20%

0%

20%

40%

60%

80%


y-o-y % increase in Volume (SME)


y-o-y % increase in Price realisation (US $/SME)

Fig: Fabric export to US in 2008 as compared to 2007

• India’s fabric exports to US increased 27% y-o-y by volume and 23% y-o-y by value during

2008.

• Though India’s fabric exports to US increased during 2008 the average price realisation

declined by 3% (y-o-y).

• Price realisation dropped significantly in May (18% y-o-y), June (15% y-o-y) and December

(20% y-o-y).

Though India’s fabric exports to US increased in 2008, there was a

significant drop in price realisation


© IMaCS 2009


• Total fabric production declined by 1.4% y-o-y during Apr –Feb, FY09 and by 2% y-o-y

during Feb, 2009 as against a 3-year CAGR of 7.3% from FY05 to FY08;

• Fabric production by handloom, power loom and hosiery decreased by around 7% y-o-y , 1%

y-o-y and 2% y-o-y respectively during Feb, 2009.

Fig: Year-on-year growth in fabric production

Fabric production declined by 1.4% (y-o-y) during Apr – Feb, FY09

-5%

0%

5%

10%

15%

20%

2005 2006 2007 2008 Apr - Feb

FY09

Mills Powerloom Hosiery Total


© IMaCS 2009


300

350

400

450

500

550

600

10

12

14

16

18

20

22

FY02 FY03 FY04 FY05 FY06 FY07 FY08 Nu

mb

er o

f p

ow

er l

oom

un

its

in T

hou

san

ds

Nu

mb

er o

f p

ow

er l

oom

s in

lak

hs

No of Power looms No. of power loom units

Fig: Weaving capacity in India

• Indian weaving industry has undergone capacity expansion over the years in anticipation of

increase in demand.

• Capacity in terms of power looms has increased over the years with corresponding increase

in the number of units

Though weaving industry has undergone capacity expansion, the

number of units has also increased


© IMaCS 2009


20%

20%

18%

19%

19%

20%

7% 7%5%

4%

4%

3%0%

5%

10%

15%

20%

25%

Q2

FY08

Q3

FY08

Q4

FY08

Q1

FY09

Q2

FY09

Q3

FY09

16%18%

18%

21%

24%

5%

6%6% 7%

7%

0%

5%

10%

15%

20%

25%



• The weaving companies* have been able to maintain the operating profit margin

however, the net profit margin has declined during FY09 with a significant decline in

Q3FY09.

Fig: Profit margins for a sample of Indian Weaving companies


Net profit margin of the weaving companies has declined during FY09

* Analysis based on a sample of 26 weaving companies


© IMaCS 2009


• D/E ratio of the analysed companies increased significantly, from 1.6 in FY04 to 3.5 in

FY08, indicating leveraged capacity expansion.

• Interest coverage ratio of the companies has declined during Q3FY09 as compared to the

previous quarters.

1.6

1.71.9

2.5

3.5

3.0

3.4 4.2 3.5

2.9

0.0

1.0

2.0

3.0

4.0

5.0



Fig: D/E and interest coverage ratio for

Indian companies*

* Analysis based on a sample of 26 weaving companies

Highly leveraged capacity expansion combined with drop in demand

has impacted the performance of the weaving companies

2.8 2.9

3.1

1.9

2.1

1.8

0.0

1.0

2.0

3.0

4.0

Q2

FY08

Q3

FY08

Q4

FY08

Q1

FY09

Q2

FY09

Q3

FY09

inte

rest

cover

age

rati

o

Fig: Quarterly interest coverage ratio for

Indian companies*


© IMaCS 2009


10%

10%

12%14%

13%

-1%

0%3%

4%

3%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%



14%

10%

12%

14%

13%

8%

4% 3%

3% 3%

2%

-3%-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Q2

FY08

Q3

FY08

Q4

FY08

Q1

FY09

Q2

FY09

Q3

FY09

Fig: Profit margins for a sample of Indian Knitting companies


• Operating profit of Indian Knitting companies has declined significantly in Q3FY09.

• Net profit margin also declined significantly during FY09 with the sample companies

registering a loss in Q3FY09.

Operating profit and Net profit margin of the Knitting companies have

declined significantly during FY09


* Analysis based on a sample of 14 Knitting companies

© IMaCS 2009


0.3 0.3 0.4 0.8 1.2

2.9 3.4

6.86.1

4.4

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



3.12.3

1.8 1.9

1.5

0.00.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Q2

FY08

Q3

FY08

Q4

FY08

Q1

FY09

Q2

FY09

Q3

FY09

inte

rest

cover

age

rati

o


Indian companies*


Indian companies*

• Though the sample of knitting companies analysed have low share of debt in the total capital

employed, the same has increased from FY04 to FY08.

• The interest coverage ratio has weakened from 2.3 in Q3FY08 to 0.01 in Q3FY09

Financial performance of Knitting companies has been significantly

impacted in Q3FY09


* Analysis based on a sample of 14 Knitting companies

© IMaCS 2009








© IMaCS 2009


• India’s garment industry is characterised by a large number of independent, small-scale

firms; an average Indian garment exporter has around 119 machines, compared to 698 in

Hong Kong and 605 in China.

• Woven and Knitted garment industry was restricted to SSI sector till 2000 and 2005

respectively which has resulted in the small-scale nature of India’s garment industry.

• Because of the predominance of small-scale fabricators in the garment sector, most garments

are produced on a contractual basis for the large manufacturers/exporters. The fabricators

specialise in low-wage, labour-intensive sewing and have the flexibility to meet small custom

orders but are much less competitive with large orders and those typically involving high

levels of automation.

SSI,

12000

Non

SSI,

1000

Fig: Number of SSI and Non SSI garment

manufacturing units in India (2007-08)

Snapshot of Indian Garment industry

Source: ICRA report

© IMaCS 2009


• Garment exports from India increased at a 3-year CAGR of 13.9% to US $ 9,699 million in

FY08, accounting for 43% of the T&C export earnings.

• Knitted garments accounted for 44% of the exports by value during FY08.

• EU27 is the major export market for Indian garments accounting for 47% of the export value in

FY08. UK is the key export destination in EU27 accounting for 12.3% of India’s total garment

export value.

• US is the second largest export market for Indian garments, accounting for 28% of India’s total

garment export value.

• Japan accounts for only 1% of India’s total garment export value.

EU27

47%

US

28%

UAE

7%

Canada

3%

Japan

1%

Others

14%

Fig: Major export markets for Indian Garments

(2007-08)

6,243 6,574

8,627 8,895 9,699

0

2,000

4,000

6,000

8,000

10,000

2004 2005 2006 2007 2008

US

$ m

illi

on

Knitted garment Woven garment Total

Fig: Year-wise trend in garment exports from India

Source: Office of Textile

Commissioner, IMaCS analysis

Garment industry accounts for 43% of India’s total T&C export

earnings with exports worth US $ 9.7 billion in FY08

© IMaCS 2009


-10%

-5%

0%

5%

10%

15%

20%




y-o-y % increase in Price realisation (Euros/kg)

-20%

-10%

0%

10%

20%

30%


• India’s garment exports to EU27 increased 3.9% y-

o-y by volume and 3.2% y-o-y by value during

2008, whereas in 2007, exports grew by 5.8% (y-o-

y) by volume and 1.1% (y-o-y) by value.

• In November, 2008 volume-wise garment exports

to EU27 registered a marginal increase of 0.3% (y-

o-y).

• During 2008, garment export volume to UK

increased by 1.5% y-o-y, compared to 2007 exports

which grew by 22% (y-o-y).

• However, there was a drop in average price

realisation by 7.3% (y-o-y) resulting in drop in

export value by 5.6% (y-o-y) during 2008, as

compared to a growth of 13.8% (y-o-y) in 2007.

• Decline in price realisation of garment exports to

UK was significant in the month of November

(11% y-o-y) and December (8% y-o-y), 2008.

During 2008, India’s garment export volume to EU27 increased by 3.9%

(y-o-y) and to UK increased by 1.5% (y-o-y)


Fig: Garment export to EU27in 2008 as

compared to 2007

Fig: Garment export to UK in 2008 as

compared to 2007

© IMaCS 2009


-25%

-5%

15%

35%


y-o-y % increase in Volume (SME)


y-o-y % increase in Price realisation (US$/SME)

Fig: Garment export to US in 2008 as compared to 2007

• Though India’s garment export volume to US increased by 1.7% (y-o-y) during 2008, the

export value declined by 3% (y-o-y) which can be attributed to significant decline in average

price realisation (5.1% y-o-y).

• There was a significant decline in price realisation ($/SME) in October (11% y-o-

y), November (20% y-o-y ) and December (10% y-o-y), 2008.

During 2008, volume-wise garment exports to US increased by 1.7%

(y-o-y) however, the export value declined by 3% (y-o-y)


© IMaCS 2009


8% 9%

13%

15%15%

3%

4%

6%7%

6%

0%

2%

4%

6%

8%

10%

12%

14%

16%



14%15% 15%

13%

15%

9%

7%7% 7%

6%5%

1%0%

2%

4%

6%

8%

10%

12%

14%

16%

Q2

FY08

Q3

FY08

Q4

FY08

Q1

FY09

Q2

FY09

Q3

FY09

Fig: Profit margins for a sample of Indian Garment companies*


• Operating profit of Indian Garment companies has declined significantly in Q3FY09 to 9%

from 15.3% in Q3FY08.

• Net profit margin has also declined significantly in Q3FY09 to 0.7% from 7.5% in Q3FY08.

Operating profit and Net profit margin of the garment companies

declined significantly in Q3FY09


* Analysis based on a sample of 23 Garment companies

© IMaCS 2009


3.4

2.61.2 1.2

1.2

3.93.9

4.6

5.2

4.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0



5.0

4.5 4.3

3.42.3

1.6

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Q2

FY08

Q3

FY08

Q4

FY08

Q1

FY09

Q2

FY09

Q3

FY09

inte

rest

cover

age

rati

o


Indian companies*


Indian companies*

• In case of analysed garment companies, the share of debt in total capital employed has

reduced from FY04 to FY08.

• The overall interest coverage ratio has weakened from 4.5 in Q3FY08 to 1.6 in Q3FY09.

Interest coverage ratio of the garment companies has declined in

Q3FY09


* Analysis based on a sample of 23 Garment companies

© IMaCS 2009








© IMaCS 2009


• Made-ups constitute an important export product for the T&C industry, contributing 16% to the

total export earnings of the T&C sector.

• In FY08 India exported US $ 3.6 billion of made-ups, up 4% as compared to FY07.

• USA is the largest export market for Indian made-ups accounting for 43% of the total export

value in 2007-08.

• EU is the second largest export market accounting for 39% of the total made-ups export value of

2007-08 with UK alone accounting for 7.7%.

• Japan accounts for only 1% of India’s total made-ups export value .

Made-ups is a key export product for T&C industry contributing 16%

to the export earnings of T&C industry

Fig: Key export markets for made-ups (2007-08)

Source: DGFT, IMaCS analysis

U S A

43%

EU

39%

Canada

3%

U A E

2%

Australia

2%

Japan

1%

Other

8%

© IMaCS 2009


-40%

-30%

-20%

-10%

0%

10%

20%


• India’s made-ups export volume to EU27 declined

by 1.8% (y-o-y) as against a growth of 14.8%

(y-o-y) in 2007.

• Average price realisation declined by 3.9% (y-o-y)

resulting in export value decline by 5.6% (y-o-y).

• Exports to EU27 declined significantly in

November 2008 with 21.1% y-o-y decline in

volume and 14.6% y-o-y decline in value.

• Made-ups exports to UK also declined 9.2% y-o-y

by volume and 11.9% y-o-y by value during

2008, compared to a 10.8% (y-o-y) growth in

volume and a 10.4% growth in value in 2007.

• Export volume to UK declined significantly in

September (24% y-o-y), October (17% y-o-y) and

November (12%y-o-y), 2008.

• Average price realisation of made-ups’ exports to

UK also declined by 3.3% during 2008.

During 2008, volume-wise made-ups exports to EU27 declined by 1.8%

(y-o-y) as against a growth of 14.8% (y-o-y) in 2007


Fig: Made-ups export to EU27 in 2008 as

compared to 2007

Fig: Made-ups export to UK in 2008 as

compared to 2007

-25%

-15%

-5%

5%

15%

25%




y-o-y % increase in Price realisation (Euros/kg)

© IMaCS 2009


-20%

0%

20%

40%


y-oy % increase in Volume (SME)


y-oy % increase in Price realisation (US$/SME)

Fig: Made-ups export to US in 2008 as

compared to 2007


• During 2008, India’s made-ups exports to US witnessed a growth of 1.2% y-o-y by volume

and 2.1% y-o-y by value.

• Though, export volume increased in November (by 3% y-o-y) and December (by 1% y-o-

y), the export value declined by 4% y-o-y and 10% y-o-y respectively on account of drop in

price realisation.

• The price realisation dropped significantly in November (by 6% y-o-y) and December ( by

12% y-o-y).

In December 2008, made-ups export to US witnessed a growth of 1.2%

y-o-y by volume

© IMaCS 2009


23%

20%

22%23%

17%

7%4%

6%

7%

2%0%

5%

10%

15%

20%

25%


Operating Profit margin

Net Profit margin

18%

17% 11%

10%

6%

12%

4%

3%

0%

-4% -4%-2%

-10%

-5%

0%

5%

10%

15%

20%

25%

Q2 FY08 Q3 FY08 Q4 FY08 Q1 FY09 Q2 FY09 Q3 FY09

Fig: Profit margins for a sample of Indian made-ups companies


• Operating profit margin of Indian Made-ups companies declined significantly in Q2FY09 to

6.4% from 18% in Q2FY08 though there was a improvement in Q3FY09.

• Net profit margin has declined significantly in FY09 with the sample of companies under

analysis registering a loss in each quarter of FY09.

Net Profit margin of Indian made-ups companies declined significantly

in FY09


* Analysis based on a sample of 7 made-ups companies

© IMaCS 2009


0.81.2

1.6

2.0 2.6

3.5 3.84.1

4.3

3.0

0.0

1.0

2.0

3.0

4.0

5.0



2.3

1.8

0.9

0.3

-0.1

0.7

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Q2

FY08

Q3

FY08

Q4

FY08

Q1

FY09

Q2

FY09

Q3

FY09

inte

rest

cover

age

rati

o


Indian companies*


Indian companies*

• Made-ups industry in India has undergone significant capacity addition on account of

anticipated demand.

• Analysis of sample companies reveals that capacity expansion has been highly leveraged

with D/E ratio of companies increasing over the years from 0.8 in FY04 to 2.6 in FY08.

• The interest coverage ratio of the companies has declined from 1.8 in Q3FY08 to 0.7 in

Q3FY09.

Highly leveraged capacity expansion combined with slowdown in demand has

impacted the financial performance of made-ups companies


* Analysis based on a sample of 7 made-ups companies

© IMaCS 2009








© IMaCS 2009


Less price realisation is the key issue faced in domestic market as well

as identified global markets

• ‘Less price realisation’ was ranked as the most severe issue faced in both domestic

market and the identified global markets.

• ‘Payment delay’ was ranked as the second most severe issue faced in the domestic

markets followed by ‘Shift of order to competing countries’ and ‘Cancellation of

orders’.

• In case of global markets ‘Shift of orders to competing countries because of price’

was ranked as the second most severe issue followed by ‘Order postponement’.

© IMaCS 2009


• Majority of the domestic manufacturers ranked ‘lack of power’ as the most severe

business constraint.

• ‘Shortage of skilled labour’ and ‘working capital issues’ were ranked as the

second most severe business constraints by the industry.

• ‘High interest rates’ and ‘delay in refund’ were also mentioned as the key business

constraints impacting the industry.

Lack of power and working capital related issues were ranked as the

key business constraints by the industry

© IMaCS 2009


Majority of T&C manufacturers reported to have an order book status of less than one month

• Majority of respondents reported an order book status of 15 days to a month.

• Garment manufacturers reported to have an order book status of greater than two months.

• Majority of T&C manufacturers who reported less than one month order book status belonged to

the spinning industry.

0%

5%

10%

15%

20%

25%

30%

0 months 0 - 0.5 months 0.5 - 1 month 1 - 2 months 2 - 3 months > 3 months

Order book status

© IMaCS 2009


Annexure – IIList of Companies analysed for the financial performance

© IMaCS 2009


• A V Cottex

• Aggarsain Spin.

• Arvind Products

• Asahi Fibres

• Chitradurga Spin

• Dhanalaxmi Roto

• Gangotri Textile

• GPI Textiles

• Hanjer Fibres

• Harshni Textiles

• Hisar Spg. Mills

• Nahar Indl. Ent.

• Niwas Spinning

• Padam Cotton

• Pasari Spinning

• Santaram Spinner

• STI India

• United Textiles

• Vippy Spinpro

• Abhishek Corpora

• Bafna Spg. Mills

• Eurotex Inds.

• Gem Spinners

• Ginni Filaments

• Ginni Intl.

• Himachal Fibres

• Indo Count Inds.

• Maral Overseas

• Mid India Inds.

• Nagreeka Exports

• Patspin India

• R M Mohite Text

• Spentex Inds.

• T N Jai Bharath

• Winsome Yarns

Sample of Spinning Companies

* The companies highlighted in blue are those for whom the quarterly updated data was not available

© IMaCS 2009


• Adhunik Synth.

• Alok Inds

• Arex Inds.

• Black Rose Indus

• BSL

• Donear Inds.

• Faze Three

• Flora Textiles

• Gravity (India)

• Kamadgiri Synth.

• Khator Fibre

• Minaxi Textiles

• Nutech Global

• Orbit Exports

• Premco Global

• Pushpsons Inds

• Rajkamal Synth.

• Ritesh Polyester

• Sanrhea Tech.

• Santosh Fin Fab

• Seasons Textiles

• Siyaram Silk

• Tuni Text. Mills

• Uniroyal Ind

• Veena Textiles

• VTM

Sample of Weaving Companies


© IMaCS 2009


• Bang Overseas

• Ceenik Exports

• Chandra Prabhu

• Evinix Accessori

• Frontline Busine

• GIVO

• Gokaldas Exports

• Haria Exports

• House of Pearl

• Kewal Kiran Clot

• Kitex Garments

• Koutons Retail

• La Mere Apparels

• Niryat Sam App

• Orient Craft

• Page Industries

• Pearl Global

• Poddar Developer

• Richa Industries

• Rupa & Co

• Samtex Fashion

• Spice Islands Ap

• Zodiac Cloth. Co

Sample of Garment Companies


© IMaCS 2009


• Acknit Indus

• Addi Inds.

• Bhandari Hosiery

• Eskay K`n'IT(I)

• Krishna Lifest.

• KSL and Indus

• Mangalam Venture

• Nahar Spinning

• New Bombay Print

• Suditi Inds.

• T T

• Tatia Global

• Yarn Syndicate

• York Exports

Sample of Hosiery/Knitwear Companies


© IMaCS 2009


• Abhishek Inds.

• Anuvin Inds.

• Modern Terry Towel

• Riba Textiles

• S R Inds.

• Vanasthali Text.

• Welspun India


Sample of Made-ups Companies

© IMaCS 2009


Annexure – IIIAverage IIP for Textiles and Textile products

© IMaCS 2009


• The average IIP for Textile and Textile products has been arrived at by taking a weighted

average of the given four Textile categories i.e. Cotton textiles, Wool, Silk and Manmade fibre

textiles, Jute and other vegetable fibre textiles and Textile products including apparel.

• The weights assigned to each product category are those provided by the CSO and are

mentioned below:

Category Weight

Cotton textiles 55.2

Wool, Silk and Manmade fibre textiles 22.6

Jute and other vegetable fibre textiles 5.9

Textile products including apparel 25.4

Average IIP for Textiles and Textile products

© IMaCS 2009


Annexure – IVAssumptions about the traded goods for the Doing

Business study

Assumptions about the traded goods for the Doing Business study

• Documents

All documents required to export and import the goods are recorded. It is assumed that the contract

has already been agreed upon and signed by both parties. Documents include bank

documents, customs declaration and clearance documents, port filing documents, import licenses

and other official documents exchanged between the concerned parties. Documents filed

simultaneously are considered different documents but with the same time frame for completion.

• Time

Time is recorded in calendar days. The time calculation for a procedure starts from the moment it

is initiated and runs until it is completed. If a procedure can be accelerated for an additional

cost, the fastest legal procedure is chosen. It is assumed that neither the exporter nor the importer

wastes time and that each commits to completing each remaining procedure without delay.

Procedures that can be completed in parallel are measured as simultaneous. The waiting time

between procedures—for example, during unloading of the cargo—is included in the measure.

• Cost

Cost measures the fees levied on a 20-foot container in U.S. dollars. All the fees associated with

completing the procedures to export or import the goods are included. These include costs for

documents, administrative fees for customs clearance and technical control, terminal handling

charges and inland transport. The cost measure does not include tariffs or trade taxes. Only official

costs are recorded.

Source:DoingBusiness, World Bank

© IMaCS 2009


Annexure – VCalculation of Effective Taxes and Duties

© IMaCS 2009


Calculation of effective taxes and duties paid by Cotton fabric

manufacturers in India

CASE I II III IV

Purchase of raw Material 100% Domestic 100% Imported 100% Domestic 100% Imported

Sale of finished Goods 100% Exports 100% Exports 100% Domestic 100% Domestic

Customs duty paid Nil 11.89 Nil 11.89

VAT paid on RM 0.72 Nil 0.72 Nil

VAT recd on FG Nil Nil Nil Nil

Anomaly in VAT 0.72 Nil 0.72 Nil

CST paid on RM 0.84 Nil 0.84 Nil

CST recd on FG Nil Nil 1.07 1.07

Anomaly in CST 0.84 Nil Nil Nil

Excise paid on RM Nil Nil Nil Nil

Excise on production Nil Nil Nil Nil

Anomaly in Excise Nil Nil Nil Nil

Octroi paid 1.9 Nil 1.9 Nil

Total state levies 3.46 11.89 2.62 11.89

Duty Drawback 0 4.9 Nil Nil

Effective duties paid 3.46 6.99 2.62 11.89

Duty as a %age of ex-factory

price3.25% 6.56% 2.46% 11.16%

Figures in Rs. considering total cost as Rs 100

© IMaCS 2009


Annexure – VIDetails of recent trade defense measures by certain

markets

© IMaCS 2009


• Bangladesh, Peru, Turkey and Egypt together account for 31% of India’s total yarn export value.

• In recent months a series of trade defense measures mainly in the form of safeguard action, tariff

increases have been taken by Turkey, Peru, Egypt and Bangladesh.

MEASURES TAKEN BY TURKEY

• From July 15th 2008, safeguard measures ranging from 15-20% have been applied on cotton yarn

items belonging to HS codes 5205 for a period of three years. These safeguard measures are

additional duties (on top of the prevailing 4% customs duty) for import of cotton yarn.

• Further, Turkey has issued a notification requiring compulsory registration of all contracts for

certain textile and clothing items, requiring confidential and sensitive information. The notification

is being viewed as a serious non-tariff barrier.

MEASURES TAKEN BY EGYPT

• Import tariffs in Egypt have been raised from January 10th 2009.

• Additional 25% duty is being imposed over and above the normal duty (5% of the CIF value).

In recent months, trade defense measures have been taken by certain export

markets which is likely to impact Indian T&C exports in short term

© IMaCS 2009


Annexure – VIIRigidity of Employment Index by "Doing Business "

Explanation of the various parameters used to rank the economies

by "Doing Business 2009 ".

• 'Difficulty of Hiring Index' measures the flexibility of contracts and the ratio of the

minimum wage to the value added per worker.

• "Difficulty of Firing Index' covers workers’ legal protections against dismissal, including

the grounds permitted for dismissal and procedures for dismissal (individual and

collective): notification and approval equirements, retraining or reassignment obligations

and priority rules for dismissals and reemployment.

• 'Firing cost indicator' measures the cost of advance notice requirements, severance

payments and penalties due when terminating a redundant worker, expressed in weeks of

salary.

• The 'Rigidity of Employment Index' is the average of three subindices: Difficulty of

Hiring, Rigidity of Hours and Difficulty of Firing.

• Each index takes values between 0 and 100, with higher values indicating more rigid

regulations.

© IMaCS 2009


Annexure – VIIISnapshot of T&C industry of the Competing

countries

© IMaCS 2009


TurkishTextile & Clothing

Industry

© IMaCS 2009


Snapshot of Turkish Textile and Clothing industry

• Turkey is a key competitor to India in both textile and clothing market.

• During Jan – Dec 2008, Turkish T&C industry achieved an export turnover of US $ 23

billion; Textiles accounted for US $ 9.4 billion of exports whereas Garment exports were

valued at US $ 13.5 billion.

• The industry deals majorly in high value-added fashionable and quality products.

• Turkey being the 6th largest producer of cotton and MMF in the world, T&C industry has

abundant raw material.

• The industry uses state of art manufacturing technology and has a well-developed textile

finishing industry.

• EU27 is the key export market for Turkish T&C products accounting for over 75% of

exports.

• Turkish T&C exports have been significantly hit by the recent economic slowdown.

• Decline in exports can be attributed to drop in demand in major markets.

• Shift of orders to low cost producing countries has also impacted Turkish T&C exports since

the country has higher manufacturing costs as compared to identified competing countries

© IMaCS 2009


Value of T&C domestic production US $ 30 billion

T&C export turnover US $ 23 billion

Contribution to Total Export Earnings 21%

Contribution to GNP 10%

Employment 2.5 million (direct),

6.5 million (indirect)

Fig: Overview of Textile and Clothing industry (2007)

24% of total

manufacturing

labour force

Source:Export Promotion Center of Turkey, 2008

• Turkey T&C industry is an important sector for the economy, contributing 21% to the export earnings

and 24% to the employment of manufacturing labour force.

• Turkey is the 6th largest producer of cotton and MMF in the world, hence domestic availability of raw

material is not a constraint for T&C industry

• Turkey exports both textile and clothing; Cotton textile products such as cotton fiber, yarn, and

woven fabrics constitute about 21.8% of total textile exports.

• EU27 is the major export market for Turkey T&C industry, constituting 79% of total T&C exports;

the key export countries are Germany, UK, France, Netherlands and Italy.

• Turkey also exports to US and Japan but these are comparatively small markets for Turkish T&C

products.

Turkish T&C industry exports both textiles and clothing with EU27 as

the major export market

© IMaCS 2009


• Turkish Textile industry majorly produces high value-added fashionable and quality products.

• The industry has medium scale as well as large scale companies with integrated production facilities

and has well-developed textile finishing industry which makes production and marketing of high

value-added products possible.

1,238

2,918

1,133

2,264

1,995

239

0 1000 2000 3000 4000

Textile Yarn

Woven fabric

Knit fabric

Million US $

Import

Export

• Despite sufficient raw material Turkey is a net importer of

yarn.

Fig: Import and export of

textile products (2008)

TEXTILE INDUSTRY

CLOTHING INDUSTRY

• Turkish Clothing Industry produces high-end branded

apparel, which are sold in leading boutiques and

department stores across the world.

• Turkish clothing companies have established indigenous

brands in the world market.

• The industry has both integrated textile and clothing

production facilities as well as thousands of clothing

producer/exporter SMEs.

Turkish T&C industry produces high value added products and has

established indigenous brands in the world apparel market


© IMaCS 2009


• Turkey textile exports increased at a 3-year CAGR of 10% to US $ 9.4 billion in Jan – Dec, 2008

with share of Textile in total export value increasing from 37% in 2005 to 41% in 2008.

• The clothing exports increased at a 3-year CAGR of 5% to US $13.5 billion in Jan – Dec, 2008.

• During Jan – Dec 2008, Turkish T&C exports were significantly impacted by the global economic

slowdown, specifically due to the drop in retail sales in EU.

• In December, 2008, apparel exports from Turkey fell by more than 25% (y-o-y) whereas exports of

textiles fell by 27% (y-o-y).

0

100

200

300

400

500

600

700

800

900

1000

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

US

$ m

illi

on

2006 2007 2008

Fig: Value-wise monthly Textile

exports (US $ million)

0

200

400

600

800

1000

1200

1400

1600

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

US

$ m

illi

on

2006 2007 2008

Fig: Value-wise monthly Garment

exports US $ million

Turkish textile and clothing exports have been severely impacted by the

global slowdown


© IMaCS 2009


Trade agreements of Turkey with the global markets


EU27

• Zero tariff for all T&C products

Turkey being a part of the EU Customs Union since 1995, the country

has preferential access to the EU market.

US • MFN duties applied

Japan

• Reduced tariff for most of the textile products

Turkey is listed as a beneficiary under Japan’s GSP

© IMaCS 2009


SWOT analysis of Turkish T&C industry

STRENGTHS

• Abundant availability of raw material, both cotton and manmade

• Geographic proximity to main markets, especially EU which leads to lower logistic costs

• Qualified and well-trained labour force

• Customs Union agreement with EU which allows for duty-free access to the EU27 markets

• Well-developed Textile finishing industry which allows production and marketing of value

added products

• Well developed production technology

• Well established domestic brands in global clothing market

WEAKNESSES

• Higher cost of manufacturing as compared to identified competing countries

THREATS

• Shift of orders towards low priced products.


• Emerging low cost garment exporters such as Vietnam, Sri Lanka and Bangladesh.

© IMaCS 2009


Bangladesh

Textile & Clothing Industry

© IMaCS 2009


Snapshot of Bangladesh Textile and Clothing industry

• Bangladesh is a key competitor to India in the Garment exports.

• During July – Nov 2008, Bangladesh T&C industry achieved an export turnover of US $ 5.04

billion, up 30% (y-o-y) as compared to July – Nov, 2007.

• The industry exports both knitted and woven garments and deals majorly in low priced

products.

• Knitted garment industry has attained sufficiency in raw material (knit fabric) whereas the

woven garment industry still has significant dependence on imported raw material (woven

fabric).

• EU27 is the key export market for Bangladeshi garments accounting for over 60% of exports

by value, followed by US (30%).

• Despite drop in imports in the global markets, imports from Bangladesh increased during Jan

– Dec, 2008 thus increasing the market share of Bangladesh in the global clothing markets.

• Gain in market share of Bangladesh can be attributed to its low cost of production and

preferential access to the global markets.

© IMaCS 2009


Contribution to foreign

exchange earnings

77%

Contribution to GDP 13%

Employment 5 million

Fig: Overview of Textile and Clothing industry

(2007-08)*

Source: Bangladesh Textile Mills Association

Fig: Value-wise break-up of textile and clothing

exports (US $ million)

0% 4%

96%

48%

52%

Fabric Made-ups

Garment

Knitwear

Woven

garments

Source: Export Promotion Bureau, Bangladesh, IMaCS analysis

• Textile and Clothing industry is one of the most important sectors in Bangladesh with respect to

foreign exchange earnings and employment.

• Garment industry is the key foreign exchange earning sector, contributing 75% to country’s total

export earnings.

• EU27 and US are the major export markets for Bangladesh followed by Canada and Japan.

Bangladesh is a major exporter of garments with EU27 and US as the

major export markets

© IMaCS 2009


Woven and knitted garments together account for 75% of the national

export earnings of Bangladesh

Bangladesh Garment industry

(2007-08)

Number of units 4740

Value of Garment exports (US $ billion) 10.7

Contribution to national export earnings 75%

Employment 2.5

million 1

1.4

1.8

2.2

2.6

2500

3000

3500

4000

4500

5000

FY02 FY03 FY04 FY05 FY06 FY07 FY08

Mil

lion

work

ers

Nu

mb

er o

f garm

ent

fact

ori

es

Number of garment factories

Employment (million workers)

Fig: Growth in garment industry over the years

• Garment industry in Bangladesh has grown from 3618 factories employing 1.8 million workers in

2001-02 to 4740 factories employing 2.5 million workers in 2007-08.

• Initially woven garments were the major export product. With the rise of knitwear exports since

mid ‘90s, both sub-sectors now contribute equally to the export earnings of the country.

Source: Bangladesh Garment Manufactures and Exporters

Association, IMaCS analysis

© IMaCS 2009


Bangladesh Knitting & Knit Dyeing industry


Total capacity (million meters) 4100

• Local Knitting industry is capable to meet 90% of the fabric demand of export oriented garment

units.

• Local Spinning industry meets around 75% of the total yarn requirement of the knitting industry.

• The well established backward linkages in Knitted garment industry allow for duty free entry to

EU with clothing exports complying with EU’s rules of origin under ‘Everything But Arms’ rule.

Bangladesh Spinning industry

Number of units 341

Total capacity (million kgs) 1600

Local Knitting industry meets 90% of the fabric requirement of export

oriented garment units

Source: Bangladesh Knitwear Manufacturers and Exporters

Association, IMaCS analysis

© IMaCS 2009


Bangladesh woven garment industry has significant dependence on

imported raw material

Bangladesh Weaving industry


Total capacity*

Number of looms 48000

Million meters 1700

*Excluding handloom

• Local Weaving industry can meet only 40% of the fabric demand of export oriented garment

units.

• Majority of the fabric demand is met by imports from the countries like China, India, Hong

Kong, Singapore, etc. resulting in significant dependence on imports.

• On account of lack of backward linkages, woven clothing exports from Bangladesh cannot

comply with EU’s rules of origin.

Bangladesh Dyeing & Finishing industry

Number of units 310

Total capacity (million meters) 2800

Source: Bangladesh Textile Mills Association

© IMaCS 2009


30%

0%

10%

20%

30%

40%

0

2

4

6

8

10

12

% i

ncr

ease

in

garm

ent

exp

ort

s

US

$ B

illi

on

Garment exports ($ US million)

% increase in Garment exports

Fig: Export performance of Garment industry

• Bangladesh garment exports during July – Nov 2008 increased by 30% (y-o-y) in value terms

despite drop in demand in the key global markets.

• EU is the largest export market for Bangladesh accounting for 60% of exports (by value) followed

by USA which accounts for 30%; Canada and Japan are the third and fourth major export markets

for Bangladeshi garments.

• EU27 imports from Bangladesh have grown during Jan – Dec 2008, with garment import volume

increasing by 6% and made-ups export volume increasing by 15% y-o-y.

• Likewise, US garment imports from Bangladesh increased 6% y-o-y by volume despite a drop in

demand thus, increasing its share in US garment imports to 6.3% in 2008 from 5.7% in 2007.

Fig: Key markets for garment export

(2007-08)

15%47% 30%

76%44%

61%

0

2000

4000

6000

8000

10000

Knitwear Woven

Garments

Total

US EU27

Other

US

EU

During July – Nov, 2008 garments exports increased by 30% (y-o-y)

(ydespite drop in the demand in the major export markets

Source: Export Promotion Bureau (Bangladesh), IMaCS analysis

© IMaCS 2009


Trade agreements of Bangladesh with the global markets


EU27


Under the Everything But Arms program (EBA) .

US • MFN duties applied on T&C products

Japan


Bangladesh, being an LDC qualifies for Special Preferential

Treatment

© IMaCS 2009


SWOT analysis of Bangladesh T&C industry

STRENGTHS

• Duty free quota free access to developed countries (except US)

• Lower labour cost as compared to competing countries

• Lower energy cost as compared to competing countries

• Availability of cheap raw material

WEAKNESSES

• Weak backward linkage in woven garment industry as a result such woven clothing

exports from Bangladesh cannot comply with the EU rules of origin

• Double taxation policy * which hampers sector growth

• Shortage of skilled workers and middle-management staff

*37.5% tax is levied on earnings; in addition the government charges 25% tax on the investment made for

expansion of business.

© IMaCS 2009


OPPORTUNITIES

• Shift of orders to low priced products on account of economic slowdown.

• Modification of EU’s GSP rules of origin which could be implemented from Jan 1, 2010.

The rules will be more exclusively based on the level of locally added value while no

more requiring two production stages in the country.

THREATS

• Removal of US and EU quotas on imports from China from December 31, 2008

SWOT analysis of Bangladesh T&C industry

© IMaCS 2009


China Textile & Clothing

Industry

© IMaCS 2009


Snapshot of Chinese Textile and Clothing industry

• China is a key competitor to India in both textile and clothing market.

• During Jan – Dec 2008, China’s T&C industry achieved an export turnover of US $ 185

billion; Textiles accounted for US $ 65 billion (35%) of exports whereas garment exports were

valued at US $119.8 billion.

• Though industry is capable of meeting international quality and variety requirements, Chinese

products receive a status of low value added in international trade.

• China being the largest producer of cotton and MMF in the world, T&C industry has abundant

raw material.

• Though EU27, US and Japan are the key export markets for China’s T&C products, these

countries together account for only 32% of total textile exports by value and 53% of total

clothing export by value indicating comparatively less dependence of China on these

markets.

• China’s T&C exports grew during 2008 despite drop in demand though the growth moderated

as compared to previous years.

© IMaCS 2009


Share in world textile exports (2007) 23.5%

Share in world clothing exports (2007) 33.4 %

Size of Textile and Clothing Market US $ 455 billion

Employment Direct: 20 million

Indirect: 100 million

Fig: Overview of Textile and Clothing industry

• China is the largest garment exporter of Apparel and second largest exporter of Textile in the world.

• China being the largest producer of cotton and MMF in the world, hence domestic availability of raw

material is not a constraint for T&C industry.

• During Jan – Dec, 2008 China exported US $185 billion of T&C products of which Textile exports

accounted for 35% by value (US $ 65 billion) and Clothing exports were valued at US $119.8 billion.

• EU27, US and Japan are the major export markets for Chinese T&C; during 2008 these countries

together accounted for 32% of total textile export and 53% of total clothing exports by value. .

China is world’s largest exporter of garment and second largest

exporter of textiles

Source: National Bureau of Statistics of China

© IMaCS 2009


0%

5%

10%

15%

20%

25%

30%

0

40

80

120

160

200

2001 2002 2003 2004 2005 2006 2007 2008

Y-o

-y %

in

crea

se i

n e

xp

ort

s

Exp

ort

s in

US

$ b

illi

on

Total T&C Exports Growth

• T&C exports of China increased at a 5-year CAGR of 22% from 2002 -2007 however, the

growth moderated in 2008 to 8.2% (y-o-y)

• During 2008 textile exports registered a growth of 16.6% (y-o-y) whereas clothing exports

increased by 4.1% (y-o-y) despite economic slowdown.

Though T&C exports registered a growth during FY08, the growth rate

moderated to 8.2% (y-o-y) as against 16% (y-o-y) in 2007

Source: Emerging Textiles

Fig: Total T&C exports of China

© IMaCS 2009


Trade agreements of China with the global markets


EU27

• Reduced tariff applied

In early 2005 EU entered an agreement with China, whereby it

imposed quotas on 10 items until 2008; the quotas have been

discontinued after December 2008


In November 2005, China-US signed a textile agreement, called the

Memorandum of Understanding under which China agreed to limit its

exports of 34 T&C products over the period 2006-2008. Since

December 2008, the textile agreement has expired thus, there are no

longer any safeguards against Chinese textile exports to the US

Japan


China is listed as a beneficiary under Japan’s GSP

© IMaCS 2009


SWOT analysis of Chinese T&C industry

STRENGTHS

• Abundant availability of raw material, both cotton and manmade.

• Lower energy cost as compared to India.

• Large scale production facilities enabling economies of scale.

• Strong domestic textile presence across the entire value chain.

• With EU27, US and Japan accounting for 32% of total textile exports and 53% of total

clothing export, China’s dependence on these markets is less as compared to the other

competing countries.

WEAKNESSES

• Low value-added status in the international trade.

• Lack of any free trade agreements with the major T&C global markets

© IMaCS 2009


SWOT analysis of Chinese T&C industry

OPPORTUNITIES


• Shift of demand towards low-priced products due to economic slowdown.

THREATS

• Increasing production costs in terms of raw material, labour, energy and environmental

protection resulting in loss of traditional competitiveness in production costs.

• Emerging low cost garment exporters such as Vietnam, Sri Lanka and Bangladesh.

© IMaCS 2009


Vietnam Textile & Clothing industry

© IMaCS 2009


Snapshot of Vietnam Textile and Clothing industry

• Vietnam is a key competitor to India in the clothing market.

• During Jan – Dec 2008, Vietnam T&C industry achieved an export turnover of US $ 9.1

billion, up 17% (y-o-y).

• Though historically the garment industry was dependent on imported raw material, the

dependence has significantly reduced in 2008 on account of measures taken by government

and industry.

• US is the key export market for Vietnam T&C products accounting for over 55% of exports

by value in Jan – Dec 2008, followed by EU27.

• During 2008, Vietnam garment exports to US increased despite drop in US total garment

imports, resulting in gain in US market share.

© IMaCS 2009


Domestic

Production

20%

Imports

from China

& Thailand

80%

Domestic

market

33%

Export

market

67%

Contribution of T&C to total

export earnings (2007-08)

15%

Employment (2007-08) > 2 million

Major Export Product within

T&C industry

Woven Apparel

Key Export Markets* USA, Japan, EU

(Germany)

Fig: Overview of Vietnam T&C industry

• Vietnam T&C industry is the largest employment generating industry in the country.

• Export market accounts for 67% of the total T&C market.

• US is the major export market accounting for 55% of the exports (by value) in 2008 followed by

EU27.

• During Jan – Dec 2008 the country had a market share of 3% in EU27 apparel imports (as against

3.1% in 2007) and 6.7% in US garment import volume (as against 5.5% in 2007)

Total T&C market:US

$13.6 billion

Domestic T&C

market:US $ 4.5 billion

Vietnam T&C industry is majorly export oriented with garment being

the major export product

© IMaCS 2009


1,154

1,3611,492

1,3111,412

0

400

800

1200

1600

2005 2006 2007 11M200711M2008

Knit Apparel Woven Apparel Total

Fig: Year-wise trend in Garment production

volume (million units)

• Vietnam’s T&C industry produces predominantly woven apparel; domestic apparel production volume

increased at a CAGR of 13.7% from 2005 to 2007.

• Vietnamese Garment industry has historically been heavily dependent on imported raw material;

between 2000 and 2006, Vietnam fabric imports increased from US $ 761.3 million to US $ 2.95

billion, registering a 288% growth.

• The government and industry have taken initiatives to reduce import dependence; the weaving sector

added 1357 shuttle-less looms in 2006, after an increase of 476 looms in 2005, demonstrating a serious

commitment to move towards domestic fabric production and modern manufacturing technology.

0%

10%

20%

30%

40%

0

1000

2000

3000

4000

5000

2005 2006 2007 11M2008

% g

row

th i

n i

mp

ort

s

US

$ m

illi

on

Fabric Imports % gowth in Fabric Imports

Fig: Year-wise trend in fabric imports

Though Vietnam Garment industry is dependent on imported raw

material, the dependence decreased during 11M2008

Source: Vietnam’s General Statistics office

© IMaCS 2009


21%

34%

17%

0%

10%

20%

30%

40%

2006 2007 2008

• During Jan – Dec 2008, Vietnam T&C industry achieved an export turnover of US $ 9.1 billion.

• The T&C exports of Vietnam grew by 17% y-o-y in Jan – Dec 2008 however the growth moderated

as compared to 34% y-o-y growth in 2007.

• With slowdown in US and EU markets the Vietnam garment industry is focusing on developing other

markets such as Russia, Africa and the Middle East.

Fig: Year-wise growth in export turnover of Vietnam

Vietnam T&C exports registered a growth of 17% y-o-y during Jan –

Dec 2008 as against 34% y-o-y during 2007

Source: Vietnam’s General Statistics office

© IMaCS 2009


Trade agreements of Vietnam with the global markets


EU27

• Reduced tariff for all T&C products

At present, the European Union is in the process of negotiating a Free

Trade Agreement with ASEAN (Association of South East Asian

Nations), of which Vietnam is a part.


Japan

• Reduced tariffs for all T&C products

Vietnam is under Japan’s GSP.

Economic Partnership Agreement is under negotiation between the

two countries which is likely to change the tariff structure

© IMaCS 2009


STRENGTHS

Lower energy cost as compared to competing countries

Lower labour cost as compared to India, China, Turkey and Sri lanka

Lower rates of Corporate tax as compared to competing countries

WEAKNESS

Significant dependence on imported raw material

Lack of indigenous brand

OPPORTUNITIES

Shift of demand to low priced products.

New FTA with Japan

THREATS

Removal of US and EU quotas on imports from China from December 31, 2008

SWOT analysis of Vietnam T&C industry

© IMaCS 2009


Sri Lankan Textile & Clothing

industry

© IMaCS 2009


Snapshot of Sri Lankan Textile and Clothing industry

• Sri Lanka is a major exporter of garments which constitute 92% of Sri Lanka’s total T&C

export earnings.

• With around US $ 3.3 billion of export earnings in 2008, the Garment industry contributes

over 40% to the country’s total export earnings.

• Sri Lankan garment industry has significant dependence on imported raw material.

• EU27 is the largest export market for Sri Lanka with UK alone accounting for 25% of total

T&C exports by value.

• US is the second largest market with a share of 50% in total T&C export value.

• Sri Lanka maintained a share of 1% in the garment import value of EU27 in 2008, though

garment imports by EU27 from Sri Lanka increased by 7.6% y-o-y.

• During 2008, Sri Lanka’s garment export value to UK increased by 6% (y-o-y) increasing the

share of Sri Lanka in UK garment imports to 3.9% (by value).

• Value-wise garment exports from Sri Lanka to the US have been decreasing over the years; in

2008 the exports declined by 6.8% (y-o-y).

© IMaCS 2009


Garment export turnover US $ 3.3 billion

Contribution to Total Export Earnings 44% (in 2007)

Contribution to GDP 10%

Employment > 35% of manufacturing workforce

(including 270,000 rural women)

Fig: Overview of Textile and Clothing industry (2008)

Source:Export Department of Customs, Sri Lanka and Emerging Textiles

• Sri Lankan T&C industry is an important sector for the economy, contributing 44% to the

export earnings and over 35% to the employment of manufacturing labour force.

• Garment exports comprise over 92% of the total T&C exports by value.

• US is the major export market for Sri Lanka with a share of 50% in total T&C export value;

share of US has declined over the years from 63.5% in 2002.

• UK is the second largest market with a share of 25% by value.

• The other key export markets are Italy, Germany, Belgium, France, Spain and Netherlands

• Sri Lankan Garment industry has significant dependence on imported raw-material, India being

one of the major suppliers to Sri Lanka.

Sri Lanka is a major exporter of garments with US and UK as the key

export markets

© IMaCS 2009


Source:Joint Apparel Association Forum, Sri Lanka

957 1,120 1,351 1,553 1,662

1,688 1,6261,561

1,592 1,606

0

500

1000

1500

2000

2500

3000

3500

2004 2005 2006 2007 2008

US

$ m

illi

on

Fig: Value-wise garment exports by Sri Lanka

• Sri Lankan garment exports have increased at a CAGR of 5.4% from 2004 to 2008.

• Despite the slowdown in demand during 2008, garment exports from Sri Lanka increased by

3.9% y-o-y though the growth moderated as against 8% y-o-y in 2007.

• Growth in garment exports continued in 2009 with garment export value increasing by 4.4% y-

o-y in Jan 2009 and 8.9% y-o-y in Feb 2009.

Garment exports from Sri Lanka increased by 3.9% (y-o-y) in 2008 as

against 8% (y-o-y) in 2007

© IMaCS 2009


Trade agreements of Sri Lanka with the global markets


EU27

• Zero tariff on T&C products

GSP+, or the Special Incentive Arrangement for Sustainable

Development and Good Governance offers a duty free access. This

has been extended for another one year.


Japan


Sri Lanka is listed as a beneficiary under Japan’s GSP

© IMaCS 2009


SWOT analysis of Sri Lankan T&C industry

STRENGTHS

Lower labour cost as compared to India and China

Qualified, literate and well-trained labour force

GSP-Plus status which allows for duty-free access to the EU27 markets

WEAKNESS

High dependence on imported raw material

OPPORTUNITIES

Shift of demand to low-priced products

THREATS

Removal of US and EU quotas on imports from China from December 31, 2008

Emerging low cost garment exporters such as Vietnam and Bangladesh

© IMaCS 2009


Disclaimer: IMaCS does not assume any liability, financial or

otherwise, for any loss or injury that the user of the recommendations in

this report may experience in any transaction. All information contained

herein is obtained by IMaCS from sources believed by it to be accurate

and reliable. Although reasonable care has been taken to ensure that any

information herein is true, such information is provided ‘as-is’ without

any warranty of any kind and IMaCS, in particular, makes no

representation or warranty, express or implied, to the

accuracy, timeliness or completeness of any such information.

© IMaCS 2009


Thank you