A five-pocket jeans is not going to work for a villager. Companies need to modify the product, not just ape the Western world. We need to have a connect with the consumer. You cannot just cater to the trouser-wearing women

Sanjay Shrenik Lalbhai, the 55-year-old chairman and managing director of Arvind, wore a denim trouser for his company's 79^th AGM on Friday. It was a conscious decision, meant to carry a message: "Denim doesn't mean just jeans. Fabric cannot be associated with a form," says the man who joined the family textile business back in 1985 and made it the world's fifth largest denim producer.

In an exclusive interview with ET, he said the Rs. 2, 700-crore firm will soon launch denim salwar-kameez and, maybe sarees, as it bets on the domestic market to beat the global blues. Excerpts:

We have a huge domestic market. Yet, 100,000 units closed down and a million jobs were lost during the year-and-half global recession. Why?

India's textile exports stand at $24 billion. When demand in the export market was falling 20%, the $35-billion domestic market growing at 4-5% could not compensate for the drop in exports. As a result, units in clusters like Tirupur had to operate at 40-50% capacities, and finally retrench.

With a revival in demand from the US & Europe ahead of Christmas, do you see a recovery in the Indian textiles sector?

US job losses to the tune of 10% hit the apparel sector the most, as impulse buying came to a halt. All big brands saw sales shrinking, as apparels are the first to go off the buying list. Now, with the stimulus package showing results, there is confidence in the economy. Apparel sales are picking up, but for the momentum to come in a big way, US consumers need to get back the feel-good factor. This we expect to happen around the second quarter of next year.

What could be an alternative export market for India?

Japan. It is a big market. Almost all Japanese companies have moved into China in joint ventures. Close to 80% of what they buy comes from China. But now, they have seen a cost escalation. So, they have now started coming to India.

Union textiles minister Dayanidhi Maran recently said, "Manufacture and make money in India". Do you see that happening?

Absolutely. We are a large population, next to China. If you take Chinese industry, it is booming. Although, its export component is huge ($220 billion), the growth is now coming from domestic consumption. In India, we need to sit with the government and figure out how can we spur domestic consumption and move more goods to the organised sector from the unorganised sector.

Our domestic market is huge at close to $35 billion. In this, the organised sector is just 7%. The organised sector is not coming up because it doesn't have the delivery mechanism and flexibility. The unorganised sector is fast, flexible, can give more options, but lacks quality and cannot offer the right ambience.

So, if you can have the ambience of an organised sector, yet not lose out on cost, that will change the game. We need to have a solid distribution mechanism and provide world-class products at affordable prices.

What is stopping you from achieving that?

In India, there are a few issues. We do not have proper distribution and infrastructure. If you want to bring down your distribution costs, you need to set up malls at the outskirts and not in the heart of the city. Only then will the rentals come down from the levels that are among the highest in the world as is the case in our major metros. Infrastructure has to develop, the real estate has to become more reasonable, land reforms need to happen. We need urban planning. So it's about policy framework also.

Coming to your favourite subject, denims, do you think the denim revolution is yet to happen in India?

Denims started in India in 1986 when we (Arvind) brought it. It is still an urban phenomenon. If the US is a one-billion meter market, we are just 300 million meter-strong in India despite having four-times more people than in the US. Denims should grow close to 30-40% in India. Denim as a lifestyle will soon become acceptable to every Indian. Why wouldn't villagers wear it?