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3. Role of BIG Retail Buyers
More than any other factor, the entry of the BIG retailers in India like Reliance, Bharati - Walmart, Aditya Birla Group, Tata-Trent are going to have a significant impact on the future direction of textile and clothing industry. Though presently organized retailer's penetration is only 3 percent in India, it is expected to grow to around 12-15 percent by 2012. As clothing form an important aspect or organized retail, the sale of clothing through organized retail chain shops can go more than 15-20 percent of total sales of clothings. This would still be much less than US, where the 24 biggest retailers account for 98 percent of apparel sales. The position in EU is also similar.
Now, the international experience suggests that these high-volume retail chains, because of their large distribution network and considerable buying power, exert a great deal of control over prices and dictate quality terms. Already there are reports of Reliance chain dictating a particular price for jeans. The retail experience has two other features as well. First is 'lean retailing' which allows retailers to maintain lean inventory, but will coerce suppliers for 'rapid replenishment' of goods. Second is the concept of 'full packaging' in that the retailer would not buy fabric from different sources and then get converted into apparels again from different sources, but would prefer a 'full package' solution from a limited member of sources.
Thus, the increasing presence of major retailers in India would result into even greater formal and informal vertical integration and horizontal consolidation in the sector, as also enhancing the quality trends. The pressure on margins will serve to reduce inefficiencies in the system by way of further modernization, consolidation and integration. The best outcome, however is the increase in the demand of fabric and hence increase in the size of the sector.
E. Any Risk Factors? Conclusions
Any major downturn in the Indian economy, and to a lesser extent, a downturn in the global economy, can seriously decelerate consumer spending including clothing purchase, which would have a strong negative impact on this sector. To that extent the global and domestic economic factors can seriously affect the growth and progress of this sector.
The conclusion of Free-Trade Agreements especially with Asian countries (who are otherwise our strong competitor in this field, though not in high technological sector) can have a deleterious effect on the domestic industry if Rules of Origin clause is not fully and strongly adhered to.
The China factor is always present, and especially after 2008, when the quantitative restrictions on China are removed from the major US and EU markets, the impact would be felt by all textiles and clothing producing countries including India. Indeed a foretaste of China's impact could be seen in 2005- the first year of quota removal- when China's export surged by almost 60% in all major areas. In effect, India has been provided a window of opportunity till this period and it behoves on the textile entrepreneurs to significantly modernize and consolidate their industries.
In conclusion, it must be understood that despite the recent advances in this sector, India has still a very long way to go. The industry is still quite fragmented and requires significant modernization and consolidation. Hence heavy investment in this sector must be continued for next several years, building further on the recent positive trends. The Industry will also have to introduce greater fashion and design elements so as to have a much higher per unit value realization than at present.
On government's part, all forward looking schemes including TUFS requires to be continued at least till the next five years, so that Indian industry is in a strong position to face the global competition. The Scheme for Integrated Textile Parks of the government is also expected to go a long way in providing for informal consolidation and integration in the sector.
Only a coordinated effort by all - government, industry and individual units, can make India achieve its apparently high and stretch targets of 2012. The next five years are thus indeed a period of reckoning when the future directions of the Indian textile and clothing sector will be set for all times to come. This period 2007-12 will also show whether India has successfully grabbed the momentous and unprecedented opportunity that has come its way.
About the author:
 Shri Jagadip Narayan Singh is a 1983 Batch of IAS Officer and presently working as Textile Commissioner, Government of India. He started his Civil Service career as Assistant Collector, Veraval, Gujarat in 1984.Since 1984; he held different position in various offices and departments of Government of Gujarat. Among important positions he held was Joint Managing Director, Gujarat Industrial Development Corporation, Director (Marketing) of Gujarat Alkalies and Chemicals, M.D. of Gujarat Industries Power Company Ltd. and Secretary (Information Technology) in Gujarat.
He was born in Patna, (Bihar) on 2nd May 1959. He has a bright academic career, ranker in SSC, topped in J. N. University and topper with Distinction in Management Studies from Asian Institute of Management, Philippines.
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