Sri Sharada Institute Of Indian Management -

Research
(A unit of Sri Sringeri Sharada Peetham, Sringeri)
Approved by AICTE
Plot No. 7, Phase-II, Institutional Area, Behind the Grand Hotel, Vasant Kunj,
New Delhi – 110070
Tel.: 2612409090 / 91; Fax: 26124092
E-mail: [email protected]; Website: www.srisim.org

PROJECT REPORT ON

TEXTILE INDUSTRY IN INDIA-

A S.W.O.T ANALYSIS

SUBMITTED TO: SUBMITTED BY:

PROF. SARTAJ KHERA TANJU ROY (20090158)
PARUL CHAUDHARY (20090138)
KARANJIT NATH (20090126)
HARSH BHANDARI (20090120)
BEDANTA SOIBAM (20090113)
ABHISHEK MUKHERJEE (20090103)
 Acknowledgement

Preservation, Inspiration and motivation have always played a key role in the success of
any venture. In the present world of competition and success, training is like a bridge
between theoretical and practical working; willingly we prepared this particular Project.
First of all we would like to thank the supreme power, the almighty God, who is the one
who has always guided me to work on the right path of my life.
We would like to thank our Mentor Prof. Sartaj Khera who has been the greatest
support in completing this project. Without her constant feedback, this project would not
have been a reality. This project would not have seen the light of the day without her
support and guide through the various stages of our project.

Constructive criticism and feedback would be highly appreciated.

TANJU ROY
PARUL CHAUDHARY
KARANJIT NATH
HARSH BHANDARI
BEDANTA SOIBAM
ABHISHEK MUKHERJEE
Sri SIIM, Vasant kunj, New Delhi
INTRODUCTION

The Indian textile industry has a significant presence in the economy as well as in the
international textile economy. Its contribution to the Indian economy is manifested in
terms of its contribution to the industrial production, employment generation and foreign
exchange earnings. 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 country’s total export earning and 4 percent to the Gross Domestic Product.

In human history, past and present can never ignore the importance of textile in a
civilization decisively affecting its destinies, effectively changing its social scenario. A
brief but thoroughly researched feature on Indian textile culture.

HISTORY OF TEXTILE INDUSTRY

India has been well known for her textile goods since very ancient times. The traditional
textile industry of India was virtually decayed during the colonial regime. However, the
modern textile industry took birth in India in the early nineteenth century when the first
textile mill in the country was established at fort Gloster near Calcutta in 1818. The
cotton textile industry, however, made its real beginning in Bombay, in 1850s. The first
cotton textile mill of Bombay was established in 1854 by a Parsi cotton merchant then
engaged in overseas and internal trade. Indeed, the vast majority of the early mills were
the handiwork of Parsi merchants engaged in yarn and cloth trade at home and Chinese
and African markets.
The first cotton mill in Ahmedabad, which was eventually to emerge as a rival centre to
Bombay, was established in 1861. The spread of the textile industry to Ahmedabad was
largely due to the Gujarati trading class.

The cotton textile industry made rapid progress in the second half of the nineteenth
century and by the end of the century there were 178 cotton textile mills; but during the
year 1900 the cotton textile industry was in bad state due to the great famine and a
number of mills of Bombay and Ahmedabad were to be closed down for long periods.
 The two world wars and the Swadeshi movement provided great stimulus to the
Indian cotton textile industry. However, during the period 1922 to 1937 the industry
was in doldrums and during this period a number of the Bombay mills changed
hands. The Second World War, during which textile import from Japan completely
stopped, however, brought about an unprecedented growth of this industry. The
number of mills increased from 178 with 4.05 lakh looms in 1901 to 249 mills with
13.35 lakh looms in 1921 and further to 396 mills with over 20 lakh looms in 1941. By
1945 there were 417 mills employing 5.10 lakh workers.

The cotton textile industry is rightly described as a Swadeshi industry because it was
developed with indigenous entrepreneurship and capital and in the pre-
independence era the Swadeshi movement stimulated demand for Indian textile in
the country.

The partition of the country at the time of independence affected the cotton textile
industry also. The Indian union got 409 out of the 423 textiles mills of the undivided
India. 14 mills and 22 per cent of the land under cotton cultivation went to Pakistan.
Some mills were closed down for some time. For a number of years since
independence, Indian mills had to import cotton from Pakistan and other countries.

After independence, the cotton textile industry made rapid strides under the Plans.
Between 1951 and 1982 the total number of spindles doubled from 11 million to 22
million. It increased further to well over 26 million by 1989-90.

Segments of Indian Textile Industry

Indian Textile Industry can essentially be categorized into two segments :-

 Organized Textile Industry

 Unorganized Textile Industry Unorganized sector is the dominant part in this industry
which mainly utilizes the traditional practices (woven or spun) in cloth production and
 hence is labor intensive in nature. This industry is characterized by the production of
clothes either through weaving or spinning with the help of hands. The decentralized
nature is considered as another important feature of the unorganized textile industry in
India.

The other half of the Indian Textile industry is a highly organized one with immense
importance on capital intensive production process. This sector is characterized by
sophisticated mills where technologically advanced machineries are utilized for mass
production of textile products.

Sub-Sectoral Categorization of Indian Textile Industry

 Textile Industry based on fiber produced through manmade means or natural

cotton

 Yarn industry utilizing fiber or filament of the man made type

 Textile industry involved in the production of wool, its derivatives and final woolen
products

 Production, processing of Jute and the textile industry based on it

 Textile industry involved in the mass production of natural silk along with
derivative and final products from silk

 Handloom Industry

 Handicrafts industry which is basically unorganized in nature

Sub-Categorized sectors of the Indian textile Industry

 Textile Industry based on fiber produced through manmade means or natural

cotton In the whole Indian textile industry, this sector has come as the largest producer
of textile products. This industry has also proved its potential in employing the maximum
 number of people in the entire industry which has been calculated to be around a
whooping one million workers. As per the latest records (31.01.2007) of Ministry of
Textiles, the total number of mills in this particular sector is 1818 in number. The
installed capacity of all these mills accumulates to

 35.37 million spindles and

 0.45 million rotors

During the year 2000-2001, the total amount of spun yarn produced was 3160 million
kgs. This amount saw an increase of around 400 million kgs within the period of 2000-
2001 to 2005-2006.

 Spun Yarn industry can again be divided into two sub-sectors:-

 Cotton Yarn producing industry the production of this industry type is heavily
dependent on the yearly production of cotton which again depends on the vagaries of
nature. Hence it has been observed that the rate of production in this sector shows
fluctuating trend.

 Completely non cotton blended yarn producing industry

This industry type is a consistent performer where its rate of production has increased
at a consistent rate. It has been observed that between the period 1999 and 2005,
capacity utilized in this sector has varied anything between 80% and 93%.

Organized sector in Textile Industry is passing through a stage of stagnation and the
main reason behind it is transformation in the structural set-up of the industry. It has
been found out that the weaving sector is delinked from the spinning sector which has
led to the rise of powerlooms of decentralized nature. Over the years, the production
capacity of this organized sector has seen an absolute decrease of 0.54 lakh between
March 2000 and January 2007.
 Cloth production has also evidenced a declining trend during 2000-2006 with an
absolute decrease of ninety four million square meters. The annual growth rate of total
cloth production in the textile industry has been calculated to be around 5.24 % between
2000-2001 to 2005-2006. But stratified result of this industry show that during the above
mentioned period, the organized sector of this industry has posted fluctuating results
whereas the unorganized one has performed positively with an yearly rate of growth
amounting to 5.4%.

 Yarn industry utilizing fiber or filament of the man made typeThis sector can be
divided into two divisions :-

 Industry type involved in the production of cellulosic fibers or filaments

 Industry type involved in the production of non-cellulosic fibers or filaments

The total production amount of man-made fiber during the period Apr'2006-Aug'2006
has increased by 16 % on a year-on-year basis. During the same period, man-made
filament production has also evidenced an increase of the amount 9 %.

 Textile industry involved in the production of wool, its derivatives and final woolen
products. This industry type is characterized by

 its export orientation,

 production base situated in the rural areas

 presence of both organized as well as non-organized sector

India's contribution to the total production of wool in the world has been 1.8%. The
employment generation capacity of the woolen textile industry in India is enormous.Till
the end of year 2006; it has employed a total number of twenty seven lakh workers
(according to the estimation of Ministry of Textile, India).
 The total raw wool production in India can be classified into three
major grades:-

 Carpet Grade amounting to 85% of the total raw wool production

 Coarse Grade amounting to 10% of the total raw wool production

Apparel Grade amounting to 5% of the total raw wool production

But it has been found out that the total demand for raw wool in India is much more than
the actual produce of the same. Hence, a large part of the demand needs to be met
through import of raw wool.

This sector also helps the Indian economy through foreign exchange earning from
export of woolen products. It has been calculated that export earning in the fiscal 2005-
2006 was Rs 2098.27 crores.

The total number of production units of woolen products in India is seven hundred and
eighteen only which is expected to increase in the near future because of the new
government program known as “Integrated Wool Improvement Program”.

Some of the specialty items utilized in the production of wool fiber in India are Pasmina
and Angora.

 Production, processing of Jute and the textile industry based on itProduction of

Jute and its associated final products occupy a significant part of Eastern India. In the
World arena too, the contribution of this Indian industry is very significant. The main part
of the revenue earned by the Jute industry is from export. In terms of export of final jute
products, India ranks second in the entire world. Another part of its revenue also comes
from the government as well as private orders for packaging purposes.
 The special characteristics of Jute can be summarized as:-

 Natural Fiber Biodegradable product

 The fibers can be renewed after use

 Very much eco-friendly in nature

The total number of mills responsible for the processed jute production amounts to a
total of seventy eight in number among which the maximum number of it is concentrated
in West Bengal (sixty one in number).

In India, Raw Jute is produced in the following states:-

 Tripura The total produced raw jute in India amounts to 90 to 100 lakh bales. This
industry is specially supported by the Government so that the conditions of farmers or
producers of Jute remain viable even in the lean years. The main form of support comes
in the form of Minimum Support Price. This support price was increased by the
government from Rs 910 to Rs 1000 between the period 2005-2006 and 2006-2007.

Textile industry involved in the mass production of natural silk along with
derivative and final products from silk India's ranking in the world of silk production is
two which is quite commendable in itself. Its contribution to the total production of silk in
the world amounts to 18%. Silk is available in the following four varieties in India,
namely :-

The rearing and breeding of silk worms and consequent production of raw silk from
them is known as Sericulture. This industry is one of the most extensive cottage
industries in rural India. More than fifty thousand villages practice this mechanism of silk
production. The most significant aspect of it is its labor-intensiveness. The different
functions involved in Sericulture are:-
 Workers who are involved in the production of silkworm seeds

 Farmers who are a the same time rear the silkworms

Workers who reel

 The workers involved in the process of twisting the silk

 Workers who weave the silk

 The workers who are involved in spinning of silk waste

 Traders of Silk

Specialty of Silk Industry can be summarized as follows :-

 Investments required in this industry are very less

 The returns associated with the sale of silk products are quite high

 Remuneration of the crop remains sustainable all through the year.

 The approximate number of people employed in this industry (directly or

indirectly) goes to six million.

Total amount of silk produced in the year 2004-2005 was sixteen thousand and five
hundred metric tonnes which increased to seventeen thousand and three hundred five
metric tonnes during 2005-2006. Foreign exchange earned by this industry through
export amounted to Rs 2,879.56 crores during 2004-2005 and Rs 3158.16 crore during
2005-2006. The silk export items of India include:-

Yarn made up of natural silk

 Carpets made up of silk

 Fabrics

 Waste of silk
  Handloom Industry Handloom industry is placed in the second position in terms of
provision of livelihood and comes only after agriculture. This sector's extent of
production has increased by more than 380 million square meters between the period
2004-2005 and 2005-2006.

Weaknesses attached with Handloom Industry in India

 Technology used in this industry are backdated in nature

 The system of production is not organized

 The yield rate of such industry is significantly low

 Availability of working capital for this industry is quite low

 The marketing aspect associated with the Handloom industry is almost nil

 Innovation in the field of creation of final product is significantly low and hence
the number of total products is limited to a few.

 Handicrafts industry Handicrafts industry is one of the most traditional industries

in India. Characteristic features of this industry are :-

 Capital (initial as well as working) required for investment is very low

 Total number of people employed in this industry are significantly high

 Value added by the handicrafts industry is quite high

 A large portion of the produce is meant for the foreign audience That is why this
industry is capable of earning foreign exchange for both the artisans and the country.

The total number of people employed in this industry amounts to 63.81 lakhs. Foreign
exchange earned by this industry through export route expanded rapidly from Rs 15,616
crores in 2004-2005 to Rs 17277 crores in 2005-2006.
CURRENT POSSITION OF TEXTILE INDUSTRY IN INDIA

Textile constitutes the single largest industry in India. The segment of the industry
during the year 2000-01 has been positive. The production of cotton declined from
156 lakh bales in 1999-2000 to 1.40 lakh bales during 2000-01. Production of man-
made fiber increased from 835 million kgs in 1999-2000 to 904 million kgs during the
year 2000-01 registering a growth of 8.26%. The production of spun yarn increased
to 3160 million kgs during 2000-01 from 3046 million kgs during 1999-2000
registering a growth of 3.7%. The production of man-made filament yarn registered a
growth of 2.91% during the year 1999-2000 increasing from 894 million kgs to 920
million kgs. The production of fabric registered a growth of 2.7% during the year
1999-2000 increasing from 39,208 million sq meters to 40,256 million sq meters. The
production of mill sector declined by 2.6% while production of handloom, power loom
and hosiery sector increased by 2%, 2.7% and 5.1% respectively. The exports of
textiles and garments increased from Rs. 455048 million to Rs. 552424 million,
registering a growth of 21%. Growth in the textile industry in the year 2003-2004 was
Rs. 1609 billion. And during 2004-05 production of fabrics touched a peak of 45,378
million square meters. In the year 2005-06 up to November, production of fabrics
registered a further growth of 9 percent over the corresponding period of the previous
year.

With the growing awareness in the industry of its strengths and weakness and the
need for exploiting the opportunities and averting threats, the government has
initiated many policy measures as follows.

The Technology Upgradation Fund Scheme (TUFS) was launched in April 99 to

provide easy access to capital for technological upgradation by various segments of
the Industry.
The Technology Mission on Cotton (TMC) was launched in February 2000 to address
issues relating to the core fiber of Cotton like low productivity, contamination,
obsolete ginning and pressing factories, lack of storage facilities and marketing
infrastructure.
A New Long Term Textiles and Garments Export Entitlement (Quota) Policies 2000-
2004 was announced for a period of five years with effect from 1.1.2000 to
31.12.2004 covering the remaining period of the quota regime.

In the current year Budget 2008-2009 states the measures for Textile Industry
as follows

► Allocation to the Technology Upgradation Fund (TUF) enhanced from Rs4.4billion

to Rs 5.4billion.
► Provision for the interest subsidy on term loans to the handloom sector to be
increased from Rs2.0billion to Rs 2.4billion.
► Rs1.9 billion to be provided for the scheme for integrated Textiles Parks (launched
in October 2005 with the intention of creating 25 textile parks)
► Excise duty on all man-made fiber yarn and filament yarn to be reduced from 16%
to 8%
► Import duty on all man-made fibers and yarns to be reduced from 15% to 10%.

FUTURE PROSPECTS:
The future outlook for the industry looks promising, rising income levels in both urban
and rural markets will ensure a rising market for the cotton fabrics considered a basic
need in the realm of new economic reforms (NER) proper attention has been given to
the development of the textiles industry in the Tenth plan. Total outlay on the
development of textile industry as envisaged in the tenth plan is fixed at Rs.1980
crore. The production targets envisaged in the terminal year of the Tenth plan are
45,500 million sq meters of cloth 4,150 million kg of spun yarn and 1,450 million kg of
manmade filament yarn. The per capita availability of cloth would be 28.00 sq meters
by 2006-2007 as compared to 23.19 sq meters in 2000-01 showing a growth of 3.19
percent. The export target of textiles and apparel is placed at $32 billion by 2006-
2007 and $50 billion by 2010.

Vision India 2010 for Textiles

▪ Textile economy to grow to $ 85 billion. by 2010.
▪ Creation of 12 million new jobs in Textile Sector.
▪ To increase India’s share in world trade to 6% by 2010.
▪ Achieve export value of $ 40 Billion by 2010.
▪ Modernization and consolidation for creating a globally competitive industry.

STRUCTURE OF INDIAS TEXTILE INDUSTRY

The textile sector in India is one of the world’s largest. The textile industry today is
divided into three segments:

1. Cotton Textiles
2. Synthetic Textiles
3. Other like Wool, Jute, Silk etc.

All segments have their own place but even today cotton textiles continue to
dominate with 73% share. The structure of cotton textile industry is very complex with
co-existence of oldest technologies of hand spinning and hand weaving with the
most sophisticated automatic spindles and loom. The structure of the textile industry
is extremely complex with the modern, sophisticated and highly mechanized mill
sector on the one hand and hand spinning and hand weaving (handloom sector) on
the other in between falls the decentralized small scale power loom sector.

Unlike other major textile-producing countries, India’s textile industry is comprised

mostly of small-scale, nonintegrated spinning, weaving, finishing, and apparel-
making enterprises. This unique industry structure is primarily a legacy of
 government policies that have promoted labor-intensive, small-scale operations and
discriminated against larger scale firms:

♦ Composite Mills.
Relatively large-scale mills that integrate spinning, weaving and, sometimes, fabric
finishing are common in other major textile-producing countries. In India, however,
these types of mills now account for about only 3 percent of output in the textile
sector. About 276 composite mills are now operating in India, most owned by the
public sector and many deemed financially sick. In 2003-2004 composite mills that
produced 1434 m.sq meters of cloth. Most of these mills are located in Gujarat and
Maharashtra.

♦ Spinning.
Spinning is the process of converting cotton or manmade fiber into yarn to be used
for weaving and knitting. This mills chiefly located in North India. Spinning sector is
technology intensive and productivity is affected by the quality of cotton and the
cleaning process used during ginning. Largely due to deregulation beginning in the
mid-1980s, spinning is the most consolidated and technically efficient sector in Indias
textile industry. Average plant size remains small, however, and technology outdated,
relative to other major producers. In 2002/03, India’s spinning sector consisted of
about 1,146 small-scale independent firms and 1,599 larger scale independent units.

♦ Weaving and Knitting.

The weaving and knits sector lies at the heart of the industry. In 2004-05, of the total
production from the weaving sector, about 46 percent was cotton cloth, 41 percent was
100% non-cotton including khadi, wool and silk and 13 percent was blended cloth.
Three distinctive technologies are used in the sector handlooms, powerlooms and
knitting machines. Weaving and knitting converts cotton, manmade, or blended yarns
into woven or knitted fabrics. India’s weaving and knitting sector remains highly
fragmented, small-scale, and labour-intensive. This sector consists of about 3.9 million
handlooms, 380,000 powerloom enterprises that operate about 1.7 million looms, and
just 137,000 looms in the various composite mills. Powerlooms are small firms, with an
average loom capacity of four to five owned by independent entrepreneurs or weavers.
Modern shuttle less looms account for less than 1 percent of loom capacity .

♦ Fabric Finishing.
Fabric finishing (also referred to as processing), which includes dyeing, printing, and
other cloth preparation prior to the manufacture of clothing, is also dominated by a large
number of independent, small-scale enterprises. Overall, about 2,300 processors are
operating in India, including about 2,100 independent units and 200 units that are
integrated with spinning, weaving, or knitting units.

♦ Clothing.
Apparel is produced by about 77,000 small-scale units classified as domestic
manufacturers, manufacturer exporters, and fabricators (subcontractors).

INDIA’S MAJOR COMPETITIORS IN THE WORLD

To understand India’s position among other textile producing the industry contributes
9% of GDP and 35% of foreign exchange earnings, India’s share in global exports is
only 3% compared to Chinas 13.75% percent. In addition to China, other developing
countries are emerging as serious competitive threats to India. Looking at export
shares, Korea (6%) and Taiwan (5.5%) are ahead of India, while Turkey (2.9%) has
already caught up and others like Thailand (2.3%) and Indonesia (2%) are not much
further behind. The reason for this development is the fact that India lags behind these
countries in investment levels, technology, quality and logistics. If India were
competitive in some key segments it could serve as a basis for building a modern
industry, but there is no evidence of such signs, except to some extent in the spinning
industry.

India’s Competitive Position in Stages of Textile Manufacture

PROBLEM FACED BY THE TEXTILE INDUSTRY IN INDIA
The cotton textile industry is reeling under manifold problems. The major problems
are the following:
♦ Sickness:
Sickness is widespread in the cotton textile industry. After the engineering industry,
the cotton textile industry has the highest incidence of sickness. As many as 125 sick
units have been taken over by the Central Government. Sickness is caused by
various reasons like the problems mentioned below.

♦ Obsolescence:
The plant and machinery and technology employed by a number of units are
obsolete. The need today is to make the industry technologically up-to-date rather
than expand capacity as such. This need was foreseen quite sometime back and
schemes for modernisation of textile industry had been introduced. The soft loan
scheme was introduced a few years back and some units were able to take
advantage of the scheme and modernize their equipment. However, the problem has
not been fully tackled and it is of utmost importance that the whole industry is
technologically updated. Not many companies would be able to find resources
internally and will have to depend on financial institutions and other sources.

♦ Government Regulations:
Government regulations like the obligation to produced controlled cloth are against
the interest of the industry. During the last two decades the excessive regulations
exercised by the government on the mill sector has promoted inefficiency in both
production and management. This has also resulted in a colossal waste of raw
materials and productive facilities. For example, the mills are not allowed to use
filament yarn in warp in order to protect the interest of art silk and powerloom sector
which use this yarn to cater to the affluent section of society.

♦ Low Yield and Fluctuation of Cotton Output:

The cotton yield per hectare of land is very low in India. This results in high cost and
price. Further, being largely dependent on the climatic factors, the total raw cotton
production is subject to wide fluctuation causing serious problems for the mills in
respect of the supply of this vital raw material.

♦ Competition from Man-made Fibres:

One of the serious challenges facing the cotton textile industry is the competition
from the man-made fibres and synthetics. These textures are gradually replacing
cotton textiles. This substitution has in fact been supported by a number of people on
the ground that it is not possible to increase substantially the raw cotton production
without affecting other crops particularly food crops.

♦ Competition from other Countries:

In the international market, India has been facing severe competition from other
countries like Taiwan, South Korea, China and Japan. The high cost of production of
the Indian industry is a serious adverse factor.

♦ Labour Problems:
The cotton textile industry is frequently plagued by labour problems. The very long
strike of the textile workers of Bombay caused losses amounting to millions of rupees
not only to the workers and industry but also to the nation in terms of excise and
other taxes and exports.

♦ Accumulation of Stock:
At times the industry faces the problems of very low off take of stocks resulting in
accumulation of huge stocks. The situation leads to price cuts and the like leading to
loss or low profits.

♦ Miscellaneous:
The industry faces a number of other problems like power cuts, infrastructural
problems, lack of finance, exorbitant rise in raw material prices and production costs
etc.

EXPORT AT A GLANCE:
Textile exports plays a crucial role in the overall exports from India. Through export
friendly government policies and positive efforts by the exporting community, textile
exports increased substantially from US$ 5.07 billion in 1991-92 to US$ 12.10 billion
during 2000-01. The textile export basket contributing over 46 percent of total textile
export. In world textile trade has risen to 3.1 percent in 1999-2000 as against 1.80
percent in early nineties. Exports have grown at an average of 11 percent per annum
over the last few years, while world textile trade has grown only about 5.4 per cent
per annum in the same years. During

the year 2000-01 India’s textile export was US$ 12014.4 million. It was increased the
year 2004-05 US$ 13038.64 million. The exports of textiles (including handicrafts,
jute, and coir) formed 24.6% of total exports in 2001-2002, however this percentage
decreased to 16.24% during 2004-2005. The textile exports recorded a growth of
15.3% in 2002-2003 and 8.7% in 2003-2004. Textile exports during the period of
April-February 2003-2004 amounted to $11,698.5 million. During 2004-05 textile
exports were US$ 13,039.00 million, recording a decline of 3.4% as compared to the
corresponding period of previous year. However, during April-November, 2005, the
textile exports have shown growth of 8.2% as compare to the corresponding period
of previous year. Against a target of US$ 15,160 million during 2004-05, the textile
exports were of US$13039 million, registering a shortfall of 14% against the target.
The overall export target for 2005-06 has been fixed at US$ 15,565 million. In 2005
textile and garments accounted for about 16% of export earnings. India’s textile
exports to the US have shown a good rise of 29.5% between January and June
2005.

Commodities 2007-08
(Million USD)
Readymade garments 6038.69
Cotton textiles 3290.31
Man-made textiles 1948.72
Wool & woolen textiles 66.57
Silk textile 406.82
Total 11751.11
Add Handicraft , Coir & coir
manufacturers and Jute
Total 13065.24

INVESTMENT IN TEXTILE INDUSTRY

Investment is the key for Indian textiles to make rapid strides. The Vision Statement
prepared by the Indian Cotton Mills federation has projected that the industry has the
potential to reach a size of $85 billion by 2010 from the current level of $ 36 billion.
Further, the vision statement has estimated that textile exports could touch $40 billion
by 2010 from $ 11 billion in 2002. In the process, Indias share in the global textile
and clothing trade is expected to double from three percent in 2002 to six percent by
2010.

To reach these these ambitious target, it is estimated that new investment to the tune
of Rs.1, 40,000 crores will be needed in the next five years. After analysing the
capacity and technology levels in various segments of textile Industry and the need
for modernisation, funds required for various segments have been below.
The Multi-Fibre Agreement (MFA)

The Multi-Fibre Agreement (MFA), that had governed the extent of textile trade
between nations since 1962, expired on 1 January 2005. It is expected that, post-
MFA, most tariff distortions would gradually disappear and firms with robust
capabilities will gain in the global trade of textile and apparel. The prize is the $360
billion market which is expected to grow to about $600 bn by the year 2010 barely
five years after the expiry of MFA.

National Textile Policy 2000

Faced with new challenges and opportunities in a changing global trade

environment, the GOI unveiled its National Textile Policy 2000 (NTP 2000) on
November 2, 2000. The NTP 2000 aims to improve the competitiveness of the Indian
textile industry in order to attain $50 billion per year in textile and apparel exports by
2010.86 The NTP 2000 opens the country’s apparel sector to large firms and allows
up to 100 percent FDI in the sector without any export obligation.

Export Promotion Capital Goods (EPCG) Scheme

To promote modernization of Indian industry, the GOI set up the Export Promotion
Capital Goods (EPCG) scheme, which permits a firm importing new or Secondhand
capital goods for production of articles for export to enter the capital goods at
preferential tariffs, provided that the firm exports at least six times the c.i.f. value of
the imported capital goods within 6 years. Any textile firm planning to modernize its
operations had to import at least $4.6 million worth of equipment to qualify for duty-
free treatment under the EPCG scheme.

Export-Import Policy

The GOIs EXIM policy provides for a variety of largely export-related assistance to
firms engaged in the manufacture and trade of textile products. This policy includes
fiscal and other trade and investment incentives contained in various programs

Duty Entitlement Passbook Scheme (DEPS)

DEPS is available to Indian export companies and traders on a pre- and post-export
basis. The pre-export credit requires that the beneficiary firm has exported during the
preceding 3-year period. The 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.

The Agreement on Textiles and Clothing (ATC)

The Agreement on Textiles and Clothing (ATC) promises abolition of all quota
restrictions in international trade in textiles and clothing by the year 2005. This
provides tremendous scope for export expansion from developing countries.

Guidelines of the revised Textile Centers Infrastructure Development Scheme

(TCUDS)

TCIDS Scheme is a part of the drive to improve infrastructure facilities at potential

Textile growth centers and therefore, aims at removing bottlenecks in exports so as
to achieve the target of US$ 50 billion by 2010 as envisaged in the National Textile
Policy, 2000.

Under the Scheme funds can be given to Central/ State Government Departments/
Public Sector Undertakings/ Other Central /State Governments agencies/recognized
industrial association or entrepreneur bodies for development of infrastructure
directly benefiting the textile units. The fund would not be available for individual
production units.

Technology Upgradation Fund Scheme (TUFS)

At present, the only scheme through which Government can assist the industry is the
Technology Upgradation Fund Scheme (TUFS) which provides for reimbursing 5%
interest on the loans/finance raised from designated financial institutions for bench
marked projects of modernization. IDBI, SIDBI, IFCI have been designed as nodal
agencies for large and medium small scale industry and jute industry respectively.
They have co-opted 148 leading commercial banks/cooperative banks and financial
institutions like State Finance Corporations and State Industrial Development
Corporation etc.

Scheme for Integrated Textile Parks (SITP)

To provide the industry with world-class infrastructure facilities for setting up their
textile units, Government has launched the Scheme for Integrated Textile Parks
(SITP) by merging the Scheme for Apparel Parks for Exports (APE) and Textile
Centre Infrastructure Development Scheme (TCIDS). This scheme is based on
Public-Private Partnership (PPP) and envisages engaging of a professional agency
for project execution. The Ministry of Textiles (MOT) would implement the Scheme
through Special Purpose Vehicles (SPVs).

National Textile Corporation Ltd. (NTC)

National Textile Corporation Ltd. (NTC) is the single largest Textile Central Public
Sector Enterprise under Ministry of Textiles managing 52 Textile Mills through its 9
Subsidiary Companies spread all over India. The headquarters of the Holding
Company is at New Delhi. The strength of the group is around 22000 employees.
The annual turnover of the Company in the year 2004-05 was approximately Rs.638
crores having capacity of 11 lakhs Spindles, 1500 Looms producing 450 lakh Kgs of
Yarn and 185 lakh Meters of cloth annually.

Cotton Corporation Of India Ltd. (CCI)

The Cotton Corporation of India Ltd (CCI), Mumbai, is a profit-making Public Sector
Undertaking under the Ministry of Textiles engaged in commercial trading of cotton.
The CCI also undertakes Minimum Support Price Operation (MSP) on behalf of the
Government of India.

The Ministry of Textiles

The Ministry of Textiles is responsible for policy formulation, planning, and

development export promotion and trade regulation in respect of the textile sector.
This included all natural and manmade cellulosic fibres that go into the making of
textiles, clothing and handicrafts.
Powerloom development and export promotion council

Powerloom development and export promotion council, set up by the ministry of

textiles government of India. PDEXCIL provide some export assistance as follows:
# Exploration of overseas market.
# Identification of items with export potential.
# Market survey and up-to-date market intelligence.
# Contact with protective buyers to interest them in your products.
# Providing your company's profile to overseas buyers and vice-versa.
# Advice on international marketing.
# Display of selected product groups.

Cotton Textile Export Promotion Council (TEXPROCIL):

The Council looks after the export promotion of cotton fabrics, cotton yarn and cotton
made-ups. Its activities include market studies for individual products, circulation of
trade enquiries, participation in exhibitions, fairs and seminars at home and abroad,
in order to boost exports.
 ANALYSIS

SWOT ANALYSIS OF INDIAN TEXTILE INDUSTRY

Indian textile industry has several Strengths

♦ Abundant Raw Material Availability
♦ Low Cost Skilled Labour
♦ Presence across the value-chain
♦ Growing Domestic Market

Indian textile industry has several Weaknesses

♦ Fragmented industry
♦ Effect of Historical Government Policies
♦ Lower Productivity and Cost Competitiveness
♦ Technological Obsolescence

Indian textile industry has several Opportunities

♦ Post 2005 challenges
♦ Research and Development and Product Development

Indian textile industry has several Threats

♦ Competition in Domestic Market
♦ Ecological and Social Awareness
♦ Regional alliances
Strengths

Abundant Raw Material Availability:

Allowing the industry to control cost and reduce over all lead-times across the value
chain.

Low Cost Skilled Labour

Low cost skilled labour providing a distinct competitive advantage for the industry.

Presence across the value-chain

Presence across the value-chain providing a competitive advantage when compared
to countries likes Bangladesh, Srilanka, who have developed primarily as
garmenters.

Reduced Lead-times:
Manufacturing capacity present across the entire product range, enabling textile
companies and garmenters do source their material locally and reduce lead-time.

Super Market:
Ability to satisfy customer requirements across multiple product grades- small and
large lot sizes specialized process treatments etc.
Growing Domestic Market
Growing Domestic market which could allow manufacturers to mitigate risks while
allowing them to build competitiveness.

Weaknesses

Fragmented industry
Fragmented industry leading to lower ability to expand and emerge as world-class
players.

Effect of Historical Government Policies

Historical regulations thought relaxed continue to be an impediment to global
competitiveness.

Lower Productivity and Cost Competitiveness

♦ Labour force in India has a much lower productivity as compared to competing

countries like china, Srilanka etc.
♦ The Indian industry lacks adequate economies of scale and is therefore unable to
compete with china, and other countries etc.
♦ Cost like indirect takes, power and interest are relatively high.

Technological Obsolescence

♦ Large portion of the processing capacity is obsolete

♦ While state of the art integrated textile mills exist majority of the capacity lies
currently with the powerloom sector.
♦ This has also resulted in low value addition in the industry.
 Opportunities

Post 2005 challenges

During the year 2005 is a huge opportunity that needs to be capitalised.

Research and Development and Product Development

♦ Indian companies needs to increase focus on product development. Newer

specialized fabric- smart Fabrics, specialized treatment etc. Faster turnaround times
for design samples. Investing in design centers and sampling labs.
♦ Increased use of CAD to develop designing capability in the Organization and
developing greater options.
♦ Investing in trend forecasting to enable growth of the industry in India.

Threats

Competition in Domestic Market

♦ Competition is not likely to remain just in the exports space, the industry is likely to
face competition from cheaper imports as well.
♦ This is likely to affect the domestic industry and may lead to increased consolidation.

Ecological and Social Awareness

♦ Development in the form of increased consumer consciousness on issues such as

usage of child labour unhealthy working conditions etc.
♦ The Indian industry needs to prepare for the fall out of such issues by issues by
improving its working practices.

Regional alliances
♦ Regional trade blocs play a significant role in the global garment industry with
countries enjoying concessional tariffs by virtue of being members of such blocs/
alliances.
♦ Indian industry would need to be prepared to face the fall out of the post 2005
scenarios in the form of continued barriers for imports.

CONCLUSION:

The Indian textile industry is currently one of the largest and most important sector in
the economy in terms of output foreign exchange earnings and employment in India.
The Textile industry has the potential to scale new height in the globalized economy.
The textile industry in India has gone through significant charges in anticipation of
increased international competition. The industry is facing numerous problems and
among them the most important once are those of liquidity for many organized sector
units, demand recession and insufficient price realization. The long-range problems
include the need for sufficient modernisation and restructuring of the entire industry to
cater more effectively to the demands of the domestic and foreign markets for textiles
as per the needs of today and tomorrow.
BIBLIOGRAPHY

Text Books:
1. Ruddar Datt, K.P.M. Sundharam, Indian Economy p 658, S.Chand & Company
Ltd, New Delhi ,2006
2. P.J. Divatia, Indian Industries in the 21st Century p46, Deep & Deep Publications
Pvt Ltd, New Delhi, 2003
3. Francis Cherunilam, Industrial Economics Indian Perspective p457, Himalaya
Publishing House 1994
4. B.M.P Singh, Indian Economy Today ,p248,Deep & Deep Publications Pvt Ltd,
New Delhi ,2004

Web Sites:

1. http://www.Indianbusiness.nic.in/India-profile/textile.htm
2. http://www.economywatch.com/business-and-economy/textile-Industry.html
3. http://hotdocs.usitc.gov
4. http://www.texprocil.com/annreport/profile-texprocil.doc
5. http://www.aepcindia.com
6. http://www.in.kpmg.com
7. http://pd.cpim.org/2004/10312004-ganguly.html
8. http://www.pdexcil.org/export.htm
9. http://www.giftsnaccessories.com/magazine/Handicrafts/11.htm
10. http://www.iimahd.ernet.in
11. http://icmr.icfai.org/casestudies
12. http://www.equitymaster.com/budget0607/sectors/textile.asp
13. http://usda.mannlib.cornell.edu/report