Indian Textile Industry: Challenges and Opportunities
The Indian textile industry is currently navigating through a landscape marked by both threats and opportunities. While the sector benefits from the prospects of accessing unrestricted markets, it also faces unforeseen challenges.
Since the beginning of 2010, the Indian textile industry has encountered various difficulties. Previously, the global economic crisis had triggered financial woes such as closures, reduced capacity utilization, layoffs, and a decline in sales. The subsequent recovery brought a ray of hope, but new challenges emerged, including a sharp increase in textile input prices and a decline in exports to the US due to intensified competition.
Despite buoyant textile stocks in the past three months, the industry is anticipated to underperform due to rising input costs and a slowdown in Indian apparel exports to the US. In 2009, India's apparel exports to the US increased by 3%, whereas China experienced a 10% growth in exports. This gap widened in 2010, with India seeing a 5% increase and China achieving a significant 25% growth in apparel exports to the US. Profits have also contracted due to higher operating and non-operating expenses, particularly affecting textiles using raw cotton and cotton yarn as inputs.
Mounting cotton and cotton yarn prices:
Cotton prices are seeing an increase for the past 15 months, while a hike in the prices of cotton yarn is a recent trend. Raw cotton prices have increased by 32% and cotton yarn prices by 23% comparatively over the last year. A data released by the textiles ministry comparing the past three months prices state that price of long staple cotton increased by 30% during the last three month, and cotton yarn prices increased by 44%. Increase in cotton prices will obstruct the earnings of textile companies. As the prices of cotton have shot up, simultaneously, prices of cotton yarn has gone up even higher. This is affecting both big and small exporters of finished products. However, good cotton crops are positively expected to reduce the shortage of raw cotton, thereby controlling the prices.
Man made fibre (MMF) and man made textile prices:
Indian Government had set a target of USD 7 billion for exports of MMF by 2014. But due to high input costs exports are anticipated to fall short of the targets. For 2011, the targeted export of USD3.8 billion is unlikely to be achieved.
The SME Times reports VK Ladia, Chairman, Synthetic & Rayon Textiles Export Promotion Council (SRTEPC) saying, "We will fall short of our target but we will not be largely short. Instead of US $3.8 billion, we might be able to achieve US $3.6 billion. The rise in the costs of raw materials is hurting exporters dearly. In fact, the input costs have also affected our profit margin."
Major markets for man made textile exports of India are US, UAE, Brazil, Italy, Egypt, Turkey, Iran, UK, and Belgium. Exports to major markets are going through a negative growth of 10.18%. For 2010, exports of MMF was USD 10.50 billion whereas, the same was USD 11.69 billion during the corresponding period of the previous year.
Rising woolen prices:
Increase in the price of greasy wool in the global market has affected Indian woolen and yarn makers. International players are retaining their orders by squeezing their margins or by restricting orders to maintain their margins. Supply blockages, and mounting prices are hitting even the big manufacturers below the belt. Woolen manufacturers are seeking alternate options by blending wool with acrylic and polyester to cut costs.
Though Indian textile industry is expected to generate opportunities in terms of access to unrestricted markets, it is also open to many threats at the same time. What is now needed is the Governments support to enable the country to compete with its counterparts.
References:
1. Apparel India, February_2011.
2. Economictimes.indiatimes.com
3. Smetimes.tradeindia.com
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