The Textile Sector in India ranks next to Agriculture. Textile is one of India’s oldest industries and has a formidable presence in the national economy in as much as it contributes to about 14 per cent of manufacturing value-addition, accounts for around one-third of our gross export earnings and provides gainful employment to millions of people. The textile industry occupies a unique place in our country. One of the earliest to come into existence in India, it accounts for 14% of the total Industrial production, contributes to nearly 30% of the total exports and is the second largest employment generator after agriculture.
Textile Industry is providing one of the most basic needs of people and the holds importance; maintaining sustained growth for improving quality of life. It has a unique position as a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing; it is a major contribution to the country's economy. This paper deals with structure, growth and size of the Indian textile industry, role of textile industry in economy, key advantages of the industry, textile industry export and global scenario and strength, weakness, opportunities and treats of the Indian textile industry.
The Indian textile industry is one of the largest in the world with a massive raw material and textiles manufacturing base. Our economy is largely dependent on the textile manufacturing and trade in addition to other major industries. About 27% of the foreign exchange earnings are on account of export of textiles and clothing alone. The textiles and clothing sector contributes about 14% to the industrial production and 3% to the gross domestic product of the country. Around 8% of the total excise revenue collection is contributed by the textile industry. So much so, the textile industry accounts for as large as 21% of the total employment generated in the economy. Around 35 million people are directly employed in the textile manufacturing activities. Indirect employment including the manpower engaged in agricultural based raw-material production like cotton and related trade and handling could be stated to be around another 60 million.
A textile is the largest single industry in India (and amongst the biggest in the world), accounting for about 20% of the total industrial production. It provides direct employment to around 20 million people. Textile and clothing exports account for one-third of the total value of exports from the country. There are 1,227 textile mills with a spinning capacity of about 29 million spindles. While yarn is mostly produced in the mills, fabrics are produced in the powerloom and handloom sectors as well. The Indian textile industry continues to be predominantly based on cotton, with about 65% of raw materials consumed being cotton. The yearly output of cotton cloth was about 12.8 billion m (about 42 billion ft). The manufacture of jute products (1.1 million metric tons) ranks next in importance to cotton weaving. Textile is one of India’s oldest industries and has a formidable presence in the national economy inasmuch as it contributes to about 14 per cent of manufacturing value-addition, accounts for around one-third of our gross export earnings and provides gainful employment to millions of people. They include cotton and jute growers, artisans and weavers who are engaged in the organised as well as decentralised and household sectors spread across the entire country.
INDIAN TEXTILE INDUSTRY STRUCTURE AND GROWTH
India’s textile industry is one of the economy’s largest. In 2000/01, the textile and garment industries accounted for about 4 percent of GDP, 14 percent of industrial output, 18 percent of industrial employment, and 27 percent of export earnings (Hashim). India’s textile industry is also significant in a global context, ranking second to China in the production of both cotton yarn and fabric and fifth in the production of synthetic fibers and yarns.
In contrast to other major textile-producing countries, mostly mostly small-scale, nonintegrated spinning, weaving, cloth finishing, and apparel enterprises, many of which use outdated technology, characterize India’s textile sector. Some, mostly larger, firms operate in the “organized” sector where firms must comply with numerous government labor and tax regulations. Most firms, however, operate in the small-scale “unorganized” sector where regulations are less stringent and more easily evaded.
The unique structure of the Indian textile industry is due to the legacy of tax, labor, and other regulatory policies that have favored small-scale, labor-intensive enterprises, while discriminating against larger scale, more capital-intensive operations. The structure is also due to the historical orientation towards meeting the needs of India’s predominately low-income domestic consumers, rather than the world market. Policy reforms, which began in the 1980s and continued into the 1990s, have led to significant gains in technical efficiency and international competitiveness, particularly in the spinning sector. However, broad scope remains for additional reforms that could enhance the efficiency and competitiveness of India’s weaving, fabric finishing, and apparel sectors.
Structure Of India’s Textile Industry
Unlike other major textile-producing countries, India’s textile industry is comprised mostly of small-scale, nonintegrated spinning, weaving, finishing, and apparel-making enterprises. This unique industry structure is primarily a legacy of government policies that have promoted labor-intensive, small-scale operations and discriminated against larger scale firms:
• Composite Mills. Relatively large-scale mills that integrate spinning, weaving and, sometimes, fabric finishing are common in other major textile-producing countries. In India, however, these types of mills now account for about only 3 percent of output in the textile sector. About 276 composite mills are now operating in India, most owned by the public sector and many deemed financially “sick.”
• Spinning. Spinning is the process of converting cotton or manmade fiber into yarn to be used for weaving and knitting. Largely due to deregulation beginning in the mid-1980s, spinning is the most consolidated and technically efficient sector in India’s textile industry. Average plant size remains small, however, and technology outdated, relative to other major producers. In 2002/03, India’s spinning sector consisted of about 1,146 small-scale independent firms and 1,599 larger scale independent units.
• Weaving and Knitting. Weaving and knitting converts cotton, manmade, or blended yarns into woven or knitted fabrics. India’s weaving and knitting sector remains highly fragmented, small-scale, and labor-intensive. This sector consists of about 3.9 million handlooms, 380,000 “powerloom” enterprises that operate about 1.7 million looms, and just 137,000 looms in the various composite mills. “Powerlooms” are small firms, with an average loom capacity of four to five owned by independent entrepreneurs or weavers. Modern shuttleless looms account for less than 1 percent of loom capacity.
• Fabric Finishing. Fabric finishing (also referred to as processing), which includes dyeing, printing, and other cloth preparation prior to the manufacture of clothing, is also dominated by a large number of independent, small scale enterprises. Overall, about 2,300 processors are operating in India, including about 2,100 independent units and 200 units that are integrated with spinning, weaving, or knitting units.
• Clothing. Apparel is produced by about 77,000 small-scale units classified as domestic manufacturers, manufacturer exporters, and fabricators (subcontractors).
Growth of Textile Industry
India has already completed more than 50 years of its independence. The analysis of the growth pattern of different segment of the industry during the last five decades of post independence era reveals that the growth of the industry during the first two decades after the independence had been gradual, though lower and growth had been considerably slower during the third decade. The growth thereafter picked up significantly during the fourth decade in each and every segment of the industry. The peak level of its growth has however been reached during the fifth decade i.e., the last ten years and more particularly in the 90s. The Textile Policy of 1985 and Economic Policy of 1991 focussing in the direction of liberalisation of economy and trade had in fact accelerated the growth in 1990s. The spinning spearheaded the growth during this period and man-made fibre industry in the organised sector and decentralised weaving sector.
Size of Textile Industry in India
• The textile industry in India covers a wide gamut of activities ranging from production of raw material like cotton, jute, silk and wool to providing high value-added products such as fabrics and garments to consumers.
• The industry uses a wide variety of fibres ranging from natural fibres like cotton, jute, silk and wool to man made fibres like polyester, viscose, acrylic and multiple blends of such fibres and filament yarn.
• The textile industry plays a significant role in Indian economy by providing direct employment to an estimated 35 million people, by contributing 4 per cent of GDP and accounting for 35 per cent of gross export earnings. The textile sector contributes 14 per cent of the value-addition in the manufacturing sector.
• Textile exports during the period of April-February 2003-2004 amounted to $11,698.5 million as against $11,142.2 million during the same period in the previous year, showing an increase of around 5 per cent.
• Estimates say that the textile sector might achieve about 15 to 18 per cent growth this year following dismantling of MFA.
ROLE OF INDIAN TEXTILE INDUSTRY IN THE ECONOMY
Textile industry plays a significant role in the economy. The Indian textile industry is one of the largest and most important sectors in the economy in terms of output, foreign exchange earnings and employment in India. It contributes 20 per cent of industrial production, 9 per cent of excise collections, 18 per cent of employment in industrial sector, nearly 20 per cent to the country’s total export earnings and 4 per cent ton the GDP. The sector employs nearly 35 million people and is the second highest employer in the country. The textile sector also has a direct link with the rural economy and performance of major fibre crops and crafts such as cotton, wool, silk, handicrafts and handlooms, which employ millions of farmers and crafts persons in rural and semi-urban areas. It has been estimated that one out of every six households in the country depends directly or indirectly on this sector.
India has several advantages in the textile sector, including abundant availability of raw material and labour. It is the second largest player in the world cotton trade. It has the largest cotton acreage, of about nine million hectares and is the third largest producer of cotton fibre in the world. It ranks fourth in terms of staple fibre production and fourth in polyester yarn production. The textile industry is also labour intensive, thus India has an advantage.
The key advantages of the Indian industry are:
• India is the third largest producer of cotton with the largest area under cotton cultivation in the world. It has an edge in low cost cotton sourcing compared to other countries.
• Average wage rates in India are 50-60 per cent lower than that in developed countries, thus enabling India to benefit from global outsourcing trends in labour intensive businesses such as garments and home textiles.
• Design and fashion capabilities are key strengths that will enable Indian players to strengthen their relationships with global retailers and score over their Chinese competitors.
• Production facilities are available across the textile value chain, from spinning to garments manufacturing. The industry is investing in technology and increasing its capacities which should prove a major asset in the years to come.
• Large Indian players such as Arvind Mills, Welspun India, Alok Industries and Raymonds have established themselves as 'quality producers' in the global market. This recognition would further enable India to leverage its position among global retailers.
• India has gathered experience in terms of working with global brands and this should benefit Indian vendors.
With a view to raise India's share in the global textiles trade to 10 per cent by 2015 (from the current 3 per cent), the Ministry of Textiles proposes 50 new textile parks. Out of the 50, 30 have been already sanctioned by the government (with a cost of US$ 710 million). Set up under the Scheme for Integrated Textile Parks (SITP), this initiative will not only make the industry cost competitive, but will also enhance manufacturing capacity in the sector.
Apart from the above, a series of progressive measures have been planned to strengthen the textile sector in India:
• Technology Mission on Cotton (TMC)
• Technology Upgradation fund Scheme (TUFS)
• Setting up of Apparel Training and Design Centres (ATDCs)
• 100 per cent Foreign Direct Investment (FDI) in the textile sector under automatic route.
• Setting up two design centres in Gujarat in collaboration with National Institute of Fashion Technology.
• Setting up a Handloom Plaza in Ahmedabad with an estimated investment of US$ 24.6 million.
• Revival plans of the mills run by National Textiles Corporation (NTC). Already, for the revival of 18 textile mills, US$ 2.21 million worth of machineries has been ordered for the upgradation and modernisation of these mills.
• Setting up a handloom mall with an investment of US$ 24.6 million at Jehangir Mill in Ahmedabad.
• Scrapping of the Textile Committee cess being collected from the textile and textile machinery industry under the Textile Committee Act.
In a further bid to bolster the envisaged annual growth rate of 11 per cent, the Government will also increase the TUF (Technology Upgradation Fund) from US$ 124 million in 2006-07 to US$ 211 million in 2007-08.
The Government of India has also included new schemes in the Annual Plan for 2007-08 to provide a boost to the textile sector. These include schemes for Foreign Investment Promotion to attract foreign direct investment in textiles, clothing and machinery; Brand Promotion on Public-Private Partnership (PPP)) approach to develop global acceptability of Indian apparel brands; Trade Facilitation Centres for Indian image branding; Fashion Hubs for creation of permanent market place for the benefit of Indian fashion industry; Common Compliance Code to encourage acceptability among apparel buyers and Training Centres for Human Resource Development on Public Private Partnership (PPP) mode.
INDIAN TEXTILE INDUSTRY
In textile Scenario
In exports Cotton yarns, fabric, made ups etc made largest chunk with US$ 3.33 Billion or 26.5% in textiles category, and Ready Made garments (RMG)-cotton including accessories made largest chunk with 4.67 Billion US $ or 37.1 % of total exports. Whereas, manmade yarn and fabrics in textiles group and RMG–Man made fibers constituted second position in the two categories, respectively. Carpets and woolen garments are other items exported from India.
In global scenario
Developed countries' exports declined from 52.2% share in 1990 to 37.8 % in 2002. And that of developing countries increased from 47.8% to 62.2 % in the same period. In 2003 the exports figures in percentage of the world trade in Textiles Group (for select countries) were:
The above chart clearly shows that export of world trade in textile group. Among world textile group EU occupies 34.80% of export, next China at 15.90%, USA at 6.40%, Republic of Korea at 6.00% Taipei, Ch at 5.50%, India and Japan at 3.80% respectively, Pakistan at 3.40%, turkey at 3.10% and Mexico at 1.20%.
In Clothing Sector the figures were as below in 2003 in percentage of total experts globally:
In this sector the exports have declined for EU (15) from 42% to 26.5% in period 1980-2003 whereas of China increased from 4% to 23% and of India from 1.7% to 2.9% only. We can see that developing countries' share in textiles had declined and in clothing it has increased sharply.
Textiles contributed 20% of India's exports to about US $ 12.5 Billion. The Quota Countries mainly USA, EU (15) and Canada constituted 70 % of total garment exports and 40% of India's textiles exports. In non-quota countries UAE is the largest market with 7% of textile exports and 10% of garment exports from India.
The exports of readymade garments as per AEPC certification data for the last five years are as follows: -
**Qty in Million PCs and Value in Million US$.
The above table clearly depicts the export of readymade garments for the last five years. In the year of 2001-2002 the value of export of readymade garment is 395.23 and in the year 2005-2006 the value is 8200.00. From 2001-2002 it started increasing and in the year 2004-2005 it declines and again in the year 2005-2006 it increases.
INDIAN TEXTILE INDUSTRY – SWOT ANALYSIS
» India has rich resources of raw materials of textile industry. It is one of the largest producers of cotton in the world and is also rich in resources of fibres like polyester, silk, viscose etc.
» India is rich in highly trained manpower. The country has a huge advantage due to lower wage rates. Because of low labor rates the manufacturing cost in textile automatically comes down to very reasonable rates.
» India is highly competitive in spinning sector and has presence in almost all processes of the value chain.
» Indian garment industry is very diverse in size, manufacturing facility, type of apparel produced, quantity and quality of output, cost, and requirement for fabric etc. It comprises suppliers of ready-made garments for both, domestic or exports markets.
» Knitted garments manufacturing has remained as an extremely fragmented industry. Global players would prefer to source their entire requirement from two or three vendors and the Indian garment units find it difficult to meet the capacity requirements.
» Industry still plagued with some historical regulations such as knitted garments still remaining as a SSI domain.
» Labour force giving low productivity as compared to other competing countries.
» Technology obsolescence despite measures such as TUFS.
» Low bargaining power in a customer-ruled market.
» India seriously lacks in trade pact memberships, which leads to restricted access to the other major markets.
» Indian labour laws are relatively unfavorable to the trades and there is an urgent need for labour reforms in India.
» Low per-capita domestic consumption of textile indicating significant potential growth.
» Domestic market extremely sensitive to fashion fads and this has resulted in the development of a responsive garment industry.
» India's global share is just 3% while China controls about 15%. In post-2005, China is expected to capture 43% of global textile trade.
» Companies need to concentrate on new product developments.
» Increased use of CAD to develop designing capabilities and for developing greater options.
» Competition in post-2005 is not just in exports, but is also likely within the country due to cheaper imports of goods of higher quality at lower costs.
» Standards such as SA-8000 or WARP have resulted in increased pressure on companies for improvement of their working practices.
» Alternative competitive advantages would continue to be a barrier.
The Indian textile industry has a significant presence in the Indian economy as well as in the international textile economy. Its contribution to the Indian economy is manifested in terms of its contribution to the industrial production, employment generation and foreign exchange earnings. The industry also contributes significantly to the world production of textile fibres and yarns including jute. In the world textile scenario, it is the largest producer of jute, second largest producer of silk, third largest producer of cotton and cellulosic fibre\yarn and fifth largest producer of synthetic fibre\yarn. Textile Industry is providing one of the most basic needs of people and the holds importance; maintaining sustained growth for improving quality of life. The Government of India has also included new schemes in the Annual Plan for 2007-08 to provide a boost to the textile sector. These include schemes for Foreign Investment Promotion to attract foreign direct investment in textiles, clothing and machinery etc.
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