Recital of the textile industry

INTRODUCTION

Indian Textile Industry:

Textiles and clothing sector is the largest employer after agriculture and its importance in Indias economy is recognized for its contribution to industrial production and export earnings. The Indian Textile Industry is growing at 20% and accounts for 4% of Indias GDP. It contributes 14% to the Industrial Production and employs about 35 million people. It accounts for 21% of India Gross Export Earning. Foreign Direct Investments inflows worth 681.59 million have been received by the industry between Aug 91 and May 06, accounting for 1.29% of total FDI inflows in the country.

Position of the Indian Textile Industry in the World Textile Economy

India contributes 20% to world spindle age capacity, the second highest spindle age in the world after China. It contributes 6% to the world rotorage and 62% to the world loomage. However in High-tech Shuttless Looms this industrys contribution is only 4.1% to the world Shuttless loomage. 12% to the world production of textile fibres and yarns is from India and is the largest producer of Jute, second largest producer of silk and cellulose fibre / yarn, third largest producer of cotton and fifth largest producer of synthetic fibres / yarns.
Indias key assets include a large and low-cost labour force, sizable supply of fabric, sufficiency in raw material and spinning capacities. On the basis of these strengths, India will become a major outsourcing hub for foreign manufacturers and retailers, with composite mills and large integrated firms being their preferred partners. It will thus be essential for SMEs to align with these firms that can ensure a market for their products and new orders.

Growth & Investment in Textiles

All India Index of Industrial Production (IIP) registered an increase of 10.1% during the first quarter of 2006-07 (April-June) as against the corresponding period of last year, the index of production for the textiles group of industries showed a surge. There was a significant increase in respect of Textiles products (9.5%) and Wool, Silk & Manmade fibre textiles (7.3%). The Cotton textiles also showed an increase of 2.4%. However,

Jute & other vegetable fibre textiles declined by 0.9%

Spun yarn production has increased by 1.5%

Cloth production was more by 7.0%. The Hosiery sector recorded the highest growth (9.6%) followed by
Power loom (7.5 %).

While the All India Wholesale Price Index rose by 4.6%, the textile group registered marginal increase of 0.1%.

Exports started picking up momentum and increased by 20.54%. Significant increase was recorded in RMG (20.65%), Cotton Textiles (31.08%), Man-made Textiles (17.99%) and Wool & woollens (16.75%). However, exports of Jute Goods (-3.84%) is yet to make an upward trend.

There was a surge in imports (13.36%), accounted by RMG (36.29%), Made-ups (40.11%), and Semi-raw material (21.45%).

Indian Textile exports consist of
Cotton yarn and fabrics,
Man-made yarn and fabrics,
Wool and silk fabrics,
Made-ups and a variety of garments, knitwear
Woven and silk besides handmade

Indian Textiles Exports and Imports

Benetton, the world's leading apparel manufacturer and marketer, makes 130 million garments annually with a turnover of 1.42 billion. Exports from the country will touch 8.75 billion in 2007-08, up from 15 billion expected in the fiscal just ended (2006-07). Major export destinations for Indias textile and apparel products are the US and EU, which together account for over 75% of demand. Exports to the US have further increased since 2005, post the termination of the MFA (Multi Fibre Agreement). Analysis of trade figures by the US Census Bureau shows that post-MFA, imports from India into the US have been nearly 27% higher than in the corresponding period in 2004-05.

Textiles Exports and Imports

Supply chain in the textile industry

In the Indian textile industry access to international markets is not achieved via designing and marketing new products but via gaining entry into international production, sourcing, and marketing networks that are set up by lead firms. The exercise of influence by interest groups over the state and policy is thus better understood by examining the supply chain in the textile industry the supply chain being the input-output structure of value-adding activities beginning with raw materials and ending with the finished product. The supply chain in the textile industry is as given in Figure

Figure I: Supply Chain in Textiles

The operation of the supply chain gives us insights into how industrial units influence the organization of production, logistics and marketing, and the options open for improving competitiveness such as moving into more sophisticated product lines (product upgrading), acquiring superior technologies or reorganizing production systems (process upgrading), or even acquiring new functions such as moving from production to design or marketing (functional upgrading) or backwards and forwards to different stages in the supply chain (vertical integration).

Foreign Direct Investment Policy in Textiles

Indian textile and apparel industry is one of the largest in the world with US$ 17 Billion of export and US$ 30 Billion of domestic textile and apparel during 2005-06. The industry has, over the years, contributed significantly to national output, employment and exports. At present, industry accounts for about 14% of our total industrial production and contributes to nearly 17% of total exports. It provides direct employment to about 35 million people and another 56 million are engaged in allied activities. The textile export has registered a growth of 22 percent to 17.08 Billion during 2005-06 from US$ 14.02 Billion during 2004-05. The Industry has a potential to reach a size of US$ 85 Billion by 2010. With its consistent growth performance and abundant cheap skilled manpower, there are enormous opportunities both for domestic and foreign investors to make investments in textile sector in India.

India has most liberal and transparent policies in Foreign Direct Investment (FDI) amongst emerging countries. India is a promising destination for FDI in the textile sector. 100% FDI is allowed in the textile sector under the automatic route.

FDI in sectors to the extent permitted under automatic route does not require any prior approval either by the Government of India or Reserve Bank of India (RBI). The investors are only required to notify the Regional Office concerned of RBI within 30 days of receipt of in word remittance. Ministry of Textiles has set up FDI Cell to attract FDI in the textile sector in the country.

The FDI cell will operate with the following objectives:

To provide assistance and advisory support (including liaison with other organizations and State Governments); Assist foreign companies in finding out joint venture partners; To sort out operational problems; Maintenance and monitoring of data pertaining to domestic textile production and foreign investment.

Government Policy

Investments in the textiles sector can be assessed on the basis of three factors:

Plan schemes such as the Technology Up gradation Funds Scheme (TUFS) Under the TUFS scheme, a total of 15.9 billion has been disbursed for technology up gradation. There are around 26 Apparel Parks in eight states in India, with a total estimated investment of 2.3 billion
Technology Mission on Cotton
Apparel Parks, etc.
A competitive industry, Apparel has the potential of achieving export earnings of 25.46 billion by 2010. Specialized textile parks, apparel parks, EOUs and EPZs have been set up with improved infrastructure. The apparel parks operate as Special Purpose Vehicle and are run independently by entrepreneurs. Government support has ensured that key policy changes in the fiscal regime have been made in the past two years, which would ensure rapid increase of clothing consumption as well as the fibre consumption. A single rate will now be prevalent throughout the country.

Opportunities in the Textile Sector

Global Textile and apparel trade is estimated to be 340 billion
Indian industry estimated at 35 billion with exports of 12 billion and employs 35 million people
India is the third largest producer of cotton, largest exporter of yarn (25% of world cotton yarn export)
India is a major player in the home textile segment (61% of world loom capacity)

How to promote textile exports

For promotion of exports the measures which should be taken up are Up gradation of textiles sector Policy level decision to achieve export target. Woven segment of readymade garment sector and knitwear have been de-reserved. Technology Up-gradation Fund Scheme to be pursued till next five years
Import of capital goods at 5% concession rate of duty with appropriate export obligation under Export Promotion For promotion of exports the measures which should be taken up are Capital Goods (EPCG) Scheme and clearly laid out EXIM policy.

Continue the present excise exemptions to the genuinely disadvantaged sectors. Retain the SSI excise exemption / CENVAT exemption to the sectors like fabrics woven on handlooms, khadi, silk yarn, hand processing totally without the aid of power whose details are contained in the Report.

Reduce customs duty from 25% to 5% on capital goods of man-made / synthetic fibre / yarn industry and similarly on certain garment sector machinery.

Domestic production of such machinery be exempted from CENVAT

Reduce customs duty on intermediates of synthetic Fibres and yarns

Reduce customs duty on apparel grade wool and flax fibre from 15% to 5%.

Setting up of quality checking laboratories

Duty Drawback Scheme wherein the exporters are allowed refund of the excise and import duty loss on raw materials Announce the constitution of a Textile Industry Reconstruction Fund with a Corpus of Rs.3000 crores for financial restructuring of the Textile industry. Construction of Apparel International Mart by Apparel Export Promotion Council to provide a world class facility to the apparel exporters to exhibit products and built international reputation.

CONCLUSION

Concluding to the Indian textile industry has been witnessing growth and has the reasons to outsmart China in the global textile market. The Vision Statement for the year 2010 for the Indian textile industry aims at achieving a share of 6% of the global market for textiles and clothing and achieving an export value of US450-billion and creating 12 million additional jobs.

About the authors:

S.Sudalaimuthu
Lecturer
Department of commerce
Bharathiar University
Coimbatore 641046
E.mail:sm_vcas@yahoo.com

Field of Specializations:
Accounting, Financial Management, Banking, E-Commerce and Computer subjects (C , Visual Basic, MIS)

Achievements:

(1) Actively engaged in guiding M.Com, M.Phil and Ph.D students, M.Com Projects guided: 42, M.Phil Projects guided: 17, currently guiding 6 Ph.D and 5 M.Phil students.
(2) Seminar / Workshop organized in the College level: 33,State level: 2,National Level: 1
(3) Seminar / Workshop participated: 42,(4) No of papers presented in the State level and National Level Seminar: 42,(5) No of Papers presented in the International Seminar: 11
(6) No of papers published: 6,(7) Developed many programs in C and Visual Basic for various commerce applications,(8) Familiar in using Accounting Packages: Tally and EX-Next Generation,(9) Designed and introduced five job oriented certificate courses in Vidya sagar college of Arts and Science, Udumalpet.,(10) Teaching Experience: U.G - 16 years, PG - 11 years.

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P.Senthil Kumar
Research scholar
Department of commerce
Bharathiar University
Coimbatore 641046
E mail: senspv@gmail.com

P.senthil Kumar did his M.Com (2006) in Department of Commerce Sree Saraswathi Thyakaraja Arts and Science College, pollachi, Coimbatore. At present he is doing research program in the Department of Commerce, Bharathiar University, Coimbatore. His Presented 9 Seminar papers in various National and International conferences. Among this 2 international level conferences, 1international symposium and 6 national level Seminars.