2010

AMITY GLOBAL BUSINESS SCHOOL

A REPORT

ON

“EXPORTS ANALYSIS OF INDIAN

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 TEXTILE INDUSTRY”

BY

A.V.N.L.SIRISHA
A PROJECT REPORT
SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS

FOR THE AWARD OF THE DEGREE OF

MASTER OF BUSINESS
ADMINISTRATION IN

INTERNATIONAL
BUSINESS (2010)
BY
A.V.N.L.SIRISHA

(A30601908001)
UNDER THE GUIDANCE

OF

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 PROF MOHANTHY

AMITY GLOBAL BUSINESS SCHOOL

BANJARA HILLS HYDERABAD-50000(A.P)

Acknowledgement

I take this opportunity to express my gratitude to all the people who have guided and helped

me in the course of completion of my project.

A successful project can never be done by an individual to whom the project is assigned, lest the

individual get the help and guardianship of a person.

I feel immense pleasure to express a deep sense of gratitude to Dr.PRASAD RAO, Amity

Global Business School, and Hyderabad, who has given me an opportunity for doing Project

A deep sense of gratitude to PROF. MOHANTHY (FACULTY GUIDE) .His valuable

suggestions and helping hands has helped me to complete my project successfully.

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 A.V.N.L.SIRISHA

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Table of contents:
Executive summary………………………………………………………………...6
Research methodology…………………………………………………..................7
History of textile industry………………………………………………………….7
Growth of Textile Industry………………………………………………………..11
Textile History of Various Countries……………………………………………..12
Structure of India textile industry…………………….…………………………...13
Textile Trend in India……………………………………………………………..15
Role of Textile Industry in India GDP…………………………………………....16
Size of Textile Industry in India………………………………………..................19
Swot Analysis of Indian Textile Industry………………………………………......................20

Influences of changes shaping the industry..……………………………………...22

The key advantages of the Indian industry are…………………………................24
Government Initiatives In Textile Industry…………………………….................24
India Textile Policy 2000………………………………………………................30
Textile Non Trade Policies………………………………………………………..30
Textiles FDI policies …………………………………………………..................31
Current Scenario of textile industry…………………………………….................32
India major competitors in the world …………………………………………….33
Problems faced by the textile industry in India…………………………………...34
Future prospects…………………………………………………………………..36
Export at glance…………………………………………………………………...37
Technology upgrading…………………………………………………………….40
Major textile companies of India………………………………………………….41
Major textile export promotion councils of India…………………………………43

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Textile Trade challenges…………………………………………………………44
Upholding textile Industry……………………………………………………….45
Milestones of exports textiles……………………………………………………46
Data interpretation: “LINER TREND ANALYSIS”……………………………47
Interpretation…………………………………………………………………….48
Recommendations……………………………………………………………….49
Conclusion……………………………………………………………………….50
Bibliography……………………………………………………………………..51

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Executive summary:
The Textile Sector in India ranks next to Agriculture. Textile is one of India’s oldest
industries and has a formidable presence in the national economy in as much as it
contributes to about 14 per cent of manufacturing value-addition, accounts for around
one-third of our gross export earnings and provides gainful employment to millions of
people. The textile industry occupies a unique place in our country. One of the earliest
to come into existence in India, it accounts for 14% of the total Industrial production,
contributes to nearly 30% of the total exports and is the second largest employment
generator after agriculture.

Textile Industry is providing one of the most basic needs of people and the holds
importance; maintaining sustained growth for improving quality of life. It has a unique
position as a self-reliant industry, from the production of raw materials to the delivery of
finished products, with substantial value-addition at each stage of processing; it is a
major contribution to the country's economy. This paper deals with structure, growth and
size of the Indian textile industry, role of textile industry in economy, key advantages of
the industry, textile industry export and global scenario and strength, weakness,
opportunities and treats of the Indian textile industry.

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Research methodology:
Objective of Research:

Each research study has its own specific purpose. It is like to discover to Question
through the application of scientific procedure. But the main aim of our research to find
out the truth that is hidden and which has not been discovered as yet.

Data sources:

Analysis is totally based on primary data. Secondary data was used only for the
reference. Analysis has been done by primary data collection, and primary data has
been collected by interacting with various people. The secondary data has been
collected through various journals and websites.

Duration of Study:

The study was carried out for a period of three months, from February 1st to April 15h.

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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 War 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.

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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.

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
fibre 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 Up gradation Fund Scheme (TUFS) was
launched in April 99 to provide easy access to capital for technological up gradation by
various segments of the Industry.

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The Technology Mission on Cotton (TMC) was launched in February 2000 to address
issues relating to the core fibre of Cotton like low productivity, contamination, obsolete
ginning and pressing factories, lack of storage facilities and marketing infrastructure
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.

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Growth of Textile Industry:
The textile policy of 1985 and the economic policy of 1991 accelerated the economic
growth during 1990s. Textile sector growth has been led by the spinning and the
manmade fibre industry. The number of cotton/ manmade fibre textile mills rose from
1035 in 87-88 to 1741 by December 1997. The number of spinning mills number rose to
1461 in December 1997 from 752 in 87-88. Liberalization led to the installation of open-
end rotors and setting up of Export Oriented Units (EOU). Currently India has the
second highest spindle age in the world after China. Aggregate production of cloth
during 1996-97 was 34,265 million sq. meters, an increase of nine percent over 1995-
96. India's contribution in world production of cotton textiles was about 12 per cent a
decade back, while currently it contributes to about 15 per cent of world cotton textiles.
India has the second-largest yarn-spinning capacity in the world (after China),
accounting for roughly 20 percent of the world’s spindle capacity. India’s spinning
segment is fairly modernized; approximately 35 to 40 percent of India’s spindles are
less than 10 years old. During 1989-98, India was the leading buyer of spinning
machinery, accounting for 28 per cent of world shipments. India’s production of spun
yarn is accounted for almost entirely by the “organized mill sector,” which includes 285
large. Man-made fibers, wool and silk segment grew by modest 4.5 per cent per annum
during the 5-year period 2000-01 to 2005-06.During the first year of quota-free global
trade, production increased leaps and bounds. Textiles production increased 10 per
cent over 2004. The growth was fuelled by a 22 per cent rise in production of other
textiles (including apparels). Cotton textile also posted an increase of nine per cent.

India has already completed more than 50 years of its independence. The analysis of
the growth pattern of different segment of the industry during the last five decades of
post independence era reveals that the growth of the industry during the first two
decades after the independence had been gradual, though lower and growth had been
considerably slower during the third decade. The growth thereafter picked up
significantly during the fourth decade in each and every segment of the industry. The

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peak level of its growth has however been reached during the fifth decade i.e., the last
ten years and more particularly in the 90s. The Textile Policy of 1985 and Economic
policy.

Textile History of Various Countries:

India

Indian textile enjoys a rich heritage and the origin of textiles in India traces back to the
Indus valley Civilization where people used homespun cotton for weaving their
clothes.Rigveda, the earliest of the Veda contains the literary information about textiles
and it refers to weaving. Ramayana and Mahabharata, the eminent Indian epics depict
the existence of wide variety of fabrics in ancient India. These epics refer both to rich
and stylized garment worn by the aristocrats and ordinary simple clothes worn by the
common people. The contemporary Indian textile not only reflects the splendid past but
also cater to the requirements of the modern times.

Japan
In 1869 the capital of Japan was shifted from Kyoto to Tokyo and from this time
onwards the Nishijin weaving tradition seemed threatened with extinction. The industry
again started to grow along with Japan's new capitalist economy by 1890 when the
Nishijin weavers embraced and applied modern technology to their own ancient and
original textile art. The textile art of Japan particularly reached an epitome of excellence
by exhibiting a cultural distinction and remarkable artistic skill in the Edo and
succeeding Meiji periods (1868 - 1912).

China
Chinese textiles enjoy an excellent heritage in textile sector and occupy a prominent
position in the global textile market. Chinese textiles are world famous and extraordinary
for their fine quality and profound symbolic meanings. Textiles in china often form an
integral aspect of its heritage and symbolically reflect its tradition and culture. In China,
textile is often closely associated with prosperity and involved in the process of
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elaborate rituals. Parents' spontaneous love for their children is most visibly reflected
through the excellent clothes they provide on festive occasions to their children. These
clothes are made up of expensive materials and excellent craftsmanship.

Africa
In the ancient times the most important aspect of textiles or more precisely cloth in
Africa was that cloth was used as form of money. The width of cloth strip was usually
standardized in each region of Africa and therefore there used to be a regular number of
such standard length cloth strips required to make a woman's wrapper cloth. This would
then be used to serve as the unit of value. Cloth was a convenient form of money
primarily because it was used by everybody, fairly durable and easily sub dividable. The
weavers, dyers and other textile artists of Africa together makes an active contribution in
creating exquisite and amazing range of textiles. African textiles usually embody a great
variety of styles. Adinkara, kente and bogolan are some of the some of the African
textiles which are becoming increasingly popular while some others like Yoruba, ase-
oke and adire are equally beautiful but less well known.

STRUCTURE OF INDIA TEXTILE INDUSTRY:

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

1.Cotton
2.Synthetic
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

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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 firm:

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 mts of cloth. Most of these mills are located inGujarat,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 India’s 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.

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Three distinctive technologies are used in the sector handlooms, power looms 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 power loom enter-prices that operate about 1.7 million looms, and
just 137,000 looms in the various composite mills. Power looms 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,orknittingunits.

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

Textile Trend in India:

India is the world’s second largest producer of textiles and garments after China. It is
the world’s third largest producer of cotton-after China and the USA - and the second
largest cotton consumer after China. The textile and garment industry in India is one of
the oldest manufacturing sectors in the country and is currently the largest . The textile
and garment industry fulfils a pivotal role in the Indian economy. It is a major foreign
exchange earner and, after agriculture, it is the largest employer with a total workforce
of 35 mn. In 2005 textiles and garments accounted for about 14 per cent of industrial
production and 16 per cent of export earnings. In cotton yarn production India has made
a mark in the world textile scenario. It is the largest exporter of the cotton yarns in the
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world. Besides yarn exports, India’s growing garment industry is working as a driving
force to improve the yarn quality and to increase the production ofcottonyarn. 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 per
cent over the corresponding period of the previous year. Textile exports during April-
November 2005 were at US$ 9,309.81 million, up 8.21 per cent from US$ 8,603.33
million during the corresponding period of the previous year. The first year of the non-
quota regime for textiles has seen Indian exports to the US grow by 27 per cent year on
year to US$ 4.6 billion, according to data released by the Office of Textiles and
Apparels (OTEXA), USA.

In keeping with the trend of textile companies increasing capacity and adding new
manufacturing units, the last week of 2005 saw a substantial number of firms, both new
and existing, queuing up to file an intent to manufacture document with the Department
of Industrial Policy and Promotion (DIPP). Out of 161 companies that had filed Industrial
Entrepreneur Memoranda (IEM) in the last week of December, textile firms accounted
for more than a quarter of all new applications. In fact, in the last six years, an estimated
US$ 6.7 billion has been invested in the textiles sector, aided by the Technology Up
gradation Fund (TUF) scheme. The TUF scheme expires in March (2007) and the
quotas on China will be lifted in 2008. Hence, companies will continue to add capacities
over the next year. Also, according to CRISIL, the sector is likely to rise over US$ 3.5
billion from the capital markets in the next few years

Role of Textile Industry in India GDP:

Textile industry plays a significant role in the economy. The Indian textile industry is
one of the largest and most important sectors in the economy in terms of output, foreign
exchange earnings and employment in India. It contributes 20 per cent of industrial
production, 9 per cent of excise collections, 18 per cent of employment in industrial
sector, nearly 20 per cent to the country’s total export earnings and 4 per cent ton the
GDP. The sector employs nearly 35 million people and is the second highest employer
in the country. The textile sector also has a direct link with the rural economy and
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performance of major fibre crops and crafts such as cotton, wool, silk, handicrafts and
handlooms, which employ millions of farmers and crafts persons in rural and semi-urban
areas. It has been estimated that one out of every six households in the country
depends directly or indirectly on this sector.India has several advantages in the textile
sector, including abundant availability of raw material and labour. It is the second largest
player in the world cotton trade. It has the largest cotton acreage, of about nine million
hectares and is the third largest producer of cotton fibre in the world. It ranks fourth in
terms of staple fibre production and fourth in polyester yarn production. The textile
industry is also labour intensive, thus India has an advantage. Role of Textile Industry in
India GDP has been quite beneficial in the economic life of the country. The worldwide
trade of textiles and clothing has boosted up the GDP of India to a great extent as this
sector has brought in a huge amount of revenue in the country. In the past one year,
there has been a massive upsurge in the textile industry of India. The industry size has
expanded from USD 37 billion in 2004-05 to USD 49 billion in 2006-07. During this era,
the local market witnessed a growth of USD 7 billion, that is, from USD 23 billion to USD
30 billion. The export market increased from USD 14 billion to USD 19 billion in the
same period. The textile industry is one of the leading sectors in the Indian economy as
it contributes nearly 14 percent to the total industrial production. The textile industry in
India is claimed to be the biggest revenue earners in terms of foreign exchange among
all other industrial sectors in India. This industry provides direct employment to around
35 million people, which has made it one of the most advantageous industrial sectors in
the country. Some of the important benefits offered by the Indian textile industry are as
follows:

 India covers 61 percent of the international textile market 


 India covers 22 percent of the global market 

 India is known to be the third largest manufacturer of cotton across the globe 

 India claims to be the second largest manufacturer as well as provider of
cotton yarn and textiles in the world 

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  India holds around 25 percent share in the cotton yarn industry across the
globe 

 India contributes to around 12 percent of the world's production of cotton yarn
and textiles 

The Role of Textile Industry in India GDP had been undergoing a moderate increase till
the year 2004 to 2005. But ever since, 2005-06, Indian textiles industry has been
witnessing a robust growth and reached almost USD 17 billion during the same period
from USD 14 billion in 2004-05. At present, Indian textile industry holds 3.5 to 4 percent
share in the total textile production across the globe and 3 percent share in the export
production of clothing. The growth in textile production is predicted to touch USD 19.62
billion during 2006-07. USA is known to be the largest purchaser of Indian textiles.
Following are the statistics calculated as per the contribution of the sectors in Textile
industry in India GDP:

 India holds 22 percent share in the textile market in Europe and 43 percent
share in the apparel market of the country. USA holds 10 percent and 32.6
percent shares in Indian textiles and apparel. 

 Few other global countries apart from USA and Europe, where India has a
marked presence include UAE, Saudi Arabia, Canada, Bangladesh, China,
Turkey and Japan 

 Ready made garments accounts for 45 percent share holding in the total
textile exports and 8.2 percent in export production of India 

 Export production of carpets has witnessed a major growth of 42.23 percent,
which apparently stands at USD 654.32 million during 2004-05 to USD
930.69 million in the year 2006-07. India holds 36 percent share in the global
textile market as has been estimated during April-October 2007 

 The technical textiles market in India is assumed to touch USD 10.63 billion
by 2007-08 from USD 5.09 billion during 2005-06, which is approximately
double. It is also assumed to touch USD 19.76 billion by the year 2014-15 

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  By 2010, India is expected to double its share in the international technical
textile market 

 The entire sector of technical textiles is estimated to reach USD 29 billion
during 2005-2010 

The Role of Textile Industry in India GDP also includes a hike in the investment flow
both in the domestic market and the export production of textiles. The investment range
in the Indian textile industry has increased from USD 2.94 billion to USD 7.85 billion
within three years, from 2004 to 2007. It has been assumed that by the year 2012, the
investment ratio in textile industry is most likely to touch USD 38.14 billion.

Size of Textile Industry in India:

The textile industry in India covers a wide gamut of activities ranging from
production of raw material like cotton, jute, silk and wool to providing high value-added
products such as fabrics and garments to consumers.

 The industry uses a wide variety of fibres ranging from natural fibres like cotton,
jute, silk and wool to man made fibres like polyester, viscose, acrylic and multiple
blends of such fibres and filament yarn. 

 The textile industry plays a significant role in Indian economy by providing direct
employment to an estimated 35 million people, by contributing 4 per cent of GDP
and accounting for 35 per cent of gross export earnings. The textile sector
contributes 14 per cent of the value-addition in the manufacturing sector. 

 Textile exports during the period of April-February 2003-2004 amounted to
$11,698.5 million as against $11,142.2 million during the same period in the
previous year, showing an increase of around 5 per cent. 

 Estimates say that the textile sector might achieve about 15 to 18 per cent growth
this year following dismantling of MFA 

Swot Analysis of Indian Textile Industry

Strengths:
1. Indian Textile Industry is an Independent & Self-Reliant industry.

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2. Abundant Raw Material availability that helps industry to control costs and reduces the lead-
time across the operation.
3. Availability of Low Cost and Skilled Manpower provides competitive advantage to industry.
4. Availability of large varieties of cotton fiber and has a fast growing synthetic fiber industry.

5. India has great advantage in Spinning Sector and has a presence in all process of
operation and value chain.

6. India is one of the largest exporters of Yarn in international market and contributes around
25% share of the global trade in Cotton Yarn.
7. The Apparel Industry is one of largest foreign revenue contributor and holds 12% of the
country’s total export.
8. Industry has large and diversified segments that provide wide variety of products.
9. Growing Economy and Potential Domestic and International Market.
10. Industry has Manufacturing Flexibility that helps to increase the productivity.
Weaknesses:
1. Indian Textile Industry is highly Fragmented Industry.
2. Industry is highly dependent on Cotton.
3. Lower Productivity in various segments.
4. There is Declining in Mill Segment.

5. Lack of Technological Development that affect the productivity and other activities in
whole value chain.

6. Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and
transportation Time.
7. Unfavorable labor Laws.
8. Lack of Trade Membership, which restrict to tap other potential market.
9. Lacking to generate Economies of Scale.
10. Higher Indirect Taxes, Power and Interest Rates.

Opportunities:
1. Growth rate of Domestic Textile Industry is 6-8% per annum.
2. Large, Potential Domestic and International Market.

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3. Product development and Diversification to cater global needs.
4. Elimination of Quota Restriction leads to greater Market Development.
5. Market is gradually shifting towards Branded Readymade Garment.
6. Increased Disposable Income and Purchasing Power of Indian
Customer opens New Market Development.
7. Emerging Retail Industry and Malls provide huge opportunities for the Apparel,
Handicraft and other segments of the industry.
8. Greater Investment and FDI opportunities are available.

Threats:
1. Competition from other developing countries, especially China.
2. Continuous Quality Improvement is need of the hour as there are different demand patterns
all over the world.
3. Elimination of Quota system will lead to fluctuations in Export Demand.
4. Threat for Traditional Market for Power loom and Handloom Products and forcing them
for product diversification.
5. Geographical Disadvantages.
6. International labor and Environmental Laws.
7. To balance the demand and supply.
8. To make balance between price and quality.

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Influences of changes shaping the industry

Some of the significant changes that have and are shaping the Indian textile industry
they are:

 Changes in Emphasis

There has been a distinct and positive shift from quality to quality. Earlier Indian textiles
were considered cheap and of low quality. The industry was at that time driven by large
volumes, which were of paramount importance. The best quality was produced in
Europe and Japan. Since then, India has come a long way, emerging as a manufacturer
of high quality yarns and fabrics. The leading mills such as Raymonds, Read & Taylor,
Aravind mills etc. Improved their quality standards prevailing into the world.

 Implementation of New Equipment 

The textile industry has also become a high technology. The textile industry has also
become a high technology industry. No body earlier could have concerned that the
industry would require top of the line technical skills. Present day textile machinery is
fully computerized and needs totally new skills to effectively manage it.

 New Marketing Trend 

On the marketing side, there has been a total change , with almost all players in the
industry extending their reach to international markets. The impact of these trends on
the textile industry is profound. Increasingly any company cannot sustain itself only on
local market demand or only the exports. One has to look at the global markets in
totality.

 Decentralized sectors 

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  Another visible change relates to the scale of operations. Earlier textile mills were
generally reasonably large size becomes a non-constraining factor with the
advent of 


 Technocrats 

Another shift in the industry is regarding entrepreneurship. Technocrats have been able
to become possible to have small size spinning, weaving and processing mills. All this
was earlier the domain, solely of large businesses.

 Cost Consciousness 

The greater competitive pressure have highlighted the need to control cost of every type
of whether it be energy, water or labor all of which were earlier taken for granted now
every mill is highly cost conscious and industrial engineers keep detailed trace of every
cost parameter including energy consumption including energy consumption, waste
control, machine efficiency and productivity. No doubt, this will have to be an ongoing
exercise. Since cost have to be ruthlessly and persistently brought down.

 Labor intensive industry 

The textile industry being labor intensive, is slowly migrating from high cost countries,
such as the United states, Europe, Japan, Australia, Taiwan and Korea. All these
countries were at one time leading textile manufacturers. But with the high labor cost,
capacities in these countries are being diverted elsewhere. This is happening even as
the developed economies make large investments in better machinery and automatism.

24 | P a g e
The key advantages of the Indian industry are:
 India is the third largest producer of cotton with the largest area under cotton
cultivation in the world. It has an edge in low cost cotton sourcing compared to
other countries. 

 Average wage rates in India are 50-60 per cent lower than that in developed
countries, thus enabling India to benefit from global outsourcing trends in labour
intensive businesses such as garments and home textiles. 

 Design and fashion capabilities are key strengths that will enable Indian players
to strengthen their relationships with global retailers and score over their Chinese
competitors. 

 Production facilities are available across the textile value chain, from spinning to
garments manufacturing. The industry is investing in technology and increasing
its capacities which should prove a major asset in the years to come. 

 Large Indian players such as Arvind Mills, Welspun India, Alok Industries and
Raymonds have established themselves as 'quality producers' in the global
market. This recognition would further enable India to leverage its position among
global retailers. 

 India has gathered experience in terms of working with global brands and this
should benefit Indian vendors. 

Government Initiatives In Textile Industry:

With a view to raise India's share in the global textiles trade to 10 per cent by 2015
(from the current 3 per cent), the Ministry of Textiles proposes 50 new textile parks. Out
of the 50, 30 have been already sanctioned by the government (with a cost of US$ 710
million). Set up under the Scheme for Integrated Textile Parks (SITP), this initiative will
not only make the industry cost competitive, but will also enhance manufacturing

25 | P a g e
capacity in the sector. Apart from the above, a series of progressive measures have
been planned to strengthen the textile sector in India:

 Technology Mission on Cotton (TMC) 


 Technology Up gradation fund Scheme (TUFS) 

 Setting up of Apparel Training and Design Centre’s (ATDCs) 

 100 per cent Foreign Direct Investment (FDI) in the textile sector under automatic
route. 

 Setting up two design centres in Gujarat in collaboration with National Institute of

Fashion Technology. 

 Setting up a Handloom Plaza in Ahmedabad with an estimated investment of
US$ 24.6 million. 

 Revival plans of the mills run by National Textiles Corporation (NTC). Already, for
the revival of 18 textile mills, US$ 2.21 million worth of machineries has been
ordered for the up gradation and modernization of these mills. 

 Setting up a handloom mall with an investment of US$ 24.6 million at Jehangir
Mill in Ahmadabad. 

 Scrapping of the Textile Committee cases being collected from the textile and 
textile machinery industry under the Textile Committee Act.

The Government of India has also included new schemes in the Annual Plan for
2010-11 to provide a boost to the textile sector. These include schemes for
Foreign Investment Promotion to attract foreign direct investment in textiles,
clothing and machinery; Brand Promotion on Public-Private Partnership (PPP))
approach to develop global acceptability of Indian apparel brands; Trade
Facilitation Centers for Indian image branding; Fashion Hubs for creation of
permanent market place for the benefit of Indian fashion industry; Common
Compliance Code to encourage acceptability among apparel buyers and Training
Centers for Human Resource Development on Public Private Partnership (PPP)
mode. Indian Textiles targets to achieve by end of the 11th Five year Plan (2007-
2012)

26 | P a g e
  Market size of US$ 115 Billion 
-Export target US$ 55 Billion -
Domestic market US$ 60 Billion
 India’s market share in world textiles trade to grow from 3% to 8 % 

 12 Million additional jobs 

 Investment Rs.150,600 Crore 

Textile Industry Policies:

 Indian Textile Industry plays a vital role in Indian economy. For the proper 

 functioning and operation of industry it is very essential to have some policies 

 and regulation in place. In India, the Ministry of Textile is responsible for the 

 formulation of policy, planning, execution, development, export promotion and 

 regulation of the Textile Industry and related sectors. There are several other 

 bodies and organizations which help to formulate and execute these policies. All 

 policies should be implemented for the greater development of the whole industry 

 so that it can help to strengthen the economy. 

Industry Policy :
 There are no restrictions regarding location for establishing manufacturing units. 

 All producers of Clothing and Accessories are exempt from obtaining Industrial 

 License to manufacture. The relicensed undertakings, however, are required to 

 file an Industrial Entrepreneur Memoranda (IEM) in Part 'A' with the Secretariat of 

 Industrial Assistance (SIA), and obtain an acknowledgement. No further approval 

 is required. 

 After commencement of commercial production, Part B of the IEM has to be filled 

 In Certain items of clothing are reserved for small-scale industries 

27 | P a g e
 Policies Related To Textile Industry:
 Trade Policies 

 Non-Trade Policies 

 Investment & FDI Policies 

 National Textiles Policy 2000 

Trade Policies
 Tariff policy; 

 India & US have reached on an Agreement for reciprocal market access
commitments for Textiles and Apparel with the negotiation of the WTO
Agreement Textile & Clothing. It provides elimination of Quota system of Textiles 

&

 Apparel from 1st January 2005. 

 Under Indo-US Agreement of 1st January 1995, India agreed to reduce tariffs on 

 Textile & apparel and remove all the restrictions on these products. 

 From 1st April 2000, Govt. Of India reduced tariffs on: . Manmade Fibers & 

 Filament Yarns from 35% to 20% · Cotton Yarn from 25% to 20% · Spun, 

 Blended, and Woolen Yarn from 40% to 20 % 

 Grey Fabrics and certain Cotton Yarns are exempt from basic Excise Duty. 

 Customs duty on Polyester Filament Yarns is reduced from 10% to 7.5%. Duty
on 

 Other Filament yarns will be remain at 10%. 

 Customs duty on Polyester Staple fibers is reduced from 10% to 7.5%. Duty on 

 Other Man Made Staple fibers will be remain at 10%. 

 Customs duty on Raw Materials such as DMT, PTA and MEG reduced from
10%to 7.5%. 

28 | P a g e
  For Small Scale Industries there is Full Exemption Limit being increased from
Rs.1 crore to Rs.1.50 crores. 

Most of the products fall under HS code 61 and 62 carry an import duty of 56.83%
which includes 30% basic duty, 16% additional duty and 4 per cent special additional
duty.
 Excise duty on Nylon Chips has been reduced from 16% to 12%. 

 Optional excise duty on Nylon Fish Net Fabrics is increased from 8% to 12%. 

 Excise Duty Exemption on specified Textile Machinery Items is withdrawn and
8% Excise Duty is imposed. 

 CST rate reduced from 4% to 3% with effect from April 1, 2007. 

 Removal of surcharge on income tax on all firms and companies with a taxable
income of Rs.1 crore or less. 

Import Licensing;

 India has liberalized its Import regime for Textiles and apparel, but some of the
part is still limited for market access. Currently, there is no import restriction for
yarns & fabrics items. Apparel & Made-up textiles goods require a Special Import
License (SIL). Govt. revised Exim Policy on 31st March 1999 by eliminating
Import Licensing Requirements for 894 consumer goods, agriculture products
and textiles. On 28th December 1999 India and Us signed an Agreement for the
elimination of import restrictions of 1,429 agriculture, textiles, consumer goods
and apparel. India removed restrictions on 715 tariff items as of 1st April 2000. 

Custom Procedures:

 Marking, Labeling, and Packaging Requirements: Marking, Labeling, and

Packaging Requirements for Textile products are technically complex and difficult
to implement. 

EXIM Policies:

29 | P a g e
  Duty Entitlement Passbook Scheme: DEPS is available for Indian Export
Companies and Traders on a Pre-Export and Post-Export basis. Pre-Export credit
requires 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 custom duties on imports of any unrestricted goods. 

Export Promotion Capital Goods Scheme:

 This scheme is available to export companies and traders who provide the GOI
with information about which type of goods and what value of Capital Goods they
will import. And they also inform what will be the outcome of export they expect to
produce from those imports. Depending upon the export commitment GOI
provides them a license to import capital goods duty-free or preferential rates of
duty. 

Pre and Post Shipment Financing:

 The Reserve Bank of India provides Indian Exporters Pre-Shipment Financing

through commercial banks for purchasing raw materials and packaging materials
by presenting Letter of Credit. RBI also provides Post-Shipment Financing
through commercial banks at preferential rates by presenting export documents. 

Export and Special Economic Zones:

 Govt. of India has established Export Processing Zones (EPZs) and Special
Economic Zones (SEZs). In EPZs units can import goods free of custom duty.
There is 5-year tax holiday to any industrial unit in EPZs. Govt. has allowed 100%
Fore3ign ownership of units under EPZs and SEZs. The Govt. considers SEZs as
foreign territory for trade and tariff purpose. Units under SEZs may engage in
Manufacturing, Trading and Services. Units are exempt from routine checking of
exports by customs, and they can sell in the domestic market on payment of duty
as applicable to imported goods. 

30 | P a g e
Duty Drawback Scheme:

 The basic objective of this scheme is to reduce the indirect taxes on exports.
Exporters can get refund of the excise and import duty. Through this scheme they
can be more competitive and have more potential market. 

India Textile Policy 2000

 For the growth and development of Indian Textile Industry and to make it more
vibrant, Govt. of India passed National Textile Policy in 2000. 

Objectives of Policy

 To produce and provide good quality cloth in affordable price to fulfill different
needs of customers. 

 To increase the share of India in Global Textile Market. 

 To increase the contribution for employment and economic growth of country. 

 Facilitate the Textile Industry to attain and sustain a pre-eminent global standing
in the manufacture and export of clothing. 

 Liberalization of controls and regulations for the market development of different 

 Textile Segments and to make them stronger to perform in competitive
environment. 

 Encourage FDI and R&D to improve the manufacturing capabilities and 

 Infrastructure under the environmental standards. 

 Facilitating financial support and arrangement to sector. 

Textile Non Trade Policies:

Technology Up gradation Fund :

 As there is huge competition in international Textile Industry therefore the

IndianTextile Industry has to be technologically well versed. Industry has been
facing problem with high capital cost to improve the technology and
modernization of Textile and Apparel Industry. Under the TUF scheme, Textile 

31 | P a g e
 and Apparel Manufacturing Units can take Loan from IDBI Bank, SIDBI, and The
Industrial Finance Corporation Of India at interest rate of 5 % points lower than
normal rates. This scheme also helps for IT Development, Product Development,
Diversification and Research & Development through funding. In 2006-07 Rs.535
crores were allotted for the scheme and, Rs.911 crores have been allocated
forthe same for 2007-08.
Cotton Technology Mission:

 To improve the performance of Cotton sector, there is need for improvement in

Research & Development, quality and productivity of products. The Marketing
Infrastructure also needs improvement. The Govt. of India is aimed to increase
production of cotton by 50% with improved quality and productivity. 

Quota Entitlement Policy:

 Textile and Apparel Industry in India was running under the terms of Multifiber
Arrangements (MFA) over the many years. Under MFA, USA, European Union
(EU), Canada, and Norway did negotiation for bilateral agreements with India and
other textile exporting countries that had limits or quota on their specific textile
exports. 

Construction of Apparel International Mart:

 Apparel Export Promotion Council has constructed an Apparel International Mart

(AIM) at Gurgaon. This will provide showrooms on lease and license basis to the
established exporters to showcase their products.

Textiles FDI policies:

After the economic reforms Indian Govt. has taken many initiatives for investment in
Textile Industry. The Govt. has liberalized its investment policies for the Textile
Industry. Lot of investment has been made for the growth and development of
various sectors of Textile Industry. For this purpose Govt. of India has launched

32 | P a g e
many schemes and plans.
 The RBI provides approval within 2 weeks to all proposals that involve foreign 

 equity up to 51 % in the manufacturing of textile products 

 Investment is increased from Rs.7349.00 crores in 2004-05 to Rs 15,032.00
crores in 2005-06. 

 During 2003-06 the total investment in Textile and Clothing was around
Rs.42,978.00 crores. 

 For Technology Up gradation Funds Scheme, Rs 916 billion has been issued for
technology upgradation.Around 26 Apparel Parks are opened in eight states in
India, with a total investment of Rs 134 billion. 

 Industrial Entrepreneurship Memorandum is implemented from 1992 with the
investment of 263 billion. 

Current Scenario of textile industry:

Textile exports are targeted to reach $50 billion by 2010, $25 billion of which will go to
the US. Other markets include UAE, UK, Germany, France, Italy, Russia, Canada,
Bangladesh and Japan. The name of these countries with their background can give
thousands of insights to a thinking mind. The slant cut that will be producing a
readymade garment will sell at a price of 600 Indian rupees, making the value addition
to be profitable by 300 %.Currently, because of the lifting up of the import restrictions
of the multi-fibre arrangement (MFA) since 1st January, 2005 under the World Trade
Organization (WTO) Agreement on Textiles and Clothing, the market has become
competitive; on closer look however, it sounds an opportunity because better material
will be possible with the traditional inputs so far available with the Indian market. At
present, the textile industry is undergoing a substantial re-orientation towards other
then clothing segments of textile sector, which is commonly called as technical
textiles. It is moving vertically with an average growing rate of nearly two times of
textiles for clothing applications and now account for more than half of the total textile
output. The processes in making technical textiles require costly machinery and skilled
workers.

33 | P a g e
INDIAS 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 earning, Indias 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

34 | P a g e
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 modernization 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

35 | P a g e
filament yarn in warp in order to protect the interest of art silk and power loom 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. 

36 | P a g e
  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. 

FUTUREPROSPECTS:
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 man
made 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 bn. 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.

37 | P a g e
EXPORT AT GLANCE:

Textile exports plays a crucial role in the overall exports from India.Throught 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.

 Strategies for Indian Exports: 

Quota free market means competition amongst firms and not nations. Quotas have
frozen the growth in market share. They encouraged the high cost domestic industry in
many textile-importing countries by freezing the market share. Even the high cost
exporting countries (Hong Kong, South Korea, Taiwan) continued to have high market
share taking advantage of quotas. Quotas also assured fixed market opportunities in
early years to Indian garment industry and textile industry despite low productivity, poor
time delivery and quality.

38 | P a g e
Number of incentives was provided in India including Duty drawback and cash
compensatory support. Garment quotas are distributed by AEPC based on Government
policy from time to time regarding past performance, etc and quotas were traded in gray
market for long time.

This is in sharp contrast to world-class manufacturing and supply chain tried by some
units in Europe and USA in online transmission of high sale garment designs in
departmental stores and replenishing the sold stocks quickly through a very low delivery
cycle. Where as Indian domestic market shall hot up by entry of both retailing chains in
India (FDI has been now permitted up to 51% in single brand stores) and Outsourcing
centers for International chains like Wal-Mart, the Indian exporters will get on one hand
newer opportunities to enter restrained markets, while on other hand they will face stiff
competition from countries like Turkey, Brazil, Mexico, Korea, China, Tunisia, Romania,
Bangladesh and Pakistan.

Quotas by restricting market supply have also kept the export prices artificially high.
There is bound to be a price war in post quota regime. Already it has started happening
with Indian exporters (at least for price elastic goods). Developed countries have
relocated facilities offshore or have shifted to high value products. Developing countries
that were free from MFA restraints will loose out due to fall in prices.

The Indian textile and clothing Industry except for cotton yarn sector should test waters
within domestic markets to establish their global competitiveness and consumer
acceptance.

Developed countries and many other countries are trying to extend quotas up to end of
2007 as evident from Istanbul declaration in March 2004.USA is developing a DNA
marker system to trace the fabric origin. The technology can identify the US produced
cotton yarn and check illegal textile imports.

Instead of criticizing, countries lie India should hold high vision as regards standards of
health, safety and child labor to conform to international standards and to avoid non-
tariff barriers.

39 | P a g e
Technology Up gradation Fund (TUF) has to be better utilized and textile technology
training infrastructure has to be improved in country. The textile sector should take lead
in this.

Global trade is expected to be in range of US $ 800 Billions in 2014 up from US $ 350

Billion in 2002 with share of textiles at 40% and clothing at 60%

According to some studies China and India will be major gainers. India could increase
their share from present 8 % in US textile market to 13.5% and from 3% to 8% in US
Garment market. For EU the projections are from 3.6 to 8% and 3% to 8 % in textiles
and garment sectors.

As on date China has distinct advantage in terms of supply chain management, low cost
and better designs.

Whereas Morgan Stanley has projected India to be one of top three exporters of textile
and garments, another study by Indian Cotton Mills Federation has estimated Indian
textile exports to reach US $ 40 Billion by 2010.

GOI on other hand has projected exports to double from US $12 Billion to 25 Billion in
next couple of years and eventually to US $ 50 Billion by 2010.

Whereas new buying season starting Jan 2005 already has seen demands for 10-15%
price reduction by the importers.

China lacks capability in value addition and fashion design. India stands to gain in ladies
blouses because of strength in hand-works, like embroidery, sequins, printing etc. On
the other hand China has clear advantage in Nightwear due to large capacity and lower
costs. Therefore, while China will focus on low value high volume capabilities, India
should gain through fashion content. India will also be favorite destination as alternative
source other than China for major retailers globally. India can emerge as good
outsourcing center for EU and US giants.

40 | P a g e
Another important factor is under valuation of Chinese currency by at east 20% vis-à-vis
Dollar. China may retain their operations in Sri Lanka, Cambodia and Vietnam due to
low costs prevailing there, when china set up facilities there for taking quota advantage.

TECHNOLOGY UPGRADATION:

The Indian Textiles Industry has suffered from severe technology obsolescence and
lack of economies of scale, which, in turn, had diluted its productivity, quality and cost
effectiveness, despite distinctive advantages in raw material, knowledge base and
skilled human resources. While the relatively high cost of state-of-the-art technology
and structural anomalies in the industry have been major contributory factors, perhaps
the single most important factor inhibiting technology up gradation has been the high
cost of capital, especially for an industry that is squeezed for margins.

Given the significance of this industry to the overall health of the Indian economy, its
employment potential and the huge backlog of technology up gradation, it has been
felt that in order to sustain and improve its competitiveness and overall long term
viability, it is essential that the textiles industry has access to timely and adequate
capital, at internationally comparable rates of interest in order to upgrade the level of
its technology. The Technology Up gradation Fund Scheme (TUFS), the flagship
scheme of Ministry of Textiles was launched on 01.04.1999. Initially proposed for a
period of five years, the scheme has now been extended till 31.03.2007, and is
designed to ensure the availability of bank finance at rates comparable to global rates.
Under this, the Government reimburses 5% of the interest charged by Banks and
Financ .The Government has strengthened and augmented the Technology Up
gradation Fund Scheme (TUFS). The allocation for the subsidy component of TUFS
was enhanced from Rs.249.00 crores in 2004-05 to Rs. 485.00 crores in 2005-06,
registering an increase of 95%. This has been further increased to Rs.835 crores in
2006-07, an increase of 91% over 2005-06. Till 31.10.2006, the Scheme has attracted
6142 applications, involving an investment of Rs 53,003.00 crores. Out of this 5882
applications with a project cost of Rs. 47,580 crore have been sanctioned. As such,
this Scheme has created such a great momentum that has resulted into an investment

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of around Rs. 50,000 crore from the textile industry only under this Scheme. Owing to
TUFS only the textile sector is still in an upbeat mood to modernize itself so that it may
take on the global competition with confidence.ial Institutions, thereby ensuring credit
availability for the up gradation of technology to industry at global rates.

MAJOR TEXTILE COMPANIES OF INDIA:

The major textile companies of India are as follows:

Arvind Mills:

Arvind Mills is India’s largest Textile Mill. It has large production in denim, shirting and
knitted garments. It is now adding value by manufacturing denim apparel. It’s sales are
around US$ 300millions.

Raymond’s :

it is a brand name of Textiles all over the world. It specialized in the diversified woolen
garments. It is expanding it’s products through the organized retail stores and
showrooms. It also looking to also expanding denim capacity and to become second
largest denim player in India. Its presence in retail will be big positive in future. Its
annual sales are around US$ 300 millions

Reliance Textiles:

Reliance Textiles is one of the major Textile Company that is in business of fully
integrated manmade fiber. It has capacity of more than 6 million tones per year. It has
joint venture partners like, DuPont, Stone & Webster, Sinco (Italy) etc.

Vardhaman SpinningVardhman deals in spinning, weaving and processing segment of

the industry. It is planning to double its fabric processing capacity to 50 million meters. It
is an approved supplier to global retailers like GaP, Target and Tommy Hilfiger. Its sales
are little over US$ 120 millions

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  Welspun India (Manufactures terry towels) 

 Century Textiles (Composite mill, cotton & Man-made) 

 Morarjee Mills (Fully integrated Composite Mill) 

 Indo Rama (Cotton and Man-made) 

 Textiles (Cotton Yarn and Knit Fabrics) 

 Ginni Filaments Ltd. (Yarn and Fasbric) 

 LNJ Bhilwara Group (Diversified and vertically integrated denim producer with
spinning and weaving capacity) 

 Mafatlal Textiles (Fully integrated Composite Mill) 

 Modern Group (Diversified, producer of denim, syntax and thread) 

 Ashima Syntex (Man-made Fiber) 

 KG Denim (Fabrics) 

 Sanghi Polyesters Ltd. (Manmade Fiber) 

 Nova Petrochemicals (Man-made Fiber) 

 S. Kumar Synfabs Ltd. (Home furnishing and Suit Fabrics) 

 Bombay Dyeing Ltd. (Composite and fully integrated) 

 Rajasthan Petro synthetics (Diversified) 

 BSL Ltd. (Textiles) 

 Garware Polyester (Diversified) 

 Banswara Syntex (Composite) 

 National Rayon Corp. (Man- 

 Indian Rayon (Man-Made Fiber) 

 Alok Textiles (Cotton and Man-made Fiber Textiles) 

 Sharda Textile Mills (Man-made Fiber) 

 Birla Group Dormeuil Birla VXL Ltd. (Fully integrated woolen textiles) 

 Gokuldas Images (Diversified) 

 Hanil Era Textiles (Yarn, Cotton & Man-made Fiber) 

 Oswal Knit India (Woolen Wear) 

 Niryat Sam Apparels (Apparel) 

 Filaments India Ltd. (Manmade Textiles) 

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 The industry has several segments such as hosiery and ready-made garments and is
divided into the organized and the un-organized sector, with players from both sectors
often grouped together in export oriented clusters. Some of the important textile clusters
are based in places such as Bhilwara, Sanganer, Panipat, Palli, Jetpur, Jodhpur, Surat,
Sambhalpur, Mysore and Bhiwandi.

MAJOR TEXTILE EXPOT PROMOTION COUNCILS OF INDIA

The major export promotion councils of India are given as follows :

A) Apparel Export Promotion Council.

B) Cotton Textile Export Promotion Council

C) Handloom Export Promotion Council.

D) Indian Silk Export Promotion Council.

Apparel Export Promotion Council:

APEC is a nodal agency sponsored by the ministry of Textile, Govt. of India. It

performs the following functions:-

 Monitors garment exports quotas and promotions of exports of

readymade garments of India. 

 Continuously involves in the task of promoting exports by organizing buyer-seller
meets, 

 Leads trade delegations to potential markets globally. 

 Participates in specialized international fairs. 

 Organized the Indian International Garment Fair biannually. 

Cotton Textile Export Promotion Council:

Cotton Textile Export Promotion council is an autonomous, non-profit export promotion

body. Its activities includes:-
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  Acting as an international face of Indian Textile Exports. 

 Collection and dissemination of information. 

Handloom Export Promotion Council:

 It is a statutory body. Its function is to promote the exports of all handloom

products like fabrics, home furnishings, carpets and floor covering etc. 

Indian Silk Export Promotion Council:

 It is the nodal agency for promotion of silk exports from India. Consist of
more than 1200 silk exporters as members. 

Textile Trade challenges:

The fiber, textile and apparel industries are in the midst of radical changes. Global
competition is intense. Although the United States is the world's seventh-largest
exporter of textiles and has increased exports by 15 times its 1970 rate, an astoundingly
rapid growth of imports, especially in apparel, has caused a major trade deficit. The
U.S. textile trade deficit rose 10.4 percent in 1999 and accounted for 1.2 percent of the
country's total trade deficit. The apparel trade deficit increased 7.1 percent and now
accounts for 14 percent of the total. With only 4.3 percent of the world's population and
16 percent of the world's textile-mill output, the United States consumes nearly 20
percent of the world's textiles and receives close to 20 percent of the world's textile and
apparel imports.

The industries' markets are becoming more complex. Short life cycles are common,
and demands for rapid response and just-in-time delivery are increasing. There are
still many hand-offs in the production and delivery processes, and few companies

45 | P a g e
 are able to control the entire process. As competition continues to increase, U.S.
fiber, textile and apparel companies must rely more on superior quality, innovative
products and rapid response to customer needs to secure markets and continue to
grow. Breakthroughs in nanosciences, electro textiles, nonwovens, medical textiles
and geotextiles are providing new hope and new challenges

Upholding textile Industry:

Weak infrastructure may be a hindrance which can be overcome with better
network and with the willingness to share profit by loyalty bottom up and
patronization from above downwards

 By putting more retail outlets With better value added products, 


 By taking the lowest end of the chain into confidence and building
their capability to innovate more and more. 

 By upholding the market knowledge at every level that happens at higher-end
that lifts the chain. 

 By building on the expertise for technical textiles that include bed sheets;
filtration and abrasive materials; furniture and healthcare upholstery; thermal
protection and blood-absorbing materials; seatbelts; adhesive tape, etc
which need skilled workers who are not easy to find in an Indian market. 

 By keeping a regular research and development department with regards to the
industry 

 By building up the peripheral market with regular update of new accessories. 

 By integrating the disorganized sectors into one segment that is functionally
independent of each other's unwanted stranglehold 

 By putting affiliated efforts into the sector 

 By creating a state owned cargo-shipping mechanism : with rationalizing
fiscal duties; upgrading technology through the Technology Up-gradation
Fund Scheme (TUFS); 

 By setting up of Apparel Parks 

 By clearing off bottlenecks in the form of regulatory practices 

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  By replacing the indirect taxes with a single nationwide VAT With
liberalization of contract norms for textile and garments units 

 By controlling export of raw materials 

 By curtailing the drawback claims falsely boosted invoice value of exports 

 By effectively installing a price discovery mechanism to track market trend to
take effective measures before hand a slump 

Milestones of exports textiles:

 Exports of textiles and clothing products from India have increased steadily over
the last few years, particularly after 2004 when textiles exports quota were
discontinued. 

 During 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 exports were of the
order of US$13.5 billion, US 14.0 billion, US$ 17.52 billion, US$ 19.15 billion and
US$ 22.13 billion respectively, denoting an increase of 64% in last five years. 

 The volume of exports, as compared to certain other countries, could not register
a faster growth due to various reasons like constraints of infrastructure, high
power and transaction cost, incidence of state level access and duties, lack of
state-of-the-art technology etc. 

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Data interpretation: “LINER TREND ANALYSIS”

Year price(y) x x2 x.y

2001 107.65 -4 16 -430.6
2002 124.13 -3 9 -372.39
2003 127.91 -2 4 -255.82
2004 135.55 -1 1 -135.55
2005 175.2 0 0 0
2006 311.74 1 1 311.74
2007 191.46 2 4 382.92
2008 221.3 3 9 663.9
2009 185.2 4 16 740.8
1580.14 0 60 905

Trend line: y=a.x+b----------------------- 1

Sum of y=a. sum of x+n.b----------- 2

Sum of(x.y)=a.sum of (x.x)+b.sum of x-----3

905=a(60)+b(0)

905=60a

a = 15.08

1580.14=15.08(0) +

9(b) 9b=1580.14

b = 175.57

Trend line:

Y=15.08x+175.57

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If suppose x=0

Y =175.57

If suppose y=0

0=15.08x+175.57

X= -11.64

Estimated for 2010:

Y =15.08x+175.57

= 15.08(5) + 175.57

= 250.97 b$

Estimated for 2015:

Y = 15.08x+175.57

= 15.08(10) + 175.57

= 326.37 b$

Interpretation:

 According to analysis we can see that there is growth in textile

industry for 2010 and 2015. 

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Recommendations:

 Increase duty drawback rates 


 Moratorium on Term Loans 

 Interest Subvention 

 Extension of Sunset Clause 

 Custom and Excise Duty on Synthetics 

 Technology Up-gradation Fund Scheme 

 Exemption from Service Tax 
 Excise Duty on Textile Machinery & Spares to be reduced
 Reduction of Custom Duty on Textile Machinery 

 Exemption route to be extended to Export Oriented Units (EOUs) 

 Fringe Benefit Tax under Sec 115 of the Income Tax Act 

 Refund of State Taxes & Duties to Exporters 
 Uniform rate of VAT on Industrial Inputs 
 Reduction of Excise Duty on Man–Made fiber Products 

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Conclusion:

The Indian textile industry is currently one of the largest and most important sector in
the economy interms of output foreign exchange earnings and employment in India The
Indian textile industry has a significant presence in the Indian economy as well as in the
international textile economy. 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. Its contribution to the
Indian economy is manifested in terms of its contribution to the industrial production,
employment generation and foreign exchange earnings. The industry also contributes
significantly to the world production of textile fibres and yarns including jute. In the world
textile scenario, it is the largest producer of jute, second largest producer of silk, third
largest producer of cotton and cellulosic fibre\yarn and fifth largest producer of synthetic
fibre\yarn. Textile Industry is providing one of the most basic needs of people and the
holds importance; maintaining sustained growth for improving quality of life. The
Government of India has also included new schemes in the Annual Plan for 2010-11 to
provide a boost to the textile sector. These include schemes for Foreign Investment
Promotion to attract foreign direct investment in textiles, clothing and machinery etc.

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 modernization
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.

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Bibliography:

www.fibre2fibre.com

www.nic.com

www.ministryofcommerce.com

www.scribd.com

www.googlebooks.com

www.indexmundi.com

www.textile.com

www.arvindmills.com

www.raymonds.com

www.wto.com

www.businessworldindia.com

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