INTRODUCTION

A textile is any kind of woven, knitted, knotted or tufted cloth, or a non-woven fabric (a cloth made of fibers that have been bonded into a fabric). Textile also refers to the yarns, threads and wools that can be spun, woven, tufted, tied and otherwise used to manufacture cloth.

The Textile industry (also known in the United kingdom and Australia as the Rag Trade) is a term used for industries primarily concerned with the design or manufacture of clothing as well as the distribution and use of textiles.

India textile industry

SOME FACTS -

India contributes to about 25% share in the world trade of cotton yarn.

India, the world’s third-largest producer of cotton and second-largest producer of cotton yarns and textiles, is poised to play an increasingly important role in global cotton and textile markets

The ready made garment sector is the biggest segment in the India’s textile export basket contributing over 46% of the total textile exports.

Exports have grown at an average of 9.47% p.a over the last decade.

It is a major foreign exchange earner after agriculture and it is a largest employer with a total workforce of 35 mn.

It contributes 20 percent of industrial production, 9 percent of excise collections, 18 percent of employment in the industrial sector, nearly 20 percent to the countries total export earning and 4 percent to the Gross Domestic Product.

FINANCIAL YEAR-WISE BREAK-UP OF INFLOW OF FOREIGN DIRECT INVESTMENT (FDI) IN INDIA FROM AUGUST 2001 To JULY 2008

(Amount in billion) IN FLOW OF FDI IN INDIA

Financial Year

 

2000-01 103.68 2.38 0.09 0.00 0.09

2001-02 184.86 4.03 0.24 0.01 0.13

2002-03 128.71 2.70 2.58 0.05 2.00

2003-04 100.64 2.19 0.43 0.01 0.43

2004-05 146.53 3.22 1.97 0.04 1.34

2005-06 245.84 5.54 4.15 0.09 1.70

2006-07 563.90 12.49 5.61 0.13 1.00

2007-08 986.42 24.58 7.48 0.19 0.76

April- July 2008 514.40 12.32 1.60 0.04 0.31 

GRAND TOTAL 3581.03 86.14 32.43 .80 .93 

Source: Department of Industrial Policy & Promotion, Ministry of Commerce

TOTAL ALL SECTOR TEXTILE In Rs in US$ in Rs In US $

% age of FDI In Textile in US$

REASON BEHIND CHANGES IN FDI OVER THE YEAR IN INDIA

Total FDI in all sector increase rapidly. because with adopting a new liberal policy and relaxation in norms..India able to attract more foreign investor .In 02-03 decline is represent in overall FDI investment but investment in textile had been increase, because Up to 100% FDI allowed in textile industry, with approval of the FIPB, and Companies free to set up fully-owned sourcing (liaison) offices, as well as marketing operations. After decline in 03-04,then 2005-08 we see growth of FDI in textile industry. because- 1)Large raw material base,2)Positive developments in the Textile Policy,3)Flexibility in production,4)Product development and design capabilities.The investment increase but not rapidly because 1)Technological Obsolescence 2)Fragmented industry 3) Lower Productivity and Cost Competitiveness.

ECB IN INDIA

External Commercial Borrowings (ECBs) are defined to include commercial bank loans, buyers’ credit, suppliers’ credit, securitised instruments such as floating rate notes and fixed rate bonds etcECB IN INDIA-The government is exploring options to ease norms for external commercial borrowings - to enable firms go for faster capacity building,

ECBs, were governed by the Ministry of Finance, Government had issued consolidated guidelines on policies and procedures for ECBs in July, 1999. The Central Government had last revised these guidelines on 19th January, 2004.

As per its directive, ECB money could be used for rupee expenditure only up to $20 million and only after RBI's permission.The $20 million restriction was later relaxed to $100 million for infrastructure companies and $50 million for other firms

ECB IN INDIA

ECB IN INDIA

YEAR ECB IN INDIA

2004 112.156661 M.US $

2005 87.969985 M.US $

2006 88.600263 M.US $

2007 141.552945 M.US $

2008 145.825745 M.US $

OVERVIEW OF ECB IN INDIA

If we see the trend of ECB in textile industry we found that, in year 04-05 there is a fall in ECB in textile industry afterwards there is a study growth in ECB. Because govt. give some relaxation to those industry that take the path of ECB.

It is generally used for Modernization, Rupee Expenditure , Acquisition, New Project, Import of Capital Goods, Working Capital.

Amount US $ Million Financial Year (April-March)

FDI Inflow %age Growth over Previous year

2003-04 322

2004-05 551 (+) 71

2005-06 861 (+) 56

2006-07 779 (-) 9

2007-08 875 (+) 12

2008-09 (April-October)

831 -

FII INFLOWS IN TEXTILE INDUSTRIES DURING FINANCIAL YEAR 2003-04 TO 2008-09

SOURCES: RBI’s Bulletin November 2008

INVESTMENT IN TEXTILE INDUSTRY

REASON OF CHANGES IN FII FROM 2003-08

03-04:This sector was performing well04-05:Even complexity of investment procedure good inflow of FII is received05-06India emerged second most favored invest destination after china according to unctad.06-07: As Japanese banks were giving more rate of interest, FII goes down.07-08:Company raised funds through FII.

Problems in the industry

Fragmented industryEffect of historical government policiesTechnological obsolescence Indian companies need to focus on product developmentCompetition in domestic marketNeed to improve the working conditions of the people.Tackle Chinese aggression over the international market

FRAGMENTED INDUSTRY

In fabric, large section of the industry is in the power loom and hand loom sectors.Global buyers prefer to source their entire requirements from two to three vendors, and Indian garments find it difficult to fulfill the capacity requirements.

TECNOLOGICAL OBSOLESCENCELarge portion of the processing capacity is obsolete.While state of the art integrated textiles mills exist, majority of the capacity lies with the power loom sector.This has also resulted in low value addition in the industry

HISTORIC REGULATIONS

The industry continues to be affected by several historic regulations. Eg. Absence of a viable exit option for industry players.

These regulations resulted in a complex industry structure, which is currently an impediment. eg.

- pre-2000, garmenting was reserved for SSI sector, which has resulted in most units being set-up with small capacities.

- knitted garments continues to be reserved for SSI sector.

On the other hand, in some cases the industry too has not taken full advantage of government initiative.

LOWER COST COMPETITIVENESS

CHANGES IN TEXTILE INDUSTRY ACCORDING TO ENVIORNMENT

The Multi-Fibre Agreement (MFA)National Textile Policy 2000Export Promotion Capital Goods (EPCG) SchemeThe Agreement on Textiles and Clothing (ATC)Scheme for Integrated Textile Parks (SITP) Cotton Corporation Of India Ltd. (CCI) Powerloom development and export promotion councilCotton Textile Export Promotion Council (TEXPROCIL)

National Textile Policy 2000

To deal with new challenges and opportunities in a changing global trade environment

Aims to improve the competitiveness of the Indian textile industry

Opens the country's apparel sector to large firms and allows up to 100 percent FDI in the sector

Export Promotion Capital Goods Scheme

To promote modernization of Indian industry permits a firm importing new or Secondhand capital goods at

preferential tariffs

The agreement on textile and clothing

Promises abolition of all quota restrictions in international trade in textiles and clothing by the year 2005

Provides tremendous scope for export expansion from developing countries.

Duty Entitlement Passbook Scheme (DEPS)

Available to Indian export companies and traders on a pre- and post-export basis

pre-export credit requires that the beneficiary firm has exported during the preceding 3-year period.

Post-export credit is a transferable credit that exporters of finished goods can use to pay or offset customs duties on subsequent imports of any unrestricted products.

Power loom Development promotion council

Exploration of overseas market. Identification of items with export potential. Market survey and up-to-date market intelligence Advice on international marketing. Display of selected product groups.

Cotton Textile Export Promotion Council (TEXPROCIL):

promotion of cotton fabrics, cotton yarn and cotton made-ups. include market studies for individual products, circulation of

trade enquiries, participation in exhibitions, fairs and seminars at home and abroad

Schemes for integrated textile parks

For Providing world class infrastructure facilities by merging the Scheme for Apparel Parks for Exports (APE) and

Textile Centre Infrastructure Development Scheme (TCIDS). Based on public private partnership. The Ministry of Textiles (MOT) would implement the Scheme

through Special Purpose Vehicles (SPVs).

Cotton Corporation Of India Ltd. (CCI) profit-making Public Sector Undertaking under the Ministry of

Textiles engaged in commercial trading of cotton undertakes Minimum Support Price Operation (MSP) on behalf of

the Government of India.

Strategies for growth

Setting up textile industries oriented SEZs. Like projected textile parks at Mundra (Gujarat), Visakhapatnam, Perundurai (Tamil Nadu)Starting up new courses such as Textile Manufacturing and Textile Technology at universities and engineering institutes. like National Institute of Fashion Technology (NIFT) run textile engineering pro.Liberalised labour laws, tax and other benefits of a Special Economic Zone need to be implementedTextile firms should lay emphasis on positioning and building brands to survive, command a price premium and achieve long term stability in the global markets. like Arvind Mills with the ‘Ruff and Tuff’ brand.As a de-risking strategy and as a measure of expanding the market Indian textile firms should explore new markets in Asia, Africa and the Americas.majority of global customers look for big exporters with they can place bulk orders, textile players should achieve vertical integration to gain more business.

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