India - Textile Sourcing and Apparel Sourcing Hub, Trends in Indian Exports

India has a strong industrialculture, and is the most preferred country for textile and apparel sourcing, nextto China. Textile and apparel industry in India and sourcing by globalretailers to India is expected to have an annual increase of 12 percent. Thesize, spread, and depth of the Indian textile and apparel industry and quotaelimination during 2004, has enhanced the sourcing opportunities to India to a considerable extent. Textile and apparel sourcing plays a major role in thedevelopment of the country' s economy.

India's international competitiveness and exports:

India is one among the worldsleading apparel exporters. India has abundant supply of cotton which accountsfor almost three-quarters of its apparel exports. Earlier, the Indian Governmenthad reserved some products like woven and knitted apparels exclusively forsmall scale industries. After the expiry of the policy and the elimination ofthe global quota system in 2004, big players started entering the retail scene.After the quota elimination, Indian firms are facilitating themselves to meetthe global demand for their products.

The outstanding performance of India in textile sourcing is contributed by a number of factors. India has a perfect supplychain starting from raw material to high quality of finished products. Textileindustry is highly labor intensive. India has abundant availability of labor atthe cheapest cost as compared with other global countries. It is enriched withexperienced entrepreneurship and skills which is hard to be overcome by othercountries. Indian textile industry is comprised of both small and bigindustries. Medium and small industries can manufacture high fashion garmentsand possess the flexibility for small orders which needs to be deliveredquickly, while big firms enable to serve big buyers.

Trendsin Indian Exports:

The history of India's exports of textile and apparels started during the 2^nd century and is anongoing process till now. Due to the quota-free regime, textile exporters aregetting into untapped destinations such as Spain, Netherlands, Australia and Italy apart from the traditional markets of US and UK. In Italy and Spain, most of the orders are from the fashion industry for specialized garments with valueadded work like embroidery. India's performance in the traditional textilemarkets of US and UK is also strong. US restrictions on Chinese exports has benefitedIndian apparel sector which resulted in an 18 percent increase of garmentexports to US.EU has also set restrictions on exports from China stating thatit affects their local market. This has also benefited Indian export forapparels. The export portfolio is on a positive swing in terms of value addeditems in cotton garments that comprises of 50 percent of the total exports ofthe country.

SourcingApparel from India:

Textile industry in India is the second largest industry next to agriculture, and makes 30 percent of the country'stotal exports and 4 percent of India's GDP. One out of every 6 household in India is linked with the textile sector. India supplies around $13 billion USD of apparel andtextile to international markets. It has 30,000 garment manufacturing unitsgiving employment opportunities to 3 million people. Sourcing to India has given good quality and productivity gains to foreign countries. Many leadingfashion brands are associated with Indian products. India is being looked uponas a major exporter of fashion apparels and is being appreciated ininternational markets. There is a strong demand for Indian made products in Italy, Spain and U.K. India is the third biggest apparel exporter to U.S. next to China and Mexico. Indian cotton products like skirts, knitted shirts, beddings etc have an everincreasing demand in the U.S.

Synthetic textile exports from India are now capturing new market with an average annual growth rate of 22 percent. India exports synthetic textiles to 175 countries currently of which Middle East comprises of 32percent and EU makes 23 percent of the total exports.

Special Economic Zones:

Special Economic Zones (SEZ) are geographical regions that have economic laws which vary from the usual economic laws of the country to provide an internationally competitive and hassle-free environment for exports. This is done with the intention to:

Attract FDI (Foreign Direct Investment).
Increase the country's exports.
Offer special tax benefits and exemption from duties.
Accelerate the country's economic growth and achieve industrialization, and
Development of infrastructural facilities for textile industries.

Preferential treatment is given to SEZ by granting them government policy concessions. Efforts are being made by the Government to minimize the weakness of the sub-sectors of the textile industry, and overcome its lack of quality infrastructure so as to enable textile business firms to conduct business smoothly.

Scheme for Integrated Textiles Park (SITP):

Indian textile industry has inherent advantages like abundant availability of cheap labor, innovative technologies, ever increasing demand in the global market etc. Despite these benefits, a few bottlenecks are seen in the availability of the infrastructure which might hinder its performance in the global market. The Central Government has come up with a new 'Scheme for Integrated Textiles Park' (SITP) to minimize the weakness of textile industries and cope with the lack of availability of quality infrastructure. SITP would create 30 new textile parks in India with international standards and house approximately 1,250 textile units at the places anticipated to be positive growth centres. The ITPs may also be set up in SEZs if the provisions of SEZs are applicable to them. The parks will be set up in the following states:

Andhra Pradesh - 5
Gujarat - 7
Maharashtra - 6
Tamilnadu - 6
Rajasthan - 4

Projects in these parks will cover weaving, knitting, processing and garmenting sectors. The positive outcome of this scheme is that it would facilitate a private investment of 15,258 crore into the textile sector, with an annual production of 24,000 crore, and generate additional five lakh jobs. The parks are expected to operate by March 2009.

Promising terms of sourcing apparel from India:

Global textile and apparel market is currently valued to be around $450 billion and is further expected to have a drastic growth of $700 billion USD by 2010. Global textile trade saw a positive increase of 12.9 percent in 2003, 11.6 percent during 2004, and 9.7 percent in 2006. Demand for apparels is estimated to grow by 25 percent thereby making 35 million tones of apparels. Of the global demand for apparels; 85 percent would be sourced from Asian countries. Sourcing of textiles and apparels to India by retail giants, worldwide is expected to have a positive growth rate of 12 percent annually. A report forecasts that textile sourcing market in India during 2008 is expected to be approximately $22 billion USD, and is further expected to grow by $35 - 37 billion USD by 2011. More buyers from China are likely to look at India as a promising substitute of China.

India is seen as a country with strong credibility in textile and apparel industry. With huge investments, innovations and development in technology, India is now blooming as a promising outsourcing hub. Elimination of the quota system, and increase in FDI would make India an outstanding sourcing centre. The number of companies sourcing from India, and their sourcing activities will see a positive increase in the near future.

References:

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Fibre2Fashion

Published: Mar 2008

India: Emerging textile and apparel sourcing hub

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India: Emerging textile and apparel sourcing hub

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