ISBN - 978-93-81583-46-3

An Analysis of Structure & Growth of the Indian Textile Industry after Phase out Quota System
Varsha Goel1, Ashutosh Nigam2 1 Research Scholar, 2Associate Professor 1 IMSAR Department, Maharshi Dayanand University, Rohtak, Haryana, 2 Department of Management Studies, Vaish College of Engg., Rohtak, Haryana 1 varshagoel1@yahoo.com, 2drashutoshnigam@gmail.com

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An Analysis of Structure & Growth of the Indian Textile Industry After Phase

An Analysis of Structure & Growth of the Indian Textile Industry after phase out Quota System
Varsha Goel1, Ashutosh Nigam2
1

Research Scholar, IMSAR Department, Maharshi Dayanand University, Rohtak, Haryana, India Varshagoel1@yahoo.com

Associate Professor, Department of Management Studies, Vaish College of Engg., Rohtak, Haryana, India drashutoshnigam@gmail.com

Abstract Indian history witnesses the glorious achievements of the textile industry. Today the Indian textile industry is one of the most important and vital industry of our economy not only in terms of output but also in terms of foreign exchange earnings and employment generation. It contributes about 14 percent to industrial production, 4 percent to the GDP, and 17 percent to the country's export earnings. In the global textile market the major importers are USA, European Union and Canada. Asia has been the principal sourcing region for imports of textiles and clothing by both USA and European Union. The Indian textile industry managed to penetrate its roots deep in the international market but that was in the era when multi-fiber Agreement (MFA) was in existence, but now, since 1 January 2005, the Multi-fiber Agreement has phased out and India needs to strive harder to sustain its past achievement. Thus, the motive behind this was to provide a window of opportunity for developed and underdeveloped economies or to save the interest of the domestic textile industry of the European Union and the US. Now since the quota is phased out it is a grand opportunity for developing countries. This development may have a positive impact not only on the textile sector of the country but also on the entire economy as a whole. The present research tries to make an attempt to analysis the structure & growth of the Indian textile industry after the abolition of the multi-fiber Agreement. Key words: Indian Textile Industry, MFA, Developing countries, Export performance

1. Introduction
Indian Textiles and Clothing Industry The history of textiles in India dates back to the use of mordant dyes and printing blocks around 3000 BC. The diversity of fibers found in India, intricate weaving on its state-of-art manual looms and its organic dyes attracted buyers from all over the world for centuries. India saw the building up of textile capabilities, diversification of its product base, and its emergence, once again, as an important global player. 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. It contributes about 14 per cent to industrial production, 4 per cent to the GDP, and 17 per cent to the country's export earnings. It would provide direct employment to over 35 million people by 2010, which includes a substantial number of people from less privileged sections of society [1]. Mills, powerlooms and handlooms constitute three independent sectors of the Indian textile industry. The mill sector is organized, mechanized and modernized production of yarn whereas the power loom and handloom sectors have remained technologically backward and stagnant. Almost all the spun yarn made in India come from the organized sector, reflecting the highly capital intensive nature of yarn spinning. Weaving in the mill sector has been gradually suffering due to

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An Analysis of Structure & Growth of the Indian Textile Industry After Phase
the competition from the power loom and the trend may continue [2]. The decentralized powerlooms sector plays a pivotal role in meeting the clothing needs of the country. The power loom industry produces a wide variety of cloth, both grey as well as processed. Production of cloth as well as generation of employment has been rapidly increasing in the power loom sector. There are 22.38 lakh power looms in the country as on 31st December, 2009 distributed over approximately 5.03 lakh units. This is about 60.39 percent of the total looms in the world. The power loom sector contributes about 62 percent of the total cloth production of the country, and provides employment to about 55.95 lakh persons during the year 2008-09. As an economic activity, handloom is the 2nd largest employment provider next only to agriculture. The sector with 60.40 percent about 35 lakh handlooms provides employment to 65 lakh persons, of which 60.40 percent are women and 35 percent belong to minority section of the society [3]. 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 and apparel industry has an unbalanced structure, 95 % of the industry is the unorganized and only 5 % is the organized. Sector consolidation process in certain segments, to take advantage of economies of scale is necessary. This will generate more employment, as smaller operations affect cost and competitiveness. India's Position in Global Textiles and Clothing Industry India's position in the World Textiles Economy Second largest producer of raw cotton. Third largest producer of cotton yarn. Third largest producer of cellulosic fibre/yarn. Second largest producer of silk. Fifth largest producer of synthetic fibre/yarn. Largest producer of jute [4]. Agreement on textile and clothing The Agreement on Textile and Clothing (ATC) came into force in January 1995 and replaced the multi-fiber Agreement. 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 stagewise integration process to be completed within a period of ten years (1995-2004) and when it expired on 1 January 2005 there was no longer the need for an agreement devoted solely for textile product. 1, January 2005, marked the end of a 10-year phase-out process of the quotas under the World Trade Organization. The abolition of quotas on specified products was gradual processes which phase out in four stages as mentioned below [5].
Table 1

Year January 1995 January 1998 January 2000 1 January 2005

Percentage of product to be brought under removal of quotas 16 17 18 49

Source: Nordas (2004).

MFA is an agreement through which developing countries of the world were restricted to export their textile products beyond a certain level to the markets of developed nations. Thus, the motive behind this was to provide a window of opportunity for developed and underdeveloped economies or to save the interest of the domestic textile industry of the European Union and the US. Now since the quota is phased out it is a grand opportunity for developing countries. This development

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may have a positive impact not only on the textile sector of the country but also on the entire economy as a whole.

2. Review of literature
Review and study of concerned literature is of almost important in research studies. The literature pertaining to the research topic gives a sample amount of knowledge regarding the studies already made in the field and various expert views. Consequently, it helps in finalizing the objective of the study and interpreting the results of the research in a scientific manner. This chapter includes the studies already made on various aspects of textile industry in India. The effort has been made to review the related literature as much as possible. Verma (2002) examined Indias competitive performance in the US and EU markets for multi fiber arrangement products categories that are important to Indian export market. In this study it is concluded that Indian garment export to the EU and US markets are export competitive. This study has pointed out various areas requiring Government policy intervention. Several policy reforms that are needed urgently in order to become more competitive in the world market have also been discussed. Manojit Saha (2005) emphasizes on the end of quota regime that ushers a new era for the Indian textile industry, and offers a huge opportunity for the textile and apparel sector in India. This development is expected to result in higher export possibility for Indian manufacturers to the US and the EU which was restricted previously. Robyn (2005) emphasizes India is a developing country. Its textiles and apparel industry is one of the most important industries for the countrys economic growth. The textiles and apparel industry is one of Indias largest foreign exchange earners, accounting for nearly 16 percent of the countrys total exports. The industry contributes about 14 percent of total industrial production in India, employing approximately 38 million workers, and accounts for about 30 percent of the countrys total exports. India exports about $US14 billion of textile and apparel products a year, and exports predict that this figure will reach over $US50 billion by 2010, which is about four times the current figure. Kirmani, Molajoni, and Mayer, (1984) examined MFA controls may not prevented developing countries from increasing their market penetration of industrial countries at a rate compatible with manufactures generally. And there is a fair degree of under utilization of quotas, other than among the dominant suppliers. Nonetheless, the magnitude of quota premiums clearly indicates that exports are considerably less than their potential. Various attempts have been made to estimate the magnitudes involved by simulating the effects of complete tariff and non-tariff liberalization on developing-country exports. In one estimate by international monetary fund researcher, import into the main OECD markets would increase by 82 percent for textile and 93 percent for clothing, given the assumption of infinitely elastic supply (a reasonably plausible assumption in all expects the very short term). UNCTAD (1986) concluded that developing countries would increase their clothing and textile exports to the USA, the EU and Japan by US$15 billion if all tariff barriers were removed. This was close to the value of total exports of clothing and textile from developing countries to these countries. Of this US$15 billion increase, 60 percent was attributed to the removal of non-tariff barriers, of which the MFA quotas are by for the most important Zhang and Dardis (1991) investigated the determinants of the textile export performance of 27 major textile exporting countries. The authors measured export performance by a countrys gross exports and net exports. They used static and dynamic models for the analysis. Their independent variables were physical capital, technological capital, human capital, unit labor costs, and domestic apparel production. He found that in his study the more the stock of physical capital and the higher the level of human capital, the more were the gross and net exports of textiles, and the more the domestic apparel production, the less were the gross and net exports of textiles. United States International Trade Commission (2001) Found that India is also a leading cotton yarn manufacturer. There are over 1,500 spinning units (38,000 million spindles and 400,000 rotors) and 280 composite mills that are vertically integrated from spinning to finished fabric. Thousands of smaller spinning units, around 200 exclusive weaving units, and an estimated

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An Analysis of Structure & Growth of the Indian Textile Industry After Phase
1,700,000 power mills are also in operation. In addition to the rich supply of natural fibers, India also has a robust capacity in man-made fiber production and has global-scale production. India is one of the top exporters of man-made yarns and fabrics in the world and stands third in the production of filament yarn). Therefore, India is self-sufficient for fabric supplies and has little need to import fabrics, either natural or synthetic, for apparel manufacturing Gherzi (2003) , NIFT (1999 ) reported that in the initial phase of the post-MFA era since 1 January 2005, the textile and clothing exports of China and India should have grown much faster than what earlier happened under the transition period since 1 January 2004, despite any WTOconsistent import curb measures that the affected developed countries would likely institute. As the same time, the actual growth of the textile and clothing exports from these countries would have been dependent on how far these countries could manage their own export capabilities and competitiveness and to what extent they were successful in identifying and exploiting the opportunities; but, Indias trade past in not an encouraging indicator of its ability to corner available trade gains for itself China presumed to be a better bet. International Labor Organization (2005) opined that the competitiveness of the Indian textile and apparel industry in the world market is dependent on several factors. One of the most important factors is comparative advantage gained from its labor-abundant economy. Labor costs in India are among the lowest in the world. Another important factor is the rich supply of raw materials. India is the third largest cotton producer in the world, with 25 percent of the worlds cotton-growing acreage, which is the fourth highest in the world, and accounts for 15 percent of world cotton output following the USA and China. India is also the second largest producer of silk, the largest producer of jute, and one of the largest production bases for cotton/denims and blends of linen. Balassa & Michalopalopolous (1985) studied the effect of the MFA on developing countries suggest that the value of rent transfer is relatively small in comparison with reduction in export earning. Estimates put the ratio of these two factors in the order of 1:10 for exports to the USA and 1:8 for the EU. However export earning and quota rent are not strictly comparable because the former represent forgone gross revenue whereas the latter represent net gains. The net effect of the MFA on developing countries depends on whether rent transfer can fully compensate for the welfare losses resulting from the reduction in exports volumes

3. Objective
To analysis the structure and growth of the Indian textile industry in India after phase out quota system.

4. Methodology
Two pronged methodology has been adopted for the study. One approach is based on Secondary sources of data and review of literature, while second approach includes an in-depth Field survey of the manufacturing units through structured questionnaires and discussions. The field survey has been carried out among middle and top executives of Textiles & Garments manufacturing units located at various textile clusters across the country. In line with terms of Reference, National Productivity Council carried out a primary survey of the textile manufacturing units based on a structured questionnaire Annexure 1. The field survey was undertaken ensuring the representation of all types of manufacturing units viz large, medium and small manufacturing units. The responding manufacturing units were drawn from various industrial clusters in different states to derive conclusions that are pertinent to the nation as a whole. The details of responding manufacturing units included in the primary survey across various clusters has been provided in Annexure 2.

3
Apart from these field surveys, views of leading experts such as management specialists, technologists, economists, policy makers etc., have also been sought on a host of qualitative information about the Textiles & Garments sector. Hence, the present study is focused on the assessment of the productivity and competitiveness of Indian textile and garment sector during the post liberalization period. Apart from the assessment of productivity and competitiveness, the

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present study also Reviews global scenario of the textile and clothing trade, in general, and the Indian textile andgarmentssector,inparticular.

5. Analysis
Indias Textile Exports Indias textile and clothing industry is one of the main stays of the national economy. It is also one of the largest contributing sectors of Indias exports worldwide. The vision statement for the textile industry for the 11th five year plan (2007-2012), inter-alia, envisages India securing 97% share in the global textiles trade by2012. At current prices the Indian textiles industry is pegged at US$ 55 billon, 64% of which services domestic demand. The textile exports basket consist of cotton, wool, silk, jute, handicraft, coir man-made fiber textiles etc. Further, the export basket consists of variety of items: cotton yarn and fabrics, wool and silk fabrics, man-made yarn and fabrics, etc., of which man-made textiles and silk showed the highest growth rate. Product wise textile export performance given in Table 2.
Table 2: Textile exports sector wise

(Value in US$ million)

April-Sept Item/Year Readymade Cotton Man-Made Silk Wool Handicraft Coir Jute Total Textiles exports % increase/ decrease

2001 4618.7 3081.9 1088.5 437.0 289.1 737.0 45.8 83.8 10381.8 -11.0

2002 5334.3 3361.4 1417.5 451.3 269.3 1190.1 66.5 173.7 12264.1 +3.98

2003 5786.37 3599.95 1821.24 545.21 337.98 1085.36 77.77 242.43 13469.31 +21.0

2004 6034.39 3544.16 2050.73 594.21 417.09 1013.85 105.56 276.25 14036.24 +3.97

2005 7986.38 4600.78 2039.57 693.28 455.92 1314.53 133.35 296.25 17520.07 +24.84

2006 8282.27 5564.15 2398.90 705.95 423.84 1364.91 145.80 260.22 19146.04 +9.28

2007 9069.80 6858.63 3177.11 657.72 443.11 1452.28 160.25 327.86 22146.78 +15.67

2008 10383.26 4803.52 3325.88 684.93 484.75 1090.77 150.02 303.21 21226..34 -4.15

2009 10064.73 5711.41 3970.88 596.05 470.20 961.67 160.60 218.40 22418.79 +5.61

2010

4735.07 3017.26 2043.00 271.71 220.82 512.96 72.26 235.12 11264.58

Source : Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta

The Textile Policy of 1985 heralded a new beginning for the textile industry by focusing on the deep-rooted structural weaknesses. The reforms in 1990s further boosted the textile industry. The textile industry was de-licensed and reforms on fiscal and export front were pursued. As a result, Exports of textiles and clothing product from India have increased steadily over the last few years, particularly after 2004 when textile export quota were discontinued. The textile exports recording a modest growth of 10.10% in the fiscal year 1999-2000. The year 2000-01 had, however shown a remarkable growth of 15% over the previous year exports. However, a declining trend has been noticed in the textile exports since the beginning of the year 2001, which is mainly due to the slow-down in the economies of some of the major importing countries such as US and increased competition from our neighboring countries like china, Bangladesh etc. Indian textiles and clothing 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. Textile exports during the period of 2001 amounted to US$ 10381.8 million as against US$ 12037.6 million during these month in the previous year, recording a decline of around 11%. This indicates the downtrend in textile exports has been reversed and they are back on path of export growth. The textile exports show the upward trend after 2002. Textile exports during the period 2006, 2007, 2008 were 19146.04US$ million, 22146.78 US$ million, 21226.34 US$ million recording a growth of 9.28%, 15.67%, 4.15% as compared to the corresponding period of previous year. During the period April-September 2010 the textile exports were 11264.58 US$ million.

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Direction of Trade The China has emerged as the fastest growing, single largest destination for Indian textile and apparel in recent years. However, USA still remains as the biggest importer of Indian textile items as it procured about 40% of Indias textile exports in 2007- 08. Apart from the US, UK, Germany, UAE, Italy, Bangladesh etc. are the major trade partners of India. Export of textile products to Bangladesh almost doubled in 2007-08 as Compared to previous year. Indian textile exports have been unevenly distributed as majority of exports to USA preceded by UAE. Indian textile export has increased to 618.21 US$ million in April-May 2009-10 to 759.27 US$ million in year AprilMay 2010-11. Country wise destination of Indian textile exports is shown in table 3.

Table 3 : Country-wise Export of Textile Items by India

April-May 20010-11

(Value in US$ Million) 759.27 262.77 313.29 235.74 129.54 102.9 --161.42 102.63 ---

April-May Country/Year 2000-01 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2992.00 3376.78 4847.98 4787.45 4297.89 472.83 618.21 USA 782.37 1031.74 1403.30 1411.86 1525.87 148.66 262.21 UK 884.92 1097.74 1022.79 1075.13 1247.34 547.23 226.77 UAE 706.98 806.83 1169.79 1120.58 1268.58 142.82 261.4 GERMANY 505.41 640.70 853.89 851.46 891.45 67.54 148.65 FRANCE 450.74 650.15 834.74 916.31 807.37 85.50 86.2 ITALY 349.48 361.09 418.74 408.79 353.93 30.50 --CANADA 256.96 273.35 392.05 346.30 665.86 55.84 56.95 BANGLADESH --120.11 557.57 ----209.11 61.62 CHINA 138.25 165.89 224.36 232.97 241.44 54.23 --SHRILANKA Source : Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta

6. Sector wise Textile Export performance

Readymade Garments Readymade garments account for approximately 45% of the countrys total textile exports. They represent value added and less import intensive sub sector, thus deserving a special place. The major importing countries/regions of our readymade garments are the E.U., the USA. Canada, Japan, U.A.E. and Switzerland. The detail of readymade garments exports during the recent times given at table 4.

Table 4 : Readymade garments Exports performance during the year 2001-2010

Sr. No. 1 2 3 4 5 6 7 8

Year 2001 2002 2003 2004 2005 2006 2007 2008

Exports 4618.7 5334.3 5786.37 6034.39 7986.38 8282.27 9069.80 10383.26

(Value in US$ million) % Inc/Dec -10.4% +15% +8.47% +4.28% +32.34% +3.70% +9.50% +14.48%

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9 10 2009 2010 (April-Sept) 10064.73 4735.07 -3.06% -

Source: Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta

Readymade garment exports were 4618.7US$ million, which represent a decline 10.4% as compared to the corresponding period of 2000-2001. Readymade garments show the upward trend particularly after 2004 when MFA phase out completely. During the period 2007-08 and 2008-09 the garment exports were 9069.80 US$ million, 10383.26 US$ million recording a growth rate 9.50%, 14.48% compared to the corresponding period of previous year. During the period AprilSeptember 2010 the readymade garment exports were 4735.07 US$ million.

The readymade garments exports performance during 2001-2010 with graph given below:-

Source: Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta

Cotton Textiles Cotton textiles i. e. yarn, fabrics and man-made ups (mill made, power loom, handloom) comprise more than 2/3 of our exports of cotton, silk, woolen and man-made fiber textiles put together. There had been a slowdown in exports of cotton textiles in recent years, which is attributed to fall in cotton yarn exports due to general recession in major markets and the higher price of indigenous cotton. The detail of cotton textiles exports during the recent times given at table 5.
Table 5 : Cotton Textiles Exports performance during the year 2001-2010

Sr. No. 1 2 3 4 5 6 7 8 9

Year 2001 2002 2003 2004 2005 2006 2007 2008 2009

Exports 3081.9 3361.4 3599.95 3544.16 4600.78 5564.15 6858.63 4803.52 5711.41

(Value in US$ million) % Inc/Dec -12% +9.6% +7.09% -1.54% +29.81% +20.93% +23.26% -29.96% +18.90%

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2010 3017.26 (April-Sept) Source : Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta The cotton textiles exports in the year 1999-2000 and 2000-2001, recording a positive growth of 10.2% and 14.2% respectively over the previous years. But during the 2001-2002, cotton textile exports have amounted to US$ 3081.9 million, which represent a decline of 12% as compared to the corresponding period of 2000-2001. But after 2001 the cotton textiles exports show the growth path particularly after 2004 when MFA phase out. During the period 2007-2008, the cotton textiles exports were 6858.63US$ million recording a growth rate 23.26% compared to the corresponding period of previous year. But during 2008-2009 the cotton textiles exports 4803.52US$ million represent with 29.96% decline. During the period April-Sept 2010 the cotton textiles exports were 3017.26US$ million. The cotton textiles exports performance during 2001-2010 with graph given below:- 10

Source : Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta

Man-Made Textiles
The man-made textile plays a very important role in our country. The exports of man-made fiber textile showed an increase of 18.8% in 1999-2000 and 28.1% in 2000-2001 over the same period of previous year in dollar terms. During 2001-02 manmade fiber textile exports have declined by 4.2% in US dollar terms as compared to the corresponding period of 2000-2001. The man-made fiber textile exports show the upward trend after 2005, because the MFA is completely phase out during 2004. During the period 2009-2010 the man-made fiber textiles export were 3970.88 US$ million recording a growth rate 19.39% compared to the corresponding period of previous year. The overall man-made textiles exports performance during recent times given at table 6.

Table 6 : Man-made Textiles Exports performance during the year 2001-2010

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(Value in US$ million) % Inc/Dec -4.2% +30.22% +28.48% +12.60% -.54% +17.61% +32.44% +4.68% +19.39% -

Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (April-Sept) Source : Foreign Trade DGCIS, Calcutta

Sr. No. 1 2 3 4 5 6 7 8 9 10

Exports 1088.5 1417.5 1821.24 2050.73 2039.57 2398.90 3177.11 3325.88 3970.88 2043.00

Statistics of India (Principal Commodities & Countries)

The Man-made textiles exports performance during 2001-2010 with graph given below:-

Source: Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta Silk Textiles Exports This is comparatively a small segment with exports having around US$ 270 million during the past few years. The exports of silk showed an increase of 37.7% in 1999-2000 and 30% in 20002001 over the same period of previous year in dollar terms. During 2001-2002 silk textiles exports have declined by 8.4% in US$ terms as compared to the corresponding period of 2000-01. The silk textiles exports show the upward trend after 2002 but in 2007 the silk textiles exports US$ 657.72 million recording a decline 6.83% compared to the corresponding period of previous year. During April-Sept 2010 the silk textiles exports 271.71US$ million represent with -12.97% declined. The overall performance of silk textiles exports during recent times given at table 7

Table 7 : Silk Textiles Exports performance during the year 2001-2010

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(Value in US$ million) % Inc/Dec -8.4% +3.27% +20.80% +8.98% +16.67% +1.82% -6.83% +4.13% -12.97%

Sr. No. 1 2 3 4 5 6 7 8 9 10

Year 2001 2002 2003 2004 2005 2006 2007 2008 2009

Exports 437 451.3 545.21 594.21 693.28 705.95 657.72 684.93 596.05

2010 271.71 (April-Sept) Source : Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta The Silk textiles exports performance during 2001-2010 with graph given below:-

Source: Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta Wool & woolen Exports of woolen textiles had been showing decline trend, which has been attributed to sluggish market conditions, over-stocking in major markets etc. Exports of woolen textiles decline by 33% in 1999-2000 over the same period of previous year in dollar terms. However, the woolen textiles exports have shown an increase of 27.6% in 2000-01 over the corresponding period of last year. During the period 2001-02 the woolen textiles exports have declined by 17% in US$ terms as compared to the corresponding period of 2000-01. The woolen textiles exports performance during the period April-Sept 2010 US$ 220.82 million. The overall performance of woolen textiles exports during the recent times given at table 8.

Table 8 : Wool & Woolen Textiles Exports performance during the year 2001-2010

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Sr No 1 2 3 4 5 6 7 8 9 10

Year

Exports

(Value in US$ million) % Inc/Dec

2001 289.1 -17% 2002 269.3 -6.84% 2003 337.98 +25.50% 2004 417.09 +23.40% 2005 455.92 +9.30% 2006 423.84 -7.03% 2007 443.11 +4.54% 2008 484.75 +9.39% 2009 470.20 -3% 2010 220.82 (April-Sept) Source : Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta The Wool & woolen textiles exports performance during 2001-2010 with graph given below:-

Source : Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta Handicraft Textiles Handicraft is one of the sub-sectors which contributes substantially to the overall textiles exports. During the period 2001-02 handicraft textiles exports declined by 22.4% in US$ terms as compared to the corresponding period of 2000-01. The handicraft textiles exports show the upward trend after 2004, but after 2007 the handicraft textile exports indicates the downward trend in textiles. During the period April-Sept 2010 the handicraft textiles exports were 512.96US$ million. The overall performance of handicraft textiles exports given at table 9.

Table 9 : Handicraft Textiles Exports performance during the year 2001-2010

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(Value in US$ million) Year Exports % Inc/Dec 2001 737.0 -22.4% 2002 1190.1 +61.47% 2003 1085.36 -8.80% 2004 1013.85 -6.58% 2005 1314.53 +29.65% 2006 1364.91 +3.83% 2007 1452.28 +6.40% 2008 1090.77 -24.89% 2009 961.67 -11.83% 2010 512.96 (April-Sept) Source : Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta Sr No 1 2 3 4 5 6 7 8 9 10 The Handicraft textiles exports performance during 2001-2010 with graph given below:-

Source: Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta Coir Textiles The coir exports showed a negative growth in 1999-2000. However the coir exports had recorded a growth of 4.6% in 2000-01 in dollar terms. During the period 2001-02 indicates the downward trend in textile exports has been reversed and they are back on path of export growth. In the year 2009-10 the coir textiles exports were 160..60 US$ million recording a growth rate 7.05% as compared to the corresponding period of previous year. The performance of coir textiles exports during April-Sept US$72.26 million. The overall performance of coir textiles exports given at table 10.

Table 10 : Coir Textiles Exports performance during the year 2001-2010

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(Value in US$ million) Year Exports % Inc/Dec 2001 45.8 -13.67% 2002 66.5 +45.19% 2003 77.77 +16.94% 2004 105.56 +35.73% 2005 133.35 +26.32% 2006 145.80 +9.33% 2007 160.25 +9.91% 2008 150.02 -6.38% 2009 160.60 +7.05% 2010 72.26 (April-Sept) Source : Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta Sr. No. 1 2 3 4 5 6 7 8 9 10 The Coir textiles exports performance during 2001-2010 with graph given below:-

Source: Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta Jute Textiles The jute sector showed a declined by 9.1% in 1999-2000 in dollar terms, but after 2001 the jute textiles exports indicates upward trend has been reversed. During the period 2009-10 the jute textile exports were 218.40US$ million recording a declined with 27097% as compared to the corresponding period of previous year. During the period April-Sept 2010 the jute textiles exports performance were 235.12US$ million. The overall performance of jute textiles exports performance during recent times given at table 11.
Table 11 : Jute Textiles Exports performance during the year 2001-2010

Sr. No. 1 2 3 4

Year 2001 2002 2003 2004

Exports 83.8 173.7 242.93 276.25

(Value in US$ million) % Inc/Dec -5.1% +107.27% +39.85% +13.71%

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An Analysis of Structure & Growth of the Indian Textile Industry After Phase
2005 296.25 +7.23% 2006 260.22 -12.61% 2007 327.86 +25.99% 2008 303.21 -7.51% 2009 218.40 -27.97% 2010 235.12 (April-Sept) Source : Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta 5 6 7 8 9 10

The Jute textiles exports performance during 2001-2010 with graph given below:-

Source: Foreign Trade Statistics of India (Principal Commodities & Countries) DGCIS, Calcutta

7. Conclusions
Analysis of the available data shows that Indian gains in world textile and clothing trade in the ATC and post MFA era have not been commensurate with its expectation by any reasonable yardstick. Indias performance in textile and clothing with reference to EU and the US market was substantially inferior in comparison with China. India accounted for less than 4% of total world export in textile in 2003. While Chinas World export in textile 16% in 2003. Such superior performance of China and Inferior performance of India seems to have continued even after the expiry of MFA by end of 2004. During the Jan May period Indias textile trade grew by 30% between 2004 and 2005 from US$ 1.51 billion to US$ 1.96 billion, while Chinas increased by 61.6% (more than double that of India) from US$ 5.05 billion to US$ 8.16 billion. So India textile and clothing exports grew much slower in comparison with China. The fact that Indias imports grew faster than its export and Chinas export grew faster than its imports. Several factors are responsible for this. These include (a) Indias inability to rise up to the occasion, (b) Its poor capabilities and resources that inhibited it from moving beyond the level of other competing developing countries and attaining a stature comparable to Chinas, (c) The myopic vision of Indian textiles and clothing enterprises about the post-quota gains whereby they expected the gains to accrue to them even as they did very little to ensure the arrival of these gains, (d) The lack of strategic orientation of Indian textiles and clothing companies due to which there was hardly any effort to understand the strategies and the underlying success factors

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of the Chinese and to respond to competition by leveraging on the same strategies and factors, and (e) The limited size of the Indian companies due to which they had neither the resources and capabilities to respond to the global market requirements nor the orientation to strategize with a long run view, to develop new geographical or product markets and to sustain competitive efforts in spite of initial market difficulties.

8. Recommendation
Readymade Garments A substantial increase in production capacities is required. The increased investment is required to be made not only in garmenting but also in downstream activities. 100 percent depreciation may be allowed on capital expenditure on textile Machinery for income tax purpose so as to encourage fresh investment Rising input costs are a factor affecting exports of garments worldwide Productivity improvement programmed Setting up of more design studios for encouraging indigenous Design Development

Manmade yarn fabrics and made-ups The high custom tariffs in the importing countries are an important limiting factor in expanding our exports. The tariff from 18 to 35 percent in many of the important regions of the world like Latin American MERCOSUR countries, Egypt and morocco in WANA regions, Russia and Uzbekistan in CIS countries. Efforts are required to negotiate with these countries to reduce the tariff structure. Dispense with the requirement of maintaining the average export performance under the EPCG scheme. Cotton yarn fabrics and made-ups Being a power intensive sector, major steps for improving power supply. Having a long term policy regarding export restriction on cotton yarn so as to ensure and predictability for the producers. Treating home textiles at par with Readymade garments for all incentives under the EXIM policy. Expand the list in new focus market scheme so as to include some more potential markets like Brazil, Mexico, South Africa, Kenya, Australia, Middle East, South America, Vietnam, Egypt, and Morocco. Carpets Infrastructure needs to be improved in the major carpet clusters particularly Bhadohi/Mirzapur belt. Carpet export sector is heavily dependent upon US and European markets. Effort may be made to explore the new markets like Turkey, Middle east, LAC countries, etc.

References
[1] Agarwal, S., and D. Dhruv, (2004), Textile and Clothing Industry in India, Khandwala Securities Limited. [2] Alka Aziz, April-june 2011, Export potential of Indian readymade garments to USA in post MFA Scenario, The Indian Journal of Commerce, Vol. 63, No. 2, April-June2011

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An Analysis of Structure & Growth of the Indian Textile Industry After Phase
[3] Annual Report 2009-10, Ministry http://texmin.nic.in/annualrep/ar_09_10_english.pdf viwed of Textile,

[4] Balassa and Michalopoulos Liberlizing World Trade. Development Policy issues series Report, VPERS4 (Washington, DC: office of the Vice President, Economics and research, World Bank, 1985). [5] Economic Survey (2009-2010), Indias External Sector, Foreign Trade Review, July-Sept. 2009, Vol. XLIV No-2,pp. 121. [6] Gherzi report (2003), Benchmarking of Costs of Production of Textile Products in India vis-vis China, Pakistan, Indonesia, Bangladesh and Sri Lanka, Swiss Textile Organization. [7] Kirmani, N, Molajoni, P. and T. Mayer, Effect of increased market access on export of Developing countries IMF staff papers, 31(4). PP. 661-684. [8] Nordas, H.K. (2004). The global textile and clothing industry post the Agreement on Textiles and Clothing (WTO working paper ERSD). Geneva: World Trade. [9] Rangarajan, K. (2005), International Trade in Textiles and Clothing: Post-MFA challenges and strategic considerations for India, Foreign Trade Review, Vol.XXXIX, Jan-March, No.4, pp. 6 [10] Robyn, M. (2005), Gandhi, industrialized, Forbes, Vol. 176 No. 11, November 28, pp. 1612. [11] Saha, Manojit, (2004), 'Mills Weaving to become Global Textile Players', Economy & Business, 6 June. [12] UNCTAD(1986) , operation and effects of the generalized system of preference (New York: United Nation, 1975). [13] Verma, Samar, (2002), 'Export Competitiveness of Indian Textile and Garment Industry', ICRIER, November. [14] Zhang, Z., & Dardis, R. (1991). Determinants of international trade patterns in textile products. Journal of the Textile Institute, 82(1), 52-60.

ANNUXERE 1 Survey Questionnaire: Company/Manufacturing Unit

National Productivity Council is carrying out a Nationwide survey across four Manufacturing Sectors (Food Processing, Textile & Clothing, Leather & Leather Products and Electronics & IT hardware) on behalf of National Manufacturing Competitiveness Council (NMCC), DIPP, Ministry of Commerce and Industry, GoI. The objective of this stakeholder survey is to identify and understand major constraints that are hindering the growth of manufacturing sector in the path of productivity growth and export competitiveness and to suggest Sector Specific recommendations to NMCC with a view to enhance sectoral/manufacturing productivity and export competitiveness. (Please fill as per instructions given with each question. Write codes/ values in the box provided at the right hand side) 1.0 Sector (1= Food Processing, 2 = Textile & Clothing, 3 = Leather & Leather Products, 4 = Electronics & IT Hardware) 2.0 State (1 = AP, 2 = Delhi & NCR, 3= Gujarat, 4 = Himachal Pradesh, 5=Maharashtra, 6=Karnataka, 7 = Kerala, 8 = North East, 9 = Rajasthan, 10 = Punjab, 11 = Tamil Nadu, 12 = UP, 13= West Bengal 3.0 Location (1= Industry Centre, 2 = Cluster, 3 = EPZ, 4 = SEZ, 5=Others 4.0 Factory/Unit/Organisation specific information Company Name & Address: -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Website if any:---------------------------------------------------------------Contact Persons Name----------------------------------------------------------------Telephone if any: ---------------e-mail address if any: ---------------------------------------------------Year of Establishment What is the Primary Business of your company ? (1=Manufacturing, 2=Trading Company, 3= Multinational company, 4=Others, What is the nature of your company? (1= Small Scale Sector, 2=Informal Sector, 3= Registered Manufacturing, 4= Others) What is the category of your company? The primary Business (1=Small, 2=Medium, 3=Large, 4=Other,) Annual turnover of your organization/Company/Enterprise (Rs lakhs) 2003-04 2004-05 2005-06 2006-07 2007-08 Trade Related Information Is your organization engaged in Exports (1=Yes, 2= No) If yes, what is the percentage of Export to Total Sales (1=1-10%, 2=10-25%, 3=25-50%, 4=50-75% 5=Above 75%) Growth in export during the last five years. (1= Increased, 2=Decreased, 3=No Change,) If Increased, please specify the range of increase in export during the last five years? (1=0-10%, 2=10-25%, 3=25-50%, 4=50% & above) If decreased, please specify the range of decrease in export in during in the last five years? (1=0-10%, 2=10-25%, 3=25-50%, 4=50% & above) The factor (s) affecting the export of your products (1=Export taxes, 2= Export quantitative restriction, 3=Certification, 4=Inspection fee, 5=State trading administration, 6=Dual pricing schemes, 6=Non trade barriers,7=Any other) Domestic Market Related Information What is the market share of your product? Please specify the range (1=1-5%, 2=5-10%, 3=10-25%, 4=25% & above) What is the percentage of Domestic Sales to Total Sales (1=1-10%, 2=10-25%, 3=25-50%, 4=50-75% 5=Above 75%) Growth in the domestic demand of your products after 2000 during last five years. (1= Increased, 2= Decreased, 3=No Change If Increased, please specify the range of increase in the domestic demand of your products in the last five years? (1=1-5%, 2=5-10%, 3=10-25%, 4=25% & above) If decreased, please specify the range of decrease in the domestic demand of your products in the last five years? (1=1-5%, 2=5-10%, 3=10-25%, 4=25% & above) What measures have you taken over the past five years to boost Competitiveness in the domestic and export markets?

4.1 4.2

4.3

4.4 4.5

5.0

5.1 5.2 5.2.1

5.2.2

5.3

6.0

6.1 6.2 6.2.1

6.2.2

7.0

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8.0

Policy Interventions that are urgently required from the Government for enhancing productivity and competitiveness of your sector (Please mention five) 1. 2. 3. 4. 5.

9.0

Any other comments : (Please specify )

Thank you Name of the Official/Investigator:-----------------------------------------------Signature : --------------------------------------------------------Place of Survey : ---------------------------Date: -----------------------

ANNEXURE 2

List of Textile Manufacturing Units contacted for the NPC Field Survey
1. Silk Fashion Creator, J.12/63-83, Bumkar Colony Matiimuvns, Varanasi, U.P. 2. Ansari Nisa Collection, No. NH A17/74 A4-1, Pathani Tula Vns, Varanasi, U.P. 3. Diamond Silk Coop.Soc. Ltd., J.11/63-101, Bunker Colony, NatiInli, Varanasi, U.P. 4. Usman Gani Ltd. 5. Over Nice Silk Manufacturing Coop Society Ltd. 6. Milap Silk Industrial Coop Society Ltd., 7. Sheena Enterprises, 412-D, Defence Colony, Kanpur 208 010 8. Gramin Bunkar Society, Near Thai Budish Temple, Sarnath, Varanasi 2211007 9. Lotus Handicrafts, 10/492, Khalasi Line, Kanpur, 208001, UP 10. Ganesh Polytex Ltd., 113/216-B, Swaroop Nagar, Kanpur- 208002, U.P.
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An Analysis of Structure & Growth of the Indian Textile Industry After Phase

11. Amitech Industries Ltd., B-20, UPSC, Industrial Area, Site 1, Kanpur 208 022 U.P. 12. Motilal Dulichand (P) Ltd., 20, Industrial Estate, Kanpur 208012, U.P. 13. JAL Exports 188 Agara Village, HSR Layout, Bangalore 34 Color Lines, MRRJ Complex, 839/1, Sector I, HSR Layout, Agara Post, Bangalore 14. Devatha Silk Kendra, Niranjan Silk Place, Avenue Road, Banglore 02 Entity Garments 105, 2nd Floor, Robby House, JM Road, Avenue Cross, Bangalore 15. M.G. Creations, 9 Anekallappa Mata Lane, Narayana, Bangalore 560 002 Texport Overseas, 86D-1, Industrial Suburb, II Stage, Yeshwanthpur, Bangalore 16. M/s R.N. Oswal Hosiery Factory, Circular Road, Shivpuri, Behind Ved Bhawan 104 17. Vardhman Spinning & General Mills, Chandigarh Road, Ludhiana 18. M/s Mahavir Spinning Mills Ltd., Chandigarh Road, Ludhiana 19. Nahar Spinning Mills Limited, 373, Industrial Area, Ludhiana 20. M/s Venus Garments (India) Ltd., G.T. Road, Near Jalandhar by pass, LDH141005 21. M/s Suyansh Knitt. Pvt. Ltd., H-7, Textile Colony, Indus. Area A Ldh. 22. M/s Duke Fashions (India) Ltd., G.T. Road (West), Jalandhar by pass, Ldh. 23. M/s Kansal Hosiery Exports, Industrial Area-A, Ldh-141 003 24. Alok Industries Ltd., Peninsula Tower, A Wing, G.K. Marg, Lower Parel, Mumbai 25. Mekatronics Products Pvt. Ltd., 104, MG House Commercial Complex, Wazirpur 26. Fab Knit Pvt. Ltd., 10/6781, D B Gupta Road, Dev Nagar, Karol Bag, New Delhi 27. Delhi Tirpal House, Agarwal Tower Plot. No. 3 Block C II, 3rd Floor 302Pitam Pura, New Delhi 88 28. Santogen Silk Mills Ltd., A-13, MIDC, Patalganga, Dist. Raigard 29. Nahar Industrial Enterprises Ltd.,21st Mile Stone, Ambala, Chandigarh Road, PO Productivity & Competitiveness of Indian Manufacturing Textile & Garments Sector Dappar, Lalru, Punjab 30. Kiran Foot Comfort Pvt. Ltd., F-21, Malviya Industrial Area, Jaipur 302017 31. Sare Orginal, F 133, Sitapura Industrial Area, Jaipur 22 Rajasthan Syntex Ltd., A-27 Nawalakha Apt, Bharat Mata Path, DLB Marg, C Scheme, Jaipur 32. BSL, Flat No. 11, 2nd Floor, Ankur Apt. 5-6 Jyoti Nager East, Jaipur- 302005 33. Jagjanan Textiles limited, S-25, Shyam nagar, Jaipur 34. Cheer Sagar,E-194, Industrial Area, Mansarover, Jaipur 35. Major Exports Ltd, E-258, Mansarover, Jaipur-20 36. Ratan Textile Pvt. Ltd, F-200-201, EPIP, Sitapura Industrial area , Jaipur -22 37. A & A Exporters, G1-156 EPIP, Riico Industrial Area, Jaipur-302022 38. Art & Craft Exclusies, G-108, RiicoWtrsal Area, Mansorover, Jaipur
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39. Avon Creations, G-112, Mansarover Industrial Area, Jaipur 302020 40. Kandoi Impex Pvt. Ltd., F-128, Sitapura Industrial Area, Sitapura, Jaipur 302022 41. Arham Spinning Mills, 6th Milestone Tisaraacwar Road, Bhiwadi 301018 42. Shree Rajasthan Texchem , A-2 Nawalahkha Apt. Bharat Mata Path JLB Marg, 43. Shree Shyam Filamens, A-2 Nawalakha Apts Bharat Mata Pata JLB Marg, Schem Jaipur 44. Gampaklal Gopaldas/Toppot Nxt-G, 4, Inreeram Industrial Polign, Vonna Magdpla RD, Jurat 45. Vikram Kiniter (P) Ltd., , C-1/121, GIDC Pandersa, Surat, Gujarat 46. S.P. Garments, No. 11 Peranbur Hiesh Road, Chennai 12 47. Design Clasic Exports, AVV Koil Street, Chimmayanlages stage I, TN 48. Dignity Innovation, G-15, 1st Main Road, Ambattur Industry Estate, Chennai 600058 49. Aarveen International, 23&23A, Pulla Avenue,Shenoy Nagar, Chennai 30 50. Big Apple Exports Pvt. Ltd., 17, Mount Road, Saidapet, Chennai 600 015

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