China Tells a Good Story

Recent news from China is worth watching and will be helpful for framing policies to support the growth of technical textiles sector in India. This week, China reported that in 2009 its GDP grew by 8.7% from its previous year. Strikingly its fourth quarter growth in 2009 has been 10.7%. The year-on-year growth in 2009 for India has been 6.7%. China economic growth story made global news with a forecast that China may very well be the worlds second largest economy by 2010-11. How much impact this shift will have on the global economy and in particular, on Indias technical textile industry? It is well accepted that the growth of nonwovens and technical textiles sectors are related to the GDP growth of nations. Developed economies such as the US, Western Europe and Japan have followed this pattern. Will India be different? Industry associations such as the USA based Association of the Nonwoven Fabrics Industry (INDA) predict a linear relationship between the GDP growth quantified by Purchasing Power Parity (PPP) and the growth of nonwovens industry. If this hypothesis holds good for India, we will certainly have a positive growth. Discussions with many leaders over the past two months have revealed that the growth is not happening fast as expected. It is therefore necessary to create a good understanding on the factors that affect the growth of technical textiles sector in India, more importantly the relationship between Indias economic growth and the development of nonwovens and technical textiles sector.

Economic Growth and Technical Textiles Industry

Early in 2008, I predicted based on the available GDP data from World Bank that Indias technical textiles sector will grow by 13.3%. It will be convenient to state that the projected growth of Indias technical textiles sector will be in double digits. At that time, although recession was just beginning, effects of serious recession were not felt. Understandingly, the double digit growth prediction had a good bit of skeptics. Around 2008-09, Government of India commissioned a market survey on the technical textiles sector. The study carried out by ICRA Management Consultancy came out with a conclusion that the technical textiles sector will grow by 11%. This correlates more or less with my earlier empirical forecast that Indias technical textiles sector will have a double digit growth. These reports indicate that although GDP alone cannot be a gold standard to predict the growth of technical textiles sector, it still can be used as a valuable yard stick for shaping the growth of technical textiles sector. Several factors such as the economic growth as measured by GDP growth, population and its growth rate and the availability of disposable income play important roles in the growth of nonwovens and technical textiles sector. Here again, China lends us a helping hand. As indicated earlier, recent forecast on Chinas economic growth foretells China will be the second largest economy soon. How is this possible and what is the relevance with the growth forecast of Indias technical textile industry? China will push Japan to the third place even though Japans per capita GDP is 4-5 times higher than that of China. As the old adage goes, it is the number that makes all the difference. Chinas population is 1.3 billion whereas; Japans population is 128 million. The combinatorial effect of the population number and per capita GDP will do the magic to push Japan to the third place. The combinatorial effect will also play an important role in enhancing the technical textile sectors growth in India. For instance, population growth rate is on Indias side. Furthermore, the middle class consumer population will be a favorable factor. The middle class population is expected to reach half a billion by 2050. This will enable the growth of Indias technical textiles sector. A great leap will occur in Indias technical textiles industry around 2020. This decade (2010-2020) will experience growth and the industry has just started to crawl.