Industry Structure and Developments
The textile industry is one of the oldest industry in the country and is playing important role in the Indian economy. The textile industry has a very complex structure with hand spun and hand woven sector on one side and capital intensive and sophisticated mill sector on the other side. The textile industry contributes around 13% of the total industrial production, 4% to the GDP and it is second employer after agriculture accounting for 19% of total work force of the country. It also contributes to Forex around 16%.
As of end December, 2005, the world’s total installed spindleage was around 188 million. With 37 million spindles India accounted for 20% of the world’s spindleage. As of February ’07, India’s installed spindleage expanded to 39.3 million.
The production for the year 2006-07 has been projected at around 3730 million kgs i.e, a growth of over 8% as compared to last year. The share of cotton yarn accounts for 72% of total spun yarn. It is expected that growth of the total market for textile and garments will increase from 53 billion USD in 2006 to 110 billion USD by March, 2012. To achieve this, it is estimated that 29 million additional spindles would be required. Therefore, the future scope for capacity expansion and modernization is promising in the long run.
The Cotton Advisory Board has estimated the Indian Cotton crop at 270 Lakh bales for the year 2006-07 against 240 lakh bales for the year 2005-06. The product yield has also increased to 503 kgs per hectare from 478 kgs in 2005-06. This is mainly due to higher production of Hybrids and BT Cotton. The cotton prices have also shown firm trend in line with international cotton prices.
According to International Cotton Advisory Committee (ICAC), the global cotton production is estimated at 25.31 million tons for the year 2006-07 and 25.22 million tons for the year 2007-08. The world cotton consumption is estimated at 26.19 million tons in 2006-07 and 26.70 million tons for the year 2007-08. Since the consumption is expected to be more than the supply, it is likely that cotton price for the year 2007-08 will be marginally higher. However, the recent strengthening of rupee against USD will also make imported cotton cheaper in Indian scenario.
According to the survey released in June, the trend of increasing mill usage in developing countries will continue through 2007-08. India’s total exports of cotton is likely to go down by 12 lakh bales ( 170 kg each ), from the record 10 lakh tones ( 44 lakh bales ) in 2006-07 to 7 lakh tones ( 32 lakh bales ) in 2007-08. The domestic consumption is expected to increase by 6 per cent to 1.9 crore bales this year.
Exports of cotton yarn during 2004-05 were 448 million kgs, which increased to 552 million kgs in 2005-06. Exports of cotton yarn is projected at 600 million kgs during the year 2006-07.
India is a large supplier of cotton yarn in world market. Pakistan is also going stronger for its supply of cotton yarn on account of its advantageous factors like favourable exchange rate, cheaper power tariff and lower wage cost and also it continues to import extra long staple cotton for manufacture of fine counts of yarn for its exports. Pakistan’s exports of cotton yarn are largely of coarse and medium counts and as such India continues to hold the upper position in terms of value.
Opportunities and Threats
The future of Indian Textile Industry is highly depending on availability of raw material at a competitive price. With the introduction of Hybrids and BT Cotton, the cotton production in India is increasing every year. The government is making efforts to supply proper quality seeds at a reasonable price to the growers and it is expected that the supply of quality cotton will be comfortable.
In the past, the Textile Industry did not develop in an organized manner and the policy favoured fragmentation resulting in organized players suffering heavily because of the distorted fiscal structure. Fortunately, in the last few years, the Government has now provided level playing field to all the sectors of textile industry and therefore, large investments are coming in the textile industry. Government had given good incentives under Technology Upgradation Fund Scheme and also benefits to the processing sector, which will give boost to the textile industry.
Risks and Concerns
The dismantling of quota has resulted in open global competition and every country has to become cost competitive and efficient. India suffers on account of high transaction cost, poor infrastructure, uncertainty about continuation of export incentives, high cost of labour and power. However, the Government will make its best efforts to provide competitive environment to the textile industry.
Raw Cotton, an agricultural product is the key raw material used for the manufacture of cotton yarn and is dependent on monsoon. Adequate availability of raw cotton at the right prices is crucial. Any disruption in the supply and / or volatile changes in the cost structure can affect the profitability.
The present inflationary conditions in the country has resulted in unprecedented frequent increase in the rate of interest on borrowings from the Banks and Institutions. Continuing such increase in the interest rate has created an element of uncertainty in the interest costs. Spinning units are highly capital intensive and has to maintain large raw material inventory levels due to its seasonality.
Apart from the intensification of international competition, the areas of concern are poor infrastructure resulting in higher transaction cost, inadequate Drawback rates which do not fully refund unrebated taxes, high cost of power and Government’s limitation to introduce labour reforms. However, Government is aware to these issues and it is hoped that satisfactory solutions will emerge in due course.
About the Author:
Jitendra R. Ajmeri, Senior Lecture in Textile Technology Department of Sarvajanik College of Engineering and Technology, Surat.
Phone Number: 0261-2240145 / 147
E- Mail ID: firstname.lastname@example.org.
Experience includes: Technical Officer in Weaving Preparatory Department of New Shorrock Mills, Nadiad (A Division of Mafatlal Industries Limited) for more than one year and Executive Marketing in Garden Engineering (A Division of Garden Silk Mills Limited), Surat for more than two years and more than nine years as a Lecturer.
Holds B.Text. Tech. and M.Text. Engg. From M.S.University, Baroda. Has to his credit 04 Presentations, 37 technical papers published in various National and International Textile Journals and 09 papers in proceedings. Guest Editor of Texmach India, a leading bi-monthly textile magazine published from Mumbai.
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