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Vice President - Planning, Outsourcing and Market Support JCT Limited
High R&D expenditure is no assurance for success
Arvind Sharma, Vice President - Planning, Outsourcing and Market Support of JCT Limited, talks about the finer points of the textile industry in India in an exclusive interview with Fibre2Fashion.com
What is the size of the cotton, polyester and nylon fabrics industries globally? How much of that is claimed by India?
The cotton textile industry is undergoing a transition. Consumption growth rate is expected to be in the range of two per cent in South and South East Asia, as against less than one per cent of the world. E-commerce is showing rapid progress in countries like India. With stabilisation of cotton prices this year, consumption growth rate in 2015-16 is expected to exceed the growth rate of 2014-15. The mantra for reaping benefits has to be Cheaper, Better and Faster.
'Cheaper' implies competitive price. 'Better' implies quality second to none while 'faster' implies quicker turnaround time of the product.
Accumulating yarn stocks, reduced yarn margins and uncertainties regarding income growth in developing countries are indicative of challenges currently facing global cotton consumption. World macroeconomic indicators are still positive. I am hopeful of the favourable outcome in cotton fabric consumption for the festive reason to give an added impetus. Indian industry is sure to reap the benefits with the entry of multinational giants like Ikea, who have already initiated big bang inception plans.
The Indian textile and apparel industry is estimated at US$ 110 billion. It has grown at a Compound Annual Growth Rate (CAGR) of 13 per cent from 2008 to 2013. It is projected to continue growing at a CAGR of 12 per cent and attain a size of US$ 440 billion by 2025. With an estimated domestic consumption of approximately US$ 70 billion and an export value of roughly US$ 40 billion, it contributes to about six per cent of the US$ 1.8 trillion Indian economy, and nearly 13 per cent of the country's total exports basket. It is the second largest provider of employment after agriculture, providing jobs and income to around 45 million people directly and indirectly.
The Indian consumers' affinity towards brands and organised retail is increasing. This is fuelling the consumption of all commercial products, including textiles and apparel. Organised retailing in India currently stands at only 8 per cent of the overall retail market of US$ 550 billion. Within this, apparel is the single largest category with a share of 35 per cent. The vast population base and a growing economy have attracted global retailers and brands into the Indian market, either on their own or in partnership with local players. Many new textile investments are already in progress, and there is room for a great deal more.
Per capita consumption in the urban areas is always higher than in the rural areas. India is witnessing fast growth and urbanisation. By 2030, it is estimated that 40 per cent of India's population will live in urban areas. India, by then, will have 68 cities with a population of more than one million. This migration from rural areas into cities will accelerate consumption of textiles and apparels.
Cotton: The size of the global cotton industry is in the range of 24 million metric tons.
The Indian textile industry is the second-largest after China, in terms of spindleage. It has a share of about 25 per cent of the world's spindle capacity.
Polyester: Worldwide, manmade textiles, which make up around 70 per cent of the total textile output, are growing at more than five per cent per annum. However, the total global textile system - including all natural and manmade products totalling around 90 million metric tons of equivalent fibres - is growing only by an average of just below four per cent. This optimistic scenario of manmade textiles prevails despite the economic uncertainty that pervades most regions. It is largely because of the rapid technological developments seen within the polyester chain, especially within the performance apparel and home textile segments. Also, it is because of a strong surge in consumption within the fast moving nonwoven area. Within the global textile system, the study demonstrates that polyester is by far the dominant textile constituent in most end-use sectors, like apparel, home textile and technical textile. Polyester claims more than 75 per cent of the estimated 70 million metric tons of fibres consumed in manmade textiles. This share is set to increase over time.
The global polyester market is in the range of US$ 70 billion, and expected to reach US$ 111 billion by 2019.
Nylon: Growing demand from increasing automotive applications is expected to drive the nylon market. It finds a major application in replacing the metal used for reducing the weight of the vehicle and meeting the vehicle emission standards. Changing lifestyle and rising disposable income of consumer groups in developing countries is driving the growth of the automotive industry. Emission standards of vehicles and environmental regulations in the developed countries of Europe are driving the light-weight vehicles market, which in turn is expected to boost the nylon market. Further, growing demand from electrical and electronic industry is expected to fuel the market growth. Owing to processing flexibility and other advantageous physical properties, electrical and electronic form the major application areas of nylon. Increasing demand for light-weight, high performance materials from a growing population in developed as well as developing countries is driving the electrical and electronics market.
How is the industry for these fabrics in north India different from that in south India?
The regional dynamics have undergone a sea change in the textile industry in the last couple of years.
A decade back, the south was flourishing in greige fabric and yarn. Prices were competitive and quality was as per international standards. With cotton yarn exports receding over time and with bulk availability of fabric from China at competitive prices, the industry has taken a blow. The USP of fine counts in cotton and quick delivery also took a beating with easy availability of fabric via the import route.
With cash-flow taking a beating, the companies are finding it difficult to survive. With enhancement of capacities by two textile conglomerates in the north - Vardhman and Nahar and with the revival of JCT, the fabric market looks upbeat there. Western India (Alok Industries Ltd) also played a predominant role in the market shift from the south. But with Alok Industries not being able to utilise its capacities significantly, the market scenario has further emerged favourable towards the north. Vigorous cost-cutting and cost-saving initiatives and excellent productivity norms achieved by Vardhman has snatched the most competitive price-tag from the south. In some basic fabric cotton qualities, even the south is facing a tough challenge to match the quality and price of premium textile conglomerates.
The concept of small-scale industries being able to sell at lower prices due to lower overheads no longer holds good. Now, the mantra for success is, the bigger you are, the more competitive you should be is. Follow it, and you win hands down. Quick rescheduling to arrive at a shorter turnaround time is becoming the need of the hour. It is the new tool to enhance your EBITDA and PAT. Customers are willing to pay more for a speedy delivery. This is how we can extract more out of our installed capacities. The simpler you make your business in textiles, the more cash rich you will be. More the financial muscle you have, more competitive you can afford to be. Make to order and right on time: That is the route to money. Make to stock means fabric goes for a song and no money is earned. Running all the machines all the time may not prove to be beneficial in times to come. In case we run all machines all the time, we have to have an extra strong planning in place. Planning where we have a strong team of inspired people with passion to perform and initiate dynamic rescheduling!
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