INDUSTRY PROFILE

The textiles and garments industry is one of the largest and most prominent sectors of Indian economy in terms of output, foreign exchange earnings and employment generation. Indian textile industry is multi-fiber based, using cotton, jute, wool, silk and mane made and synthetic fibers. The major sub-sectors that comprise the textiles sector include the organized Cotton/Man-Made Fibre Textiles Mill Industry, the Man-Made Fibre / Filament Yarn Industry, the Wool and Woollen Textiles Industry, the Sericulture and Silk Textiles Industry, Handlooms, Handicrafts, the Jute and Jute Textiles Industry, and Textiles Export. In the spinning segment, India has an installed capacity of around 40 million spindles (23% of world), 0.5 million rotors (6% of world). In the weaving segment, India is equipped with 1.80 million shuttle looms (45% of world), 0.02 million shuttle less looms (3% of world) and 3.90 million handlooms (85% of world).

The organized mill (spinning) sector recorded a significant growth during the last decade, with the number of spinning mills increasing from 873 to 1564. The organized sector accounts for production of almost all of spun yarn, but only around 4 percent of total fabric production. In other words, there are little over 200 composite mills in India leaving the production of fabric and processing to the decentralized small weaving and processing firms. The Indian apparel sector is estimated to have over 25000 domestic manufacturers, 48000 fabricators and around 4000 manufacturer-exporters. Cotton apparel accounts for the majority of Indian apparel exports.

Indian textile industry can be divided into several segments, some of which can be listed as below:-

Cotton Textiles Silk Textiles Woolen Textiles Readymade Garments Hand-crafted Textiles Jute and Coir

The Indian Textiles Industry has an overwhelming presence in the economic life of the country. Apart from providing one of the basic necessities of life, the textiles industry also plays a pivotal role through its contribution to industrial output, employment generation, and the export earnings of the country. Currently, it contributes about 14 percent to industrial production, 4 percent to the GDP, and 17 percent to the country's export earnings. It provides direct employment to over 35 million people The Textiles sector is the second largest provider of employment after agriculture. Thus, the growth and all round development of this industry has a direct bearing on the improvement of the economy of the nation. The Indian textiles industry is extremely varied, with the hand-spun and hand-woven sector at one end of the spectrum, and the capital intensive, sophisticated mill sector at the other. The decentralized power looms / hosiery and knitting sector from the largest section of the Textiles Sector. The close linkage of the Industry to agriculture and the ancient culture, and traditions of the country make the Indian textiles sector unique in comparison with the textiles industry of other countries. This also provides the industry with the capacity to produce a variety of products suitable to the different market segments, both within and outside the country.

The Multi-Fiber Arrangement (MFA) has governed international trade in textiles and clothing since 1974. The MFA enabled developed nations, mainly the USA, European Union and Canada to restrict imports from developing countries through a system of quotas.

The Agreement on Textiles and Clothing (ATC) to abolish MFA quotas marked a significant turnaround in the global textile trade. The ATC mandated progressive phase out of import quotas established under MFA, and the integration of textiles and clothing into the multilateral trading system before January 2005.

The Agreement on Textiles and Clothing

ATC is a transitory regime between the MFA and the integration of trading in textiles and clothing in the multilateral trading system. The ATC provided for a stage-wise integration process to be completed within a period of ten years (1995-2004), divided into four stages starting with the implementation of the agreement in 1995. The product groups from which products were to be integrated at each stage of the integration included:-

[1] tops and yarns; [2] fabrics; [3] made-up textile products; and [4] clothing.

The ATC mandated that importing countries must integrate a specified minimum portion of their textile and garment exports based on total volume of trade in 1990, at the start of each phase of integration. In the first stage, each country was required to integrate 16 percent of the total volume of imports of 1990, followed by a further 17 percent at the end of first three year and another 18 percent at the end of third stage. The fourth stage would see the final integration of the remaining 49 percent of trade.

CURRENT SCENARIO

Fabric production rose to 60,996 million sq meters in FY 2011 from 52,665 million sq meters in FY 2007. Production of raw cotton grew to 32.5 million bales in FY11 from 28 million bales in FY07 while production of man-made fibre rose to 1,281 million kgs in FY11 from 1139 million kgs in FY07. Production of yarn grew to 6,233 million kgs in FY11 from 5,183 million kgs in FY07.

India has the potential to increase its textile and apparel share in the world trade from the current level of 4.5 per cent to 8 per cent and reach US$ 80 billion by 2020.

POLICY AND REGULATORY FRAMEWORK

The Ministry of Textiles is responsible for policy formulation, planning, development, export promotion and trade regulation in the textile sector. This includes all natural and manmade cellulosic fibre used to make textiles, clothing and handicrafts. National Textile Policy, 2000 the policy was introduced for the overall development of the textiles industry. The key areas of focus include:-

Technological upgrades Enhancement of productivity Quality consciousness Strengthening of raw material base Product diversification Increase in exports and innovative marketing strategies Financing arrangements Increasing employment opportunities Integrated human resource development

Technology Mission on Cotton (TMC), 2000 —the scheme was introduced to address concerns around cotton production and processing sectors and to place the cotton economy on a sound footing. It was initially to be phased out at the end of the Tenth Five Year Plan (2002-07). However, the scheme’s Mini Mission -iii and iv has been further extended into the Eleventh Plan for two years to accomplish targets. National Jute Policy, 2005 —the objective of the policy is to develop the jute industry and ensure high quality production, maximum employment and substantial contribution to economic growth.

Jute Technology Mission (JTM), 2006, The objectives of this programme include

Improving the yield and quality of jute fibre Strengthening existing infrastructure for the development and supply of quality seeds Improving the quality of fibre through better methods of retting and extraction technologies Increasing the supply of quality raw material to the jute industry at reasonable prices and

developing efficient market linkages for raw jute. Modernizing, upgrading technology, improving productivity, diversifying and developing

human resource for the jute industry Developing and commercializing innovative technology for the diversified use of jute and

allied fibre

Development of mega cluster schemes

Comprehensive Powerloom Cluster Development Scheme (CPCDS) To assist entrepreneurs to set up world-class units with modern infrastructure, latest

technology and adequate training and human resource development (HRD) inputs along with appropriate market linkages.

Comprehensive Handloom Cluster Development Scheme (CHCDS) Formulated to address the challenges faced by weavers within the cooperative sector and

outside, due to poor infrastructure in some clusters. Comprehensive Handicrafts Cluster Development Scheme (CHCDS)

The textile industry segments eligible to avail concessional loans for technology upgrade requirements include:-

Spinning, cotton ginning and pressing Silk reeling and twisting Wool scouring and combing Synthetic filament yarn texturising, crimping and twisting Manufacturing of viscose filament yarn (VFY) or viscose staple fibre (VSF) Weaving or knitting including non-wovens and technical textiles Garments, made-up manufacturing Processing of fibre, yarn, fabric, garments and made-ups Jute

GROWTH TRENDS

The Indian textile industry can be divided into a number of segments such as cotton, silk, woolen, readymade, jute and handicraft. The total cloth production registered during September 2010 was 10.2 per cent higher than that registered for September 2009. The total production of cloth during April – September 2010 increased by 2.1 per cent as compared to the period April –

September 2009. The highest growth was observed in the power loom sector (13.2 per cent), followed by hosiery sector (9.1 per cent).

The total textile exports during April-July 2010 (provisional) were valued at US$ 7.58 billion as against US$ 7.21 billion during the corresponding period of the previous year. The share of textile exports in total exports was 11.04 per cent during April-July 2010. Cotton textiles has registered a growth of 8.2 per cent during April-September 2010 -11, while wool, silk and man-made fibre textiles have registered a growth of 2.2 per cent while textile products including apparel have registered a growth of 3 per cent. Textiles and apparel industry exports, valued at US$ 20.02 billion, contributed about 11.5 per cent to the country's total exports in 2008–09. The total textiles imports into India in 2008–09 were valued at US$ 3.33 billion.

The total foreign exchange earnings from the textile exports during the current financial year (April-July 2011) was registered at US$ 10.32 billion against US$ 7.75 billion during the corresponding period of financial year 2010-11.

India has the potential to increase its textile and apparel share in the world trade from the current level of 4.5 per cent to 8 per cent and reach US$ 80 billion by the end of the year 2020.

The Textile sector grew at 3-4 per cent during the last 6 decades. As per the 11th Five Year Plan (FYP), it was projected to fast-track to a growth rate of 16 per cent in value and is further expected to reach US$ 115 billion (exports US$ 55 billion and domestic market US$ 60 billion) by 2012. Exports are likely to reach US$ 32 billion in 2011-12 and domestic market US$ 55 billion.

IMPORT SCENARIO

The total imports of T&C products by India reached US$ 3.36 billion in 2009-10. Man-made Filaments was the biggest import amongst T&C items, with a share of 16.56% followed by impregnated textile fabric and cotton with a share of 15.62%. The imports have decreased by 3.30% during 2009-10 in dollar terms. However, the share of import of T&C products by India as percentage of total imports of all commodities has gone up during 2009- 10, and reached 1.17% as against 1.14% during 2008-09.

EXPORTS

The Indian textiles industry contributes substantially to India’s exports earnings. The export basket consists of wide range of items containing cotton yarn and fabrics, man-made yarn and fabrics, wool and silk fabrics, made-ups and variety of garments. India’s textile products, including handlooms and handicrafts, are exported to more than a hundred countries. However, the USA and the EU, account for about two-third of India’s textiles exports. The other major

export destinations are Canada, U.A.E., Japan, Saudi Arabia, Republic of Korea, Bangladesh, Turkey, etc. In the post-quota period, India has emerged as a major sourcing destination for new buyers. As a measure of growing interest in the Indian textile and clothing sector a number of buyers have opened their sourcing/ liaison office in India.

India's textiles and clothing industry is one of the mainstays of the national economy. It is also one of the largest contributing sectors of India's exports worldwide. The Vision Statement for the textiles industry for the 11th Five Year Plan (2007-12), inter-alia, envisages India securing a 7% share in the global textiles trade by 2012. At current prices the Indian textiles industry is pegged at US$ 55 billion, 64% of which services domestic demand. The textiles industry accounts for 14% of industrial production, which is 4% of GDP; employs 35 million people and accounts for nearly 12% share of the country's total exports basket.

World trade in textiles and clothing amounted to US $ 385 billion in 2003, of which textiles accounted for 43 percent (US $ 169 bn) and the remaining 57 percent (US $ 226 bn) for clothing. Developed countries accounted for little over one-third of world exports in textiles and clothing. The shares of developed countries in textiles and clothing trade were estimated to be 47 percent (US $ 79 bn) and 29 percent, (US $ 61 bn) respectively.

COUNTRY-WISE ANALYSIS

● In the global market exports of clothing, India ranked as the 6th largest exporter as per WTO data - 2008 (latest), trailing Bangladesh, Turkey, Hong Kong, EU and China. In the global exports of Textiles & Clothing (T&C) combined, India ranked as 5th largest exporter, trailing Turkey, Hong Kong, China and EU, as per WTO data - 2008 (latest).

● The calendar year 2008 since the month of August onwards was not at all conducive for the Indian T&C export either as the major markets for T&C viz. USA, EU and Japan has been in recessionary condition and financial crisis. In this environment, textiles sector is amongst the worst hit sectors. The recessionary trend observed in the calendar year 2010 changed due to gradual recovery of major economies from the global economic slowdown. USA, the single largest importer of T&C items, observed a positive growth of 15.30% and 18.10% in its imports of T&C from the world and India, respectively during the first 11 months of calendar year 2010. Almost all major T&C exporting countries showed positive trend in US market during the first 10 month of calendar year 2010. (Source: GTIS)

● India's position in the EU markets with a share of 7.93% and a negative growth rate of 8.86% was small in comparison to China which occupied over 41% market size with a negative growth of 6.04% in 2009. The EU's overall T&C import registered a growth of 7.30% in 2008 and a decline of 11.87% in 2009. In the first 10 months of calendar year2010, EU's overall imports of

T&C have grown by 5.03% while India recorded a growth of 3.54% over the corresponding period in 2009. China & Turkey, the two largest exporters of T&C to EU have recorded growth of 6.45% and 6.56% respectively during same period. (Source: GTIS)

Import Trends in USA

In 1990, restrained or MFA countries contributed as much as 87 percent (US $ 29.3 bn) of total US textile and clothing imports, whereas Caribbean Basin Initiative (CBI), North American Free Trade Area (NAFTA), Africa Growth and Opportunity Act (AGOA) and ANDEAN countries together contributed 13 percent (US $ 4.4 bn). Thereafter, there has been a decline in exports by restrained countries; the share of preferential regions more than doubled to reach 30 percent (US $ 26.9 bn) of total imports by USA.

The composition of imports of clothing and textiles by USA in 2003 was 80 percent (US $ 71 bn) and 20 percent (US $ 18 bn), respectively. Asia was the principal sourcing region for imports of both textiles and clothing by USA. Latin American region stood at second position with a share of 12 percent (US $ 2.2 bn) and 26 percent (US $ 18.5 bn), respectively, for textiles and clothing imports, by USA. In most of the quota products imported by USA, India was one of the leading suppliers of readymade garments in USA. Though China is a biggest competitor, the unit prices of China for most of these product groups were high and thus provide opportunities for Indian business.

Import Trends in EU

EU overtook USA as the world’s largest market for textiles and clothing. Intra-EU trade accounted for about 40 percent (US $ 40 bn) of total clothing imports and 62 percent (US $ 32.5 bn) of total textile imports by EU. Asia dominates EU market in both clothing and textiles, with 30 percent (US $ 30 bn) and 17 percent (US $ 8 bn) share, respectively. Central and East European countries hold a market share of 11 percent (US $ 11.3 bn) in clothing and 7.5 percent (US $ 4 bn) in textiles imports of EU.

As regards preferential suppliers, the growth of trade between EU and Mediterranean countries, especially Egypt and Turkey, was highest in 2003. As regards individual countries, China accounted for little over 5 percent (US $ 2.8 bn) of EU’s imports of textiles and over 12 percent (US $ 12.4 bn) of clothing imports.

In the EU market also, India is a leading supplier for many of the textile products. It is estimated that Turkey would emerge as a biggest competitor for both India and China. However, with regard to unit prices, India appears to be lower than both Turkey and China in many of the categories.

Import Trends in Canada

Amongst the leading suppliers of textiles and clothing to Canada, USA had the highest share of over 31 percent (US $ 8.4 bn), followed by China (21% - US $ 1.8 bn) and EU (8% - US $ 0.6

bn). India was ranked at fourth position and was ahead of other exporters like Mexico, Bangladesh and Turkey, with a market share of 5.2 percent (US $ 0.45 bn).

It may be noted that clothing sector would offer higher gains than the textile sector, in the post MFA regime. Countries like Mexico, CBI countries, many of the African countries emerged as exporters of readymade garments without having much of textile base, utilizing the preferential tariff arrangement under the quota regime. Besides, countries like Bangladesh, Sri Lanka, and Cambodia emerged as garment exporters due to cost factors, in addition to the quota benefits. Thus, it may be concluded that these countries are likely to lose their market share in the future scenario.

It may be said that countries like China, USA, India, Pakistan, Uzbekistan and Turkey have resource based advantages in cotton; China, India, Vietnam and Brazil have resource based advantages in silk; Australia, China, New Zealand and India have resource based advantages in wool; China, India, Indonesia, Taiwan, Turkey, USA, Korea and few CIS countries have resource based advantages in manmade fibers. In addition, China, India, Pakistan, USA, Indonesia have capacity based advantages in the textile spinning and weaving.

China is cost competitive with regard to manufacture of textured yarn, knitted yarn fabric and woven textured fabric. Brazil is cost competitive with regard to manufacture of woven ring yarn. India is cost competitive with regard to manufacture of ring-yarn, O-E yarn, woven O-E yarn fabric, knitted ring yarn fabric and knitted O-E yarn fabric. According to Werner Management Consultants, USA, the hourly wage costs in textile industry is very high for many of the developed countries. Even in developing economies like Argentina, Brazil, Mexico, Turkey and Mauritius, the hourly wage is higher as compared to India, China, Pakistan and Indonesia.

From the above analysis, it may be concluded that China, India, Pakistan, Taiwan, Hong Kong, Brazil, Indonesia, Turkey and Egypt would emerge as winners in the post quota regime. The market losers in the short term (1-2 years) would include CBI countries, many of the sub-Saharan African countries, Asian countries like Bangladesh and Sri Lanka.

The market losers in the long term (by 2014) would include high cost producers, like EU, USA, Canada, Mexico, Japan and many east Asian countries. The determinants of increase / decrease in market share in the medium term would however depend upon the cost, quality and timely Review of Indian Textiles and Clothing Industry The textiles and garments industry is one of the largest and most prominent sectors of Indian economy, in terms of output, foreign exchange earnings and employment generation. Indian textile industry is multi-fiber based, using delivery. In the long run, there are possibilities of contraction in intra-EU trade in textile and garments, reduction of market share of Turkey in EU and market share of Mexico and Canada in USA, and thus provide more opportunities for developing countries like India.

It is estimated that in the short term, both China and India would gain additional market share proportionate to their current market share. In the medium term, however, India and China would have a cumulative market share of 50 percent, in both textiles and garment imports by USA. It is

estimated that India would have a market share of 13.5 percent in textiles and 8 percent in garments in the USA market. With regard to EU, it is estimated that the benefits are mainly in the garments sector, with China taking a major share of 30 percent and India gaining a market share of 8 percent. The potential gain in the textile sector is limited in the EU market considering the proposed further enlargement of EU. It is estimated that India would have a market share of 8 percent in EU textiles market as against the China’s market share of 12 percent.

MILESTONES

i) Exports of textiles and clothing products from India have increased steadily over the last few years, particularly after 2004 when textiles exports quota were discontinued.

ii) India's Textiles & Clothing (T&C) export registered robust growth of 25% in 2005-06, recording a growth of US$ 3.5 billion over 2004-05 in value terms thereby reaching a level of US$ 17.52 billion and the growth continued in 2006-07 with T&C exports of US$19.15 billion recording an increase of 9.28% over previous year and reached USD22.15 billion in 2007-08 denoting an increase of 15.7% but declined by over 5% in 2008-09 with exports of USD 20.94 billion. During 2009-10, the exports of T&C increased by over 5.60% and reached the level of USD 22.42 billion. Thus exports of T&C have denoted an increase of 60.14% in the last five years (2004-05 to 2009-10). Indian T&C exports is facing various constraints of infrastructure, high power and transaction cost, incidence of state level cess and duties, lack of state-of-the-art technology etc. Readymade Garments account for almost 45% of the total textiles exports. Apparel and cotton textiles products together contribute nearly 70% of the total textiles exports.

iii) The exports basket consists of a wide range of items comprising readymade garments, cotton textiles, handloom textiles, man-made fibre textiles, wool and woolen goods, silk, jute and handicrafts including carpets.

iv) India's textiles products, including handlooms and handicrafts, are exported to more than a hundred countries. However, the USA and the EU, account for about two-third of India's textiles exports. The other major export destinations are Canada, U.A.E., Japan, Saudi Arabia, Republic of Korea, Bangladesh, Turkey, etc.

v) The export of textiles and clothing aggregated to US$ 22.42 billion in 2009-10. The Government fixed the target for 2010-11 at US$ 25.48 billion. So far during the period April- September'10, exports of T&C have been achieved at USD 11.26 billion.

Global exports of Ready Made Garments (RMG)

● Global exports of RMG during 2007-08 were of the order of US$ 9.07 Billion, which increased to US$ 10.38 Billion during 2008-09 but declined by 3% to US$ 10.04 Billion in 2009-10.

● As per latest available statistics, exports of RMG during April- September, 2010 was of the order of USD4735.07 Million as against USD5010.57 Million during the same period last year, indicating a decline of over 5.50% in US$ terms this year.

● EU was biggest destination for RMG exports, with over US$5.2 Billion worth of exports during the year ending March, 2010. However, there was a decline of over 3% compared to exports in 2008-09.

● US was the 2nd biggest destination for RMG, with exports of US$ 2.6 Billion, though this was a decline of around 2% compared to the preceding financial year.

● UAE was the 3rd biggest destination with around a Billion dollar worth of exports to that group.

● Considerable appreciation of RMG exports was seen in South Africa, Singapore, Australia, Malaysia, Kuwait and Brazil.

GOVERNMENT INITIATIVES

The Government of India has promoted a number of export promotion policies for the Textile sector in the Union Budget 2011-12 and the Foreign Trade Policy 2009-14. This also includes the various incentives under Focus Market Scheme and Focus Product Scheme; broad basing the coverage of Market Linked Focus Product Scheme for textile products and extension of Market Linked Focus Product Scheme etc. to increase the Indian shares in the global trade of textiles and clothing. The various schemes and promotions by the Government of India are as follows -

Welfare Schemes: The Government has offered health insurance coverage and life insurance coverage to 161.10 million weavers and ancillary workers under the Handloom Weavers' Comprehensive Welfare Scheme, while 733,000 artisans were provided health coverage under the Rajiv Gandhi Shilpi Swasthya Bima Yojna.

E-Marketing: The Central Cottage Industries Corporation of India (CCIC), and the Handicrafts and Handlooms Export Corporation of India (HHEC) have developed a number of e-marketing

platforms to simplify marketing issues. Also, a number of marketing initiatives have been taken up to promote niche handloom and handicraft products with the help of 600 events all over the country.

Skill Development: As per the 12th FYP, the Integrated Skill Development Scheme aims to train over 2,675,000 people within the next 5 years (this would cover over 270,000 people during the first two years and the rest during the remaining three years). This scheme would cover all sub sectors of the textile sector such as Textiles and Apparel; Handicrafts; Handlooms; Jute; and Sericulture.

Credit Linkages: As per the Credit Guarantee program, over 25,000 Artisan Credit Cards have been supplied to artisans, and 16.50 million additional applications for issuing up credit cards have been forwarded to banks for further consideration with regards to the Credit Linkage scheme.

Financial package for waiver of overdues: The Government of India has announced a package of US$ 604.56 million to waive of overdue loans in the handloom sector. This also includes the waiver of overdue loans and interest till 31st March, 2010, for loans disbursed to handloom sector. This is expected to benefit at least 300,000 handloom weavers of the industry and 15,000 cooperative societies.

Textiles Parks: The Indian Government has given approval to 21 new Textiles Parks to be set up and this would be executed over a period of 36 months. The new Textiles Parks would leverage employment to 400,000 textiles workers. The product mix in these parks would include apparels and garments parks, hosiery parks, silk parks, processing parks, technical textiles including medical textiles, carpet and power loom parks.

RECENT DEVELOPMENTS

From January 2000 to June 2011, 482 Mergers and Acquisitions (M&A) deals have taken place. The top 5 M&A deals are listed below:-

Along with the increasing export figures in the Indian Apparel sector in the country, Bangladesh is planning to set up two Special Economic Zones (SEZ) for attracting Indian companies, in view of the duty free trade between the two countries. The two SEZs are intended to come up on 100-acre plots of land in Kishoreganj and Chattak, in Bangladesh.

Italian luxury major Canali has entered into a 51:49 joint venture with Genesis Luxury Fashion, which currently has distribution rights of Canali-branded products in India. The company will now sell Canali branded products in India exclusively.

Along with the increasing export figures in the Indian Apparel sector in the country, Bangladesh is planning to set up two Special Economic Zones (SEZ) for attracting Indian companies, in view of the duty free trade between the two countries. The two SEZs are intended to come up on 100-acre plots of land in Kishoreganj and Chattak, in Bangladesh.

Italian luxury major Canali has entered into a 51:49 joint venture with Genesis Luxury Fashion, which currently has distribution rights of Canali-branded products in India. The company will now sell Canali branded products in India exclusively.

Name of SEZ and status

State Area (hectares)

Sector Developer / Promoter

Details

Mahindra City SEZ (Functional)

Tamil Nadu

607.1 Apparel and fashion accessories

Mahindra Group and Tamil Nadu Industrial Development Corporation (TIDCO)

Mahindra City is India’s first integrated business city, divided into business and lifestyle zones. The business zone provides plug-n-play working spaces. This zone comprises an SEZ (primarily for exporters) and domestic tariff area (DTA) for companies targeting the domestic market. The lifestyle zone

offers residential units, schools, medical centres, malls, business hotels and recreational facilities.

Surat Apparel Park (Functional)

Gujarat 56 Textiles Gujarat Industrial Development Corporation (GIDC)

Key industrial units include Safari Exports, Venus Garments, Benchmark Clothings, P.K. International, Tomal Prints, J.R. Fashion and Ganga Export.

Brandix India Apparel City - BIAC (Functional0

Andhra Pradesh

404.7 Textiles Brandix India Appre City Pvt Ltd

Integrated apparel supply chain city plans to house world class apparel chain partners. 60 million liters of water per day is available. Has one of the most advanced affluent systems in the region. BIAC has dedicated 200 MW power sub-station.

Karnataka Industrial Areas Development Board – KIADB (Functional)

Karnataka Textiles Karnataka Industrial Areas Development Board (KIADB)

In addition to the four functional SEZs, there are 13 in-principle approved, 19 formally approved and 12 notified SEZs in India.

Other government initiatives Scheme for Integrated Textile Parks

The scheme was introduced to neutralise the weakness of fragmentation in the various subsegments of the textiles value chain and the unavailability of quality infrastructure.

The Eleventh Five Year Plan (2007-2012) outlay for the textiles and apparel sector has been fixed at US$ 2.91 billion (INR 140 billion), which is almost four times the outlay fixed during the Tenth Plan —US$ 0.74 billion (INR 35.8 billion).

EXPORT PROMOTION MEASURES

The Government has been continually supporting the textiles exports sector through fiscal and non-fiscal measures as well as through incentivisation schemes to enable the sector to increase market share in the global textiles markets.

Export Promotion Councils - Apparel Export Promotion Council (Aepc)

The Apparel Export Promotion Council (AEPC) was sponsored back in 1978 to promote exports of readymade garments from India. The Council was administering the exports entitlements quota in respect of readymade garment items, which were subject to trade restraints in USA,European countries and Canada. Besides its headquarter at New Delhi, the Council has Regional Offices at Jaipur (Rajasthan), Ludhiana (Punjab), Mumbai (Maharashtra), Chennai and Tirupur (Tamil Nadu), Bangalore (Karnataka) and Kolkata (West Bengal). The Council is the implementing agency for the Knitwear Technology Mission and Common Compliance Code Schemes which are Plan Schemes of the Central Government.

The Cotton Textiles Export Promotion Council (TEXPROCIL)

The Cotton Textiles Export Promotion Council (TEXPROCIL), Mumbai was incorporated under the Indian Companies Act, VII of 1913 in October, 1954 with the pressing objective of export promotion of cotton textiles. In the year under review, the Cotton Textiles Export Promotion Council (TEXPROCIL), Mumbai made a number of suggestions for strengthening the export efforts and also to provide data for monitoring exports. The Council continued to disseminate information on demand patterns, consumer preferences, competing products/countries etc. with a view to assist Indian exporters to compete effectively in the overseas markets. The Council also undertakes export promotion measures to project the considerable product range of Indian cotton textiles in India and abroad.

The Synthetic & Rayon Textiles Export Promotion Council (SRTEPC)

The Synthetic & Rayon Textiles Export Promotion Council (SRTEPC), Mumbai was incorporated in 1954 under the Indian Companies Act, 1913 with the basic objectives to establish, promote and operate maintain and increase the export of synthetic and/or cellulosic yarn, etc. In the period under review, the Council provided comprehensive inputs to the Government for modification in export import policy/procedures as well as disseminated information on demand patterns, fashion trends and prices of competing products in the overseas markets to enable Indian exporters to implement modernized cost-effective manufacturing techniques, product adaptation and diversification. The Council undertook several export promotion measures to generate greater awareness of Indian man-made

Export Promotion Activities of EPCs

During the year 2009-10, the EPCs continued export promotion activities of textiles exports. These included participation in overseas exhibitions/fairs, organization of Buyer-seller-Meets (BSMs) abroad and, sponsoring trade delegations for consolidating the existing markets and exploring new markets. Major textiles fairs like India International Garment Fair and Indian Handicrafts & Gifts Fair were held in New Delhi, which attracted large number of buyers from all over the world. The EPCs participated in all major fairs & exhibition world-wide, and Textiles Mega Shows were jointly put up in Japan, South Africa and Latin America

TEXTILE RESEARCH ASSOCIATION (TRAs)Ministry of Textiles has been providing financial support to the Textile Research Associations engaged in the work of research and development. The budget allocation for the year 2010-11 for the research projects is Rs. 10 crores.

Cotton Textile Research Association (CTRAS)

There are eight Textile Research Associations (TRAs) receiving financial support from the Ministry of Textiles, of these the following are the Cotton Textile Research Associations (CTRAs):

i. Ahmedabad Textile Industry's Research Association (ATIRA), Ahmedabadii. Bombay Textile Research Association (BTRA), Mumbai.iii. South India Textile Research Association (SITRA), Coimbatoreiv. Northern India Textile Research Association (NITRA), Ghaziabad.

Like other TRAs, these TRAs are textile industry promoted private bodies, set up and promoted by the textile industry of the respective region for carrying out research and providing them various services including consultancy, testing, training and research etc. Their main sources of earnings include government grants, subscriptions from member-mills, fees from the services etc. Since these have renowned industrialists as their elected Chairmen in overall in-charge of their functions, Government provides full autonomy in their functioning.

Testing Services

Testing is one of the major services of ATIRA to the industry. It spans from physical and chemical testing of textile material of all kinds to testing of Water, Waste Water as well as Flue Gas, Process Gas, Solid Waste including Environment Audit Samples, Ambient Air Samples, Noise Samples, machine accessories, and calibration. The testing services are widely utilized by

textile and allied industries across the country and across the textile sectors and the number of samples for testing are on the ever increasing trend.

INFORMATION AND COMMUNICATION TECHNOLOGY IN TEXTILES

Today Industry and Trade community requires an efficient platform having features as ubiquity, global reach, interactivity, security, information density with quality, reliability, accessibility with customization. These are essential requirements for controlling the competitive edge in the business race and may be achieved only in a well-tuned ICT enabled platform. In addition to that it has to sustain its position in global market with strong brand equity of it products against the turbulent behaviors of the global economic fluctuations. In virtue of the above issues, Ministry has already launched flagship programs with various other initiatives and succeeded in them. Post 'flag ship program' reflects a positive rejuvenation in both global and domestic business health of Indian Textiles Industry. By empowering the corporate body with modern management techniques and ICT tools, Ministry fulfilled the expectations of trade and industry especially in delivering online services and support. Various IT enhancements like enriching the information dissemination through websites, interactive services like filing of Export Authorization Registration Certificate (EARC) by cotton exporters, e-marketing, e-sharing of specializations in designs and patterns of Handloom products etc. were successfully implemented. National Informatics Centre (NIC), Department of Information Technology, Ministry of Communications & Information Technology contributed a prime role in each initiatives described above. It is providing full-fledged technical support in developing and maintaining the ICT infrastructure and network services. In addition to that various office automation systems, information systems/analytical tools are developed and implemented for usage at various levels of the Management.

ENHANCING WEBSITES

Ministry and its various organizations established and integrated efforts to deliver the industry centric information services in their respective websites. All major textiles organizations (twenty three in number) including Attached/ Subordinate offices, Public Sector Undertakings, Export Promotion Councils and educational institutes like NIFT etc. have upgraded their sites with new features and contents. Ministry's website has been refined as per the 'Guidelines for Indian Government Websites' issued by D/o Administrative Reforms and Public Grievances. Cyber security auditing is being undertaken by NIC to secure the website from cyber threats.

Being it is a channel for an efficient and effective way of information dissemination with the Industry; websites are strengthened with more user centric content pages, interactive channels with industry penetration and awareness programs. Moreover, features like Multi language

support, FAQs, Online Feedback and comments and Web linkages have been integrated on various websites to enhance their interactiveness. Downloadable Forms / applications of Ministry & its organizations required by the user domain are made available. Apart from this, statistical data & analysis relating to various sectors of cotton, jute, silk, manmade fiber and their magazines/journals are also made available on respective websites for free of cost.

Regular updations Events, Photo gallery, Media feedback are incorporated. Monthly status report on enhancement and upgradation of websites of the respective organizations are received by the Ministry and reviewed for further improvement on regular basis.

E-marketing Portals

Existing e-Marketing portals of Central Cottage Industries Corporation of India Ltd. (CCIC) (http://www.cottageemporium.in and the Handicraft and Handlooms Export Corporation of India Ltd. (HHEC) (http://www.hheconline.in/) are enriched by display of more handicrafts and handlooms products with detail specifications.

Design pool portals

In order to benefit the Weavers of the Handlooms Sector, near about 1,500 free contemporary designs are made available in the websites of Office of Development Commissioner (Handlooms) in http://www.designdiary.nic.in/ designpool.asp and National Institute of Fashion Technology (NIFT). These are images in easily downloadable format, tagged with technical details in regional languages to reuse or reproduce. The designs have an important bearing on the marketing of handcrafted and handlooms products as well as motivate the weavers and artisans to innovate new contemporary products. It extends its support in sustaining and capturing both domestic and export markets.

ICT Infrastructure upgradations

Additional Hardware/Software, Network equipment and visual aids are installed at various sections / conference room as per requirement. LAN of the Ministry is going to be upgraded with high band width which will facilitate fast internet services, online meetings / Video Conferencing, VOIP teleconferencing etc. Under the guidelines of the cabinet secretary, various cyber security measures are undertaken by the Ministry. Automatic patch management and regular updating for virus scanners is activated on the network to protect it from the cyber threats.

Implementation of E-GovernanceEconomic Research and Market intelligence Unit (ERMIU) is providing an integrated interface for collection and dissemination of Information to Trade and Industry through a dedicated web site (http://ministryoftextiles.gov.in/ermiudel/). Various analytical reports on Prices of Textiles items, Production of Yarn/Cloth etc., Sectorial information of Cotton, Silk, Man Made Fibre, Jute, and Import/Export of Indian Textiles are available on the ERMIU web site along with Indian economy indicators. Latest information on the Policies, Plans, Budget, Schemes, Acts, Notifications and initiatives taken by the Ministry are made available on the web site of the Ministry (http://ministryoftextiles.gov.in). To enhance the participation of the Textiles Industry in governance, on-line feedbacks / comments are invited from the Industry on the website at the time of finalizing the various policies on Textiles sector. Various office automation applications like File Tracking System, Court Case Monitoring System, Monitoring of VIP references etc. are being maintained.

ICT implementation in other organizationAttached and subordinate offices under the Ministry have also upgraded their ICT infrastructure as per the requirement with sophisticated LAN. These offices had enhanced their respective web sites with more users centric features. Various application forms required by the public or Trade community for submitting the proposal under different schemes are also provided on the site for downloading. Various statistical reports on the Industrial database are also being published for the reference to the industry. To disseminate the information at the grass root level, field offices are equipped with Internet and Email facility. Awareness courses for the purpose are organized for officials to operate and deliver the services more effectively.

PORTERS FIVE FORCES MODEL OF INDIAN TEXTILE INDUSTRY

Textile industry provided one of the most fundamental necessities of the people. It is an independent industry, from the basic requirements of raw materials to the final products, with huge value-addition at every stage of processing. In fact, it is estimated that one out of every six household in India is directly or indirectly dependent on this sector.

Here we try to analyze the sector’s dynamics through Porter’s five force model.[1] Threat To New Entrants

Indian Textile Industry is very dependent on personal contacts and experience. The new actors would have to bring some kind of client base along with the new establishment. Product differentiation may constitute a barrier of entry as manufacturers are heavily dependent on references and word of mouth. Without any established client portfolio it is difficult to attract, endure increased costs in creating sample collections to show potential customers. Hence, in startup phase costs are not only associated with the manufacturing required but also with the costs for designers and creating samples. In the sense of reference dependency, barriers of entry are considered as very strong.

As the new entrant has limited experience in textile manufacturing and there are no built up relationships with customers, they might experience disadvantages relative to the established competitors.

Governmental policies do affect the business environment to some extent. An example of this is subsidies, which are offered to companies establishing production in certain regional areas.

In addition to these potential barriers of entrance, new entrants may have second thoughts about entering the new market, if existing manufacturers may retaliate on new entrants. The Indian textile industry though, has such a large population of manufacturers so any new actors may hardly be noticed by the competition, which minimizes the risk for retaliation.

[2] Bargaining Power Of Customer Global textile & clothing industry is currently pegged at around US$ 440 bn.US and European markets dominate the global textile trade accounting for 64% of clothing and 39% of textile market. With the dismantling of quotas, global textile trade is expected to grow (as per Mc. Kinsey estimates) to US$ 650 billion by 2012 (5 year CAGR of 10%). Although China is likely to become the supplier of choice, other low cost producers like India would also benefit as the overseas importers would try to mitigate their risk of sourcing from only one country. The two-fold increase in global textile trade is also likely to drive India's exports growth. India's textile export (at US$ 15 billion in 2005) is expected to grow to US$

40 billion, capturing a market share of close to 8% by 2012. India, in particular, is likely to benefit from the rising demand in the home textiles and apparels segment, wherein it has competitive edge against its neighbors.

Hence, the bargaining power of customers is strong. For that reason, it is of importance for a producer of apparel to differentiate their products or production so it will not compete with price as primary mean.

Differentiation is accomplished either by quality or service. Differentiation can be considered as especially important in the Indian textile industry since contracts are usually set on short-term basis and are rarely set more than six months ahead. Hence, there is a need to tie the customer to manufacturers without the need of explicit contracts. Thus, the bargaining power for the Customer is improved.

[3] Bargaining Power Of Suppliers India is a country where we have numerous players in textile industry which all are varied in terms of size and power. There has been increase in production and supply of textile products in last few decades globally, mainly due to rapidly changing social and economic structure of the countries worldwide. In past few years, especially after the removal the trade related tariffs and non-tariff barriers in 2005, Asian countries such as India, China, Hong Kong and Japan have emerged as major players in this particular industry, mainly due to their changes on economic front and infrastructure developments.

The large number of available suppliers in India gives an initial indication of a weak bargaining position for the supplier group. Additionally, the supplier group lacks switching costs and has a low level of product differentiation. This leads to great possibilities for textile manufacturers to scout the supplier group for best terms and prices for production. As a result, manufacturers can contact a large number of suppliers and play suppliers against each other. Such behavior weakens the bargaining power for suppliers and as a result pushes prices down and makes prices similar among suppliers.

An advantage which the Indian Suppliers have capitalized on is, due to their ability to integrate forward in value added chain, they have achieved a better bargaining position towards textile manufacturing. As previously seen, companies in the textile and apparel sector have established forward to create vertically integrated company groups. Deep relationships between manufacturers and suppliers illustrate how important the textile manufacturing industry is for the supplier group. An example of this is how suppliers and manufactures interact in activities such as research and development (R&D). By this process the supplier obtains knowledge on what customers downstream in the value added chain demands.

[4] Threat Of Substitute Products When using such a broad term as Textile, there are obvious reasons for identifying substitute product groups proves difficult. Of course, there are variations in types of clothing and material. Variations in textile segment can also be identified as trends in fashion and styles. Hence products within the apparel segment can act as substitutes but the general conclusion still stands; there’s no substitute to apparel.

[5] Competitive Rivalry Within The Industry The textile manufacturing segment in India is made out of numerous manufacturers which all are varied in terms of size and power. It is a massive sector with thousands of companies producing apparel. The apparent high growth rate of total textile exports indicates that the rivalry between manufacturers is low. The growth rate is high in some product segments but even negative in others. Hence, the rivalry between apparel manufacturers is diverse since they enjoy different growth rates.

Additionally, textile as a perishable product group is in the risk of temptations to cut prices when demand slackens. For example, when there are recessions in the business cycle apparel prices will drop significantly in price. Both these factors exemplify and indicate that the rivalry between manufacturers is high.

As Indian apparel manufacturers are pressured to lower prices in order to stay competitive with companies abroad, the overall rivalry within the industry gets companies to expand their customer base in order to keep profits up. It is therefore reasonable to believe that such expansions may occur on the behalf of competitors if possible, and thereby increase the rivalry in the industry.

SWOT ANALYSIS OF TEXTILE INDUSTRY

India is a traditional textile -producing country with textiles in general, and cotton in particular, being major industries for the country. India is among the world’s top producers of yarns and fabrics, and the export quality of its products is ever increasing. Textile Industry is one of the largest and oldest industries in India. Textile Industry in India is a self-reliant and independent industry and has great diversification and versatility. The textile industry can be broadly classified into two categories, the organized mill sector and the unorganized decentralized sector.

The organized sector of the textile industry represents the mills. It could be a spinning mill or a composite mill. Composite mill is one where the spinning, weaving and processing facilities are carried out under one roof.

The decentralized sector is engaged mainly in the weaving activity, which makes it heavily dependent on the organized sector for their yarn requirements. This decentralized sector is comprised of the three major segments viz., powerloom, handloom and hosiery. In addition to the above, there are readymade garments, khadi as well as carpet manufacturing units in the decentralized sector.

Strengths of the Textile Industry:The following are few strengths of the Indian Textile Industry: An Independent and self-reliant industry; Large and potential domestic and international market; Abundant Raw Material availability that helps industry to control costs and reduces the lead-

time across the operation; Availability of low cost and skilled manpower provides competitive advantage to industry; Availability of large varieties of cotton fiber and has a fast growing synthetic fiber industry; Promising export potential.

Weaknesses of the Textile Industry:The following are the few drawbacks of the textile industry, which it has to overcome. The Industry is a highly fragmented Industry. It is highly dependent on Cotton. There is lower productivity in various segments. There is a declining in Mill Segment. Lack of Technological Development that affect the productivity and other activities in whole

value chain. Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and

transportation Time. Unfavorable labor Laws. Lack of Trade Membership, which restrict to tap other potential market.

Opportunities in the Indian Textile Industry:The textile industry is undergoing a major reorientation towards non-clothing applications of textiles, known as technical textiles like thermal protection and blood-absorbing materials; seatbelts; adhesive tape, and multiple other specialized products and applications. These technical textiles are an emerging industry with a potential to reach a size of US $ 127 billion and hold a great promise for Indian textiles industry.

Indian textile industry phase-out of the quota regime of the multi-fibre arrangement (MFA) is upbeat with new investment flowing and various initiatives taken by the government. A Vision 2010 for textiles formulated by the government to capitalize on the upbeat mood aims to increase India's share in world's textile trade to 8% by 2010 and to achieve export value of US $ 50 billion by 2010 Vision 2010 for textiles envisages growth in Indian textile economy from the current US $ 37 billion to $ 85 billion by 2010 and modernization and consolidation for creating a globally competitive textile industry.

High growth is expected in the domestic market as well as exports. The growth of the Industry is expected in the following areas: Cotton Jute Ready garment Silk textile Handloom Textiles export Wool and Woolen textiles Handicrafts

Threats in the Indian Textile Industry: Increased competition in Domestic market Cheaper imports Changing Government policy on FDI.

Cost competitiveness in Indian garments sector has been restrained by limited scale operations, obsolete technology and reservation under SSI policies. While retaining its traditional cost advantages of home grown cotton and low cost labour, India needs to sharpen its competitive edge by lowering the cost of operations through efficient use of production inputs and scale operations. Besides, there are needs for rationalization of charges, levies related to usage of export logistics to remain cost competitive.

As fallout to the quota regime, there would be consolidation of production and restriction on supplying countries, which would necessarily mean improved scale operations. Indian players should also integrate to achieve operating leverage and demonstrate high bargaining power.

It is reported that Chinese textile firms have already invested heavily to expand and grab huge market share in the quota free world. In India, organised players in this sector would require huge investments to remain competitive in the quota free world. These players need to expand and integrate vertically to achieve scale operations and introduce new technologies. It is estimated that the industry would require Rs. 1.5 trillion (US $ 35 billion) new capital investment by end of 2014 to lap the potential export opportunities of US $ 70 billion. It is estimated that USA and EU together would offer a market of US $ 42 billion for Indian textiles and garments in 2014.

Technology plays a lead role in the weaving and processing, which would improve quality and productivity levels. Innovations would also be happening in this sector, as many developed countries would innovate new generation machineries that are likely to have low manual interface and power cost. Indian textile industry should also turn into high technology mode to reap the benefits of scale operations and quality. Foreign investments coupled with foreign technology transfer would help the industry to turn into high-tech mode.

Internationally, trading in textile and garment sector is concentrated in the hands of large retail firms. Majority of them are looking for few vendors with bulk orders and hence opting for vertically integrated companies. Thus, there is need for integrating the operations in India also, from spinning to garment making, to gain their attention. This would also bring down the turn around time and improve quality. Indian players should also improve upon their soft skills, viz., design capabilities, textile technology, management and negotiating skills.

Garment manufacturing business is order driven. It would be difficult for the players to keep the workforce full time, even in lean season. This calls for changes in contract labour laws.

Logistics and supply chain would also play a crucial role as timely delivery would be an important requirement for success in international trade. The logistics and supply chain management of Indian textile firms are relatively weak and needs improvement and efficiency. China has already created a world class export infrastructure. Given the volume of projections for exports by India, it may be necessary to create additional export infrastructure, especially investment for modernization of ports. In addition, India needs to invest for creating brand equity, supply chain management and apparel industry education.

To sum up, the ability of Indian textile industry to take advantage of quota phase-out would depend upon their ability to enhance overall competitiveness through exploitation of economies of scale in manufacturing and supply chain. The need of the hour therefore is to evolve a well chalked out strategy, aimed at improvement in the levels of productivity and efficiency, quality control, faster product innovation, quick response to changes in consumer preferences and the ability to move up in the value chain by building brand names and acquiring channels of distribution so as to outweigh the advantages of competitors in the long run.

MAJOR PLAYERS IN TEXTILE INDUSTRY

COMPANY BUSINESS AREAS

ITC Lifestyle Lifestyle market

Reliance Industries Ltd. Fabric, formal wear

Welspun India Ltd. Home textiles, bathrobes, terry towels

Arvind Limited Spinning, weaving, processing and garment production (denims, shirting, khakis, knitwear)

Mafatlal Industries Ltd Shirting, poplins, bottom wear fabrics, voiles

Vardhman Group Yarn, fabric, sewing threads, acrylic fibre

Aditya Birla Nuvo – Madura Garments, Jayashree Textiles and Indian Rayon

Madhura Garments – lifestyle marketJayashree Textiles – domestic linen and worsted yarnIndian Rayon – viscose filament yarn

Bombay Dyeing & Manufacturing Company Ltd.

Bed linen, towels, furnishings, fabric for suits, shirt dresses and saris in cotton and polyester blends

Raymond Ltd. Worsted suiting, tailored clothing, denim, shirting, woolen outerwear