Description
It highlited the Report on textile industry from indian perspective. India is one of the few countries which have a presence across the entire value chain of the Textile and Apparel Industry. A well defined strategy will enable India’s textile industry to shift focus to “Value – Added” products. The greatest value addition in the textile chain is generated in the apparel segment.
Group 2: 31230 Kshitiz Saxena 31231 Senthil Prabhu 31232 Vikrant Sharma 31233 Konika Sharma 31234 Tanmaya Singh 31292 Jagannadha Vedula
Global Marketing: Product Market Study
Textiles & Garments
Industry: Textiles and Garments Textiles are a very important sector for the Indian economy. It is the second largest in terms of direct employment (about 35 m people). Besides, it has a very important role to play at the country?s macroeconomic level. Just to put things in perspective, the sector contributes to almost 14% of the industrial production and about 35% of the gross export earnings. The sector?s contribution to the GDP stands at over 6%. Due to all of the above, the growth of the industry has a bearing on the development of the economy, especially exports. Regulatory framework: Multi-Fibre Agreement-1974, ATC-1995 Trade in textiles and clothing was governed by the Multi-fibre Arrangement (MFA) prior to 1995. MFA was an instrument under the garb of which, developed nations protected their domestic textile industry by imposing quotas on imports from other countries. In 1995, Agreement on Textile and Clothing (ATC) was signed. On December 31, 2004, the quota regime ended and countries are now free to trade. All textile items have been removed from the reservation list in 2005. This is of particular benefit to developing nations like India, who can then have free access to the developed world. The Multi-Fibre Agreement was set up in 1974 as a set of formal quota agreements and restrictions, governing textiles and the clothing trade between developing countries and the developed world. The MFA replaced the 1964 Agreement in International Trade in Cotton Textiles. There are a number of reasons cited for the introduction of the MFA, although the most widely accepted is that of the developed world using it as a form of protectionism to secure their own textile industries against the threat posed by low-cost competition from less developed countries. „However, by giving quotas to individual nations, it also gave them a guaranteed share of the rich countries.? (BBC News, 2004) This is in contrast to some other justifications for the MFA, for example „a major aim of the multi-fibre agreement has been to provide greatest scope for newly industrialised countries to increase their share of world trade in textile products whilst at the same time maintaining some stability for textile production in the developed economies.? (Griffiths and Wall, 1997) The quotas, operated under the Agreement on Textiles and Clothing (ATC), were originally introduced under the MFA. A key feature of these quotas is that they are imposed only by a subset of countries and only on exports from a subset of exporters. (Hamilton, 1990) Another important feature is that the importers allow exporters to allocate the quotas and hence potentially to benefit from the higher prices in the restricted markets. (Martin, Manole and Van Der Mensbrugghe, 2004)
The following supply and demand diagrams outline the theoretical affects of imposing quotas such as the MFA. The diagram assumes that world supply is perfectly elastic, and represented by point Pw, the point of production assuming free trade. Production of clothes and textiles in the developed economy is represented by 0Q1; and the level of demand for these products is represented by 0Q2. There is clearly a difference between the level supplied and demanded at this price; therefore, the developed world needs to import Q2-Q1 from the developing world economies.
(Taken from Griffiths & Wall, 1997)
Assume now the introduction of the MFA, which is represented by the implementation of a quota, Q3-Q1, limiting imports from the developing economies to the developed world. The total supply into the developed economies is now represented by SH+Q, which results in a price rise from Pw to Pw?, and a reduction in demand from Q2 to Q5. In turn, the level of imports from the developing nations is reduced by the amount Q3 – Q1. The imposition of the MFA therefore, leads to a situation of reduced consumer surplus, indicated by area 1+2+3+4. There is however, an area of producer surplus, indicated by area 1 on the diagram, although the quota leaves a net welfare loss represented by area 2+3+4. This diagram explains the principles of the MFA as a quota system, and its effects. However, the MFA operates under a system where some countries are restricted and others are not. The following diagram looks at the effects of this situation.
(Adapted from Faini, De Melo and Takacs, 2001)
The assumptions for this diagram are as follows: there are two countries exporting an identical textile product. D represents the demand curve for developed countries, and S1 and S2 are supply curves for two developing countries exporting to the developed country. If free trade existed, then P0 would be the equilibrium price, and each country would export at levels X1 and X2 respectively, where their supply curves intersect at P0. The MFA is now used to introduce an export quota on country 2, placing a cap on the number of imports, reflected by level Q2. Country 2?s supply curve now becomes vertical at the level of the quota, because they cannot export further goods beyond this point. The total level of supply to the developed world now becomes S1+SQ2, raising the equilibrium price to P1. The level of exports from the country without a quota now increases to XQ1, to compensate for the loss of exports from the other country. This diagram shows the inefficiencies created by implementing the MFA, through its restriction of imports from low-cost countries, shifting production to higher costs countries. If the MFA were removed, allowing the developing countries to produce at a cheaper rate then the production savings are represented by the grey area on the diagram. Therefore, consumers in developed countries pay more for their goods, and LDCs, subject to quotas, cannot generate the level of export earnings which they otherwise could. There is an argument that developing countries actually benefit through the MFA, because they receive „quota rents?, meaning they receive higher prices than they would be guaranteed in a free market, as shown by area 1 on the first diagram above. However, this is not likely to be a valid argument given that a study by Balassa and Michalopoulos (1985) showed that the value of lost output, as highlighted by the diagrams, exceeds the quota rent by 9 times to the US, and by 7 times to the EU. In addition, „quotas on imports of textiles in the US have restricted the supply of certain apparel products and increased their price by as much as 70%? (Tanzea, 2000 cited in Hill). It is therefore argued that „the bilateral quotas that make up the MFA arbitrarily divide up markets and prevent trade flows from efficiently allocating production and efficiently distributing goods among consumers in different countries.? (Faini, De Melo and Takacs, 2001) In 1994, as part of the Uruguay Round of multilateral trade negotiations, it was decided that the MFA should be phased-out by January 1st 2005, as part of the Agreement on Textiles and Clothing. This was to ensure that the clothing and textile industry become better aligned with the principles of WTO, and the promotion of free trade. There will be a number of beneficiaries from the removal of the MFA, although large scale and low cost producers are likely to benefit most, such as China, India and Pakistan. China is going to be by far the largest gainer from removal of quotas, the level of Chinese clothing exports raised from 11 million units in 1995 to 213 million units in 2004.
Market Access The removal of the MFA is unlikely to benefit everyone, and smaller producers, and those with higher costs, such as South Africa, may lose out from its removal. Competition levels are also likely to increase following the removal of quotas, with those countries which depend on clothing and textiles exports likely to suffer the most, such as Mauritius, Bangladesh, and Lesotho. „The end of a global quota system means that Cambodia will have to compete with larger and cheaper rivals, like China and Vietnam. The garment industry provides jobs for 270,000 people in Cambodia and is the country?s biggest industry by some distance.? (BBC News, 2004) The removal of quotas is likely to have political, consumer and efficiency implications for the countries involved. Politically, this is likely to test the ability of the WTO to influence multinational trading agreements. As shown in the diagrams above, consumers stand to gain benefit from a welfare gain due to lower prices. The knock-on effect of removing quotas should also be an overall increase in efficiency as greater competition is introduced into the market, and removes the distortions to world market prices. Thus the implementation of the MFA led to a situation of consumer welfare loss in developed countries, and a loss of potential export earnings for LDCs, and the inability to exploit their comparative advantage in this area. Value Chain in the Textile Industry
Textile Exports: Many textile manufacturers export their material in the form of yarn, fabric, made ups, etc. Only 35% have shown to have any kind of quality certifications. The average capacity utilization among exporting companies is relatively higher compared with those selling only in the domestic market. The major export destinations are the US and Europe, with over 70% of the companies necessarily exporting to these countries. Another upcoming segment is home furnishings. On an average they export over 90% of their output, followed by garment firms, which on an average export 82% of their produce.
Emerging opportunities: Africa, Japan, EU There are not too many players existing in these markets. US market has showed a slowdown. In Africa demand for home-furnishings is increasing as standards of living grow. Also quality is not a big concern as of now. In Europe fashion industry is ever growing. Therefore scope for processed fabrics. The main competitor is China, it raised export tax rebates for textiles to 13%. Market Size, pattern and growth The Indian textile industry is one of the oldest and most significant industries in the country. This is evident from the fact that the textile industry accounts for around 4 per cent of the gross domestic product (GDP), 14 per cent of industrial production and 16 per cent of the country's total export earnings. In fact, it is the largest foreign exchange earning sector in the country. Moreover, it provides employment to over 35 million people. With direct linkages to the rural economy and the agriculture sector, it is estimated that one out of every six households in the country depends on this sector, either directly or indirectly, for its livelihood. The Indian textile industry is estimated to be around US$ 52 billion and is likely to reach US$ 115 billion by 2012. The domestic market is likely to increase from US$ 34.6 billion to US$ 60 billion by 2012. It is expected that India's share of exports to the world would also increase from the current 4 per cent to around 7 per cent during this period. With China leading the global textile trade, India ranks
second with 8 per cent of the total. India contributes to nearly 4 per cent of total textile exports and 3 per cent of total apparel exports in the world. India's textile exports have shot up from US$ 18.71 billion in 2006-07 to US$ 20.25 billion in 2007-08, registering a growth of over 8 per cent. The India Advantage The textiles and apparels sector is a major contributor to India?s economy in terms of foreign exchange earnings and employment. Moreover, certain natural advantages and external factors have fuelled the growth of this industry with a clear competitive edge. India has overtaken the US to become the world's second largest cotton producing country, after China, according to a study by International Service for the Acquisition of Agri-biotech Application. BT cotton was a major factor contributing to higher rate of production, from 15.8 million bales in 2001-02 to 31 million bales in 2007-08. ? ? ? ? ? ? ? India is the largest exporter of yarn in the international market and has a share of 25 per cent in world cotton-yarn exports. India accounts for 12 per cent of the world's production of textile fibres and yarn. In terms of spindleage, the Indian textile industry is ranked second, after China, and accounts for 23 per cent of the world's spindle capacity. The country has the highest loom capacity, including handlooms, with a share of 61 per cent in world loomage. India is the largest producer of jute in the world. It is the second largest producer of silk and the only country to produce all four varieties of silk – mulberry, tusar, eri and muga. India is the fifth largest producer of synthetic fibres/yarn.
Indian Textile Industry: Changing Profile The Indian textile industry has embarked on an ambitious programme of modernisation and technological upgradation in recent years to transform the textile sector from a state of lowtechnology level to a producer of high-technology products. Technological upgradation in India has resulted in ? A shift from commodity-based trading to high value-added fashion garments. ? Vertical integration and horizontal consolidation of production process leading to lowering of manufacturing costs. ? Improved productivity gains. ? Efficient supply chain management. ? Development of economies of scale.
Textiles and Apparel Trade The global textiles and apparel trade is estimated at US$ 450 billion and is expected to touch US$ 700 billion by 2010. Of the US$ 52-billion Indian textile and apparel industry, the domestic industry accounts for US$ 30 billion and the remaining is accounted for by exports. Total exports increased to US$ 20.25 billion in 2007-08 from US$ 14.03 billion in 2004-05. Currently, India has a 3.5-4 per cent share in the world's export of textiles and 3 per cent in clothing exports. As per the latest figures available with the Ministry of Textiles, India exported textiles worth US$ 10.518 billion during the first six months (April-September) of 2008-09, an increase of 7.15 per cent over the corresponding period last year. Indian textiles, handlooms and handicrafts are exported to more than a 100 countries. Target Market As per the latest figures available with the Ministry of Textiles, during the April-September period of 2008-09, the US continued to be the single largest buyer of Indian textiles with a 20.31 per cent share. The US is followed by UAE with 8.27 per cent share, UK with 7.53 per cent, Germany with 6.11 per cent and France with 3.80 per cent. The other countries that make the top 10 include Italy (3.76 per cent), China (2.54 per cent), Spain (2.76 per cent), Bangladesh (2.45 per cent) and Netherlands (2.44 per cent). Readymade garments (RMG) are the largest export segment, accounting for almost 45 per cent of total textile exports and 8.2 per cent of India's total exports. This segment has benefitted significantly with the termination of the Multi-Fibre Arrangement (MFA) in January 2005. RMG exports from India were worth US$ 8.87 billion in 2007-08. During April-May 2008-09 RMG exports were worth US$ 1.567 billion, an increase of 11.56 per cent over the corresponding period of 2007-08. Exports of cotton textiles have increased by nearly 42 per cent to US$ 1.075 billion in April-May 2008-09, up from US$ 756.16 million in the corresponding period of the previous fiscal. Moreover, export of manmade textiles has increased by almost 47 per cent to US$ 604 million in April-May 2008-09 from US$ 410 million in the corresponding period last fiscal. During April-May 2008-09, exports of silk increased by 16.65 per cent to US$ 117.35 million, export of wool increased by 28.67 per cent to US$ 75 million and exports of jute increased by 35.31 per cent to US$ 55.44 million. Significantly, apparel is the second largest retail category in India. It accounts for about 10 per cent of the US$ 37 billion Indian retail market, and with the continuing boom in consumer demand, is estimated to grow at the rate of 12-15 per cent annually. In fact, reflecting the huge opportunity in this segment, AT Kearney's 'Retail Apparel Index' ranks India as the third most attractive market for apparel retailers.
Investments in the Textile Sector: Domestic market India's liberalised policies and the government's decision to allow 100 per cent FDI in the emerging textiles industry has led to an increase in the investment inflows into the sector. In the last three years, the sector has attracted a total investment of US$ 5,770 million. The cumulative Foreign Direct Investment (FDI) made in this sector between 1991 and 2007 has been US$ 575 million, representing 1.22 per cent of the total FDI attracted by the country. The domestic textiles and apparels market in India is witnessing strong growth owing to a young population, an increase in disposable incomes and a rapid growth in organised retail, which has fuelled the growth of the textiles market. Consequently, the domestic market is estimated to grow to over US$ 50 billion by 2014. Significantly, the textile sector is estimated to offer an incremental revenue potential of no less than US$ 50 billion by 2014 and over US$ 125 billion by 2020. As per the Ministry of Textiles, during the three years - 2004-05 to 2006-07 - investments in the textile sector have increased from US$ 2.94 billion to US$ 7.85 billion. Textile and Apparel Sourcing According to the Confederation of Indian Industry–Ernst & Young Textiles and Apparel Report 2007, the Indian sourcing market is estimated to grow at an annual average rate of 12 per cent from an expected market size of US$ 22 billion-25 billion in 2008 to US$ 35 billion-37 billion by 2011. Simultaneously, world's cutting edge fashion brands such as Hugo Boss, Diesel and Liz Claiborne are stepping up their sourcing from India. More international brands are queuing up to source from India, through vendors or wholly-owned units. German kidswear brand Kanz, Ireland's biggest linen manufacturer Baird McNutt, and Finnish textile major Ahlstrom are buying into the India garment story. Even consumer spending on apparel in India has grown over the last five years, touching the global benchmark of 5 per cent of the total income, according to consultancy firm McKinsey. Technical Textiles Technical or functional textiles are those textiles that have some functional properties attached to it and are different from traditional textiles that are merely used for adoration. Technical textiles have become an „emerging industry? with the Indian market size of technical textiles likely to jump to US$ 12.46 billion by 2010.
Competition in market
In terms of labour cost per hour, India already enjoys : ? A significant competitive edge over developed countries like USA; UK and Italy ? Some competitive edge over newly-industrialised economies like Hong Kong; Taiwan, Mexico, Southern Europe and coastal China ? Relatively no competitive edge over mainland China, Pakistan and Bangladesh
India’s Presence across the “Value Chain”
Conclusion India is one of the few countries which have a presence across the entire value chain of the Textile and Apparel Industry. A well defined strategy will enable India?s textile industry to shift focus to “Value – Added” products. The greatest value addition in the textile chain is generated in the apparel segment.
doc_663642597.docx
It highlited the Report on textile industry from indian perspective. India is one of the few countries which have a presence across the entire value chain of the Textile and Apparel Industry. A well defined strategy will enable India’s textile industry to shift focus to “Value – Added” products. The greatest value addition in the textile chain is generated in the apparel segment.
Group 2: 31230 Kshitiz Saxena 31231 Senthil Prabhu 31232 Vikrant Sharma 31233 Konika Sharma 31234 Tanmaya Singh 31292 Jagannadha Vedula
Global Marketing: Product Market Study
Textiles & Garments
Industry: Textiles and Garments Textiles are a very important sector for the Indian economy. It is the second largest in terms of direct employment (about 35 m people). Besides, it has a very important role to play at the country?s macroeconomic level. Just to put things in perspective, the sector contributes to almost 14% of the industrial production and about 35% of the gross export earnings. The sector?s contribution to the GDP stands at over 6%. Due to all of the above, the growth of the industry has a bearing on the development of the economy, especially exports. Regulatory framework: Multi-Fibre Agreement-1974, ATC-1995 Trade in textiles and clothing was governed by the Multi-fibre Arrangement (MFA) prior to 1995. MFA was an instrument under the garb of which, developed nations protected their domestic textile industry by imposing quotas on imports from other countries. In 1995, Agreement on Textile and Clothing (ATC) was signed. On December 31, 2004, the quota regime ended and countries are now free to trade. All textile items have been removed from the reservation list in 2005. This is of particular benefit to developing nations like India, who can then have free access to the developed world. The Multi-Fibre Agreement was set up in 1974 as a set of formal quota agreements and restrictions, governing textiles and the clothing trade between developing countries and the developed world. The MFA replaced the 1964 Agreement in International Trade in Cotton Textiles. There are a number of reasons cited for the introduction of the MFA, although the most widely accepted is that of the developed world using it as a form of protectionism to secure their own textile industries against the threat posed by low-cost competition from less developed countries. „However, by giving quotas to individual nations, it also gave them a guaranteed share of the rich countries.? (BBC News, 2004) This is in contrast to some other justifications for the MFA, for example „a major aim of the multi-fibre agreement has been to provide greatest scope for newly industrialised countries to increase their share of world trade in textile products whilst at the same time maintaining some stability for textile production in the developed economies.? (Griffiths and Wall, 1997) The quotas, operated under the Agreement on Textiles and Clothing (ATC), were originally introduced under the MFA. A key feature of these quotas is that they are imposed only by a subset of countries and only on exports from a subset of exporters. (Hamilton, 1990) Another important feature is that the importers allow exporters to allocate the quotas and hence potentially to benefit from the higher prices in the restricted markets. (Martin, Manole and Van Der Mensbrugghe, 2004)
The following supply and demand diagrams outline the theoretical affects of imposing quotas such as the MFA. The diagram assumes that world supply is perfectly elastic, and represented by point Pw, the point of production assuming free trade. Production of clothes and textiles in the developed economy is represented by 0Q1; and the level of demand for these products is represented by 0Q2. There is clearly a difference between the level supplied and demanded at this price; therefore, the developed world needs to import Q2-Q1 from the developing world economies.
(Taken from Griffiths & Wall, 1997)
Assume now the introduction of the MFA, which is represented by the implementation of a quota, Q3-Q1, limiting imports from the developing economies to the developed world. The total supply into the developed economies is now represented by SH+Q, which results in a price rise from Pw to Pw?, and a reduction in demand from Q2 to Q5. In turn, the level of imports from the developing nations is reduced by the amount Q3 – Q1. The imposition of the MFA therefore, leads to a situation of reduced consumer surplus, indicated by area 1+2+3+4. There is however, an area of producer surplus, indicated by area 1 on the diagram, although the quota leaves a net welfare loss represented by area 2+3+4. This diagram explains the principles of the MFA as a quota system, and its effects. However, the MFA operates under a system where some countries are restricted and others are not. The following diagram looks at the effects of this situation.
(Adapted from Faini, De Melo and Takacs, 2001)
The assumptions for this diagram are as follows: there are two countries exporting an identical textile product. D represents the demand curve for developed countries, and S1 and S2 are supply curves for two developing countries exporting to the developed country. If free trade existed, then P0 would be the equilibrium price, and each country would export at levels X1 and X2 respectively, where their supply curves intersect at P0. The MFA is now used to introduce an export quota on country 2, placing a cap on the number of imports, reflected by level Q2. Country 2?s supply curve now becomes vertical at the level of the quota, because they cannot export further goods beyond this point. The total level of supply to the developed world now becomes S1+SQ2, raising the equilibrium price to P1. The level of exports from the country without a quota now increases to XQ1, to compensate for the loss of exports from the other country. This diagram shows the inefficiencies created by implementing the MFA, through its restriction of imports from low-cost countries, shifting production to higher costs countries. If the MFA were removed, allowing the developing countries to produce at a cheaper rate then the production savings are represented by the grey area on the diagram. Therefore, consumers in developed countries pay more for their goods, and LDCs, subject to quotas, cannot generate the level of export earnings which they otherwise could. There is an argument that developing countries actually benefit through the MFA, because they receive „quota rents?, meaning they receive higher prices than they would be guaranteed in a free market, as shown by area 1 on the first diagram above. However, this is not likely to be a valid argument given that a study by Balassa and Michalopoulos (1985) showed that the value of lost output, as highlighted by the diagrams, exceeds the quota rent by 9 times to the US, and by 7 times to the EU. In addition, „quotas on imports of textiles in the US have restricted the supply of certain apparel products and increased their price by as much as 70%? (Tanzea, 2000 cited in Hill). It is therefore argued that „the bilateral quotas that make up the MFA arbitrarily divide up markets and prevent trade flows from efficiently allocating production and efficiently distributing goods among consumers in different countries.? (Faini, De Melo and Takacs, 2001) In 1994, as part of the Uruguay Round of multilateral trade negotiations, it was decided that the MFA should be phased-out by January 1st 2005, as part of the Agreement on Textiles and Clothing. This was to ensure that the clothing and textile industry become better aligned with the principles of WTO, and the promotion of free trade. There will be a number of beneficiaries from the removal of the MFA, although large scale and low cost producers are likely to benefit most, such as China, India and Pakistan. China is going to be by far the largest gainer from removal of quotas, the level of Chinese clothing exports raised from 11 million units in 1995 to 213 million units in 2004.
Market Access The removal of the MFA is unlikely to benefit everyone, and smaller producers, and those with higher costs, such as South Africa, may lose out from its removal. Competition levels are also likely to increase following the removal of quotas, with those countries which depend on clothing and textiles exports likely to suffer the most, such as Mauritius, Bangladesh, and Lesotho. „The end of a global quota system means that Cambodia will have to compete with larger and cheaper rivals, like China and Vietnam. The garment industry provides jobs for 270,000 people in Cambodia and is the country?s biggest industry by some distance.? (BBC News, 2004) The removal of quotas is likely to have political, consumer and efficiency implications for the countries involved. Politically, this is likely to test the ability of the WTO to influence multinational trading agreements. As shown in the diagrams above, consumers stand to gain benefit from a welfare gain due to lower prices. The knock-on effect of removing quotas should also be an overall increase in efficiency as greater competition is introduced into the market, and removes the distortions to world market prices. Thus the implementation of the MFA led to a situation of consumer welfare loss in developed countries, and a loss of potential export earnings for LDCs, and the inability to exploit their comparative advantage in this area. Value Chain in the Textile Industry
Textile Exports: Many textile manufacturers export their material in the form of yarn, fabric, made ups, etc. Only 35% have shown to have any kind of quality certifications. The average capacity utilization among exporting companies is relatively higher compared with those selling only in the domestic market. The major export destinations are the US and Europe, with over 70% of the companies necessarily exporting to these countries. Another upcoming segment is home furnishings. On an average they export over 90% of their output, followed by garment firms, which on an average export 82% of their produce.
Emerging opportunities: Africa, Japan, EU There are not too many players existing in these markets. US market has showed a slowdown. In Africa demand for home-furnishings is increasing as standards of living grow. Also quality is not a big concern as of now. In Europe fashion industry is ever growing. Therefore scope for processed fabrics. The main competitor is China, it raised export tax rebates for textiles to 13%. Market Size, pattern and growth The Indian textile industry is one of the oldest and most significant industries in the country. This is evident from the fact that the textile industry accounts for around 4 per cent of the gross domestic product (GDP), 14 per cent of industrial production and 16 per cent of the country's total export earnings. In fact, it is the largest foreign exchange earning sector in the country. Moreover, it provides employment to over 35 million people. With direct linkages to the rural economy and the agriculture sector, it is estimated that one out of every six households in the country depends on this sector, either directly or indirectly, for its livelihood. The Indian textile industry is estimated to be around US$ 52 billion and is likely to reach US$ 115 billion by 2012. The domestic market is likely to increase from US$ 34.6 billion to US$ 60 billion by 2012. It is expected that India's share of exports to the world would also increase from the current 4 per cent to around 7 per cent during this period. With China leading the global textile trade, India ranks
second with 8 per cent of the total. India contributes to nearly 4 per cent of total textile exports and 3 per cent of total apparel exports in the world. India's textile exports have shot up from US$ 18.71 billion in 2006-07 to US$ 20.25 billion in 2007-08, registering a growth of over 8 per cent. The India Advantage The textiles and apparels sector is a major contributor to India?s economy in terms of foreign exchange earnings and employment. Moreover, certain natural advantages and external factors have fuelled the growth of this industry with a clear competitive edge. India has overtaken the US to become the world's second largest cotton producing country, after China, according to a study by International Service for the Acquisition of Agri-biotech Application. BT cotton was a major factor contributing to higher rate of production, from 15.8 million bales in 2001-02 to 31 million bales in 2007-08. ? ? ? ? ? ? ? India is the largest exporter of yarn in the international market and has a share of 25 per cent in world cotton-yarn exports. India accounts for 12 per cent of the world's production of textile fibres and yarn. In terms of spindleage, the Indian textile industry is ranked second, after China, and accounts for 23 per cent of the world's spindle capacity. The country has the highest loom capacity, including handlooms, with a share of 61 per cent in world loomage. India is the largest producer of jute in the world. It is the second largest producer of silk and the only country to produce all four varieties of silk – mulberry, tusar, eri and muga. India is the fifth largest producer of synthetic fibres/yarn.
Indian Textile Industry: Changing Profile The Indian textile industry has embarked on an ambitious programme of modernisation and technological upgradation in recent years to transform the textile sector from a state of lowtechnology level to a producer of high-technology products. Technological upgradation in India has resulted in ? A shift from commodity-based trading to high value-added fashion garments. ? Vertical integration and horizontal consolidation of production process leading to lowering of manufacturing costs. ? Improved productivity gains. ? Efficient supply chain management. ? Development of economies of scale.
Textiles and Apparel Trade The global textiles and apparel trade is estimated at US$ 450 billion and is expected to touch US$ 700 billion by 2010. Of the US$ 52-billion Indian textile and apparel industry, the domestic industry accounts for US$ 30 billion and the remaining is accounted for by exports. Total exports increased to US$ 20.25 billion in 2007-08 from US$ 14.03 billion in 2004-05. Currently, India has a 3.5-4 per cent share in the world's export of textiles and 3 per cent in clothing exports. As per the latest figures available with the Ministry of Textiles, India exported textiles worth US$ 10.518 billion during the first six months (April-September) of 2008-09, an increase of 7.15 per cent over the corresponding period last year. Indian textiles, handlooms and handicrafts are exported to more than a 100 countries. Target Market As per the latest figures available with the Ministry of Textiles, during the April-September period of 2008-09, the US continued to be the single largest buyer of Indian textiles with a 20.31 per cent share. The US is followed by UAE with 8.27 per cent share, UK with 7.53 per cent, Germany with 6.11 per cent and France with 3.80 per cent. The other countries that make the top 10 include Italy (3.76 per cent), China (2.54 per cent), Spain (2.76 per cent), Bangladesh (2.45 per cent) and Netherlands (2.44 per cent). Readymade garments (RMG) are the largest export segment, accounting for almost 45 per cent of total textile exports and 8.2 per cent of India's total exports. This segment has benefitted significantly with the termination of the Multi-Fibre Arrangement (MFA) in January 2005. RMG exports from India were worth US$ 8.87 billion in 2007-08. During April-May 2008-09 RMG exports were worth US$ 1.567 billion, an increase of 11.56 per cent over the corresponding period of 2007-08. Exports of cotton textiles have increased by nearly 42 per cent to US$ 1.075 billion in April-May 2008-09, up from US$ 756.16 million in the corresponding period of the previous fiscal. Moreover, export of manmade textiles has increased by almost 47 per cent to US$ 604 million in April-May 2008-09 from US$ 410 million in the corresponding period last fiscal. During April-May 2008-09, exports of silk increased by 16.65 per cent to US$ 117.35 million, export of wool increased by 28.67 per cent to US$ 75 million and exports of jute increased by 35.31 per cent to US$ 55.44 million. Significantly, apparel is the second largest retail category in India. It accounts for about 10 per cent of the US$ 37 billion Indian retail market, and with the continuing boom in consumer demand, is estimated to grow at the rate of 12-15 per cent annually. In fact, reflecting the huge opportunity in this segment, AT Kearney's 'Retail Apparel Index' ranks India as the third most attractive market for apparel retailers.
Investments in the Textile Sector: Domestic market India's liberalised policies and the government's decision to allow 100 per cent FDI in the emerging textiles industry has led to an increase in the investment inflows into the sector. In the last three years, the sector has attracted a total investment of US$ 5,770 million. The cumulative Foreign Direct Investment (FDI) made in this sector between 1991 and 2007 has been US$ 575 million, representing 1.22 per cent of the total FDI attracted by the country. The domestic textiles and apparels market in India is witnessing strong growth owing to a young population, an increase in disposable incomes and a rapid growth in organised retail, which has fuelled the growth of the textiles market. Consequently, the domestic market is estimated to grow to over US$ 50 billion by 2014. Significantly, the textile sector is estimated to offer an incremental revenue potential of no less than US$ 50 billion by 2014 and over US$ 125 billion by 2020. As per the Ministry of Textiles, during the three years - 2004-05 to 2006-07 - investments in the textile sector have increased from US$ 2.94 billion to US$ 7.85 billion. Textile and Apparel Sourcing According to the Confederation of Indian Industry–Ernst & Young Textiles and Apparel Report 2007, the Indian sourcing market is estimated to grow at an annual average rate of 12 per cent from an expected market size of US$ 22 billion-25 billion in 2008 to US$ 35 billion-37 billion by 2011. Simultaneously, world's cutting edge fashion brands such as Hugo Boss, Diesel and Liz Claiborne are stepping up their sourcing from India. More international brands are queuing up to source from India, through vendors or wholly-owned units. German kidswear brand Kanz, Ireland's biggest linen manufacturer Baird McNutt, and Finnish textile major Ahlstrom are buying into the India garment story. Even consumer spending on apparel in India has grown over the last five years, touching the global benchmark of 5 per cent of the total income, according to consultancy firm McKinsey. Technical Textiles Technical or functional textiles are those textiles that have some functional properties attached to it and are different from traditional textiles that are merely used for adoration. Technical textiles have become an „emerging industry? with the Indian market size of technical textiles likely to jump to US$ 12.46 billion by 2010.
Competition in market
In terms of labour cost per hour, India already enjoys : ? A significant competitive edge over developed countries like USA; UK and Italy ? Some competitive edge over newly-industrialised economies like Hong Kong; Taiwan, Mexico, Southern Europe and coastal China ? Relatively no competitive edge over mainland China, Pakistan and Bangladesh
India’s Presence across the “Value Chain”
Conclusion India is one of the few countries which have a presence across the entire value chain of the Textile and Apparel Industry. A well defined strategy will enable India?s textile industry to shift focus to “Value – Added” products. The greatest value addition in the textile chain is generated in the apparel segment.
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