Unlike other countries, Indian textile industry has dominant share in the country's economy:

• At Rs 1,430 bn, accounts for 6% of the GDP
• At USD 12 bn, accounts for 30% of India's exports
• Provides employment to 18% of India's workforce

Despite having good potential, India's participation in global trends in Textiles so far was comparatively limited and constrained due to trade barriers in the form of quotas and internal inefficiencies. However, the industry will witness structural changes in the years to come like

• Sourcing pattern changing towards integration - Global retailers preferring to source directly from vertically integrated textile players
• Vertical integration order of the day
• Size determines bargaining power - Global buyers are looking at reducing no of vendors & hence opting for large vertically integrated players

The government in the latest budget has identified the textile industry as a thrust sector. Some of the measures like reduction in import duties on textile machinery, 10% capital subsidy for new investment in processing in addition to TUFS benefit will mobilize and encourage new investment in Textile industry. These measures will enhance conviction by creating favorable investment climate to mobilize necessary funds to double share of India's world trade.

However, the present labour laws may continue to be a constraining factor in mobilizing investment at a pace at which it is intended.

In the last two years, Arvind Mills has undertaken expansion projects in garments (Jeans- 4 Mn Pcs pa, trousers-1.5 Mn Pcs pa, shirts garments- 4.8 Mn Pcs pa and knits garments- 4 Mn Pcs pa) to the tune of Rs 50 crores besides normal capital expenditure in other divisions like denim and shirting fabrics. All the expansion projects were completed during FY05.

Among the new projects undertaken by Arvind are:

• Exploring to expand the shirts garment facility by another 1.5 Million pieces per annum.
• The company has acquired 53.4% equity of Arvind Brands Limited, an associate company engaged in the business of marketing and manufacturing of branded apparel in India, to make it 100% subsidiary.
• The company is expanding its denim operations and putting up a new denim dyeing and processing plant for manufacturing 10 Million meters per annum of fabric. With this addition the total denim capacity would be augmented to 120 Million meters per annum Rs.80 crores are to be installed by outside investors. These units would operate as dedicated job work units, with company entering into long-term supply contract with these units.
• The garment operations of the company currently operating at single shift would be converted into two shift operations during 2005-06. This will increase its installed capacity from about 13 Million pieces per annum to 20 Million pieces per annum

Company refrains from providing guidance on the financial performance. However, Arvind Mills is building operational capabilities to take advantage of the potential arising out of removal of quotas post 2005 by rapidly implementing plans in vertical integration.