The Indian textile industry is experiencing a significant turnaround with an overall growth projection of 15-20% in the coming years. This positive trend was already noticeable in the second quarter and notably improved during the fourth quarter. Several external factors have contributed to this growth, contrasting with the previous growth rate of 8%. These factors include recovering demand from the USA and Europe, as well as favorable raw material prices. Additionally, the increased cost of manufacturing in China and power shortages in some Asian nations like Bangladesh and Sri Lanka have further supported this trend.

Questions arise in light of this resurgence:

(1) Is this growth sustainable?
(2) Is it the right time to invest in modern technology within the textile, technical textile, and textile machinery segments?
(3) Is it appropriate to extend policy support to ensure growth and sustainability?

Present Status

India is the second-largest producer of cotton, which is a crucial raw material for its textile industry. The four major cotton-producing countries in the world are China, India, the USA, and Pakistan, together accounting for approximately three-quarters of global cotton production. China leads as the largest cotton producer, despite having half the land area dedicated to cotton production compared to India. India's challenge lies in improving productivity and yield.

In addition to cotton, India possesses a strong base of other textile fibers, including silk, jute, polyester, viscose, and other synthetic fibers.

Several Indian states, such as Gujarat, Maharashtra, Tamil Nadu, Andhra Pradesh, Punjab, and Karnataka, are renowned for their textile industries, encompassing both organized and decentralized power loom and hosiery sectors. Despite this, India has not achieved significant prominence in the global textile market, particularly in textile processed goods and garments. Export markets primarily feature cotton yarn and cotton-based products for countries like China, Bangladesh, and Sri Lanka. India's technological advancement, especially in weaving and processing, lags behind many other textile-producing nations worldwide. Modernization efforts have primarily concentrated on the spinning and garment sectors, and there is room for improvement in human skills and productivity through comprehensive training across all segments.

Recent developments reveal that countries like China have substantially reduced their cotton and textile production. Conversely, countries like Sri Lanka, Bangladesh, and other Asian textile producers face challenges such as power shortages and a lack of key raw materials like cotton or synthetic fibers. Given that the textile industry relies heavily on labor, developed countries in Europe, the USA, and other regions have lost competitiveness due to high labor costs.

Experts' opinions suggest that India was expected to dominate the global textile market, particularly in the cotton textile segment, by 2022.

Thus, the question arises whether India is prepared to seize emerging opportunities in the global textile industry and potentially become a leader in cotton textiles within the next two decades.

National Policy Initiatives


Textile sector, having its national importance, is predominantly driven by national Textile Policy supported by state level policy measures, mainly by leading textile states - Gujarat, Maharashtra, Tamil Nadu and others. Besides, extension of TUF Scheme for another year, Union Budget 2012-13 has otherwise extended duty relief to shuttle-less looms and processing machinery which has the weakest link in the whole textile value chain. Budget has also extended concessions rate of customs duty of 5% to other machinery. This will, in turn, extend flexible option to get required technology mainly for cotton spinning and Technical Textile Segment. Support for weighted deduction of 200% for R&D expenditure in an in-house facility will give a further boost for functional and technical textile for new product and application.


State Level Initiatives


Various states like Gujarat, Maharashtra, Tamil Nadu and others have already identified textile and garments as focus sectors. In addition, to supports from Union Government, Gujarat and Maharashtra have announced a specific textile policy to attract new investment in spinning and technology upgradation for weaving, processing and other sectors. Karnataka has its own textile policy "Suvarna Vastra Neethi" 2008-13. Similarly, Punjab is expected to announce its Textile Policy by May 2013, Rajasthan by March 2013, Tamil Nadu by May 2013 whereas FICCI has already submitted draft West Bengals Textile Policy - 2022 to increase contribution from 5.24% to 10% by 2022-23.


Impact of Policy Initiatives


While reviewing various policy measures by national and state Governments since the year 1960 it may be observed that much more initiatives or encouragement could not be done for modernization of this sector to bring at par with the world textile sector. In the year 1960 National Policy has banned on weaving capacity. As a result and as per the need, decentralized powerloom sector came out with discarded looms from the organized sectors which were permitted till 1980 in places like Surat, Ahmedabad, Bhivandi, Ichhalkardi, Erode and other parts of Tamil Nadu. Looking to the need for modernization, Government announced for soft loan in the year 1980. However, this could be attracted only a small part of spinning sector. Other sectors could not take the advantage of modernization because of high cost of machineries and restriction on import mainly for weaving and processing sector. During the said period, spinning was the only sector, could supply yarn in textile with competitive price. In the year 1985, National Textile Policy permitted to regularize all the powerloom sectors even with their obsolete technology. It is only during 1990-91 which allowed import of old and outdated second-hand sulzer technology for weaving. Because of announcement of export-oriented units, many cotton spinning units could be established with modern machineries. In parallel with the discarded second-hand machineries from the organized sectors, many small spinning units came up in the places like Coimbatore and Ahmedabad. Till that time, the cotton spinning modern technology was available only with LMW at Coimbatore. Other indigenous machineries were not at par with the technology required. During the same period, foreign collaboration could be done only in processing machinery sector. As a result, many good processing machinery manufacturing units came up in places like Ahmedabad, Mumbai and other parts of Tamil Nadu. But overall, India continues to become incapable of manufacturing required textile machineries, except spinning.

The major initiative of the National Government came up only with the announcement of TUF Scheme and Cotton Technology Mission in 1999. However, modernization could be done only in the areas of spinning for a period of next three years mainly due to free trade regime. A small part of modern weaving machineries of around 30,000 were established across the country. In fact, technology upgradation fund could be attracted by the processing sector only with 10% credit linked subsidy was announced. In reality with a better market situation, TF Scheme became attractive only from 2005. But, cotton technology mission was significantly accepted by the ginning sector and implemented successfully, wherein 80% of the total ginning industries could go for technology upgradation. In the year 2000, garment sector made out of SSI list, could attract investment by the large sectors though not significantly in terms of number and investment.


State like Gujarat in its Industrial Policy 1990-95 announced for the support of modernization wherein some of the cotton spinning segment could take this benefit. Cost of imported machineries was so high that no other sector in textile could make any investment taking advantage of this support. Since then, interest subsidy scheme under Policy 1995-2000 and 2003 also could not make this segment attractive for the new investment with modern machineries because of high investment cost. In the year 2007, Gujarat announced specific policy on Technical Textiles. Subsequently, Gujarat Textile Policy 2009 also allowed the large sectors to get benefit with a cap. However, Gujarat Textile Policy 2012 addressed both small and large sectors under purview of various financial and infrastructure support. As a result, proposal for over 40 lakh spindles investment for cotton spinning alone is received which will in turn, create a driving force to scale up existing weaving, processing and garmenting in a faster pace. Support for establishing Centre of Excellence and Textile Park is one of the unique approach to empower and competitive for whole segment in the State.


Conclusion


In view of the on-going favorable situation of Indian Textile Industry, along with various policy supports both from Union and State Governments, country is expected to see new investment with best technology in whole value chain in the next five years with a sustainable model. But cotton textile will be much costlier and for manufacturing high valued items and export only whereas, synthetic and blended textile will be continued for the masses.


This article was originally published in the Textile Review magazine, May, 2013 issue, published by Saket Projects Limited, Ahmedabad.


About the Author:


Dr. Chandan Chatterjee is an Advisor of Project & Technology at iNDEXTb (A Govt. of Gujarat Organization) Gandhinagar.