Competitiveness of Indian textile industry

Submitted by: Gautam Dubey Roll no. 12-MBA-18

J J Fabtex Pvt. Ltd.

J J Fabtex
founded in 2003 specializes in all ladies, men's and Children clothing Major buyers: Bandolera, Lobs , Tramantona, M & Co, Hatrstring, Notations, Gramicci, Serena lily, Mamaqi, K.C. Parker, LTB, arvind brands capacities to manufacture quality garments have been raised to: Knitted/Wovens Garments: 60,000 pieces per month.

Indian textile industry

It contributes around 14% to industrial production 4% to GDP 10.6% to the countrys export earnings industrys size is estimated at US$ 55 bn 64% of the companies catering to domestic demand textiles industry is the second-largest employment generator after agriculture

Indian textile industry

The textiles industry provides direct employment to more than 35 mn people and indirect employment to 47 mn people generates significant employment through forward and backward linkages More than 70 textile and clothing clusters account for about 80% of total production in the country

Basic facts about Indian textiles and clothing (T&C) exports

Indias share in global T&C trade: 4% in textiles and 2.8% in clothing Indias rank in world trade: 7th in textiles and 6th in clothing Share in the countrys total exports basket: 12% Readymade garments share: nearly 50% of total textile exports Indias textiles products are exported to over 100 countries Two-third of Indias textiles are exported to the US and EU Other major export destinations include Canada, UAE, Japan, Saudi Arabia, Republic of Korea, Bangladesh and Turkey.

Major destinations for Indias ready made garments exports (%)

Top-10 destinations for Indias ready made garments exports (US$ mn)

Major government policies/initiatives

National Textile Policy - 2000 De-reservation of the garments sector Technology Upgradation Fund Scheme (TUFS) Scheme for Integrated Textile Parks (SITP)

Rising sun

SWOT analysis of the Indian Textile industry

Strengths
Various types of raw materials are available in abundance Government initiatives to encourage exports and upgrade technology Low cost of labor Strong presence across the entire value chain, from fiber to garments

Weaknesses
Low cotton yield per hectare, high financing cost and lack of adequate technology High dependence on EU and US for exports Highly fragmented industry with large number of small size and technologically-outdated plants, lacking benefits of economies of scale Infrastructure bottlenecks for handling huge volumes Lack of trained manpower and low labor productivity due to lack of technological development

Opportunities
Favorable demographics in the domestic market; increasing young population coupled with rising income levels Emergence of retail industry as a whole and development of various malls provide huge opportunities for the apparel segments Opportunities in product diversification (for e.g., Technical Textiles) Increasing working female population with higher propensity to spend compared with home keepers Change in consumption pattern, including rising demand for high quality premium fabrics and development of various products that cater to global needs Replacement of the Multi Fiber Agreement (MFA) and integration of the textile industry resulting in huge opportunities for exports. Gradual development in the technical side of the industry provides an opportunity

Threats
Increased, cost-based competition from other countries (Bangladesh, Vietnam, and Sri Lanka) Pricing pressures due to removal of US and EU quotas on imports from China Fluctuations in the demand in exports due to the elimination of quota regime Higher borrowing cost which affects the profitability of the small and medium firms Rising input costs

Primary research

Do you think competitiveness in the sector has increased?

Sales

yes(85%) no(15%)

Where do you find the raw material?

within the country(60%) within the state(22%) import(18%)

Do you think quality of human resources has increased in last five years?

yes(44%)
no(44%) no change(12%)

Do you think our education system satisfies to industry needs?

yes(56%) no(44%)

Are labor relations productive?

yes(60)
no(40)

Are you satisfied with infrastructure?

yes(14%)
no(86%)

Has corruption levels increased in govt. in last five years?

Sales

increased(69%) decresed(6%)

remained same(25%)

Do you find tax regime to be complicated?

Sales

yes(95%) no(5%)

Do you find govt. support to be sufficient?

Sales

yes(30%) no(70%)

Problems faced by the industry

Migration of labor Corruption in govt. Fluctuations in rupee dollar exchange rate are adversely affecting the export competitiveness of the sector. delays in transit time on rail, road, sea etc., are causing to cost escalations Cost of the basic inputs and infrastructure such as raw materials, power, labor, transportation etc., are more expensive than other countries. High lending rates in India Power outages and poor water supply. Local competition is faced from illegal sale

suggested solutions to the problems faced by the industry

subsidizing unit rates of power or encourage the use of other viable options such as non conventional energy sources. immediate requirement for reduction in the transit time and cost at the international check points Building HR resources through industry-govt.educational institute co-operation there is need to work out time bound refund mechanisms from Technology Up gradation Fund providing hedging mechanisms to industry against currency fluctuations International Exposure for Indian manufacturers

 Ensuring raw material is available in the country at competitive prices More R & D initiatives in textile design Tax rates, collateral demands Uniform tax regime

Thank you!