Textile Industry Overview

Textile Industry is one of the largest and oldest industries in India. It has a significant role in

India as it fulfils the essential and basic need of people. Textile Industry in India stands at

unique place and has maintained a sustainable growth over the years. This is a self-reliant and

independent industry and has great diversification and versatility. Textile Industry in India

provides great contribution for the development of economy. It is the second largest textile

industry in the world after China. It provides ample employment opportunities to people

belonging to all classes. After agriculture this industry provides employment to maximum

number of people in India employing 35 million people.

Textile Industry represents the rich culture, tradition, heritage & economic well-being of

country with diversified range and versatility. At the same time industry is competitive

enough to fulfill different demand patterns of domestic and global markets. Indian Textile

Industry plays vital role in country's economic development and contributes 14% to industrial

production in the country. Textile Industry contributes around 4% of GDP, 9% of excise

collections, 18% of employment in industrial sector, and 16% share in country’s export.

Indian Textile Industry is valued at US $36 bn. The development of Indian Textile Industry

started in 1985. This was the year, for the first time Textile sector was considered as an

important industry and a separate policy was formulated for sector’s development. In the year

2000, National Textile Policy was announced.

With further development Textile Industry came out of Quota Regime of Import Restrictions

under the Multi Fiber Arrangement (MFA). This development came on 1st January 2005

under the World Trade Organization (WTO) Agreement on Textiles and Clothing. Because of

the elimination of quota restrictions, most of the developing countries now can develop the

potential market at both domestic and international level. These countries can develop the

industry expertise and can have competitive advantage through implementing new

technology, more skilled labor will improved distribution channel, cost effective operation

and production with greater value addition in each step of value chain. Moreover it will help

for Foreign Direct Investment in industry that will create great opportunity to strengthen the

sector. Some of the strengths of Indian Textile Industry are large and potential domestic and

international market, large pool of skilled and cheap labor, well-established industry,

promising export potential etc.

HISTORY OF TEXTILE

No one knows when exactly the spinning and weaving of textile began. It has been said that

people knew how to weave even 27000 years ago. This was even before humans were able to

domesticate animals. The oldest actual fragment of cloth found was in southern Turkey.

People used fibers found in nature and hand processes to make fibers into cloth. Even though

high technology was not available, skilled weavers created a wide variety of fabrics. Dyeing

of fabrics was done to satisfy the universal human need for beauty.

Within time, more complex social and political organization of people evolved. With the

growth of cities and nations, improvements in technology came into place and there was a

substantial development in the international trade, both of which involved textiles.

Chinese textile was considered to be the most significant in international trade. Historians

have claimed that silk from China has reached ancient Greece and Rome along a trade route

called the Silk Road in the latter part of the second century B.C. and Egypt in 1000 B.C. The

Romans also imported cotton from nearby Egypt and from India. Archeologists have found

facilities for dyeing and finishing cotton fabrics in settlements throughout the Roman world.

During the middle ages, the production and trading of the plant called ‘woad’, an important

source of dye, was a highly developed industry. During the fifteenth century, Trade Fairs in

southern France provided a place for the active exchange of wools from England and silks

from the Middle East. The economic activities surrounding these events gave rise to the first

international banking arrangements. Even the discovery of America was a result of the desire

of Europeans to find a faster route not only to the spices but also to the textiles of the Orient.

Textile trade quickly took root in America, as colonists sold native dyes such as indigo and

cochineal to Europe and bought cottons from India. Although advances were being made in

the technology of textile production, the manufacture of cloth in Western Europe in 1700 was

still essentially a hand process. Yarns were spun on a spinning wheel and fabrics were woven

by hand-operated looms.

A major reorganization of manufacturing of a variety of goods occurred during the latter half

of the 1700s in Western Europe. These changes, known as the Industrial ‘Revolution’, altered

not only technology, but also social, economic, and cultural life. The production of textiles

was the first area to undergo industrialization during the seventeenth and eighteenth centuries

as the result of an economic crisis. Good quality textile products, produced inexpensively in

India and the Far East, were gradually replacing European goods in the international market.

In Britain, it became imperative that some means be found to increase domestic production,

to lower costs, and to improve the quality of textiles. The solution was found in the

substitution of machine or nonhuman power for hand processes and human power.

Many important inventions, most importantly spinning machines, automatic looms, and the

cotton gin, improved the output and quality of fabrics. These inventions provided the

technological base for the industrialization of the textile industry. Each invention improved

one step of the process. For example, an improvement that increased the speed of spinning

meant that looms were needed that consumed yarn more rapidly. More rapid yarn production

required greater quantities of fiber. The growth of the textile industry was further hastened by

the use of machines that were driven first by waterpower, then by steam, and finally by

electricity. The textile industry was fully mechanized by the early part of the nineteenth

century. The next major developments in the field were to take place in the chemist‘s

laboratory. Experimentation with the synthesis of dyestuffs in the laboratory rather than from

natural plant materials led to the development and use of synthetic dyes in the latter half of

the nineteenth century. Other experiments proved that certain natural materials could be

dissolved in chemical solvents and re-formed into fibrous form. By 1910, the first plant for

manufacturing rayon had been established in the United States.

The manufacture of rayon marked the beginning of the manufactured textile fibers industry.

Since that time, enormous advances have been made in the technology for every field in the

textile industry. Today, the textile industry utilizes a complex technology based on scientific

processes and vast economic organizations.

With the application of advanced technology to the textile field, textile use has expanded

from the traditional areas of clothing and home furnishings into the fields of construction,

medicine, aerospace, sporting goods, and industry. These applications have been made

possible by the ability of textile scientists to utilize textile fibers, yarns, and fabrics for

specific uses. At the same time that textile technology is making strides in new directions, the

fabrics that consumers buy for clothing and household use also benefit from the development

of new fibers, new methods of yarn and fabric construction, and new finishes for existing

fibers and fabrics.

Today, a huge international industrial complex encompasses the production of fiber,

spinning of yarns, fabrication of cloth, dyeing, finishing, printing, and manufacture of goods

for purchase. Consumers purchase many different products made of textiles. The story of the

journey that these products make as they progress from fiber to yarn to fabric to finished

product is not just the story of spinning yarns, weaving or knitting fabric, or constructing the

end product. It is also the story of a complex network of interrelated industries.

HISTORY OF INDIAN TEXTILE INDUSTRY

The history of textiles in India dates back to nearly five thousand years to the days of the

Harappan civilization. Evidences that India has been trading silk in return for spices from the

2nd century have been found. This shows that textiles are an industry which has existed for

centuries in our country. Recently there has been a sizeable increase in the demand for Indian

textiles in the market. India is fast emerging as a competitor to China in textile exports. The

Government of India has also realized this fact and lowered the customs duty and reduced the

restrictions on the imported textile machinery. The intention of the government‘s move is to

enable the Indian producers to compete in the world market with high quality products. The

results of the government‘s move can be visible as Indian companies like Arvind Mills,

Mafatlal, Grasim; Reliance Industries have become prominent players in the world. The

Indian textile industry is the second largest in the world-second only to China. The other

competing countries are Korea and Taiwan. Indian Textile constitutes 35% of the total

exports of our country.

The history of apparel and textiles in India dates back to the use of mordant dyes and printing

blocks around 3000 BC. The foundations of the India's textile trade with other countries

started as early as the second century BC. A hoard of block printed and resist-dyed fabrics,

primarily of Gujarati origin, discovered in the tombs of Fostat, Egypt, are the proof of large

scale Indian export of cotton textiles to the Egypt in medieval periods.

During the 13th century, Indian silk was used as barter for spices from the western countries.

Towards the end of the 17th century, the British East India Company had begun exports of

Indian silks and several other cotton fabrics to other economies. These included the famous

fine Muslin cloth of Bengal, Orissa and Bihar. Painted and printed cottons or chintz was

widely practiced between India, Java, China and the Philippines, long before the arrival of the

Europeans.

India Textile Industry is one of the largest textile industries in the world. Today, Indian

economy is largely dependent on textile manufacturing and exports. India earns around 27%

of the foreign exchange from exports of textiles. Further, India Textile Industry contributes

about 14% of the total industrial production of India. Furthermore, its contribution to the

gross domestic product of India is around 3% and the numbers are steadily increasing. India

Textile Industry involves around 35 million workers directly and it accounts for 21% of the

total employment generated in the economy.

Indian Textile Industry Market

India Textile Industry is one of the leading textile industries in the world. Though was

predominantly unorganized industry even a few years back, but the scenario started changing

after the economic liberalization of Indian economy in 1991. The opening up of economy

gave the much-needed thrust to the Indian textile industry, which has now successfully

become one of the largest in the world.

India textile industry largely depends upon the textile manufacturing and export. It also

plays a major role in the economy of the country. India earns about 27% of its total foreign

exchange through textile exports. Further, the textile industry of India also contributes nearly

14% of the total industrial production of the country. It also contributes around 3% to the

GDP of the country. India textile industry is also the largest in the country in terms of

employment generation. It not only generates jobs in its own industry, but also opens up

scopes for the other ancillary sectors. India textile industry currently generates employment

to more than 35 million people. It is also estimated that, the industry will generate 15 million

new jobs by the year 2015

India is a traditional textile -producing country with textiles in general, and cotton in

particular, being major industries for the country. India is among the world’s top producers of

yarns and fabrics, and the export quality of its products is ever increasing. Textile Industry is

one of the largest and oldest industries in India. Textile Industry in India is a self-reliant and

independent industry and has great diversification and versatility. The textile industry can be

broadly classified into two categories, the organized mill sector and the unorganized

decentralized sector.

The organized sector of the textile industry represents the mills. It could be a spinning mill or

a composite mill. Composite mill is one where the spinning, weaving and processing

facilities are carried out under one roof. The decentralized sector is engaged mainly in the

weaving activity, which makes it heavily dependent on the organized sector for their yarn

requirements. This decentralized sector is comprised of the three major segments viz., power

loom, handloom and hosiery. In addition to the above, there are readymade garments, khadi

as well as carpet manufacturing units in the decentralized sector.

The Indian Textile Industry has an overwhelming presence in the economic life of the

country. It is the second largest textile industry in the world after China. Apart from

providing one of the basic necessities of life i.e. cloth, the textile industry contributes about

14% to the country's industrial output and about 17% to export earnings. After agriculture

this industry provides employment to maximum number of people in India employing 35

million people. Besides, another 50 million people are engaged in allied activities. India is the

largest producer of Jute, the 2nd largest producer of Silk, the 3rd largest producer of Cotton

and Cellulosic Fibers/Yarn and 5th largest producer of Synthetic Fibers/Yarn.

The main objective of the textile policy 2011 is to provide cloth of acceptable quality at

reasonable prices for the vast majority of the population of the country, to increasingly

contribute to the provision of sustainable employment and the economic growth of the nation;

and to compete with confidence for an increasing share of the global market. India's textile

industry is considered a pioneer in the industry, as the industrialization of India in other areas

is managed by funds generated by the textile machinery industry. However, since the

beginning of liberalization in 1992 to 1970, the industry tends to protect domestic producers

of cotton with a clear objective continuous erosion of its prosperity.

Prospect

Considering the continual capital investments in the textile industry, the Govt. of India may

extend the Technology Upgradation Fund Scheme (TUFS) by the end of the 11th Five Year

Plan (till 2011-2012), in order to support the industry. Indian textile industry is massively

investing to meet the targeted output of $85bn by the end of 2010, aiming exports of $50bn.

There is huge development foreseen in Indian textile exports from the $17bn attained in

2005-06 to $50bn by 2009-10. The estimation for the exports in the current financial year is

about $19bn. There is substantial potential in Indian exports of technical textiles and home

textiles, as most European companies want to set up facilities near-by the emerging markets,

such as China and India.

The global demand for apparel and woven textiles is likely to grow by 25 percent by year

2010 to over 35mn tons, and Asia will be responsible for 85 percent output of this growth.

The woven products output will also rise in Central and Southern American countries,

however, at a reasonable speed. On the other hand, in major developed countries, the output

of woven products will remain stable. Weaving process is conducted to make fabrics for a

broad range of clothing assortment, including shirts, jeans, sportswear, skirts, dresses,

protective clothing etc., and also used in non-apparel uses like technical, automotive, medical

etc.

It is been forecasted that the woven textile and apparel markets will sustain their growth from

current till 2010. The imports of apparel and textiles will rise from developed economies like

the USA and the western countries of Europe and Japan, along with some newly emerged

economies, such as South Korea and Taiwan. Certainly, import growth has been witnessed

vertical rise in the previous year.

Apparel is the most preferred and important of all the other applications. Woven fabrics are

widely used in apparel assortments, including innerwear, outerwear, nightwear and

underwear, as well as in specialized apparels like protective clothing and sportswear. Home

textile also contributes considerably in woven fabric in products assortments like curtains,

furnishing fabrics, carpets, table cloths etc.

Special kind of woven fabrics are utilized in medical as well as industrial applications. The

medical applications include adhesives, dressing bandages, plasters etc.

The Indian Industry foresees huge demand for industrial woven products for medical and

automotive applications. Demand for woven fabrics is anticipated to be rise vertically in the

sector of home textiles.

Non woven sector has great future in terms of global demand, thus major facilities of cotton

yarn are currently concentrating just on home textiles. It is mandatory, that the peak

management of the cotton yarn manufacturers analyze the future prospect and growing graph

of demand for non woven products.

Anticipating massive growth in medical and automobile sectors, these sectors assures

substantial demand for non woven facilities in India. Albeit, home textiles also will lure

higher demand, there are specific demands for home textile facilities also.

The 7th Five Year Plan has huge consideration on agricultural growth that also includes

cotton textile industry, resulting a prosperous future forecast for the textile industry in India.

Indian cotton yarn manufacturers should rush forward for joint ventures and integrated plans

for establishing processing and weaving facilities in home textiles and technical textiles in

order to meet export target of $50bn, and a total textile production of $85bn by 2009-2010.

Expectations are high, prospects are bright, but capitalising on the new emerging

opportunities will be a challenge for textile companies. Some prerequisites to be included in

the globally competing textile industry are:

Imbibing global best practices

Adopting rapidly changing technologies and efficient processes

Innovation

Networking and better supply chain management

Ability to link up to global value chains.

The Indian textiles industry has established its supremacy in cotton based products, especially

in the readymade garments and home furnishings segment. These two segments will be the

key drivers of growth for Indian textiles. Readymade garment exports were worth US$ 8 bn

in FY06 and will cross US$ 16 bn by the end of 2010, assuming a conservative growth of

15% per annum. According to estimates, investments in textiles are expected to touch US$ 31

bn by 2010.

The readymade garment segment will be the principal driver of growth even in the domestic

industry. The changing preferences of Indian consumers -- from buying cloth to readymade

garments -- have prompted several companies to move up the value chain into the finished

products segment.

Strategic Initiatives

Business integration -- especially forward integration -- by the larger textile companies has

been prominent among Indian companies. Several companies that are engaged in fabric

manufacturing are now keen to enter the readymade garments space. A recent entrant is

Siyaram, which launched its readymade garments range in Nov 06, following suit with other

majors like Century Textiles and Raymond.

Most of the large textile companies have opted for an inorganic growth strategy to scale up

operations. Acquisition is the most logical step towards integrating operations and building

the value chain. Domestic acquisitions are on the rise, while acquiring foreign assets is yet to

gain traction. Some recent domestic acquisitions that have been executed in 2006 include

KSL & Industries’ acquisition of Deccan Cooperative, and Ambattur Clothing taking over

Celebrity Fashions. Another growing phenomenon observed among Indian textile companies

is the setting up of manufacturing facilities in strategic regions outside India, where they can

avail of duty concessions and reduce export lead-time. Zodiac and Ambattur Clothing have

set up facilities in the Gulf region to cut down on export delivery schedules to the European

and US markets. Raymond has set up a unit in Bangladesh to avail of the zero duty access to

the EU.

This trend is seen primarily among the large domestic players, who are trying to achieve

sizable scales in order to win orders from the large retailers in the US and EU. Global

retailers prefer large-sized companies that can scale up capacities consistently, keep up with

delivery schedules and meet their growing demand. They have clear preferences for

companies with integrated design, process and manufacturing facilities.

An interesting commonality in countries with successful garment exports is that they have a

much lower level of sub-contracting than India. A study during the 1990s found that apparel

firms Future Outlook XXXIII in India subcontracted 74% of their output, as compared to

only 11% in Hong Kong, 18% in China, 20% in Thailand, 28% in South Korea and 36% in

Taiwan. Consequently, these countries have a wider base of exports and have done very well

in the market for large volumes of uniform products.

Foreign Acquisitions by Indian Textile Companies

Period Acquirer Acquired Company

May 01 Arvind MillsLicense Of ‘Healthtex’ Kidswear

Brand Of Vf Corpn (USA)

Jun 01 Ambattur Clothing Colour Plus (UK)

Sep 01 Raymond’s Regency Texteis Portuguesa

Limitada (Portugal)

Sep 03 Jindal Polyester Rexor Group (France)

Dec 04 JCT Ltd CNLT Malaysia (Synegal)

May 05 Reliance Group ICI Pakistan Ltd (Pakistan)

Jun 05 Zodiac ClothingShirting Company Located In

Alqoze Industrial Area (Dubai)

Dec 05 GHCL Dan River (USA)

May 06 Malwa IndustriesEmmetre Tintolavanderie

Industrial (Italy)

May 06 Malwa Industries Third Dimension Apparels (Italy)

Jul 06 Welspun India CHT Holding (UK)

Jul 06 Spentex IndustriesTashkent-To’yetpa Tekstil Ltd

(Uzbek)

Jul 06 GHCL Rosebys (UK)

 

The exports market will remain favourable for India till 2008, when quota restrictions on

China end. Post 2008, competition will become tougher. This will be the phase in which

Indian textile companies will come under tremendous pricing pressures and tighter product

delivery schedules. Nevertheless, the value-added segments of readymade garments, home

furnishings and made-ups will continue to grow.

Implications for SMEs

The new business dynamics have varying undertones across the value chain. The segment

that is likely to be hit is weaving. The SMEs in the Powerloom and handloom sector will face

significant churn in the future. Spinning mills that account for 95% of the yarn and fibre

production, will move up the value chain into weaving. This will erode the viability of the

hitherto protected Powerloom and handloom operators numbering over 400,000, who have

remained insulated from competitive forces so far. A possible remedy could be for these

weavers to align with bigger players or integrate operations that would ensure off-take of

their products.

The fragmented industry structure has in the past been beneficial in generating employment,

but will be difficult to sustain in a globally competitive environment. For fabric

manufacturers in the unorganised segment, this will mean inefficient units losing out

eventually, while the more efficient and dynamic ones aligning with manufacturers or buyers.

For readymade garment SMEs, rising demand and preference for ready-to-wear outfits in the

domestic market will sustain a large number of units in this sector. This will be the most

thriving segment in the industry and SMEs will play a key role.

India’s key assets include a large and low-cost labour force, sizable supply of fabric,

sufficiency in raw material and spinning capacities. On the basis of these strengths, India will

become a major outsourcing hub for foreign manufacturers and retailers, with composite

mills and large integrated firms being their preferred partners. It will thus be essential for

SMEs to align with these firms, which can ensure a market for their products and new orders.

Weaknesses of the Indian textile industry include fragmentation of the industry, lengthy

delivery times, delays in customs clearance and high transportation and input costs. To tackle

these factors, the Government will have to play a key role. Infrastructure development,

reforms in labour laws and significant policy support will be essential.

Textile Sectors in India:

The Man-Made Fiber / Yarn and Powerloom Sector : This part of industry includes fiber

and filament yarn manufacturing units. The Power looms sector is decentralized and plays a

vital role in Indian Textiles Industry. It produces large variety of cloths to fulfill different

needs of the market. It is the largest manufacturer of fabric and produces a wide variety of

cloth. The sector contributes around 62% of the total cloth production in the country and

provides ample employment opportunities to 4.86 million people.

The Cotton Sector : Cotton is one of the major sources of employment and contributes in

export in promising manner. This sector provides huge employment opportunities to around

50 million people related activities like Cultivation, Trade, and Processing. India’s Cotton

sector is second largest producer of cotton products in the world.

The Handloom Sector : The handloom sector plays a very important role in the country’s

economy. It is the second largest sector in terms of employment, next only to agriculture.

This sector accounts for about 13% of the total cloth produced in the country (excluding

wool, silk and Khadi).

The Woolen Sector : The Woolen Textile sector is an Organized and Decentralized Sector.

The major part of the industry is rural based. India is the 7th largest producer of wool, and

has 1.8% share in total world production. The share of apparel grade is 5%, carpet grade is

85%, and coarse grade is 10% of the total production of raw wool. The Industry is highly

dependent on import of raw wool material, due to inadequate production.

The Jute Sector : Jute Sector plays very important role in Indian Textile Industry. Jute is

called Golden fiber and after cotton it is the cheapest fiber available. Indian Jute Industry is

the largest producer of raw jute and jute products in the world. India is the second largest

exporter of jute goods in world.

The Sericulture and Silk Sector: The Silk industry has a unique position in India, and plays

important role in Textile Industry and Export. India is the 2nd largest producer of silk in

world and contributes 18% of the total world raw silk production. In India Silk is available

with varieties such as, Mulberry, Eri, Tasar, and Muga. Sericulture plays vital role in cottage

industry in the country. It is the most labor-intensive sector that combines both Agriculture

and Industry.

The Handicraft Sector : The Indian handicrafts industry is highly labor intensive, cottage

based and decentralized industry. It plays a significant & important role in the country’s

economy. It provides employment to a vast segment of craft persons in rural & semi urban

areas and generates substantial foreign exchange for the country, while preserving its cultural

heritage.

Structure of India’s Cotton Textile Industry

Unlike other major textile-producing countries, India’s textile industry is comprised mostly of

small-scale, non-integrated spinning, weaving, finishing, and apparel-making enterprises.

This unique industry structure is primarily a legacy of government policies that have

promoted labor intensive, small-scale operations and discriminated against larger scale firms:

Cotton farming and harvesting: Cotton is grown in tropical as well as sub tropical

area in India. Mostly the cotton grown in India is from dry lands and crops mostly

depend on the irrigation systems available and not only on the rain water.

Ginning: Ginning is the process where cotton fiber is separated from the cotton seed.

The first step in the ginning process is when the cotton is vacuumed into tubes that

carry it to a dryer to reduce moisture and improve the fiber quality. Then it runs

through cleaning equipment to remove leaf trash, sticks and other foreign matter.

Ginning is accomplished by one of two methods. Cotton varieties with shorter staple

or fiber length are ginned with saw gins. This process involves the use of circular

saws that grip the fibers and pull them through narrow slots. The seeds are too large to

pass through these openings, resulting in the fibers being pulled away from the seed.

Long fiber cottons must be ginned in a roller gin because saw gins can damage their

delicate fibers.

Oil mill: in the operation the oil is extracted from the cotton seeds that are coming

from the ginning process. The cotton seeds coming from the ginning unit are then

passed through the pressing unit and crude cotton oil is produced. The pressed cotton

seed oil cake is supplied as the cattle feed. The crude is further modified as the bio-

diesel which could be used as the one of the energy source. The refined cotton oil is

also used as the edible oil but it is proved to be unfit for the human health.

Spinning: Spinning is the process of converting cotton or manmade fiber into yarn to

be used for weaving and knitting. Largely due to deregulation beginning in the mid-

1980s, spinning is the most consolidated and technically efficient sector in India’s

textile industry. Average plant size remains small, however, and technology outdated,

relative to other major producers. In 2002/03, India’s spinning sector consisted of

about 1,146 small-scale independent firms and 1,599 larger scale independent units.

Weaving and Knitting: Weaving and knitting converts cotton, manmade, or blended

yarn into woven or knitted fabrics. India’s weaving and knitting sector remains highly

fragmented, small scale, and labor-intensive. This sector consists of about 3.9 million

handlooms, 380,000 “Powerloom” enterprises that operate about 1.7 million looms,

and just 137,000 looms in the various composite mills. “Power looms” are small

firms, with an average loom capacity of four to five owned by independent

entrepreneurs or weavers. Modern shuttle less looms account for less than 1 percent of

loom capacity.

Fabric Finishing: Fabric finishing (also referred to as processing), which includes

dyeing, printing, and other cloth preparation prior to the manufacture of clothing, is

also dominated by a large number of independent, small scale enterprises. Overall,

about 2,300 processors are operating in India, including about 2,100 independent units

and 200 units that are integrated with spinning, weaving, or knitting units.

Clothing: Apparel is produced by about 77,000 small-scale units classified as

domestic manufacturers, manufacturer exporters, and fabricators (subcontractors).

Composite Mills: Relatively large-scale mills that integrate spinning, weaving and,

sometimes, fabric finishing are common in other major textile-producing countries. In

India, however, these types of mills now account for about only 3 percent of output in

the textile sector. About 276 composite mills are now operating in India, most owned

by the public sector and many deemed financially “sick.”

India textile industry is one of the leading in the world. Currently it is estimated to be around

US$ 52 billion and is also projected to be around US$ 115 billion by the year 2012. The

current domestic market of textile in India is expected to be increased to US$ 60 billion by

2012 from the current US$ 34.6 billion. The textile export of the country was around US$

19.14 billion in 2006-07, which saw a stiff rise to reach US$ 22.13 in 2007-08. The share of

exports is also expected to increase from 4% to 7% within 2012. Following are area,

production and productivity of cotton in India during the last six decades:

YearArea in lakh

hectares

Production in lakh bales of 170

kgs

Yield kgs per

hectare

1950-51 56.48 30.62 92

1960-61 76.78 56.41 124

1970-71 76.05 47.63 106

1980-81 78.24 78.60 170

1990-91 74.39 117.00 267

2000-01 85.76 140.00 278

2001-02 87.30 158.00 308

2002-03 76.67 136.00 302

2003-04 76.30 179.00 399

2004-05 87.86 243.00 470

2005-06 86.77 244.00 478

2006-07 91.44 280.00 521

2007-08 94.39 315.00 567

2008-09 93.73 290.00 526

Though during the year 2008-09, the industry had to face adverse agro-climatic conditions, it

succeeded in producing 290 lakhs bales of cotton comparing to 315 lakhs bales last year, yet

managed to retain its position as world's second highest cotton producer.

Economic issues

Prices of Cotton

The Minimum Support Prices of Kapas (Seed cotton) for fair average quality announced for

the cotton season 2005- 2006 (Oct – Sept), was fixed at last year’s level (2004-05) i.e.

Rs.1760/- per quintal for medium staple variety (F-414/J-34/H- 777). The support price for

H-4 (Long staple variety) has been fixed at Rs.1980/ - per quintal, an increase of Rs.20/- per

quintal over support price of 2004-05. The MSP fixed for F-414/H-777/J-34 variety of kapas

will be applicable only to Rajasthan. The price of this variety, grown in Haryana and Punjab

has been fixed keeping in view the respective quality differential, vis-à-vis Rajasthan,

obtaining in these States. The Cotton Corporation of India Ltd. (CCI) undertook massive

MSP operations throughout 2004-05 in all the cotton growing states, and procured kapas

equivalent to lint cotton of 27.52 lakhs bales. In 2004-05, due to favourable seasonal

conditions, there was a sharp rise in productivity, which peaked to a record 463 Kg.

Lint/hectare, as compared to 399 kg. / lint per hectare during 2003-04, the cultivated area

increased to 89.20 lakhs hectares in 2004-05, as compared to 76.30 lakhs hectares in 2003-04,

and the production touched 243 lakh bales in 2004-05, as compared to 179.00 lakh bales in

2003-04.

Present Scenario

Textile Industry is offering one of the most basic requirements of community and it possess

importance; preserve continued growth for developing quality of life. From the

manufacturing of raw materials to the delivery of end products, it has gain it’s kind of

position, as a self-dependent sector and with considerable value-addition at every stage of

dealing; it is a key input to the country’s economy.

Today the textiles and clothing industry engages an important position in India’s economy.

Being the major foreign exchange earner having about 35% in its torso, contributing to about

30 % of India’s exports and 14% of industrial productions, expecting above 6% GDP in

2005, and it considered as the second largest vital sector of employment initiator after

agriculture sector.

Under the World Trade Organization (WTO) Agreement on Textiles and Clothing, the textile

quota scheme of quantitative import limitations under the multi-fiber arrangement (MFA)

came to an end on 1st January, 2005, hence developing countries like India will flourish in

the new competitive atmosphere and as a result, the Indian textile industry will have a

stronger place in both their export and domestic markets.

All along with its usual yarn and fabrics, at present India is exporting more than 100 garment

product range. Many worlds’ leading brands like Tommy Hilfiger, Gap, Liz Claibome, Polo

etc are sourcing products from India.

With huge investments, persistence innovations, latest product mix and planned marketing,

today, India has come out as a flourishing outsourcing centre for textiles and apparel industry

to meet the global requirement of the manufacturing fibers and yarns products. In a view of

the rising rapport with major global brands, dismantling of quota system from 2005 era

would hit upon India as a main global outsourcing hub.

Competitive advantage & possible growth in Synthetic Textiles Sector India’s synthetic

textile sector is relatively modern and has a high growth potential which will help India to

coming out as a major outsourcing hub. With a compounded annual growth rate of more than

22% the exports of MMF textiles have stretched out to a level of US $1.62 billion in 2002-03

starting from small exports in 1954. The export growth in 2002-03 matches up to the

preceding year was in the harmony of 30 percent, and the MMF textile sector is the only

sector where the performance has exceeds by the target fixed for this year by US $ 115

million.

Indian synthetic textiles are more and more accomplishing new markets along with keeping

the market share in the existing markets. At present Indian synthetic textile exports are

targeting more than 175 countries worldwide, where Middle East accounted for over 32

percent of our exports and the share of the extremely quality conscious in European Union,

approximately 23 percent.

Over the years, the Indian MMF textile sector has built-up an export base; and the share of

MMF textile exports in the total Indian textile export has also been raised, the share moved

up from 10.38% in 2000-01 to 11.46% in 2001-02 and more to about 14% in 2002-03.

At present Indian exports of synthetic textiles to USA are rising at more than 90% yearly. It

has also been observed that export growth will be striking for major MMF textile items after

dismantling of quota system from 2005.

Furthermore, Indonesia, Korea’s export of synthetic textiles are turning down compared to

previous year. Manufacturing capacity of Korea has declined by more than 30% in the

polyester filament sector in 2002 and in 2003 and it is expected to turn down further more,

which will end with a turn down in their exports of polyester filament fabrics. Due to anti-

dumping duty on the polyester filament fabrics obtained from Taiwan and Korea, countries

like Brazil, gaining of more opportunity for India will exists as a larger synthetic fabrics

exporter.

In the world, synthetic textile trade’s share of India is also seeing increasing. The export

share of Indian synthetic textiles in worldwide increased from 0.11% in 1971 to 1.12% in

1991 and more to about 3% in 2002. This suggests the rising performance of Indian synthetic

textile items in the worldwide market.

Still there is an opportunity to explore new market segments like Latin America and Africa

all along with maintaining the share in the established markets like European Union and

USA. At this stage an annual growth expected to 15% for synthetic textiles and exports are

expected to touch US$ 2.5 billion in 2005-05 and US$ 4.3 billion in 2009-10.

SWOT analysis of the textile industry

Strengths Weaknesses

Strong and diverse raw material base

Third largest producer of cotton

Fifth largest producer of man-made fibre and yarn

Structural weaknesses in weaving and processing

2 percent of shuttleless looms as percentage of total looms as against world average of 16 percent and China,

Vertical and horizontal integrated textile value chain

Strong presence in entire textile value chain from raw material to finished goods

Globally competitive spinning industry

Average cotton yarn spinning cost at US$ 2.5 per kg. Which is lower than all the countries including China

Low wages: rate at 0.75 US$ per operator hour as compared to US$ 1 of China and US$ 3 of Turkey

Unique strength in traditional handlooms and handicrafts

Flexible production system

Diverse design base

Pakistan and Indonesia 15 percent, 9 percent and 10 percent respectively.

Highly fragmented and technology backward textile processing sector

Highly fragmented garment industry

Except spinning, all other segments are predominantly in decentralized sector.

The rigid labour laws: proving a bottleneck particularly to the garment sector. Large seasonal orders cannot be taken because the labour strength cannot be reduced during the slack season.

Inadequate capacity of the domestic textile machinery manufacturing sector.

Big demand and supply gap in the training facilities in textile sector.

Infrastructural bottlenecks in terms of power, utility, road transport etc.

Employment Generation

The textile sector itself has the potential to create 1.2 crore employment opportunity over the

next five years. The government would continue to encourage growth within the textiles

industry as it holds huge potential for employment and exports.

Textile Sector Contribution:

According to the Annual Report 2009-10 of the Ministry of Textiles, the Indian textile

industry contributes about 14 per cent to industrial production, 4 per cent to the country's

gross domestic product (GDP) and 17 per cent to the country’s export earnings. It provides

direct employment to over 35 million people and is the second largest provider of

employment after agriculture. According to the Ministry of Textiles, the cumulative

production of cloth during April’09-March’10 increased by 8.3 per cent as compared to the

corresponding period of the previous year. Total textile exports increased to US$ 18.6 billion

during April’09- January’10, from US$ 17.7 billion during the corresponding period of the

previous year, registering an increase of 4.95 per cent in rupee terms. Further, the share of

textile exports in total exports has increased to 12.36 per cent during April’09-January’10,

according to the Ministry of Textiles. As per the Index of Industrial Production (IIP) data

released by the Central Statistical Organization (CSO), cotton textiles have registered a

growth of 5.5 per cent during April-March 2009-10, wool, silk and man-made fibre textiles

have registered a growth of 8.2 per cent and textile products including wearing apparel have

registered a growth of 8.5 per cent.

Technical Textile Segment:

According to the Ministry of Textiles, technical textiles are an important part of the textile

industry. The Working Group for the Eleventh Five Year Plan has estimated the market size

of technical textiles to increase from US$ 5.29 billion in 2006-07 to US$10.6 billion in 2011-

12, without any regulatory framework and to US$ 15.16 billion with regulatory framework.

The Scheme for Growth and Development of Technical Textiles aims to promote indigenous

manufacture of technical textile to leverage global opportunities and cater to the domestic

demand.

Current Status

The textile industry holds significant status in the India. Textile industry provides one of the

most fundamental necessities of the people. It is an independent industry, from the basic

requirement of raw materials to the final products, with huge value-addition at every stage of

processing.

Today textile sector accounts for nearly 14% of the total industrial output. Indian fabric is in

demand with its ethnic, earthly colored and many textures. The textile sector accounts about

30% in the total export. This conveys that it holds potential if one is ready to innovate.

The textile industry is the largest industry in terms of employment economy, expected to

generate 12 million new jobs by 2010. It generates massive potential for employment in the

sectors from agricultural to industrial. Employment opportunities are created when cotton is

cultivated. It does not need any exclusive Government support even at present to go further.

Only thing needed is to give some directions to organize people to get enough share of the

profit to spearhead development.

Segments

Textile industry is constituted of the following segments

Readymade Garments

Cotton Textiles including Handlooms (Millmade / Powerloom/ Handloom)

Man-made Textiles

Silk Textiles

Woollen Textiles

Handicrafts including Carpets

Coir

Jute

The cottage industry with handlooms, with the cheapest of threads, produces average dress

material, which costs only about 200 INR featuring fine floral and other patterns. It is not

necessary to add any design to it. The women of the house spin the thread, and weave a piece

in about a week.

It is an established fact that small and irregular apparel production can be profitable by

providing affordable casual wear and leisure garments varieties.

Now, one may ask, where from the economy and the large profit comes in if the lowest end

of the chain does not get paid with minimum per day labour charge. It is an irony of course.

What people at the upper stratum of the chain do is, to apply this fabric into a design with

some imagination and earn in millions. The straight 6 yards simple saree, drape in with a

blouse with embroideries and bead work, then it becomes a designer¡¦s ensemble. For an

average person, it can be a slant cut while giving it a shape, which can double the profit.

Maybe, the 30 % credit that the industry is taking for its contribution to Indian economy as

good as 60 % this way. Though it is an industry, it has to innovate to prosper. It has all the

ingredients to go ahead.

Textile exports are targeted to reach $50 billion by 2010, $25 billion of which will go to the

US. Other markets include UAE, UK, Germany, France, Italy, Russia, Canada, Bangladesh

and Japan. The name of these countries with their background can give thousands of insights

to a thinking mind. The slant cut that will be producing a readymade garment will sell at a

price of 600 Indian rupees, making the value addition to be profitable by 300 %.

Currently, because of the lifting up of the import restrictions of the multi-fibre arrangement

(MFA) since 1st January, 2005 under the World Trade Organization (WTO) Agreement on

Textiles and Clothing, the market has become competitive; on closer look however, it sounds

an opportunity because better material will be possible with the traditional inputs so far

available with the Indian market.

At present, the textile industry is undergoing a substantial re-orientation towards other then

clothing segments of textile sector, which is commonly called as technical textiles. It is

moving vertically with an average growing rate of nearly two times of textiles for clothing

applications and now account for more than half of the total textile output. The processes in

making technical textiles require costly machinery and skilled workers.

The application that comes under technical textiles are filtration, bed sheets and abrasive

materials, healthcare upholstery and furniture, blood-absorbing materials and thermal

protection, adhesive tape, seatbelts, and other specialized application and products.

Strengths

India enjoys benefit of having plentiful resources of raw materials. It is one of the

largest producers of cotton yarn around the globe, and also there are good resources of

fibres like polyester, silk, viscose etc.

There is wide range of cotton fibre available, and has a rapidly developing synthetic

fibre industry.

India has great competitiveness in spinning sector and has presence in almost all

processes of the value chain.

Availability of highly trained manpower in both, management and technical. The

country has a huge advantage due to lower wage rates. Because of low labor rates the

manufacturing cost in textile automatically comes down to very reasonable rates.

The installed capacity of spindles in India contributes for 24% share of the world, and

it is one of the biggest exporters of yarns in the global market. Having modern

functions and favourable fiscal policies, it accounts about 25% of the world trade in

cotton yarn.

The apparel industry is largest foreign exchange earning sector, contributing 12% of

the country's total exports.

The garment industry is very diverse in size, manufacturing facility, type of apparel

produced, quantity and quality of output, cost, requirement for fabric etc. It comprises

suppliers of ready-made garments for both, domestic or export markets.

Weakness

Massive Fragmentation:

A major loop-hole in Indian textile industry is its huge fragmentation in industry structure,

which is led by small scale companies. Despite the government policies, which made this

deformation, have been gradually removed now, but their impact will be seen for some time

more. Since most of the companies are small in size, the examples of industry leadership are

very few, which can be inspirational model for the rest of the industry.

The industry veterans portrays the present productivity of factories at half to as low as one-

third of levels, which might be attained. In many cases, smaller companies do not have the

fiscal resources to enhance technology or invest in the high-end engineering of processes.

The skilled labor is cheap in absolute terms; however, most of this benefit is lost by small

companies.

The uneven supply base also leads barriers in attaining integration between the links in

supply chain. This issue creates uncontrollable, unreliable and inconsistent performance.

Political and Government Diversity:

The reservation of production for very small companies that was imposed with an intention to

help out small scale companies across the country, led substantial fragmentation that distorted

the competitiveness of industry. However, most of the sectors now have been de-reserved,

and major entrepreneurs and corporate are putting-in huge amount of money in establishing

big facilities or in expansion of their existing plants.

Secondly, the foreign investment was kept out of textile and apparel production. Now, the

Government has gradually eliminated these restrictions, by bringing down import duties on

capital equipment, offering foreign investors to set up manufacturing facilities in India. In

recent years, India has provided a global manufacturing platform to other multi-national

companies that manufactures other than textile products; it can certainly provide a base for

textiles and apparel companies.

Despite some motivating step taken by the government, other problems still sustains like

various taxes and excise imbalances due to diversification into 35 states and Union

Territories. However, an outline of VAT is being implemented in place of all other tax

diversifications, which will clear these imbalances once it is imposed fully.

Labour Laws:

In India, labour laws are still found to be relatively unfavorable to the trades, with companies

having not more than ideal model to follow a 'hire and fire' policy. Even the companies have

often broken their business down into small units to avoid any trouble created by labour

unionization.

In past few years, there has been movement gradually towards reforming labour laws, and it

is anticipated that this movement will uphold the environment more favourable.

Distant Geographic Location:

There are some high-level disadvantages for India due to its geographic location. For the

foreign companies, it has a global logistics disadvantage due the shipping cost is higher and

also takes much more time comparing to some other manufacturing countries like Mexico,

Turkey, China etc. The inbound freight traffic has been also low, which affects cost of

shipping - though, movement of containers are not at reasonable costs.

Lack of trade memberships:

India is serious lacking in trade pact memberships, which leads to restricted access to the

other major markets. This issue made others to impose quota and duty, which put scissors on

the sourcing quantities from India.

Opportunities

It is anticipated that India's textile industry is likely to do much better. Since the consumption

of domestic fibre is low, the growth in domestic consumption in tandem is anticipated with

GDP of 6 to 8 % and this would support the growth of the local textile market at about 6 to 7

% a year.

India can also grab opportunities in the export market. The industry has the potential of

attaining $34bn export earnings by the year 2010. The regulatory polices is helping out to

enhance infrastructures of apparel parks, Specialized textile parks, EPZs and EOUs.

The Government support has ensured fast consumption of clothing as well as of fibre. A

single rate will now be prevalent throughout the country.

The Indian manufacturers and suppliers are improving design skills, which include different

fabrics according to different markets. Indian fashion industry and fashion designers are

marking their name at international platform. Indian silk industry that is known for its fine

and exclusive brocades, is also adding massive strength to the textile industry.

The industry is being modernized via an exclusive scheme, which has set aside $5bn for

investment in improvisation of machinery. International brands, such as Levis, Wal-Mart, JC

Penny, Gap, Marks & Spencer and other industry giants are sourcing more and more fabrics

and garments from India. Alone Wal-Mart had purchased products worth $200mn last year

and plans to increase buying up to $3bn in the coming year. The clothing giant from Europe,

GAP is also sourcing from India.

Anticipation

As a result of various initiatives taken by the government, there has been new investment of

Rs.50,000 crore in the textile industry in the last five years. Nine textile majors invested

Rs.2,600 crore and plan to invest another Rs.6,400 crore. Further, India's cotton production

increased by 57% over the last five years; and 3 million additional spindles and 30,000

shuttle-less looms were installed.

Forecast till 2010 for textiles by the government along with the industry and Export

Promotion Councils is to attain double the GDP, and the export is likely attain $85bn. The

industry is anticipated to generate 12mn new jobs in various sectors.

Recent Trends

The mood in the Indian textile industry given the phase-out of the quota regime of the Multi-

Fibre Arrangement (MFA) is upbeat with new investment flowing in and increased orders for

the industry as a result of which capacities are fully booked up to April 2005. As a result of

various initiatives taken by the government, there has been new investment of Rs.500 billion

in the textile industry in the last five years. Nine textile majors invested Rs.26 billion and

plan to invest another Rs.64 billion. Further, India's cotton production increased by 57% over

the last five years; and 3 million additional spindles and 30,000 shuttles-less looms were

installed.

The industry expects investment of Rs.1,400 billion in this sector in the post-MFA phase. A

Vision 2012 for textiles formulated by the government after intensive interaction with the

industry and Export Promotion Councils to capitalise on the upbeat mood aims to increase

India's share in world's textile trade from the current 4% to 8% by 2012 and to achieve export

value of US $ 50 billion by 2012 Vision 2012 for textiles envisages growth in Indian textile

economy from the current US $ 37 billion to $ 85 billion by 2012; creation of 12 million new

jobs in the textile sector; and modernisation and consolidation for creating a globally

competitive textile industry. The textile industry is undergoing a major reorientation towards

non-clothing applications of textiles, known as technical textiles, which are growing roughly

at twice rate of textiles for clothing applications and now account for more than half of total

textile production. The processes involved in producing technical textiles require expensive

equipments and skilled workers and are, for the moment, concentrated in developed

countries. Technical textiles have many applications including bed sheets; filtration and

abrasive materials; furniture and healthcare upholstery; thermal protection and blood-

absorbing materials; seatbelts; adhesive tape, and multiple other specialized products and

applications.

Vision Statement for textile industry

(2007-2012)

To build world class, state-of-the-art, manufacturing capacities and achieve a predominant global standing in manufacture and export of textiles and clothing.

To ensure the growth of the Indian textile industry at 16 percent per annum in value terms, to US$ 115 billion, by the end of the Eleventh Five Year Plan.

To secure a 7 percent share in global textile trade by the end of the Eleventh Five Year Plan.

To equip the textile industry to withstand the pressures of import penetration, and maintain dominance of the growing domestic market.

To enable Small & Medium Enterprises (SMEs) to achieve competitiveness to face the global scenario with confidence.

To provide a conducive policy environment which will encourage innovation, augment R&D efforts, and enhance productivity through the upgradation of technology, manufacturing processes and the development of human resources.

To establish the Indian textiles industry as a producer of internationally competitive value added products.

Future of Textile Industry in India

The textile industry in India is one of the flourishing sectors of Indian economy. It contributes

more than 13% to industrial output, 16.63% to export revenues and 4% to the nation’s GDP.

In the year 2010, the industry is estimated to produce 12 million jobs with an investment of

US$ 6 billion in the fields of textiles equipments and structure, and garment manufacturing

by the end of 2015.

Union Ministry of Textiles certified Apparel Export Promotion Council (AEPC) has taken the

responsibility to motivate the foreign investors to invest in Indian Textile industry by

exhibiting it massive unexplored domestic market. It has also formulated and endorsed the

motto of “come, invest, produce and sell in India”. Under this the ministry has decided to

send it representatives to Germany, Switzerland, France, Italy and US. The objective is to

trigger the foreign investment towards instituting textile units in India by offering numerous

allowances to global investor like low-priced workforce and intellectual right fortification.

The government of India has also taken few initiatives to promote the textile industry by

permitting 100% Foreign Direct Investment in the market. Owing to the upright and straight

incorporated textiles price chain, the Indian textile industry symbolizes a strong existence in

the complete value chain from raw commodities to finished products. The Synthetic and

Rayon Textile Export Promotion Council (SRTEPC) has taken all the required steps to meet

the target of doubling the synthetic textile exports in India to US$ 6.2 billion by seizing 4%

of market share by FY 2011-12.

GlobalTextileMarket Overview

The global textile market value is estimated to be US$ 4.50 trillion during the year 2008. It is

observed that clothing accounted for about 60% of the market, while textile accounted for the

balance 40%. The global textile industry grew at an estimated average annual rate of about

2.5% during 2000-2008. The global slowdown has also affected Textile industry adversely.

The global fibre demand has decreased by one percent in 2008. It is also observed that the

global textile and clothing industry can be broadly divided into Natural Fibre and Manmade

Fibre industry. The Natural Fibre industry includes Cotton, Wool, Silk and Jute; while the

manmade Fibre Industry includes Polyamides, Polyester, Polyethylene, Viscose and Acrylic.

Global Fibre Scenario

The global fibre demand in 2003 was 641 Lacs MT. The demand for fibre grew at a CAGR

of 5.05% to reach an estimated 807.50 Lacs MT during 2008. It is noted that during the same

period, demand for natural fibre grew at a CAGR of 4.65%, while the demand for manmade

fibre grew at CAGR of 5.38%.

PFY Demand in India

The domestic demand for PFY stood at 1014755 Tons during the year 2003. The demand for

PFY grew at CAGR of 4.21% to reach an estimated 1288523 Tons by the years 2008.

PFY industry, as we know, had faced difficult market conditions during the years 1999-2002

due to excess capacity over demand which lead to cut throat unhealthy competition causing

substantial erosion in profitability of these companies. However, as now new capacities came

up during this period, the gap between supply and demand got gradually bridged up and POY

manufacturing units/companies are doing reasonably well since beginning of 2002 and are

expected to do much better during the next few years in view of the sustained demand

growth.

As per detailed survey conducted by 'CRISINFAC' the domestic Polyester industry is likely

to witness robust demand growth and higher profit margins in the next five years due to the

following positive factors favouring Polyester Industry.

Price Competitiveness of Polyester: viz-a-viz other substitutes like cotton, silk and

woollen yarns.

Excise duty reduction to encourage demand: Excise duty on POY has been

progressively reduced over the previous few years to 16% and is expected to be

reduced further which will further increase the price competitiveness of POY.

Increase of PFY in non-appeal segments: In India, fibre is mostly used for textile

applications i.e. 93% and only 7% for non-apparel applications like home textiles,

automotive an industrial segments as against 59% worldwide. The demand of non-

apparel segment is expected to grow @ 20% p.a. as Polyester offers high tenacity an

strength which is most suitable for such applications.

Lower per capita consumption: The average per capita consumption (PCC) of fabric

in India is much lower than in its neighbouring countries. India has a huge potential

market, given that its PCC is as low as 1.4 kg as compared China (5 kgs), Pakistan (3

kgs) and Indonesia (5 kgs). India has the advantage of a large an growing domestic

market, and a good GDP growth.

Rapid urbanization: higher spend on clothing: In India, out of the total population,

about 70% is rural. Behaviour patterns suggest that most of the fabric demand in this

segment is need-based. The urban demand, on the other hand, is also driven by

fashion trends and favours more sophisticated textiles, and variety in designs and

colours. The average urban spend on apparel is higher than rural spend.

However, over the years, the clothing pattern in India has shifted. Men's clothing

consumption has moved from the traditional cotton based wear to synthetic fabrics.

Cotton dhotis are giving way to trousers (mostly made of polyester or polyester

blends). Likewise, women are moving from cotton saris to synthetic saris/dresses.

Levy of Anti-dumping duty on import of POY to lower threats of import leading to

availability of better contribution to domestic manufacturers.

Rapid additions in downstream processing facilities leading to incremental

demand.

Manufacturing of manmade fibres globally is getting shifted mainly to China and

India. As China's domestic consumption almost matches its production, India will be

able to increase its presence in the International market.

Keeping in view the strong fundamentals mentioned above, CRISINFAC has projected the

POY industry grew at a healthy 7.8% Compounded Annual Growth Rate (CAGR).

Raising concern over India's share in the US imports of technical textiles and non-woven

fabric which is way behind China, industry body Ficci today said domestic industry needs

research and development (R&D) support.

"India's share in the US imports of special purpose fabric (technical textiles) and non-woven

fabrics was merely 2.6 per cent and 1.2 per cent, respectively in 2009 compared to China's

share of 15 per cent and 12 per cent," a Ficci study said.

India needs to strengthen its capabilities to tap this growing market as technology-intensive

products are the future, it said.

The study said there is a need to formulate a comprehensive research and development

(R&D) policy for the Indian textile industry. The chamber has submitted its

recommendations to the Ministry of Textiles in this regard. The study pointed out that only a

small portion of revenue of the Indian textile industry is derived by innovative or technology

intensive products. "The policy should aim at increasing the country's share of advance

technology-based products and high value-added items in global market to seven per cent in

next five years from less than two percent currently.

The chamber has also recommended setting-up of a National Textiles Research Council with

seed money of Rs 30 crore and an annual grant of Rs 10 crore. The council could be the apex

body for undertaking and providing direction to research in textiles in the country, the study

said.

Ficci said that the policy should provide a special focus on eco-friendly textiles that would

help in reducing carbon footprint. "Development of eco-friendly and sustainable linkages is

key to competitiveness. Also, the competitive edge for Indian textile industry will come from

adoption of new and advance materials with functional properties (like anti-microbial fabrics

for patients dress) in the textiles sector," it said.

Government Initiative for Textile Industry:

According to the Ministry of Textiles, investment under the Technology Upgradation Fund

Schemes (TUFS) has been increasing steadily. During the year 2009-10, 1896 applications

have been sanctioned at a project cost of US$ 5.23 billion. The cumulative progress as on

December 31, 2009, includes 27,477 applications sanctioned, which has triggered investment

of US$ 45.5 billion and amount sanctioned under TUFS is US$ 18.9 billion of which US$

16.4 billion has been disbursed so far till the end of April, 2010.

Moreover, in May 2010, the Ministry of Textiles informed a parliamentary panel that it

proposes to allocate US$ 785.2 million for the modernization of the textile industry.

The Scheme for Integrated Textile Park (SITP) was approved in July 2005 to facilitate setting

up of textiles parks with world class infrastructure facilities. 40 textiles park projects have

been sanctioned under the SITP. According to the Minister of State for Textiles, Panabaaka

Lakshmi, under the SITP, a cumulative expenditure of US$ 204.3 million has been incurred

against allocation of US$ 220.7 million in the last three years.

In the Union Budget 2010-11 presented in February 2010, the Finance Minister made the

following announcements to benefit the textile industry:

The central plan outlay for the industry has been enhanced to US$ 1.03 billion. Of this

US$ 521.4 million is for TUFS, US$ 76 million for SITP, US$ 80.2 million for

handlooms, US $ 69.3 million for handicrafts and US$ 98.4 million for sericulture.

Allocation for textiles and jute industry is US$ 713.4 million.

The total allocation for village and small enterprises sector which include handicrafts

and handlooms is US$ 210.3 million.

US$ 31.5 million has been provided for development of mega clusters in handlooms,

handicrafts and powerloom sectors.

Customs duty at 4 per cent for import of readymade garments for retail sales has been

withdrawn.

The micro small medium enterprises in textiles sector have been given full CENVAT

credit on capital goods in one installment in the year of receipt of such goods and the

facility of payment of excise duty in quarterly basis.

Investments

According to the Minister for Textiles, Mr Dayanidhi Maran, around US$ 5.35 billion of

foreign investment is expected to be made in India in the textile sector over the next five

years.

The textiles industry has attracted foreign direct investment (FDI) worth US$ 817.26 million

between April 2000 and March 2010, according to data released by the Department of

Industrial Policy and Promotion.

S Kumars Nationwide has formed a joint venture (JV) with Donna Karan

International to design, produce and distribute the entire range of DKNY menswear

apparel across the world except Japan for 10 years. The new venture will invest US$

25 million for expansion of Donna Karan’s menswear brand and expects to record

sales of about US$ 140 million in the next three years.

The Andhra Pradesh government has allocated over 1000 acres of land for the

Brandix India Apparel City (BIAC) in the state’s special economic zone (SEZ), which

was inaugurated in May 2010. The apparel city is expected to attract an investment of

US$ 1.2 billion (around Rs 5,400 crore).

Private equity firms TPG and Bain Capital have picked up stakes in children apparel

retailer Lilliput Kidswear for US$ 27 million and US$ 60.7 million respectively.

Italian sportswear maker Lotto is planning to invest US$ 10 million over the next five

years to capture 7 per cent of India’s branded sports apparel and equipment market.

The brand, which started its stand-alone retail chain in India in 2008, has 31 stand-

alone stores across the country and plans to open 200 more such stores by 2015.

World's leading lingerie brand, Germany-based, Triumph International, plans to invest over

US$ 217 million in India to open 12 more flagship outlets and 30 additional EPS (Exclusive

Partner Stores) during 2010.

Government policies relating to textile industries in India

The Indian textile industry is one of the largest industries in the world. The Ministry of

Textiles in India has formulated numerous policies and schemes for the development of the

textile industry in India. Some of them are detailed in the following sections.

National Textile Policy

The National Textile Policy was formulated keeping in mind the following objectives:

Development of the textile sector in India in order to nurture and maintain its position

in the global arena as the leading manufacturer and exporter of clothing.

Maintenance of a leading position in the domestic market by doing away with import

penetration.

Injecting competitive spirit by the liberalisation of stringent controls.

Encouraging Foreign Direct Investment as well as research and development in this

sector.

Stressing on the diversification of production and its Upgradation taking into

consideration the environmental concerns.

Development of a firm multi-fibre base along with the skill of the weavers and the

craftsmen.

 Such goals are set to meet the following targets:

The size of textile and apparel exports must reach a level of US $50 billion by the

year 2010.

The Technology Upgradation Fund Scheme should be implemented in a strict manner.

The garments industry should be removed from the list of the small scale industry

sector.

The handloom industry should be boosted and encouraged to enter into foreign

ventures so as to compete globally. The National Textile Policy has also formulated

rules pertaining to certain specific sectors. Some of the most important items in the

agenda happen to be the availability and productivity along with the quality of the raw

materials. Special care is also taken to curb the fluctuating price of raw materials.

Steps have also been taken to raise silk to the international standard.

 Preamble

To comprehend the purpose of textile industry that is to provide one the most basic

needs of the people and promote its sustained growth to improve the quality of life.

To acknowledge textile industry as a self-reliant industry, from producing raw

materials to delivery of finished products; and its major contribution to the economy

of the country.

To understand its immense potentiality for creating employment opportunities in

significant sectors like agriculture, industry, organized sector, decentralized sector,

urban areas and rural areas, specifically for women and deprived.

To recognize the Textile Policy of 1985, this boosted the annual growth rate of cloth

production by 7.13%, export of textile by 13.32% and per capita availability of fabrics

by 3.6%.

To analyze the issues and problems of textile industry and the guidelines provided by

the expert committee set up for this specific purpose.

To give a different specification to the objectives and thrust areas of textile industry.

To produce good quality cloth for fulfilling the demands of the people with

reasonable prices.

To maintain a competitive global market

 Thrust areas

Government of India is trying to promote textile industry by giving emphasis on several areas

of textile, which are as below:

Innovative marketing strategies

Diversification of product

Enhancement of textile oriented technology

Quality awareness

Intensifying raw materials

Growth of productivity

Increase in exports

Financing arrangements

Creating employment opportunities

Human Resource Development

Efforts

Government of India has set some targets to intensify and promote textile industry. To

materialize these targets, efforts are being made, which are as follows:

Textile and apparel exports will reach the US $ 70 billion mark by 2015

All manufacturing segments of textile industry will come under TUFS ( Technology

Upgradation Fund Scheme)

Increase the quality and productivity of cotton. The target is to increase 50%

productivity and maintain the quality to international standards

Establish the Technology Mission on jute with an objective to increase cotton

productivity of the country

Encourage private organization to provide financial support for the textile industry

Promote private sectors for establishing a world class textile industry

Encourage handloom industry for producing value added items

Encourage private sectors to set up a world class textile industry comprising various

textile processing units in different parts of India

Regenerate functions of the TRA (Textile Research Associations) to stress on

research works.

Government policy on cotton and man-made fiber

One of the principal targets of the government policy is to enhance the quality and production

of cotton and man-made fiber. Ministry of Agriculture, Ministry of Textiles, cotton growing

states are primarily responsible for implementing this target.

 Other thrust areas

1. Information Technology: Information technology plays a significant role behind the

development of textile industry in India. IT (Information Technology) can promote to

establish a sound commercial network for the textile industry to prosper.

2. Human Resource Development: Effective utilization of human resource can

strengthen this textile industry to a large extent. Government of India has adopted

some effective policies to properly utilize the manpower of the country in favour of

the textile industry.

3. Financing arrangement: Government of India is also trying to encourage talented

Indian designers and technologists to work for Indian textile industry and accordingly

government is setting up venture capital fund in collaboration with financial

establishments.

Acts

Some of the major acts relating to textile industry include

Central Silk Board Act, 1948

The Textiles Committee Act, 1963

The Handlooms Act, 1985

Cotton Control Order, 1986

The Textile Undertakings Act, 1995

Government of India is earnestly trying to provide all the relevant facilities for the textile

industry to utilize its full potential and achieve the target. The textile industry is presently

experiencing an average annual growth rate of 9-10% and is expected to grow at a rate of

16% in value, which will eventually reach the target of US $ 115 billion by 2012. The

clothing and apparel sector are expected to grow at a rate of 21 %t in value terms.

Tariff policy

India & US have reached on an Agreement for reciprocal market access commitments for

Textiles and Apparel with the negotiation of the WTO Agreement on Textile & Clothing. It

provides elimination of Quota system of Textiles & Apparel from 1st January 2005.

Under Indo-US Agreement of 1st January 1995, India agreed to reduce tariffs on Textile &

apparel and remove all the restrictions on these products.

From 1st April 2000, Government of India reduced tariffs on Manmade Fibers & Filament

Yarns from 35% to 20%

Cotton Yarn from 25% to 20%

Spun, Blended, and Woolen Yarn from 40% to 20 %

India agreed to bind its tariffs on 265 textile & apparel products (Textured Yarns of Nylon &

Polyester, Filament Fabrics, Sportswear, and Home Textiles.)

Apparel products are free from Excise Duties & various Taxes.

Grey Fabrics and certain Cotton Yarns are exempt from basic Excise Duty.

Customs duty on Polyester Filament Yarns is reduced from 10% to 7.5%. Duty on other

Filament yarns will be remain at 10%.

Customs duty on Polyester Staple fibers is reduced from 10% to 7.5%. Duty on other Man

Made Staple fibers will be remain at 10%.

Customs duty on Raw Materials such as DMT, PTA and MEG reduced from 10% to 7.5%.

For Small Scale Industries there is Full Exemption Limit being increased from Rs.1 crore to

Rs.1.50 crores.

Most of the products fall under HS code 61 and 62 carry an import duty of 56.83% which

includes 30% basic duty, 16% additional duty and 4 per cent special additional duty.

Excise duty on Nylon Chips has been reduced from 16% to 12%.

Optional excise duty on Nylon Fish Net Fabrics is increased from 8% to 12%.

Excise Duty Exemption on specified Textile Machinery Items is withdrawn and 8% Excise

Duty is imposed.

CST rate reduced from 4% to 3% with effect from April 1, 2007.

Removal of surcharge on income tax on all firms and companies with a taxable income of

Rs.1 crore or less.

Import Licensing:

India has liberalized its Import regime for Textiles and apparel, but some of the part is still

limited for market access. Currently, there is no import restriction for yarns & fabrics items.

Apparel & Made-up textiles goods require a Special Import License (SIL). Govt. revised

Exim Policy on 31st March 1999 by eliminating Import Licensing Requirements for 894

consumer goods, agriculture products and textiles. On 28th December 1999 India and Us

signed an Agreement for the elimination of import restrictions of 1,429 agriculture, textiles,

consumer goods and apparel. India removed restrictions on 715 tariff items as of 1st April

2000.

Custom Procedures:

Marking, Labelling, and Packaging Requirements: Marking, Labelling, and Packaging

Requirements for Textile products are technically complex and difficult to implement.

According to textile regulation passed on 22nd July 1998 by GOI, Yarns, and Fabrics to have

the statutory markings and these markings should not mislead the consumers. For instance,

Cloths must be remarked with the name & address of manufacturer, a description of cloth,

sort number, length in meters and width in centimetres, and washing instructions. The Man

made fiber cloth must indicate whether it is made by spun or filament yarn. The month &

year of packaging, the exact composition of cloth. The Marking must appear on the face plate

of each piece of cloth. The language for marking must be in Hindi and English with

international numerals.

EXIM Policies:

Duty Entitlement Passbook Scheme: DEPS is available for Indian Export Companies and

Traders on a Pre-Export and Post-Export basis. Pre-Export credit requires the beneficiary

firm has exported during the preceding 3-year period. The Post-Export credit is a transferable

credit that exporters of finished goods can use to pay or offset custom duties on imports of

any unrestricted goods.

Export Promotion Capital Goods Scheme: This scheme is available to export companies and

traders who provide the GOI with information about which type of goods and what value of

Capital Goods they will import. And they also inform what will be the outcome of export

they expect to produce from those imports. Depending upon the export commitment GOI

provides them a license to import capital goods duty-free or preferential rates of duty.

Pre and Post Shipment Financing: The Reserve Bank of India provides Indian Exporters Pre-

Shipment Financing through commercial banks for purchasing raw materials and packaging

materials by presenting Letter of Credit. RBI also provides Post-Shipment Financing through

commercial banks at preferential rates by presenting export documents.

Export and Special Economic Zones: Govt. of India has established Export Processing Zones

(EPZs) and Special Economic Zones (SEZs). In EPZs units can import goods free of custom

duty. There is 5-year tax holiday to any industrial unit in EPZs. Govt. has allowed 100%

Foreign ownership of units under EPZs and SEZs. The Govt. considers SEZs as foreign

territory for trade and tariff purpose. Units under SEZs may engage in Manufacturing,

Trading and Services. Units are exempt from routine checking of exports by customs, and

they can sell in the domestic market on payment of duty as applicable to imported goods.

Duty Drawback Scheme: The basic objective of this scheme is to reduce the indirect taxes on

exports. Exporters can get refund of the excise and import duty. Through this scheme they

can be more competitive and have more potential market.

Reform measures and Policy initiatives:

The Textile Industry came out of Quota Regime of Import Restrictions under the Multi Fibre

Arrangement (MFA). This development came on 1st January 2005 under the World Trade

Organization (WTO) Agreement on Textiles & Clothing. In an effort to increase India's share

in the world textile market, the Government has introduced a number of progressive steps.

100 per cent FDI allowed through the automatic route.

De-reservation of readymade garments, hosiery and knitwear from the SSI sector.

Technology Mission on Cotton has been launched to make available quality raw

material at competitive prices.

Technology Up gradation Fund Scheme (TUFS) has been launched to facilitate the

modernization and up gradation of the textiles industry.

Scheme for Integrated Textile Park (SITP) has been started to provide world-class

infrastructure facilities for setting up their textile units through the Public Private

Partnership model.

The Indian Textile Plaza is being built, in the city of Ahmedabad to encourage exports

to overseas markets.

50 textile parks are being established to enhance manufacturing capacity and increase

the industry's cost competitiveness.

A cluster approach for the development of the handloom sector has been adopted

from the year 2005-06 onwards.

Measures have been initiated for protection of handloom items like Banarasi

brocades, Jamdani of Bengal etc., under the Geographical Indications of Goods

(Registration and Protection) Act, 1999. So far sanctions to register 20 items have

been issued under the Act.

For the handicraft sector, some of the new initiatives include the facility center for

exporters and entrepreneurs in the Public Private Partnership (PPP) mode on build,

own and operate model with the government meeting 40% of the total cost of setting

up the centre with maximum investment of Rs. 24 lakhs.

In the Wool Sector, a project in public private partnership mode was approved for

setting up processing and finishing facilities for shawl manufacturers at Ludhiana in

Punjab.

In the Jute Sector, the Jute Technology Mission was started during the year 2006-07

with Mini Missions being implemented by the Ministry. The focus of the mission is

on improvement of the yield and quality of Jute Fibre, establishing market

infrastructure, storage godowns, developing prototypes of machinery with private

sector involvement, development of human resources for the jute industry etc.

GOVERNMENT POLICIES, SCHEMES AND CORPORATIONS FOR

PROMOTING TEXTILE INDUSTRY IN INDIA:

The Multi-Fibre Agreement (MFA)

The Multi-Fibre Agreement (MFA), that had governed the extent of textile trade between

nations since 1962, expired on 1 January 2005. It is expected that, post-MFA, most tariff

distortions would gradually disappear and firms with robust capabilities will gain in the

global trade of textile and apparel. The prize is the $360 bn market which is expected to grow

to about $600 bn by the year 2010 – barely five years after the expiry of MFA.

National Textile Policy 2000

Faced with new challenges and opportunities in a changing global trade environment, the

GOI unveiled its National Textile Policy 2000 (NTP 2000) on November 2, 2000. The NTP

2000 aims to improve the competitiveness of the Indian textile industry in order to attain $50

billion per year in textile and apparel exports by 2010.86 The NTP 2000 opens the country’s

apparel sector to large firms and allows up to 100 percent FDI in the sector without any

export obligation.

National Jute Policy-2005:

The objectives of the policy are to:

Enable millions of jute farmers to produce better quality jute fibre for value added

diversified jute products and enable them to enhance per hectare yield of raw jute

substantially;

Facilitate the Jute Sector to attain and sustain a pre-eminent global standing in the

manufacture and export of jute products;

Enable the jute industry to build world class state-of-the-art manufacturing

capabilities in conformity with environmental standards, and, for this purpose, to

encourage Foreign Direct Investment, as well as research and development in the

sector;

Sustain and strengthen the traditional knowledge, skills, and capabilities of our

weavers and craftspeople engaged in the manufacture of traditional as well as

innovative jute products;

Expand productive employment by enabling the growth of the industry;

Make Information Technology (IT), an integral part of the entire value chain of jute

and the production of jute goods, and thereby facilitate the industry to achieve

international standards in terms of quality, design, and marketing;

Increase the quantity of exports of jute and jute products by achieving a CAGR of

15% per annum;

Involve and ensure the active co-operation and partnership of State Governments,

Financial Institutions, Entrepreneurs, and Farmers’ Organizations in the fulfilment of

these objectives.

Export Promotion Capital Goods (EPCG) scheme

To promote modernization of Indian industry, the GOI set up the Export Promotion Capital

Goods (EPCG) scheme, which permits a firm importing new or Second-hand capital goods

for production of articles for export to enter the capital goods at preferential tariffs, provided

that the firm exports at least six times the c.i.f. value of the imported capital goods within 6

years. Any textile firm planning to modernize its operations had to import at least $4.6

million worth of equipment to qualify for duty-free treatment under the EPCG scheme.

Export-Import Policy

The GOI’s EXIM policy provides for a variety of largely export-related assistance to firms

engaged in the manufacture and trade of textile products. This policy includes fiscal and other

trade and investment incentives contained in various programs

Duty Entitlement Passbook Scheme (DEPS)

DEPS is available to Indian export companies and traders on a pre- and post-export basis.

The pre-export credit requires that the beneficiary firm has exported during the preceding 3

year period. The post-export credit is a transferable credit that exporters of finished goods can

use to pay or offset customs duties on subsequent imports of any unrestricted products.

The Agreement on Textiles and Clothing (ATC)

The Agreement on Textiles and Clothing (ATC) promises abolition of all quota restrictions in

international trade in textiles and clothing by the year 2005. This provides tremendous scope

for export expansion from developing countries.

Guidelines of the revised Textile Centres Infrastructure Development Scheme (TCUDS)

TCIDS Scheme is a part of the drive to improve infrastructure facilities at potential Textile

growth centres and therefore, aims at removing bottlenecks in exports so as to achieve the

target of US$ 50 billion by 2010 as envisaged in the National Textile Policy, 2000. Under the

Scheme funds can be given to Central/ State Government Departments/ Public Sector

Undertakings/ Other Central /State Government’s agencies/recognized industrial association

or entrepreneur bodies for development of infrastructure directly benefiting the textile units.

The fund would not be available for individual production units.

Technology Upgradation Fund Scheme (TUFS)

At present, the only scheme through which Government can assist the industry is the

Technology Upgradation Fund Scheme (TUFS) which provides for reimbursing 5% interest

on the loans/finance raised from designated financial institutions for bench marked projects

of modernisation. IDBI, SIDBI, IFCI have been designed as nodal agencies for large and

medium small scale industry and jute industry respectively. They have co-opted 148 leading

commercial banks/cooperative banks and financial institutions like State Finance

Corporations and State Industrial Development Corporation etc.

Scheme for Integrated Textile Parks (SITP)

To provide the industry with world-class infrastructure facilities for setting up their textile

units, Government has launched the “Scheme for Integrated Textile Parks (SITP)” by

merging the ‘Scheme for Apparel Parks for Exports (APE)’ and ‘Textile Centre Infrastructure

Development Scheme (TCIDS)’. This scheme is based on Public-Private Partnership (PPP)

and envisages engaging of a professional agency for project execution. The Ministry of

Textiles (MOT) would implement the Scheme through Special Purpose Vehicles (SPVs).

National Textile Corporation Ltd. (NTC)

National Textile Corporation Ltd. (NTC) is the single largest Textile Central Public Sector

Enterprise under Ministry of Textiles managing 52 Textile Mills through its 9 Subsidiary

Companies spread all over India. The headquarters of the Holding Company is at New Delhi.

The strength of the group is around 22000 employees. The annual turnover of the Company

in the year 2004-05 was approximately Rs.638 crores having capacity of 11 lakhs Spindles,

1500 Looms producing 450 lakh Kgs of Yarn and 185 lakh Mtrs of cloth annually.

Cotton Corporation of India Ltd. (CCI)

The Cotton Corporation of India Ltd (CCI), Mumbai, is a profit-making Public Sector

Undertaking under the Ministry of Textiles engaged in commercial trading of cotton. The

CCI also undertakes Minimum Support Price Operation (MSP) on behalf of the Government

of India.

GOVERNMENT REGULATIONS AND SUPPORT

Government Initiatives

The textile industry, being one of the most significant sectors in the Indian economy, has

been a key focus area for the Government of India. A number of policies have been put in

place to make the industry more competitive.

The Technology Upgradation Fund Scheme (TUFS): Recognising that technology

is the key to being competitive in the global market, the Government of India

established the Technology Upgradation Fund Scheme (TUFS) to enable firms to

access low-interest loans for technology upgradation. Under this scheme, the

Government reimburses 5 per cent of the interest rates charged by the banks and

financial institutions, thereby ensuring credit availability for upgradation of the

technology at global rates. Under the TUF Scheme, launched on April 1, 1999, loans

amounting to Rs. 149 billion have been disbursed to 6,739 applicants. In consonance

with the industry, the TUF Scheme has been continued during the Eleventh Plan

(2007-2012). Allocation for TUF has been raised from Rs.5.35 billion in 2006-07, to

Rs.9.11 billion in 2007-08. Handlooms will now be covered under the TUF scheme.

Integrated Textile Parks Scheme: Manufacturing is a thrust area for the

government, as Indian industry and the government see foreign companies more as

partners in building domestic manufacturing capabilities rather than a threat to Indian

businesses. Following this through, the Central Government as well as various States

has executed Schemes such as, Schemes for Integrated Textile and Apparel Parks.

Under the Scheme for Integrated Textiles Parks (SITP), 26 parks have been approved

so far out of 30 sanctioned. The Budget provision for these parks has been increased

from Rs.1.89 billion in 2006-07 to Rs.4.25 billion in 2007-08.

Scheme for Handlooms: For Handlooms a cluster approach for the development of

the handloom sector was introduced in 2005-06 and 120 clusters were selected. 273

new yarn depots are opened up till now and the Handloom Mark was launched. The

Government proposes to take up additional 100-150 clusters in 2007-08.

Health Insurance Scheme: The Health Insurance Scheme has so far covered

3,00,000 weavers and will be extended to more weavers. The scheme will also be

enlarged to include ancillary workers. The Corporate Catalyst India A report on

Indian Textiles Industry Government proposed to enhance the allocation for the sector

from Rs.2.41 billion in 2006-07 to Rs.3.21 billion next year.

Quality Improvement

The Textile Commission, under the Ministry of Textiles, facilitates firms in the industry to

improve their quality levels and also get recognised quality certifications. Out of 250 textile

companies that have been taken up by the Commission, 136 are certified ISO 9001. The other

two certifications that have been targeted by the Textile Commission are ISO 14000

Environmental Management Standards and SA 8000 Code of Conduct Management

Standards.

Foreign Direct Investment (FDI) Policy

100% FDI is allowed in the textile sector under the automatic route. FDI in sectors to the

extent permitted under automatic route does not require any prior approval either by the

Government of India or Reserve Bank of India (RBI). The investors are only required to

notify the Regional Office concerned of RBI within 30 days of receipt of in word remittance.

Ministry of Textiles has set up FDI Cell to attract FDI in the textile sector in the country. The

FDI cell will operate with the following objectives:

o To provide assistance and advisory support (including liaison with other organisations

and State Governments).

o Assist foreign companies in finding out joint venture partners.

o To sort out operational problems.

o Maintenance and monitoring of data pertaining to domestic textile production and

foreign investment.

Foreign Investment Scenario

A new trend in recent years has been the arrival in India of expatriate and western designers

(from France, Italy, UK) who are beginning to form joint ventures with Indian designers to

cater to the domestic and export markets. Italian companies are investing in capacity

expansion and striking manufacturing, distribution and franchising deals with India Inc.

Carrera is to invest US$ 252.7 million in textile projects in India. Although direct investment

in retail remains closed to FDI as of now, companies have found alternative structures

through which they can approach Indian consumers (examples include Levi Strauss, Marks &

Spencer, Royal Sporting House, Adidas, Nike and Reebok in fashion products). There is

certainly a broader opportunity to “grow the market from inside” as companies can freely set

up fully-owned sourcing (liaison) offices, as well as marketing operations. The number of

FDI approved between 1991 and 2004 was 641 which amount to over US$ 1.02 billion.

Other legislations regarding the Textile sector

Ministry of finance has added 165 new textile products under duty drawback schedule. The

new products included wool tops, cotton yarn, acrylic yarn, viscose yarn, various blended

yarn/fabrics, fishing nets etc. Further, the existing entries in the drawback schedule relating to

garments have been expanded to create separate entries of garments made up of

(1) Cotton

(2) Man-made fibre blend and

(3) MMF

Separate rates have been prescribed for these categories of garments on the basis of

composition of textiles. After the phasing out of quota regime under the MFA, India can

envisage its textile sector becoming $100 billion industry by 2010. This will include exports

of $50 billion. The proposed targets would be achieved provided reforms are initiated in

textile sector and local manufacturers adopt measures to improve their competitiveness. A 5-

pronged strategy aiming to attract FDI by making reforms in local market, replacement of

existing indirect taxes with a single nationwide VAT, liberalization of contract norms for

textile and garments units, elimination of restrictions that cause poor operational and

organizational performance of manufacturers, was suggested.

The Union Minister said that the Board for Industrial and Financial Reconstruction (BIFR)

had approved rehabilitation schemes for sick NTC mills at a cost of Rs 39 billion. Of the 66

mills, 65 unviable mills have been closed after implementing Voluntary Retirement Scheme

(VRS) to all employees. According to him, the government has already constituted assets sale

committees comprising representatives of Central and state governments, operative agency,

BIFR, NTC and the concerned NTC subsidiary to effect sale of assets through open tender

system. Proposals for modernization of NTC mills have been made to the consultative

committee members, including formation of a committee of experts to improve management

of these mills. Even the present status of jute industry was under the scanner of the

consultative committee.

The Government had announced change from the value-based drawback rate hitherto

followed to a weight-based structure for textile exports that will discourage raw material

exports and also curtail the scope for misusing the drawback claims by boosting invoice value

of exports. NCDEX has launched its silk contract (raw silk and cocoon). With this launch, the

total number of products offered by NCDEX goes up to 27. The launch of the silk contract

will offer the entire suite of fibres to the entire value chain ranging from farmers to textile

mills. With the objective of protecting the interests of those affected by the WTO agreements

and globalisation process, Government of India jointly with NCDEX has adopted a policy of

encouraging future contracts of silk. The Government will run during the Eleventh Plan

period a Scheme for the Development and Growth of Technical Textiles (SDGT) at an outlay

of Rs 960 million to promote indigenous manufacture of technical textiles. The scheme

would also provide infrastructure support by setting up centres of excellence for manufacture

of technical textiles.

Highlights of the Foreign Trade Policy

The Hon’ble Union Minister of Commerce & Industry, Government of India, had announced

the Foreign Trade Policy on 8th April’05. Some of the Salient Features / Highlights of the

proposals pertaining to Textile Industry in general and Handlooms in particular are.

1. Formulation of Inter-State trade Council to engage State Governments in providing an

enabling environment for promotion of international trade.

2. Proposed removal of export cess on export of all agricultural and plantation

commodities levied under various Commodity Board Acts.

3. Realizing that great potential and opportunities exist in the manufacturing sector,

Annual supplement introduces a number of measures to enhance the competitiveness

of manufacturing sector.

No safeguard and antidumping duty to be levied on inputs under advance

licence for deemed export supplies made to ICB (International Competitive

Bidding) projects.

To promote accelerated export performance, balance export obligation will be

waived for the exporters completing 75% of their export obligation in half the

prescribed export obligation period.

Reduced export obligation and enhanced time available for exports under the

EPCG Scheme for the imports made by the agriculture sector.

Reduced obligation at six times the duty saved amount as against the normal

eight times for imports made by the SSI sectors under the EPCG Scheme.

EPCG Scheme will facilitate the modernization of retail sector by allowing

concessional duty imports. For this the retailer should have a minimum

covered shopping area of 1000 square meters.

4. Export of poultry and dairy products and their value added products facilitated by

granting them duty credit @ 5% of the FOB value of the exports under the Vishesh

Krishi Upaj Yojna.

5. Package has been developed for modernizing the marine sector Package allows duty

free import of inputs based on the past export performance, import of mono filament

long line system for tuna fishing at concessional duty and establishes a self removal

for clearance of waste of perishable commodities.

6. Gems & Jewellery exports –

Entitlement of duty free imports of samples enhanced to Rs. 3 lakhs.

Supply of gold of 0.995 and above purity allowed for release for export

purposes.

7. Package for EOU sector: For units debonding from EOU’s, a simplified procedure is

being worked out. Similarly, capital goods can be transferred to other units by simply

intimating Central Excise & Development Commissioner. EOUs can claim IT

exemption within a period of 12 months from the date of exports.

8. Reducing congestion at the major ports. The facility for export obligation discharge in

rupee payment under the EPCG has been extended to the minor ports, ICDs and CFS

also.

9. Procedural simplification:

Single common application form called Aayaat Niryaat Form introduced

reducing the size of the form by more than 60%.

The categories of advance licences merged into a single category

Annual advance licence, which was available only to status holders, will now be

available to all the exporters with some export performance.

Export obligation extension for five years under advance licence based on BIFR

rehabilitation package.

Bank guarantee threshold reduced for units in Agri export zones and established

service providers and a category of manufacturer exporters.

Simplified clubbing norms under the advance licence and EPCG Scheme will

help exporters in regularizing their cases.

Chartered Engineer Certificate in lieu of Central Excise Certificate for non-

excisable units and those importing spares will be accepted as installation

certificate. This will reduce the transaction time.

Imports made under Served from India Scheme can be transferable within the

group companies and managed hotels. The provision will allow bulk sourcing and

better utilization of the entitlement.

10. Handlooms:

Government has decided to develop a trademark for Handloom on lines similar to

‘Woolmark’ and ‘Silkmark’. This will enable handloom products to develop a

niche market with the distinct identity.

All Export Promotion Council shall open a separate Cell to involve and

encourage youth and women entrepreneurs in export effort.

Minister of Commerce and Industry invited Suggestions on a proposal to change

the names of Export Promotion Councils to ‘Trade Promotion Council.

All actions by Income Tax authority on DEPB benefits have been stopped by

Prime Minister with immediate effect. The matter is to be decided at economic

advisory council headed by Prime Minister in the next 30 days

Environmental Analysis and Concerns of Indian Textile Industry.

If we analyze the textile industry, the major determinants of competitiveness are both policy

and politics in the international trade and commerce. Further, the industry performance is

influenced by domestic institutional, policy, infrastructure and managerial dynamics.

In textile industry, voluntary initiatives such as Worldwide Responsible Apparel Production

(WRAP) and Apparel Industry Initiative (AIP) are attempting to instill social and

environmental standards in textile and clothing sectors. It is in this ‘buyer-driven global

commodity chain’ that India has to position itself.

Based on our experience of working with the textile industry, this article is an attempt to

briefly outline the environmental concerns and identify ways to enhance internal and external

competitiveness of textile sector.

Like every product, clothes and other textiles products affect the environment to varying

degrees throughout their life cycles, through use of chemicals, solvents and huge quantities of

water. This apart, use of energy, solid waste and effluent discharge, emit dust, fumes, etc. to

the atmosphere are major environmental concerns of textile industry.

Before textiles reach the consumer, they go through many different physical and chemical

processes. For example they may be treated with chemicals to dye, make them more hard-

wearing or wrinkle-resistant, or less flammable.

Studies have shown that some of the chemicals used in textile industry are carcinogenic and

others may trigger allergic reactions. Some flame retardants that are used in certain textiles

contain organic bromine compounds that are persistent (break down very slowly in the

environment). Textile industry is known to use restricted chemicals such as azo dyes and

formaldehyde.

Manufacturing of all variants of textiles have an impact on the environment. Usage of raw

material and other natural resource inputs such as water etc have not only resource depleting

impacts but release of effluents or emissions have natural resource degrading impacts. The

industry is known to use large quantities of water during its processing.

For example, to grow the fiber for one cotton diaper requires 105.3 gallons of water, one T-

shirt needs 256.6 gallons of water, one bath towel needs 401.4 gallons of water, a man’s dress

shirt requires 414.5 gallons of water, and 987 gallons of water are required for one pair of

jeans.

An average integrated textile mill produces 15 tons of finished cloth per day. It uses a total of

approximately 3,840 cubic meters of water per day, including 1,680 cubic meters for

finishing and processing, another 960 cubic meters for steam generation, and an equivalent

volume for serving the workers colony and other domestic uses of water. The water used for

finishing and processing results in contaminated liquid effluent of approximately 1,500 cubic

meters per day.

In Tirupur of Tamilnadu, India, annually the textile industries alone utilize around 28.8

billion liters of ground water.

Further, usage of synthetic dyes puts environmental limitation because production of these

dyes requires strong acids, alkalis, solvents, high temperatures, and heavy metal catalysts.

Since production of these dyes need very toxic and hazardous chemicals.

Environmental issues can no longer be ignored by the textiles industry and the Government.

Indian textile industry needs to realize that to remain competitive, operating costs have to be

reduced and environmental compliance has to be enhanced. Government should not only

strive to integrate environmental goals into the national textile policy but also in the plans and

programmes. Textile sector cannot have independent growth strategies that are bereft of

environmental concerns arising at various points of value chain because environmental costs

are proving to be a drag on its own long term growth and development.

To drive home the criticality of integrating environmental concerns Tirupur industrial cluster

in Tamilnadu, India is being used as illustration.

The textile industry in Tirupur was expected to achieve the targeted export of US$ 50 Billion

by the year 2010. But, such growth is now greatly hampered due to immense environmental

damage due to the effluents released from the textile units to cause to the Noyyal river,

ground water system and agricultural fields mainly due to the textile wet processing

industries in Tirupur. Textile manufacturers use energy as a raw material input to the

manufacturing process or for some other purpose usually referred to as non-fuel use.

Electricity consumption is increasing in textile mills. Textile manufacturers have to deal with

rising energy and other supply costs. For e.g. Dow Chemical Co. and DuPont both raised

prices on nearly everything they sell, from chemicals used in bathroom cleaners to freezer

bags and kitchen counter tops, because of high raw materials costs.

Understanding the value chain of textile industry will enable identifying and addressing all

sources of environmental impacts in a life cycle process. Such an integrated approach has not

been undertaken in India on environmental impacts of textile manufacturing. A

comprehensive analysis of the environmental impact of textile manufacturing activity is a

critical need of the hour and it needs to be initiated at the earliest, which includes an analysis

of the degradation by air pollution, wind, water and other agents.

A complete survey of how developments in the textile industry and consumers of its products

have affected the environment in the past needs to be taken up. This should also cover the

most recent solutions adopted by the industry to alleviate the problems. This is important

given the high textile production targets post 2005, and the ways in which the industry is

responding to the environmental challenges.

Fortunately, unlike any other country in the world, India has hand-loom sector, where

production is relatively environmentally benign. Thus, for Indian textile sector, the main

drivers for environmentally benign growth can be:

Growth of hand-loom sector

Competition

Pressure exerted down the supply chain by the consumer

Reducing production costs

Meeting current and anticipated legislative requirements

Concern for the global and local environment

Professionals at Green Stratos are currently part of several initiatives in the textile sector such

as promoting organic cotton and creating market linkages for handloom sector, use of

environment friendly dies and promotion of energy efficiency in the textile sector.

General Environment Impacts of Textile Industries

Textile processing industry is characterised not only by the large volume of water required

for various unit operations but also by the variety of chemicals used for various processes.

There is a long sequence of wet processing stages requiring inputs of water, chemical and

energy and generating wastes at each stage. The other feature of this industry, which is a

backbone of fashion garment, is large variation in demand of type, pattern and colour

combination of fabric resulting into significant fluctuation in waste generation volume and

load. Textile processing generates many waste streams, including liquid, gaseous and solid

wastes, some of which may be hazardous.

The nature of the waste generated depends on the type of textile facility, the processes and

technologies being operated, and the types of fibres and chemicals used. The textile

industry is a significant contributor to many national economies, encompassing both small

and large-scale operations worldwide. In terms of its output or production and employment,

the textile industry is one of the largest industries in the world. The textile manufacturing

process is characterised by the high consumption of resources like water, fuel and a variety

of chemicals in a long process sequence that generates a significant amount of waste. The

common practices of low process efficiency result in substantial wastage of resources and a

severe damage to the environment. The main environmental problems associated with

textile industry are typically those associated with water body pollution caused by the

discharge of untreated effluents. Other environmental issues of equal importance are air

emission, notably Volatile Organic Compounds (VOC)’s and excessive noise or odour as

well as workspace safety.

Air pollution:

Most processes performed in textile mills produce atmospheric emissions. Gaseous

emissions have been identified as the second greatest pollution problem (after effluent

quality) for the textile industry. Speculation concerning the amounts and types of air

pollutants emitted from textile operations has been widespread but, generally, air emission

data for textile manufacturing operations are not readily available. Air pollution is the most

difficult type of pollution to sample, test, and quantify in an audit.

Water pollution:

The textile industry uses high volumes of water throughout its operations, from the washing

of fibres to bleaching, dyeing and washing of finished products. On average, approximately

200 litres of water are required to produce l kg of textiles. The large volumes of wastewater

generated also contain a wide variety of chemicals, used throughout processing. These can

cause damage if not properly treated before being discharged into the environment. Of all

the steps involved in textiles processing, wet processing creates the highest volume of

wastewater.

The aquatic toxicity of textile industry wastewater varies considerably among production

facilities. The sources of aquatic toxicity can include salt, surfactants, ionic metals and their

metal complexes, toxic organic chemicals, biocides and toxic anions. Most textile dyes

have low aquatic toxicity. On the other hand, surfactants and related compounds, such as

detergents, emulsifiers and dispersants are used in almost each textile process and can be an

important contributor to effluent aquatic toxicity, BOD and foaming.

Solid waste pollution:

The primary residual wastes generated from the textile industry are non-hazardous. These

include scraps of fabric and yarn, off-specification yarn and fabric and packaging waste.

There are also wastes associated with the storage and production of yarns and textiles, such

as chemical storage drums, cardboard reels for storing fabric and cones used to hold yarns

for dyeing and knitting. Cutting room waste generates a high volume of fabric scraps,

which can often be reduced by increasing fabric utilisation efficiency in cutting and sewing.

Cleaner production is an attractive approach to tackle environmental problems associated

with industrial production and poor material efficiency. Since the cleaner production

approach has been successfully implemented in some areas in the textile sector, it shows

that significant financial saving and environmental improvements can be made by relatively

low-cost and straightforward interventions. This improves the quality of products and

minimises the cost of production, enabling the branch to compete in the global market.

Moreover, Cleaner Production also improves the company’s public image by highlighting

the steps it has taken to protect the environment.

Low Yields in Cotton

The relatively rapid gains in productivity in the predominately rainfed Central zone since

1990 are due to technological advances that, if combined with a continuation of recent

modest growth in the North and South zones, could lead to a substantial hike in national

average yields and production. While this productivity gap indicates that significant further

on farm yield improvements are possible, a range of technical, economic, and institutional

factors prevent realization of the potential of the varieties cultivated

Following are the few factors which contributes towards the low yield

• Delayed Sowing. Late sowing of cotton reduces yields by providing less optimal sunlight

conditions for crop development and, in some areas, by allowing less time for picking the

mature crop before clearing the field for the following crop. Sowing delays are caused either

by the late arrival of seasonal rainfall needed for sowing or by delays in harvesting the

preceding crop. Yield losses associated with late sowing and shortened harvest times may be

reduced by new shorter duration varieties and better management, but crop competition will

likely continue to limit yields in some areas.

• Monsoon Dependence. Erratic monsoon rainfall affects 60-70 percent of cotton area,

reducing yields through moisture stress and creating risk that reduces investment in seed,

fertilizer, and pesticide inputs. Even with improved varieties and management, average yields

in the mostly rainfed Central and South zones are likely to remain below those achieved in

other countries with more reliable rainfall.

• Poor Seed Quality. Poor seed quality is a pervasive problem in cotton cultivation. Only

about 35 percent of cotton area is sown with certified seed with assured varietal purity and

germination. Commercially available seeds are often of poor quality, with sale of uncertified,

substandard, and second generation (F2) hybrid seeds not uncommon. Although supplies of

certified seed are generally available, financial constraints lead most farmers to use retained

seeds or lower priced uncertified seeds from the market.

The proliferation of cotton varieties in markets and farmers’ fields confounds efforts to

improve seed quality, maintain varietal purity, and improve crop management practices.

Roughly 100-130 cotton varieties developed in both the public and private sectors are now

cultivated in India. A study by the Central Institute for Cotton Research (CICR) indicates that

the average cotton farmer in the Central and South zones plants 3-4 varieties on farms

averaging about 2 hectares, a practice that greatly complicates crop and seed management.

• Plant Protection. Insect and disease infestations, including bollworms, white fly, jassids,

and leaf curl virus, are significant problems in India’s three cotton production zones.

Although per hectare use of pesticides is higher for cotton than for any other crop, effective

plant protection is constrained by poor farm management, pesticide subsidies that encourage

indiscriminate use, and problems with pesticide quality. Improved on farm pest management

practices, including appropriate crop rotations, pest surveillance, pesticide applications, and

adoption of Integrated Pest Management (IPM) practices have proved difficult to implement

on small, resource constrained farms.

• Crop Management. Large gaps between average on farm yields and the potential of

existing varieties also stem from poor management practices, including use of inappropriate

varieties, seed rates, seed spacing, and fertilizer dosages. As in the case of plant protection,

improvement of crop management practices is complicated by the need to extend

recommended practices to large numbers of small, limited-resource farmers.

• Lack of Suitable Varieties. Cotton yields are affected by lack of varieties— or genotypes

— suitable for some agronomic conditions. Indian scientists cite three priorities for plant

breeding efforts: (1) higher yielding, short-duration, and pest-resistant cultivars for the

irrigated North zone, (2) higher yielding varieties for the drought-prone Central zone, and (3)

varieties suited for the soils on rice fallow common in the South zone.

Water Management issues

Water resources need to be protected from unsustainable use and pollution – between 1970

and 1995, 25% of the world’s freshwater ecosystems were lost. Agriculture takes up about

69% of global freshwater withdrawal and rice, wheat and cotton together account for 58% of

the worldwide irrigated area, making these three crops the major consumers of freshwater

(WWF, 1999). Approximately 73% of cotton is produced in irrigated fields and only 27%

under rain-fed conditions. Most irrigation systems in cotton production rely on the technique

of flood irrigation – freshwater is drawn from its source and transported to the place of its

consumption. Losses of freshwater can occur through evaporation, seepage and poor water

management. Water losses can be drastically cut through good water management practices

which are integral to the farming approach taken in the Fair trade cotton standard including

input of organic matter, crop rotation, and appropriate irrigation methods (if needed). In areas

of water shortage, appropriate measures should be taken to improve water storage and

collection systems.

Bt cotton issue

Bt cotton is one of the variety of cotton which gives the lager yield and the less quantity of

pesticides are needed because of its inbuilt pest resistance capacity. But the research was

carried out and it was found that the cotton growers who are using the Bt cotton at their farm

need to use more the amount of pesticides compared to the other normal cotton growers after

third year of the Bt cotton and the yield of the cotton goes down compared to the normal

cotton growers. So it has a major impact on the cotton growers and also the resistance of the

insect increases with the frequent use of Bt cotton.

Soil Pollution

Soil in the cotton growing region and near-by region is getting polluted because of the

excessive use of the chemical pesticides resulting into the low yield. This can be avoided by

using the organic pesticides for growing the cotton.

Pollution due to Lint

The pollution due to lint in the cotton ginning industry is very hazardous to health. Most of

the worker working at this place suffers from the lungs diseases because of the pollution

problems.

Manufacturing industries often cause a great deal of damage to the

environment through the release of both toxic and nonhazardous

wastes. As the damaging effects of chemicals become more

apparent, our society is demanding cleaner and more efficient

production methods. The U.S Environmental Protection Agency details environmental

consequences, regulations, and proposed solutions in the Office of Compliance Sector

Notebook Project: Profile of the Textile Industry.

Pollution Outputs

Wastewater is one of the largest sources of waste produced by the textile and apparel

industries. Because the production of textile and apparel goods requires many different steps,

wastewater is produced throughout the manufacturing process. High volumes of wastewater

are produced in manufacturing operations such as resizing, dyeing, rinsing, printing,

bleaching, finishing, and cleaning. In fact, each pound of goods produced can be the source

of approximately 15 gallons of waste from dyeing and rinsing processes alone. Facilities that

are involved in the dyeing of goods often turn out more than one million gallons of

wastewater each day.

The textile and apparel industries also release waste in the form of air emissions. However,

the amount of polluted air produced is relatively small in comparison to other manufacturing

industries. Small amounts of waste are emitted at various stages of production, each stage

releasing a different type of emission. Due to the high number of manufacturing stages, there

are many different types of air pollutants generated by these industries. Because there are so

many different components to the emissions of these industries, it is usually difficult to

control and measure air pollution.

Wastewater and air emissions generally receive the most attention from politicians and

consumers due to their hazardous nature. Yet, there is another set of nontoxic, residual wastes

that results from the production of textiles and apparels. A large amount of fabric waste and

other scraps are left over at the end of production. For e.g. most production methods waste

anywhere from 28 to 6 percent of fabric. Furthermore, packaging materials are not always

able to be reused or recycled.

Environmental Problems

A number of different environmental problems have been caused by the textile and apparel

industry. As previously stated, a large amount of wastewater and polluted air is generated

during production. A number of other problems arise that are not simply related to the output

waste produced. For example, a large amount of water, energy, and other valuable resources

are consumed during the production process.

Additionally, many facilities are not as environmentally sound as they could

be due to outdated equipment that is difficult and extremely expensive to

replace. Machinery is often very loud and disrupts surrounding communities.

Many employees are unqualified for their jobs and lack the training necessary to understand

the most efficient way of carrying out an assigned task. Moreover, they do not have the skills

needed to improve or recognize harmful practices. The assistance of the government is

crucial if this industry is to continually make strides in decreasing waste. However, most

businesses are currently limited by the lack of support expended by the government.

Prevention Methods and Proposals

In order to make significant changes in the wastes generated by textile and apparel

manufacturing facilities, several preventative measures must be taken. To begin with,

companies should begin to set improved regulations for the raw goods used in manufacturing.

Reusable containers should be required, and the use of harmful substances should be limited.

Individuals should be employed by company and industry executives to research and develop

new ways of producing goods using less harmful chemicals or wholly alternative treatments

altogether. Simple improvements can be made by ensuring optimal settings of equipment and

the optimal environment for the facility.

Additionally, organizations should take every step possible to reduce input amount by

recycling as much as possible and by continually updating equipment. In order to achieve a

new level of environmental responsibility, better training programs for employees must be

established. The government needs to become more involved in assisting individual facilities

and in the regulations set forth for the industry. Organizations should be encouraged to create

"eco" friendly goods.

Regulations

Like any industry, textiles and apparel must adhere to several standards so that our

environment will be preserved. The Resource Conservation and Recovery Act of 1976

regulate the treatment of hazardous materials and waste. Regulations are set for determining

what should be classified as a hazardous material, where and for how long such materials can

be stored, and treatment of the land where hazardous materials will be disposed.

A number of debates have arisen in recent years concerning cancer rates in communities

located near various manufacturing facilities. The Emergency Planning and Community

Right-To-Know Act addresses these issues by improving the knowledge of possible dangers

to surrounding communities. Furthermore, the Clean Water Act serves to keep American

bodies of water safe and clean. No other industry act is as important to our environment. The

closely related Safe Water Drinking Act requires a certain level of quality in our drinking

water. Industry businesses are limited in the wastes they produce so that drinking water will

not reach a contaminated level.

The Clean Air Act encourages safe emissions and is an attempt by the government to

improve air quality. The act has the ability to suggest emission standards that are apply to the

entire textile industry. It also allows these emissions to be screened and companies must keep

detailed records of their pollutants.

Textile Industry Sponsored Initiatives Concerning the Environment

The American Textile Partnership brings together researchers at leading universities with the

United States Department of Energy, among others. While the top priority for AMTEX is

concerned with national competitiveness, some aspects of the group deal with environmental

issues. For instance, the Textile Resource Conservation (TRec) falls under the umbrella of

AMTEX. TRec's main goal is to encourage manufacturing processes that will do as little

harm to the environment as possible. Specifically they aim to employ fewer input resources,

without creating any net waste.

Another initiative taking by many companies is called the Encouraging Environmental

Excellence (E3) program. Involvement with the program is voluntary. To be considered by

inclusion in the E3 program, companies must show a strong commitment to improving the

environment. Goals must be set, steps should be taken to prevent excessive waste and

pollution, and recycling policies improved.

Technological Environment Analysis

To continue the growing investment trend in the textiles sector and to achieve a

growth of 16 percent in value terms, it is proposed to continue with the Technology

Upgradation Fund Scheme (TUFS), which has proved to be highly successful in

increasing investment in the textiles sector.

As on 31.07.2006, projects worth Rs.44,686 crore were sanctioned under TUFS. The

growth of the TUFS has been significant during the last two years, registering a

growth of 123 percent and 127 percent over the previous years. In order to maintain

the pace of investment that has come in during the last 2 – 3 years, it is essential to

continue the Technology Upgradation Fund Scheme (TUFS) in its present form until

the end of Eleventh Five Year Plan. The Working Group is of the view that even a

slight modification in TUFS at this juncture may have an adverse psychological

impact, disrupting the investment plans of the industry and also may result in

distortion which will not be conducive for the long term growth of the industry.

Even with the capacities envisaged for the terminal year of the Eleventh Five Year

Plan, India will be significantly behind China in all the segments, especially spinning,

weaving, processing and garmenting. Currently, over 20 percent of the total

production of cotton in the country is being exported as raw cotton. Export of cotton

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (Es-timated)

0

5000

10000

15000

20000

25000

30000

35000

1320 1438 32897349

15032

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Project cost sanctioned under TUFS

(Rs.

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yarn has been simultaneously declining. Obviously, there is significant scope to

convert the raw cotton currently being exported into yarn, both for the export market

and for domestic consumption. Investments in the downstream segments of weaving

and processing is necessary to ensure that the maximum quantity of yarn produced in

the country is domestically converted into finished products, in order to meet the

increasing requirements of the garment industry. Sufficient supply of yarn and fabrics

internally will reduce the dependence of the garment industry on imported yarn and

fabrics. In short, if the country aims to move up the value chain in textiles, increasing

investment is a must. TUFS has emerged as a successful instrument in leveraging

investment in the private sector.

In China, Pakistan, Spain and several other competing countries, policy support to the

textiles and clothing industry and targets for growth in the sector have been

announced by the Government. China has proposed substantial expansion during the

next five years from its present capacities, which already are about 5 times that of

India. In order to remain competitive in the international market and to withstand

increasing competition in the domestic market, it is necessary to ensure the large

investment in modernization and expansion as envisaged in this report. This will be

possible only if the TUFS continues in its present form.

The interest rates currently applicable to the textiles and clothing industries of major

competing countries are substantially lower than the present Primary Lending Rate

(PLR) in India. Interest rates are increasing in the country and the PLR may continue

to increase during the Eleventh Plan period. Interest rates applicable to term loans in

some of the competing countries are given below:

(i) South Korea 4.50 percent p.a.

(ii) Malaysia 3.50 percent p.a.

(iii) Taiwan 2.50 percent p.a.

(iv) Thailand 5.00 percent p.a.

As against this, the current PLR in India is around 11.00 percent p.a.

The Working Group has aimed at 12 percent growth in production and 22 percent in

exports. To achieve this growth, incremental production facilities would have to be set

up. It is estimated that the requirement of funds for setting up these incremental

facilities will be approximately Rs.1,50,600 crore during the Eleventh Plan period.

This investment will not come without support from Government in the form of the

extension of TUFS.

The financial outlay during the Eleventh Plan for TUFS may appear to be high at

Rs.11,315 crore, but considering the contribution of the industry in terms of exports

and employment it is negligible.

Social Issues

Linda Golodner's "Apparel Industry Code of Conduct: A Consumer Perspective on Social

Responsibility" addresses a number of social concerns evident in the apparel industry.

Golodner’s is president of the National Consumers League.

Child Labor

Child labor is one of the leading social concerns for the apparel industry. American

companies are constantly looking for ways to reduce production costs. Child labor

specifically refers to jobs that prevent children from attaining education or jobs that could be

detrimental to the child. The increased minimum wage level and increased import costs make

it increasingly difficult for Americans to compete with overseas firms. Many apparel goods

are either produced by foreign companies or by American companies whose manufacturing

facilities are abroad.

Many foreign countries do not have restrictions on child labor laws. There are several reasons

why employing children is a common practice in many nations. Children do not need to be

paid as much as adults, they are more easily manipulated, school is not always an option, and

it is a tradition in many nations.

Labels

Labels are the key source of information available to consumers about various textile and

apparel products. Information on labels is far more likely to be looked at than information on

company websites because the contents are available immediately when looking at a product

label. Labelling often includes country of production. However, it is important to disclose

more information that this on the label - shoppers want to know other details about the

production process such labor practices, environmental consequences, and testing procedures.

Sweatshops

The apparel industry is one industry particularly affected by

sweatshops. Sweatshops infringe upon some of the most basic

rights of individuals concerning working conditions such as wages,

safety, and overtime. Furthermore, sweatshops often employ

children. Unfortunately, it is often difficult to monitor the practices

of overseas companies. Our government does not have the ability to analyze the labor

practices of all foreign plants and cannot force them to adhere to American standards.

Branding

Building Indian brands in global apparel market is necessary, because the marketers can

increase the value of their products by branding. As we all know, there are very few apparel

exporters who had attempted to create brands in the global market. Others, still supply to

international buying houses or retail chains as per the specifications and designs provided by

the buyers and most importantly the exporters put the label or brand name as stipulated by the

buyer wherein the exporters voluntarily hide their identity in the global market.

Although, the apparel exporters do have the capability to produce as per the requirement of

global market, their main lacuna is strategic thinking in creating their own brands. Let’s see

the scenario of apparel branding in domestic market.

There is cut throat competition in the market, many brands enter the market and with a short

run success they become obsolete.

This is because consumer tastes are changing fast due to the influence of cultural,

psychological and global trends and hence they are less loyal. To put salt on the wound, many

global brands are also entering the Indian market, making Indian brands clueless as to how to

survive the competition. This situation necessitates the marketers to strengthen their brands

for their stay in the market. This might be possible only when the marketers consider

branding not as a set of activities, but as a strategic thinking.

To compete in domestic as well as global market place in the long run, the marketers must

create and manage strong brands. The brand value will become a vital factor in creating loyal

customers which would pose a formidable defence in the competitive market. For example

consider the Polo Ralph Lauren brand; there are customers who would like to wear (Polo)

horse on their shirt so that people around them know that they can afford to buy a Polo Ralph

Lauren shirt. It has the stylish component, but it has also something a little extra. In reality,

the customer can purchase an almost identical shirt somewhere else, without the labelling on

it, for quite a bit less. It is the status and the reputation that the brand carries which really

promotes the brand value and encourages people to purchase the brand against the plethora of

competing brands.

Brands are cultures

Many people think that branding is nothing but just creating a brand name, advertising it, and

building the image of the brand. According to Prof Douglas B Holt of Harvard Business

School, branding is not a selected set of activities but it is a strategic point of view. Branding

requires managers to put conscious efforts to build the society’s perceived value of the

product.

Society attributes meaning to the products which would eventually become facts about the

product over the years. These facts make up the culture of the product. A brand need not just

be a name or a logo; it can also be unique design features. These features become material

markers of the brand. Customer experiences, advertisements, sponsoring activities to the

events, newspaper articles evaluating the brand and conversations with friends and colleagues

that mention the brand establish the brand culture.

Brand value

Brand culture facilitates the customer to form perceptions about the value of the brand. The

value of the brand is nothing but the difference between what a consumer will pay for a

branded product and a physically identical product without brand culture. In consumer

markets, brand value has components such as reputation, experiential and symbolism.

Reputation value

Consumers often feel the risk of unknown and also they have the tendency to reduce it by

some way or other. For example, if the consumers don’t know about the quality of the fabric

that they intend to purchase, they would perceive the purchase decision as risky. In such

situations, reputation of the brand in terms of quality offers confidence to the consumers to go

ahead with the purchase. The stories about product experiences which they hear from various

sources also act as a base for building the reputation of the brand.

Experiential value

Consumers don’t value the product on all parameters. They often jump into conclusion very

fast and become regular in buying and using particular brands based on faith. Becoming

regular with a particular brand help the customers in reducing the search costs and need for

straining the brain in analysis and decision making.

They often are not interested to investigate the evidences for the claims the brands make.

They tend to attribute certain benefits for which they buy the particular brand. Raymond

constantly promotes ’Complete man’ benefit for their suiting which is the key benefit for

which consumers go for Raymond. That’s why Raymond still remains above competition

with a leading value and volume share in the organised ready-to-stitch (RTS) market.

IMPORTANCE OF BRAND

The constantly changing market poses new challenges to clothing enterprises, and the clients’

demands are also continually rising, and so it is necessary every now and again to offer them

a higher added value. This added value is a properly planned brand strategy, the so-called

branding. Firms without any distinct features, without a clear vision or specific mission, or

without permanent values, will sink in the mass of messages hitting the market. A brand

image is defined through its selected symbolic patterns. The most important among these are

the brand’s name, logo, and composition of graphic elements and colours all associated with

the company. It is crucial for a brand built on these elements to give a clear message to the

customer about the kind of company he is dealing with, what its product is and who the

clients are. All the elements comprising a brand image have to be closely related to the idea

and goals of the company. This certainly helps its positive identification, and as a result a

strong and distinct image is created in the customers’ mind. It is important that the customer’s

mind should absorb and retain as much information about a brand as possible; some time

later this is translated into the reconcilability and prestige of a brand on the market. A brand

product offers a sense of safety, and guarantees quality and reliability. Brand values are

features that appeal to the emotional sphere of human perception

Hence a brand is the most valuable asset of a company, and customer satisfaction is the key

to a long-term success. As consumers must have a reason for selecting this given brand from

among many others, each brand should have a motto apart from its distinctive usability. It is

necessary to define why it is different and what its position is. A brand is not an

advertisement, but rather a whole philosophy underlying a set of combined actions fixed on

the company’s success. It is certainly an indispensable tool allowing effective conquest of

markets, retention of the market position, and international competition

SWOT ANALYSIS IN BRAND BUILDING

Opportunities

Indian apparels accounted for a tiny fraction of less than 3 per cent of overall world export of

apparel, suggesting an opportunity for considerable growth. There is a very large domestic

market for Indian apparel manufactures. As per McKinsey study, the market size is of Rs

20,000 crore, out of which only Rs 4,000 crore is catered to by branded apparel. So there is

still an Rs 16,000 crore market, which is catered by the unorganised small size units. The

developed nations, which are the destinations for Indian textile products, use textiles in the

form of apparel. Therefore, in order to improve the presence in these markets and capture

larger values of the chain the focus needs to be shifted towards the effective performance of

the textile apparel supply chain network, rather than looking at textile industry in isolation.

Threats

Various regulatory, technological and marketing changes were expected to affect India’s

textile industry over the next few years. For a product line characterised by unpredictable

demand pattern and seasonality on one end and highly labour intensive on other, it is

necessary to have flexibility to balance the labour force employment from time to time. There

are few factors such as infrastructure and government policies that have caused wide gap in

the economic development between India and other nations for textile industry in particular,

in spite of enjoying the benefits of abundant cheap labour, low manufacturing cost, available

raw materials and a large domestic market.

Strengths

The Indian textile industry is globally more competitive than other industries in the country

on relative terms. Most of the inputs required for this sector being available from domestic

sources and there are very little requirements of imports and precious foreign exchange. From

middle of 1990s, manufacturing units of larger capacity with upgraded technology, mostly in

collaboration with a joint venture partner were established. During the same period, Indian

consumers could see availability of international brands in domestic market, which were

made by Indian garment manufacturers. This had raised the expectation level of discerning

consumers and apparel industry faced the challenge to improve its performance from this set

of demanding consumers. Importers of Indian apparels were generally satisfied with price

and enthusiastic about the ability to source small production quantities. With the entry of

international garment companies into India, they

Determining the identity and building desirable brand image

Choosing the best project

Introducing brand to the market by means of marketing activity

Law protection of brand

Determine the needs of the customers

Controlling introduced brand on the market

Testing the product bring in new designs, new craftsmanship, modern scientific

management and also the marketing strategies.

These all can strengthen the competition mechanism so that the industry will gain more

resources for developing new products, new brand names, technology development and staff

training in order to increase the market competitiveness.

Weaknesses

The small manufacturing units lacked sophisticated planning and information system and

failed to offer scale economy. The present labour policy in a way discourages Indian apparel

units to set up large size manufacturing set up and achieve economies of scale. A large size

unit, by Indian standard, could well be the smallest in size in the competing countries like

China, Indonesia, Thailand, Bangladesh, and Sri Lanka. One major area of concern for the

Indian apparel exporters is the declining average unit value realization, which has dropped

from $ 4.44 in 1994 to $ 3.70 in 2000. This clearly reflects the Indian exporters’ inability to

move up the value chain and the threats of being branded as supplier of low end products in

the international apparel market. This leads to the question of whether it makes sense to

promote the brand image that exists at present or improve all on the weaknesses substantially

before we think of further promotion. Buyers were frustrated by delivery and production lead

times, the absence of large capacity garment manufacturers, and difficulties associated with

freight handling. The long and uncertain lead times seem to be the most serious problem,

faced by the buyers of finished textile products and apparels. At times, products are delayed

by three months, missing a season totally. In such situation, buyers normally ask for

discounts, sharing of airfreight burden or full payment of the airfreight, and in worst case

cancel the order.

Well integrated and lean supply chains: Shorter cycle and delivery times

The Indian textile industry has a long and complex supply chain. This affects not only the

cycle times, but also the delivery times. The average cycle time in the Indian textile industry

is about 45-50 days, which sometimes extends to 80 days. The mean delay in the supply

chain from procurement of raw materials and to export of finished goods is 15.5 days. Shelf

life of fashion driven products is very short (approximately 45days), hence such delays are

untenable. These delays not only affect time-to-market, but also Work-in- Progress (WIP),

variability of supply chain and hence the cost. Therefore strong deployment of industrial

engineering with particular emphasis on cellular manufacturing and JIT systems, in order to

establish lean supply chains is extremely crucial for manufacturers. Presence across the value

chain, vertical integration and investment in captive power units helps in effective demand

assessment, resulting in greater control over the supply chain and cost reduction.

Brand promotion

Brands, in today’s consumer oriented market, play an important role in terms of

market penetration and higher unit value realization. Brands assure consumers that

products are of a certain quality, durability, and conform to several social,

environmental, and quality standards. The markets of USA and Europe, which

account for more than 90 percent of Indian Apparel Exports, are entirely dominated

by various global brands, and Indian exporters are merely suppliers to such brands.

It is estimated that the final retail value of an apparel product sold to consumers in

export markets is 5-10 times higher than its ex-factory price. As a result, the country

is losing a significant amount of export earnings.

Brand development, therefore, will deepen the market share and acceptability of

Indian apparel, thereby leading to increased export earnings. However, brand

promotion is not only an expensive proposition, but also requires very carefully

designed multi-stakeholder strategy, on a sustainable basis. The capacity of Indian

industry, by virtue of being SME oriented, fragmented and decentralized, to design

and launch brand promotion efforts on its own is limited. Therefore, a Public-Private

Partnership (PPP) approach is the appropriate strategy to develop globally acceptable

Indian apparel brands.

The Indian apparel industry will be encouraged to create a Special Purpose Vehicle

(SPV) for the purpose of brand creation and promotion. The role of the SPV will

include need assessment, mobilization of resources, assistance to enterprises to design

and launch the brands in selected markets, to forge linkages with key stake holders,

and other hand-holding support. The SPV will be a Corporate body with the majority

stake being held by user apparel industry enterprises through associations / councils.

The SPV, in consultation with the Government, would develop detailed guidelines

and strategy for brand promotion.

DISTRIBUTION

The Indian Textile industry is highly fragmented sector.

Industry is fully vertically integrated across the whole value chain and interconnected

with various operations.

Textile Industry comprises small-scale, medium-scale, large-scale, non-integrated,

spinning, weaving, finishing, and apparel-making firms and enterprises.

This is an unorganized sector and includes Handlooms, Powerloom, Hosiery,

Knitting, Readymade Garments, Khadi, Carpet and Handicrafts manufacturing units.

The organized Mill Sector comprises of spinning Mills, and Composite Mills where

spinning, weaving, and processing activities are done.

The Fibre and Yarn Sector of the textile industry includes Textile Fibers, Natural

Fibers such as Cotton, Jute, Silk and Wool; Synthetic / Man-Made fibers such as

Polyester, Viscose, Nylon, Acrylic and Polypropylene.

The Man-Made Textile Sector includes Fibre and Filament Yarn manufacturing units

of Cellulosic and Non-Cellulosic origin. The Cellulosic Fibre/yarn Industry is

controlled by the Ministry of Textiles, and the Non-Cellulosic Industry is controlled

by the Ministry of Chemicals and Fertilizers.

India is the largest producer of Jute, the 2nd largest producer of Silk, the 3rd largest

producer of Cotton and Cellulosic Fibre/Yarn and 5th largest producer of Synthetic

Fibers/Yarn.

The Textile and Apparel Supply Chain

The Textile and Apparel Supply Chain comprises diverse raw material sectors, ginning

facilities, spinning and extrusion processes, processing sector, weaving and knitting factories

and garment (and other stitched and non-stitched) manufacturing that supply an extensive

distribution channel.  This supply chain is perhaps one of the most diverse in terms of the raw

materials used, technologies deployed and products produced.

This supply chain supplies about 70 per cent by value of its production to the domestic

market. The distribution channel comprises wholesalers, distributors and a large number of

small retailers selling garments and textiles. It is only recently that large retail formats are

emerging thereby increasing variety as well as volume on display at a single location. 

Another feature of the distribution channel is the strong presence of ‘agents’ who secure and

consolidate orders for producers.  Exports are traditionally executed through Export

Houses or procurement/commissioning offices of large global apparel retailers.

It is estimated that there exist 65,000 garment units in the organized sector, of which about 88

per cent are for woven cloth while the remaining are for knits.  However, only 30–40 units

are large in size (as a result of long years of reservation of non-exporting garment units for

the small scale sectors – a regulation that was removed recently).  While these firms are

spread all over the country, there are clusters emerging in the National Capital Region

(NCR), Mumbai, Bangalore, Tirupur/Coimbatore, and Ludhiana employing about 3.5 mn

people.  According to our estimate, the total value of production in the garment sector is

around Rs.1050–1100 bn of which about 81 per cent comes from the domestic market. The

value of Indian garments (e.g. saree, dhoti, salwar kurta, etc.) is around Rs.200–250 bn. 

About 40 per cent of fabric for garment production is imported – a figure that is expected to

rise in coming years.

The weaving and knits sector lies at the heart of the industry. In 2004-05, of the total

production from the weaving sector, about 46 per cent was cotton cloth, 41 per cent was

100% non-cotton including khadi, wool and silk and 13 per cent was blended cloth.  Three

distinctive technologies are used in the sector – handlooms, powerlooms and knitting

machines.  They also represent very distinctive supply chains.  The handloom sector

(including khadi, silk and some wool) serves the low and the high ends of the value chain –

both mass consumption products for use in rural India as well as niche products for urban &

exports markets.  It produces, chiefly, textiles with geographical characterization (e.g., cotton

and silk sarees in Pochampally or Varanasi) and in small batches.  Handloom production in

2003-04 was around 5493 mn.sq.meters of which about 82 per cent was using cotton fibre.

Handloom production is mostly rural (employing about 10 million, mostly, household

weavers) and revolves around master-weavers who provide designs, raw material and often

the loom.

Weaving, using powerlooms was traditionally done by composite mills that combined it with

spinning and processing operations.  Over the years, government incentives and demand for

low cost, high volume, standard products (especially sarees and grey cloth) moved the

production towards powerloom factories and away from composite mills (that were

essentially full line variety producers). While some like Arvind Mills or Ashima transformed

themselves into competitive units, others gradually closed down.   In 2003-04, there remained

223 composite mills that produced 1434 mn. sq. mts. of cloth.  Most of these mills are located

in Gujarat and Maharashtra.  Most of the woven cloth comes from the powerlooms (chiefly at

Surat, Bhiwandi, NCR, Chennai).  In 2005, there were 425,792 registered powerloom units

that produced 26,947 mn. sq. mts of cloth and employed about 4,757,383 workers.    Weaving

sector is predominantly small scale, has on an average 4.5 power looms per unit, suffers from

outdated technology, and incurs high co-ordination costs. Knits have been more successful

especially in export channels.  Strong production clusters like Tirupur and Ludhiana have led

to growth of accessories sector as well, albeit slowly. The hosiery sector, on the other hand,

has largely a domestic focus and is growing rapidly.

The spinning sector is perhaps most competitive globally in terms of variety, unit prices and

production quantity.  Though cotton is the fibre of preference, man-made fibre (polyster fibre

and polyster filament yarn) is also produced by about 100 large and medium size producers.

Spinning is done by 1566 mills and 1170 Small and Medium Enterprises (SME).  Mills,

chiefly located in North India, deploy 34.24 mn. spindles and 0.385 mn rotors while the SME

units produce their yarn on 3.29 mn spindles and 0.119 mn. rotors producing 2270 mn kg of

cotton yarn, 950 mn kg of blended yarn and about 1106 mn kg of man-made filament yarn

every year. Worsted and non-worsted spindles (producing woolen yarn) have also

progressively grown to 0.604 mn and 0.437 mn respectively.  Spinning sector is technology

intensive and productivity is affected by the quality of cotton and the cleaning process used

during ginning.

The processing sector, i.e., dyeing, finishing and printing is mostly small in scale.  The

largest amongst these would dye and finish about 5000 m/day.  The remaining are

independent process houses (or part of composite mills) that use automated large batch or

continuous processing and have an average scale of about 20,000 m of cloth daily. About

82.5 per cent or 10,397 units are hand processors who dye cloth or yarn manually and dry in

open sunshine.  Of the remaining (and these use automated and semi-automated equipment),

2076 are independent process houses.

Cotton remains the most significant raw material for the Indian textile industry.  In 2003-04,

3009 mn kg of cotton was grown over 7.785 mn acres. Other fibres produced are silk (15742

tonnes), jute (10985000 bales), wool (50.7 mn kg) and man-made fibres (1100.65 mn kg). 

Cotton grows mostly in western and central India, silk in southern India, jute in eastern and

wool in northern India.  Significant qualities of cotton, silk and wool fibres are also imported

by the spinning and knitting sectors. (Except for garments, all data in this section was

obtained from OTC 2004 and Texmin 2005.)

Managing such a complex supply chain requires coordination through excellent managerial

practices, technology and facilitating policies.

Competitiveness of Indian Textile & Apparel Industry

India is one of the few countries that own the complete supply chain in close proximity from

diverse fibres to a large market. It is capable of delivering packaged products to customers

comprising a variety of fibres, diverse count sizes, cloths of different weight and weave, and

panoply of finishes. This permits the supply chain  to mix and match variety in different

segments to deliver new products and applications.  This advantage is further accentuated by

cost based advantages and diverse traditions in textiles.

Indian strength in spinning is now well established – on unit costs on ring yarn, open-ended

(OE) yarn as well as textured yarn, Indian firms are ahead of their global competitors

including China.  Same is true on some woven OE yarn fabric categories (especially grey

fabrics) but is not true for other woven segments. India contributes about 23 per cent of world

spindles and 6 per cent of world rotors (second highest in the world after China). Fifty five

per cent of total investment in technology in the last decade has been made in the spinning

sector.  Its share in global shuttleless loom, however, is only about 2.8 per cent of world

looms (and is ranked 9th in the world). The competitiveness in the weaving sector is adversely

affected by low penetration of shuttleless looms (i.e., 1.69 % of Indian looms), the

unorganized nature of the sector (i.e., fragmented, small and, often, un-registered units, low

investment in technology & practices especially in the powerloom, processing, handloom and

knits) and higher power tariffs.  There is, however, a recent trend of investment in setting up

hi-tech, stand-alone mid-size weaving companies focusing on export markets. India also has

the highest deployment of handlooms in the world (handlooms are low on productivity but

produce specialized fabric).  While production and export of man-made fibre (and filament

yarn) has increased over the years, Indian industry still lags significantly behind US, China,

Europe, Taiwan etc.  (Texmin, 2005.)

Indian textile industry has suffered in the past from low productivity at both ends of the

supply chain – low farm yields affecting cotton production and inefficiency in garment sector

due to restriction of size and reservation.  Add to this, contamination of cotton  with

consequent increase in cost (as it affects quality and requires  installation of additional

process to clean and open cotton fibres before carding operations), poor ginning (most

equipment dates back to 1940s), high average defect rates in production process (which also

leads to increase in effective labor and power costs), hank yarn requirement, etc. and  its

competitiveness gets compromised severely. Similarly, processing technology is primarily

manual and small batch oriented with visual color matching and sun drying.  This leads to

inconsistency in conformance quality.   Lead times across the sector continue to be affected

by variability in the supply chain – defect rates average over 5%, average % of orders on time

is about 80%, variance in order size across firms is high (e.g., the coefficient of variability of

average order size for spinning firms is about 2.6), and on an average, 16 days of sales as

work-in-process inventory (the highest for garment firms) and an average of 30 days of sales

in raw material inventory (the highest for spinning firms) (Chandra 2004).   Some of the

hurdles (e.g., reservation in the garment sectors) including tariff distortions between the

organized and unorganized sectors have now been systematically removed by policy

initiatives of Government of India and have opened avenues for firms to compete on the basis

of their capabilities.

Trade data of post-MFA performance reveals some interesting trends – Indian firms

registered a 27 per cent growth in exports to US (against China’s 52 per cent) during the Jan-

April 2005 time period.  Most of this growth has been in textiles while apparels show

marginal gains. Apparels & accessories constituted 78% of global exports to USA (FICCI

2005). (India is still a relatively small yet growing player in the global apparel market.)  It is

expected that India will soon replace Mexico as the second largest apparel supplier to the US.

Challenges facing Indian Textile and Apparel Industry

Textile supply chains compete on low cost, high quality, accurate delivery and flexibility in

variety and volume. Several challenges stand in the way of Indian firms before they can own

a larger share of the global market:

Scale: Except for spinning, all other sectors suffer from the problem of scale. Indian firms are

typically smaller than their Chinese or Thai counterparts and there are fewer large firms in

India. Some of the Chinese large firms have 1.5 times higher spinning capacity, 1.25 times

denim (and 2 times gray fabric) capacity and about 6 times more revenue in garment than

their counterparts in India thereby affecting the cost structure as well as ability to attract

customers with large orders. The central tendency is to add capacity once the order has been

won rather than ahead of the demand.  Customers go where they see both capacity and

capabilities.  Large capacity typically goes with standardized products.  These firms need to

develop the managerial capabilities required to manage large work force and design an

appropriate supply chain. For the size of the Indian economy, it will have to have bigger

firms producing standard products in large volumes as well as small and mid size firms

producing large variety in small to mid size batches (the tension between the organized and

un-organized sectors will have to be addressed first, though). Then there is the need for

emergence of specialist firms that will consolidate orders, book capacities, manage

warehouses and logistics of order delivery.

Skills : Three issues must be mentioned here : (a) there is a paucity of technical manpower –

there exist barely 30 programmes at graduate engineering (including diploma) levels

graduating about 1000 students – this is insufficient for bringing about technological change

in the sector; (b) Indian firms invest very little in training its existing workforce and the skills

are limited to existing processes (Chandra 1998);  (c) there is an acute shortage of trained

operators and supervisors in India. It is expected that Indian firms will have to invest close to

Rs. 1400 bn by year 2010 to increase its global trade to $ 50 bn. This kind of investment

would require, by our calculations, about 70,000 supervisors and 1.05mn operators in the

textile sector and at least 112,000 supervisors and 2.8mn operators in the apparel sector

(assuming a 80:20 ratio of investment between textiles and apparel).  The real bottleneck to

growth is going to be availability of skilled manpower.

Cycle Time: Cycle time is the key to competitiveness of a firm as it affects both price and

delivery schedule.  Cycle time reduction is strongly correlated with high first pass yield, high

throughput times, and low variability in process times, low WIP and consequently cost. 

Indian firms have to dramatically reduce cycle times across the entire supply chain which is

currently quite high (Chandra, 2004).  Customs must provide a turnaround time of ½ day for

an order before Indian firms can they expect to become part of larger global supply chains. 

Indian firms need a strong deployment of industrial engineering with particular emphasis on

cellular manufacturing, JIT and statistical process control to reduce lead times on shop

floors.  Penetration of IT for improving productivity is particularly low in this sector.

Innovation & Technology: A review of the products imported from China to USA during

January–April 2005 reveals that the top three products in terms of percentage increase in

imports were Tire Cords & Tire Fabrics (843.4% increase over the previous year), Non-

woven fabrics (284.1% increase) and Textile/Fabric Finishing Mill Products (197.2%

increase) (FICCI, 2005). None of these items, however, figure in the list of imports from

India that have gained in these early days of post-MFA.  Entry into newer application

domains of industrial textiles, Nano-textiles, home furnishings etc. becomes imperative if we

are to grow beyond 5–6% of global market share as these are areas that are projected to grow

significantly.  Synthetic textiles comprise about 50 per cent of the global textile market. 

Indian synthetic industry, however, is not well entrenched.  The Technology Upgradation

Fund of the government is being used to stimulate investment in new processes.

However, there is little evidence that this deployment in technology has accompanied

changes in the managerial regimes – a necessary condition for increasing productivity and

order winning ability.

Domestic Market: The Indian domestic market for all textile and apparel products is

estimated at $26 bn and growing.  While the market is very competitive at the low end of the

value chain, the mid or higher ranges are overpriced (i.e., ‘dollar pricing’). Firms are not

taking advantage of the large domestic market in generating economies of scale to deliver

cost advantage in export markets. The Free Trade Agreement with Singapore and Thailand

will allow overseas producers to meet the aspirations of domestic buyers with quality and

prices that are competitive in the domestic market.  Ignoring the domestic market, in the long

run, will peril the export markets for domestic producers. In addition, high retail property

prices and high channel margins in India will restrict growth of this market.  Firms need to

make their supply chain leaner in order to overcome these disadvantages.

Institutional Support: Textile policy has come long ways in reducing impediments for the

industry – sometimes driven by global competition and, at other times, by international trade

regulations.  However, few areas of policy weakness stand out – labor reforms (which is

hindering movement towards higher scale of operations by Indian firms), power availability

and its quality, customs clearance and shipment operations from ports, credit for large scale

investments that are needed for upgradation of technology, and development of manpower

for the industry.  These are problems facing several sectors of industry in India and not by

this sector alone.

In conclusion, competitive strategies are developed by sector level firms and its their

individual and collective initiatives that secure higher market share in global trade. While one

has to be ever vigilant of non-tariff barriers in the post MFA world, the new market will be

won on the basis of capabilities across the supply chain. Policy will need to facilitate this

building of capabilities at the firm level and the flexible strategies that firms will need to

devise periodically.

Textile Industry Concerns

Indian Textile Industry is highly fragmented Industry that is lead by several small-

scale industries. Because of this, there is lack of Industry Leadership. These small

companies do not have fiscal resources to invest in technological up-gradation and

they are not able to generate economies of scale. This leads to inability to establish a

world-class competitive player.

Despite many policies Industry is bound with historical regulations that are reason for

Complex Industry Structure.

Though Industry has cheap and skilled manpower but they are less productive.

Industry is unable to generate economies of scale, as a result, it is tough to balance the

demand and supply equation.

There is lack of technological up-gradation in various steps of value chain that affect

the quality, cost and distribution.

There are high Costs like, High Indirect Taxes, Power and Interest Rates.

Inadequate Research & Development.

There is less FDI in this industry that is hurdle to make industry more competitive on

global basis.

Industry has unfavourable labor Laws.

India has disadvantage in terms of Geographic Locations. Because of this there is

Global Logistic Disadvantage as shipping cost is higher.

There is uneven supply chain model and inbound freight traffic is low which affects

cost of shipping.

India lacks in various trade memberships, which restrict to tap potential market.

Inappropriate energy supplies to rural and sub-urban areas.

Industry needs to compete on the basis of Price, Quality and Delivery for the different

segments.

THE CHALLENGES AND STRATEGY FOR GROWTH OF THE INDIAN TEXTILE

INDUSTRY

The Indian textile industry is in a stronger position now than it was in the last six

decades. The industry which was growing at 3 – 4 percent during the last six decades

has now accelerated to an annual growth rate of 9 – 10 percent. There is a sense of

optimism in the industry and textiles sector has now become a ‘sunrise’ sector.

The catalysts which have placed the industry on this trajectory of exponential growth

are a buoyant domestic economy, a substantial increase in cotton production, the

conducive policy environment provided by the Government, and the expiration of the

Multi Fibre Agreement (MFA) on 31st December’2004.

The buoyant Indian economy, growing at the rate of 8 percent, has resulted in higher

disposable income levels. The disposable income of Indian consumers has increased

steadily. The proportion of the major consuming class (population that has an annual

income of more than US$ 2000) has risen from 20 percent in 1995-96 to 28 percent in

2001-02. This is expected to move up to 35 percent by 2005-06, and to 48 percent by

2009-10. This translates into a growth of 9.3 percent over the next 8 years, and will

result in higher spending capacity, manifesting itself in the greater consumption of

textiles.

The Indian textile industry consumes a diverse range of fibres and yarn, but is

predominantly cotton based. A significant increase in cotton production during the

last two – three years has increased the availability of raw cotton to the domestic

textiles industry at competitive prices, providing it with a competitive edge in the

global market.

The Government has also provided industry a conducive policy environment and

initiated schemes which have facilitated the growth of the industry. The Technology

Mission on Cotton has increased cotton production and reduced contamination levels.

The Technology Upgradation Fund Scheme (TUFS) has facilitated the installation of

the state-of-the-art / near state-of-the-art machinery at competitive capital cost. The

rationalization of fiscal duties has provided a level playing field to all segments,

resulting in the holistic growth of the industry.

Quotas which have restrained the export growth of the Indian textile industry for over

four decades were eliminated with effect from 01.01.2005. This has unshackled

Indian exports, and this is evident from the growth registered in the quota markets.

Apparel exports to USA during 2005 have increased by 34.2 percent, while textiles

exports have increased by 16 percent. Similarly, in Europe, apparel exports have

increased by 30.6 percent and textiles exports by 2.2 percent, during the

corresponding period. In 2006 also the export growth in these two markets is

continuing with the same trend. This increasing trend in exports is expected to

continue as major global players are not inclined to source exclusively from China.

India is considered as the second most preferred destination for major global retailers

due to its strength of vertical and horizontal integration.

At this juncture, a strong foundation for industry has been laid on which world class

manufacturing units can realize their full potential and make a mark in the

international economy.

Human Resources Development

The non-availability of quality manpower is a dampener to growth in many textile

clusters. It is not only a weakness of the sector, but is fast emerging as a major threat

to the growth which has been envisaged.

The Working Group has estimated the incremental manpower requirement at 17.37

million, comprising of 12.02 million direct and 5.35 million indirect in the ancillary

industry. The maximum requirement is estimated in the clothing and apparel sector.

The current training infrastructure in the country consists of engineering colleges,

polytechnics, IITs, and agencies like Apparel Training & Development Centers

(ATDCs), Powerlooms Service Centers (PSCs), Weaving Service Centers (WSCs),

Textiles Research Associations (TRAs), ITIs, Private Vocational Training institutes

etc.

It is estimated that the output of trainees from the entire existing training

infrastructure is not even adequate to meet existing requirements. One of the critical

factors which would impact adversely on the growth process of the textiles industry is

the inadequacy of training facilities in the country. To meet the incremental

requirement for training, the Working Group suggests the following measures:-

Increasing availability of textiles machinery

The domestic textiles machinery manufacturing industry is projected to triple its capacity

during the Eleventh Five Year Plan with adequate support from the Government. However,

even with enhanced capacity, the indigenous textiles machinery industry would not be able to

meet the demands of the textile industry. For example, during the Eleventh Plan, the

incremental spindle requirement is 29.25 million (21 million incremental + 8.25 million for

replacement), at the rate of 5.85 million spindles per annum. However, the indigenous textiles

machinery industry has projected a capacity of 3.85 million spindles per annum by the end of

Eleventh Plan. Similarly, an incremental 1.09 lakh shuttleless looms are required to be

installed by the industry (20,000 by the organized sector + 88,851 by powerloom sector).

Against this requirement, the textiles machinery industry has projected a capacity of 20,000

shuttleless looms by the terminal year of the Eleventh Plan. Further, the indigenous textiles

machinery industry does not produce knitting and garmenting machinery. The Working

Group has critically examined this issue and has suggested the following three-pronged

strategy –

(i) Transfer of textile machinery industry from the Ministry of Heavy Industries to the

Ministry of Textiles – This will help to provide adequate support to domestic textiles

machinery manufacturing industry in the implementation of a time-bound action plan

to increase the availability of indigenous machinery to meet the demand from

different segments of the textiles industry. A scheme on the lines of TUFS should be

initiated, with 5 percent interest reimbursement and 10 percent capital subsidy to

encourage modernization.

(ii) Aggressive wooing of the Foreign Direct Investment (FDI) in the textiles machinery

sector - To attract reputed manufactures of textiles machinery - spinning, weaving

and processing – and invite them to set up facilities in India to meet the growing

requirements of Indian industry. One of the biggest factors that has triggered the

growth of the Chinese industry is the domestic availability of the textiles machinery.

Globally reputed textiles machinery manufacturers have set up units in China, and

have developed models which are suitable to the Chinese industry. We should also

encourage the global manufacturers to set up similar units in India to meet the

requirement of the Indian textile industry. To increase the FDI, the Working Group

recommends that Government may consider FDI proposals from textiles machinery

manufacturers on a selective basis, independent of laid down stipulations in the Press

Note No. 18.

(iii) A critical relook at importing second hand machinery – Permission to import recent

vintage (technologically comparable, and with a significant residual life) may be

given to importers along with benefits at par with those given to the import of new

machinery. Sufficient care will have to be taken that while accepting such machinery,

India should not become a technology junk yard.

Labour reforms

Rigid labour laws are now emerging as a constraint to the growth of the industry,

particularly the clothing and apparel segment. There is need to liberalise labour laws

on the following lines:

Permit use of contract labour in Export Oriented Units (EOUs): The export business

is seasonal and contractual in nature. Excess labour during lean periods or during the

initial stages of developing an export market(s), when the uncertainty of orders is

high, can lead to financial difficulties. Section 10 of the Contract Labour (Regulation

and Abolition) Act, 1970 needs to be amended. The section should exclude textile

units engaged in export related activity (where exports / deemed exports comprising

50 percent or more of their sales) to facilitate outsourcing of activities without any

restriction, as well as to offer contract appointments. Protection of the rights of these

labour will be ensured in terms of their health, safety, welfare, social security, etc.

For example, countries such as China, Bangladesh and Sri Lanka have allowed

contract labour in the textiles sector.

Permitting firms to adjust their workforce: Units employing over 100 people

currently fall under the purview of Industrial Disputes Act, 1956. The Act stipulates

that employers must obtain necessary approvals for lay-offs. This proves to be a

hindrance, especially for medium sized enterprises. There is need to relax the norms

of the Industrial Disputes Act (Chapter VB), by keeping units employing up to 500

people (presently 100) outside its purview. For example, Malaysia regards the right

to hire, assign work, reward, transfer, promote and adjust the workforce as managerial

rights. Workforce adjustment (ILO Convention on Termination of Employment) at

the instance of employer due to structural and other changes should be permitted.

Extending work hours: The Government also needs to consider the demand of labour

intensive sections of the textiles industry such as made-ups and garmenting industry

to increase the hours in a shift from nine at present to twelve, and also increase the

working hours in a week from forty eight to sixty, in order to cater to the peak season

requirements of customers, and to compensate for lower labour productivity.

Employment Conditions and Job Satisfaction

The liberalization policies of the Indian government, begun in 1991, assisted in opening up

the economy to domestic and international competition. Autarkic policies of the past decades

had limited foreign investment and prioritized the growth of domestic industry through

import substitution and public ownership of much of the means of production. Emphasis on

self-reliance had eventually led to an economic crisis, which did not help to improve working

conditions for the majority of the Indian labor force. During this period, many skilled and

unskilled workers among the population had opted for better employment opportunities in

other countries.

Despite the benefits of economic liberalization, it has not quickly solved the problem of

unemployment and other social and economic ills. Short-and long-term job losses as a result

of competition, for example, have been common, especially among the unprofitable firms.

One of the main areas of employment for many of the poor has been the cotton textile

industry with its traditional concentration of mills in the cities of Bombay, Ahmedabad, and

Coimbatore. Along with mills that use the most advanced technology to process raw cotton

and form cotton fiber, there also have existed a large number of small-scale workshops and

households that use traditional handlooms (the type used by Mahatma Ghandi) and rely on

manual labor for the processing of cotton. India's market liberalization led to the foreclosure

of much of the traditional handloom cotton industry and resulted in nearly 2.3 million

workers losing their jobs. Many of these workers have remained unemployed. Managers of

the modern mills attribute this to the older age of hand-loom workers and their inflexibility or

inability to adjust to the mechanized cotton mills.

As opposed to neighbouring China, trade unions in India play a very prominent role in the

business community. Every industry has a trade union that advocates the rights and

employment opportunities of its members. Trade unions strive to obtain the best deal for their

members in terms of wages, working conditions, acceptable remuneration, and welfare

packages. As much as 92 percent of the labor force in India is unionized. Some of the

laborers of the cotton industry have gained employment in the textile industry, which with its

labor force of 39 million is among the largest unionized industries.

Women constitute an important segment of the Indian labor force whose working conditions

have not made significant progress. Despite some noticeable advances for a small percentage

of women, women as a whole have been relegated largely to agricultural and menial pursuits

that pay the lowest wages. In some ways, as the overall economy has grown, the situation of

working women in India has even deteriorated. In 1911, for example, three-quarters of the

working women of India were agricultural workers; in 1991, the proportion was over 80

percent. Nearly 70 percent of the population as a whole derives its livelihood from land

resources, and women contribute an estimated 55 to 66 percent of the total farm labor force.

India Textile Industry is one of the leading textile industries in the world. Though was

predominantly unorganized industry even a few years back, but the scenario started changing

after the economic liberalization of Indian economy in 1991. The opening up of economy

gave the much-needed thrust to the Indian textile industry, which has now successfully

become one of the largest in the world.

Employment in textile and allied sectors

Sr. No. Sector / Industry

Employment

(In Mn. Nos.)

As on

March 2006

Projected for the terminal year of the

Eleventh PlanIncrease

I. Textile sector

1. Cotton/Man-made Fibre/Yarn Textile/Mill Sector (including SSI spinning & exclusive weaving units)

0.94 1.40 0.46

2. Man-made Fibre/Filament Yarn Industry (including texturising industry)

0.16 0.24 0.08

3. Decentralised Powerlooms Sector 4.86 5.08 0.22

4. Handloom Sector 6.50 7.00 0.50

5. Knitting Sector 0.43 0.45 0.02

6. Processing Sector 0.29 0.44 0.15

7. Woollen Sector 1.50 3.20 1.70

8. Ready Made Garment Sector

(including Knitwear Sector)5.57 11.22 5.65

9. Sericulture 5.95 7.70 1.75

10. Handicraft Sector 6.57 8.00 1.43

11. Jute Industry

i) Organised Jute Industryii) Decentralised Jute Industry

0.26

0.14

0.26

0.20

0.00

0.06

Total (I) 33.17 45.19 12.02

II. Allied Sector

1. Cottoni) Cotton Agricultureii) Cotton Ginning/Pressingiii) Cotton Trade

18.60

1.00

18.00

20.00

1.30

19.00

1.40

0.30

1.00

Sub - Total 37.60 40.30 2.70

2. Sheep rearing 1.20 2.80 1.60

3. Jute Agriculture 16.00 17.00 1.00

4. Textile machinery industry & accessories 0.05 0.10 0.05

Total (II) 54.85 60.20 5.35

Grand Total (I + II ) 88.02 105.39 17.37