opportunity analysis in textile industry

8/4/2019 OPPORTUNITY ANALYSIS IN TEXTILE INDUSTRY

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FOR INTERNAL ASSESSMENT

FOR PROJECT TRIMESTER

SUBMITTED BY

VINEET SARAFF

SECTION: FN3

ROLL 82

PGP-SS-2008-10

INTERNATIONAL INSTITUTE OF

PLANNING AND MANAGEMENT, NEW

DELHI

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AProject Report On

OPPORTUNITY ANALYSIS IN

TEXTILE INDUSTRY


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Table of Content

1. ABSTRACT ................................................................................... 3.

2. EXECUTIVE SUMMARY........................................................... 4.

3. HISTORY OF TEXTILE........................................................... 5-7

4. HISTORY OF INDIAN TEXTILE INDUSTRY.................... 8.

5. INDIAN TEXTILE INDUSTRY INTRODUCTION............... 9-10

6. CURRENT INDUSTRY SCENARIO................................... 11-12

7. BENEFITS TO OTHER INDUSTRIES.................................. 15-17

8. TRADE REFORMS AND EFFICIENCY OF FIRMS.......... 18

9. GLOBAL TRADE VOLUME AND TRENDS...................... 19-20

10. INDIAS COMPETITIVENESS............................................. 21-27

11. BIG INDIAN TEXTILE MANUFACTURERS.................... 28-32

12. BUSINESS ANALYSIS........................................................... 33-37

13. FUTURE PROSPECTS..................................................... 38

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ABSTRACT

India Textile Industry is one of the leading textile industries in the world. Though was

predominantly unorganized industry even a few years back, but the scenario started changing

after the economic liberalization of Indian economy in 1991. The opening up of economy

gave the much-needed thrust to the Indian textile industry, which has now successfully

become one of the largest in the world.

India textile industry largely depends upon the textile manufacturing and export. It also plays

a major role in the economy of the country. India earns about 27% of its total foreign

exchange through textile exports. Further, the textile industry of India also contributes nearly

14% of the total industrial production of the country. It also contributes around 3% to the

GDP of the country. India textile industry is also the largest in the country in terms of

employment generation. It not only generates jobs in its own industry, but also opens up

scopes for the other ancillary sectors. India textile industry currently generates employment to

more than 35 million people. It is also estimated that, the industry will generate 12 million

new jobs by the year 2010.

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EXECUTIVE SUMMARY

India textile industry is one of the leading in the world. Currently it is estimated to be around

US$ 52 billion and is also projected to be around US$ 115 billion by the year 2012. The

current domestic market of textile in India is expected to be increased to US$ 60 billion by

2012 from the current US$ 34.6 billion. The textile export of the country was around US$

19.14 billion in 2006-07, which saw a stiff rise to reach US$ 22.13 in 2007-08. The share of

exports is also expected to increase from 4% to 7% within 2012

Despite its being one of the oldest industries, textile has lagged in terms of IT adoption in the

past. Now with many textile SMEs targeting the exports markets, their IT appetites have

grown. A focus on the IT-spending trends in this vertical

Although one of the largest breadbaskets next to agriculture and a major foreign exchange

earner, the Indian textile industry, was marked with conservatism.

This attitude is reflected with regard to its business too. The sector has been averse to

sprucing up its infrastructure and technology. Funnily, IT has never figured as a top priority to

this micro-vertical, as most of the business is run by close-knit families. Despite this, the

textile industry recorded a high growth of 273.8 percent through exports to the US in 2005-06,

and is confident of reaching $50 billion from the current $11 billion in 2010. Of this, $25

billion is expected to come from garments alone.

An IDC India report says, of the total $19,225.5 million IT-spending by manufacturing in

2006, textile spent 26 percent, and this is expected to show healthy growth for the next four

years.

Indian textile industry can be divided into several segments, some of which can be listed as:

1. Cotton Textiles

2. Silk Textiles

3. Woollen Textiles

4. Readymade Garments

5. Hand-crafted Textiles

6. Jute and Coir

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HISTORY OF TEXTILE

No one knows when exactly the spinning and weaving of textile began. It has been said that

people knew how to weave even 27000 years ago. This was even before humans were able to

domesticate animals. The oldest actual fragment of cloth found was in southern Turkey.

People used fibers found in nature and hand processes to make fibers into cloth. Even though

high technology was not available, skilled weavers created a wide variety of fabrics. Dyeing

of fabrics was done to satisfy the universal human need for beauty. Within time, more

complex social and political organization of people evolved. With the growth of cities and

nations, improvements in technology came into place and there was a substantial development

in the international trade, both of which involved textiles.

Chinese textile was considered to be the most significant in international trade. Historians

have claimed that silk from China has reached ancient Greece and Rome along a trade route

called the Silk Road in the latter part of the second century B.C. and Egypt in 1000 B.C. The

Romans also imported cotton from nearby Egypt and from India. Archeologists have found

facilities for dyeing and finishing cotton fabrics in settlements throughout the Roman world.

During the middle ages, the production and trading of the plant called woad,an importantsource of dye, was a highly developed industry. During the fifteenth century, Trade Fairs in

southern France provided a place for the active exchange of wools from England and silks

from the Middle East. The economic activities surrounding these events gave rise to the first

international banking arrangements. Even the discovery of America was a result of the desire

of Europeans to find a faster route not only to the spices but also to the textiles of the Orient.

Textile trade quickly took root in America, as colonists sold native dyes such as indigo and

cochineal to Europe and bought cottons from India. Although advances were being made in

the technology of textile production, the manufacture of cloth in Western Europe in 1700 was

still essentially a hand process. Yarns were spun on a spinning wheel and fabrics were woven

by hand-operated looms.

A major reorganization of manufacturing of a variety of goods occurred during the latter half

of the 1700s in Western Europe. These changes, known as the Industrial Revolution, altered

not only technology, but also social, economic, and cultural life. The production of textiles

was the first area to undergo industrialization during the seventeenth and eighteenth centuries

as the result of an economic crisis. Good quality textile products, produced inexpensively in

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India and the Far East, were gradually replacing European goods in the international market.

In Britain, it became imperative that some means be found to increase domestic production, to

lower costs, and to improve the quality of textiles. The solution was found in the substitution

of machine or nonhuman power for hand processes and human power.

Many important inventions, most importantly spinning machines, automatic looms, and the

cotton gin, improved the output and quality of fabrics. These inventions provided the

technological base for the industrialization of the textile industry. Each invention improved

one step of the process. For example, an improvement that increased the speed of spinning

meant that looms were needed that consumed yarn more rapidly. More rapid yarn production

required greater quantities of fiber. The growth of the textile industry was further hastened by

the use of machines that were driven first by waterpower, then by steam, and finally by

electricity. The textile industry was fully mechanized by the early part of the nineteenth

century. The next major developments in the field were to take place in the chemists

laboratory. Experimentation with the synthesis of dyestuffs in the laboratory rather than from

natural plant materials led to the development and use of synthetic dyes in the latter half of the

nineteenth century. Other experiments proved that certain natural materials could be dissolved

in chemical solvents and re-formed into fibrous form. By 1910, the first plant for

manufacturing rayon had been established in the United States.

The manufacture of rayon marked the beginning of the manufactured textile fibers industry.

Since that time, enormous advances have been made in the technology for every field in the

textile industry. Today, the textile industry utilizes a complex technology based on scientific

processes and vast economic organizations.

With the application of advanced technology to the textile field, textile use has expanded from

the traditional areas of clothing and home furnishings into the fields of construction,

medicine, aerospace, sporting goods, and industry. These applications have been made

possible by the ability of textile scientists to utilize textile fibers, yarns, and fabrics for

specific uses. At the same time that textile technology is making strides in new directions, the

fabrics that consumers buy for clothing and household use also benefit from the development

of new fibers, new methods of yarn and fabric construction, and new finishes for existing

fibers and fabrics.

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Today, a huge international industrial complex encompasses the production of fiber, spinning

of yarns, fabrication of cloth, dyeing, finishing, printing, and manufacture of goods for

purchase. Consumers purchase many different products made of textiles. The story of the

journey that these products make as they progress from fiber to yarn to fabric to finished

product is not just the story of spinning yarns, weaving or knitting fabric, or constructing the

end product. It is also the story of a complex network of interrelated industries.

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HISTORY OF INDIAN TEXTILE INDUSTRY

The history of textiles in India dates back to nearly five thousand years to the days of the

Harappan civilization. Evidences that India has been trading silk in return for spices from the

2nd century have been found. This shows that textiles are an industry which has existed for

centuries in our country. Recently there has been a sizeable increase in the demand for Indian

textiles in the market. India is fast emerging as a competitor to China in textile exports. The

Government of India has also realized this fact and lowered the customs duty and reduced the

restrictions on the imported textile machinery. The intention of the governments move is to

enable the Indian producers to compete in the world market with high quality products. The

results of the governments move can be visible as Indian companies like Arvind Mills,

Mafatlal, Grasim; Reliance Industries have become prominent players in the world. The

Indian textile industry is the second largest in the world-second only to China. The other

competing countries are Korea and Taiwan. Indian Textile constitutes 35% of the total exports

of our country.

The history of apparel and textiles in India dates back to the use of mordant dyes and printing

blocks around 3000 BC. The foundations of the India's textile trade with other countries

started as early as the second century BC. A hoard of block printed and resist-dyed fabrics,primarily of Gujarati origin, discovered in the tombs of Fostat, Egypt, are the proof of large

scale Indian export of cotton textiles to the Egypt in medieval periods.

During the 13th century, Indian silk was used as barter for spices from the western countries.

Towards the end of the 17th century, the British East India Company had begun exports of

Indian silks and several other cotton fabrics to other economies. These included the famous

fine Muslin cloth of Bengal, Orissa and Bihar. Painted and printed cottons or chintz was

widely practiced between India, Java, China and the Philippines, long before the arrival of the

Europeans.

Today, Indian economy is largely dependent on textile manufacturing and exports. India earns

around 27% of the foreign exchange from exports of textiles. Further, India Textile Industry

contributes about 14% of the total industrial production of India. Furthermore, its contribution

to the gross domestic product of India is around 3% and the numbers are steadily increasing.

India Textile Industry involves around 35 million workers directly and it accounts for 21% of

the total employment generated in the economy.

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INDIAN TEXTILE INDUSTRY

INTRODUCTION

The textile industry is the largest industry of modern India. It accounts for over 20 percent of

industrial production and is closely linked with the agricultural and rural economy. It is the

single largest employer in the industrial sector employing about 38 million people. If the

employments in allied sectors like ginning, agriculture, pressing, cotton trade, jute, etc. are

added then the total employment is estimated at 93 million. The net foreign exchange

earnings in this sector are one of the highest and, together with carpet and handicrafts, account

for over 37 percent of total export earnings at over US $ 10 billion. Textiles, alone, account

for about 25 percent of Indias total forex earnings.

Indias textile industry since its beginning continues to be predominantly cotton based with

about 65 percent of fabric consumption in the country being accounted for by cotton. The

industry is highly localized in Ahmedabad and Bombay in the western part of the country

though other centers exist including Kanpur, Calcutta, Indore, Coimbatore, and Sholapur.

The structure of the textile industry is extremely complex with the modern, sophisticated and

highly mechanized mill sector on the one hand and the hand spinning and hand weaving

(handloom) sector on the other. Between the two falls the small-scale power loom sector.

The latter two are together known as the decentralized sector. Over the years, the government

has granted a whole range of concessions to the non-mill sector as a result of which the share

of the decentralized sector has increased considerably in the total production. Of the two sub-

sectors of the decentralized sector, the power loom sector has shown the faster rate of growth.

In the production of fabrics the decentralized sector accounts for roughly 94 percent while the

mill sector has a share of only 6 percent.

Being an agro-based industry the production of raw material varies from year to year

depending on weather and rainfall conditions. Accordingly the price fluctuates too.

The Ministry of Textiles under the Government of India has taken some significant steps to

arrest these problems. It has framed "The National Textile Policy 2000" to address the

aforesaid issues. This policy aims at negating these problems and increasing the foreign

exchange earnings to the tune of US$ 50 billion by the year 2010. It includes rational road-

maps for the development and promotion of all the sectors involved directly or indirectly with

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the textile industry of India. Further, the policy also envisages to bring the unorganized

decentralized textile sector (which accounts for 76% of textile production) at par with the

organized mill sector. Furthermore, the policy also aims at introducing modern and efficient

manufacturing machineries and techniques in the Indian textile sector

The apparel industry supply chain can be broadly categorized into six major components -

raw materials, textile plants, apparel plants, export chains, retail stores and customers.

Supply Chain of the Textile Industry

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CURRENT INDUSTRY SCENARIO:

Close to 14% of the industrial output and 30% of the export market share is contributed

directly by the Indian textile industry. Indian textile industry is also the largest industry when

it comes to employment that generates jobs not just within but also in various support

industries like agriculture. As per a recent survey the textile industry is going to contribute 12

million new jobs in India by 2010 itself.

Indian textile industry is as old as the word textile itself. This industry holds a significant

position in India by providing the most basic need of Indians. Starting from the procurement

of raw materials to the final production stage of the actual textile, the Indian textile industry

works on an independent basis.

The final phase-out of the Multi-fiber Arrangement (MFA) and the system of quotas that has

governed the global trade in textiles and apparel for the last forty-two years has significantly

altered the institutional rules of trade in the textile and clothing industry. With the elimination

of all remaining quotas on apparel from January 1 2005, the textile and clothing sector is now

fully integrated into the regulatory framework of the General Agreement on Tariffs and Trade

(GATT) of the World Trade Organization (WTO). Buyers are now free to source textile and

apparel in any amount from any country; suppliers are similarly free to export as much

product as they are able, subject only to a system of national tariffs. As global competition

intensifies under the new quota-free trading regime, countries are bracing for major changes

in the structure of sourcing and apparel supply worldwide. With the removal of the quotas, it

was expected that the developing countris, who have a major play in the textile industry will

benefit themselves as they have stable supply network, experience in networking, capacities

for scaling up and the ability to offer a full bundle of services. It was also expected that

smaller countries, which enjoyed the restriction on trade will fall out from the picture.

The textile sector has increased their investment in projects to upgrade their equipment amid

fierce market competition and to meet the growing demand for more textile products. Total

investment in the textile industry between 2004 and 2008 was around Rs.65,478 crore in

India, which is expected to reach Rs.1,50,600 crore by 2012. This enhanced investment would

generate 17.37 million jobs-- 12.02 million direct and 5.35 million indirectby 2012.

Investments in the textiles sector can be assessed on the basis of three factors:

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Plan schemes such as the Techno Up-gradation Funds Scheme (TUFS), Technology

Mission on Cotton, Apparel Parks, etc. Under the TUFS scheme, a total of Rs 916 billion has

been disbursed for technology up gradation. There are around 26 Apparel Parks in eight

states in India, with a total estimated investment of Rs 134 billion

Industrial Entrepreneurship Memorandums implemented from 1992 to Aug 06,

amounting to Rs 263 billion

Foreign Direct Investments inflows worth US$ 910 million have been received by the

textile industry between Aug 91 and May 06, which account for 1.29% of total FDI inflows

in the country.

Though significant investments are being made in the textiles segment, the bulk of them are

in the spinning and weaving segments. A cumulative total of US$ 6.67 billion in investment

was done in 2008. Of this, more than two-thirds is in the spinning and weaving segments,

while only 25% is in processing and garment units

The elimination of global textile quotas is expected to drive garment production to China,

benefiting consumers in North America and Europe at the expense of developing nations

where apparel manufacturing has become a bridge to an industrial economy. Africa received

record high foreign direct investment (FDI) inflows in 2005 of US$31 billion, but this wasmostly concentrated in a few countries and industries. The textile sector has increased their

investment in projects to upgrade their equipment amid fierce market competition and to meet

the growing demand for more textile products.

The global fibre industry will continue to shift to the Asia/Pacific region, particularly China,

South Korea and Taiwan. Textile trade in the world is estimated to be around US$ 300 billion

currently. Industry experts predict that by 2014 the facilities in the west will close down and

they will source their textiles from more efficient areas of the world resulting in the trade

volume of around US$ 800 billion. The Indian textile industry, which has accelerated to an

annual growth of 9-10 per cent, is expected to grow at a rate of 16 per cent in value terms and

reach a level of USD 115 billion by 2012. With 8.6% growth rate, Turkey also recorded a

very strong average annual growth rate of its textiles and clothing exports but from a much

lower basis. It could increase its exports from 8.6 to 17.6 billion US-Dollars. Pakistan exports

amounted to 9.9 billion US-Dollars in 2005 which translates into an average annual growth

rate of 5.4%.

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As of now, the general impression any individual would get about the Indian textile industry

leaders in the past few months is that it is in a major decline state. The following could be the

reasons that attribute to this decline.

Global recession

Less export orders due to reductions in inventories by global retail giants like Wal-

Mart

Rising price of raw materials like cottons

Infrastructure bottlenecks such as power, particularly in Tamil Nadu

In the times of adversity, like what we are facing right now, it is an immediate task for all

stake holders to pause for a moment and take stock of the difficulties and chart plans for

sustainability and growth of the Indian textile industry.

With the opening of world markets and the abolition of textile quotas since 2005, there came a

negative situation as well. But, hindsight is always 20-20. Indian textile industry should have

focused on all major sectors right from fibre to fashion and planned for an organized growth

across the supply chain so as to compete with China and even countries such as Pakistan,

Vietnam and Thailand, which are also growing from the textile perspective. Instead, the

industry had put majority of its stock in the spinning sector. This is clearly evident in the

utilization of Technology Upgradation Fund Scheme effectively by the spinning sector.

Although it is a positive outcome, the industry did not focus on many other value adding

segments such as weaving and finishing. Indian powerloom sector, which enables value-

addition is a highly unorganized industry and needed major upgradation. As of now, the

powerloom segment is also picking up where in many of the unorganized powerlooms are

becoming organized. Technical textiles sector is still in its infancy and a tangible growth will

be highly visible by 2035 when the growth in this sector will be exponential.

The weak links in the Indian conventional industry such as weaving and finishing have to be

strengthened. There must be consolidated efforts by Indian Textile Machinery Manufacturers

Association, end-users and the Government to undertake a major step and come-up with

alternatives to European Machinery, which the Indian weaving sector can afford. This should

be put into practice within the next five years, if dedicated efforts are undertaken with the

financial support for R & D by the Government through its various schemes. Technical

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textiles sector must transform from a non crawling phase to at least a crawling industry in the

next three years. General awareness on nonwoven and technical sectors has been created with

the recent marathon training workshops and conferences such as, "Advances in Textiles,

Nonwoven and Technical Textiles", organized for the past five years in Coimbatore by Texas

Tech University, USA and those such as the Texcellance and IIT's Technical Textiles

conferences. These have put India on the international map in technical textiles. These

conferences are of less use if they do not translate into investments and new projects.

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BENEFITS TO OTHER INDUSTRIES

The pursuit of a better fibre and a better fabric is yielding products used in medicine,

aeronautics, astronautics, seawater desalination, and construction of buildings and roads. The

new kinds of textiles possess characteristics that make them useful in numerous formerly

unexpected applications. Although textiles are still the major component of the clothes we

wear and of many furnishings in our homes and offices, they are also used widely in

medicine, aeronautics, astronautics, pollution abatement, and numerous other fields.

Innovation in textile technology continues and more unusual products will almost surely

emerge.

MEDICAL

Certain fibres and textile materials are especially suitable for use in building synthetic body

parts and medical scientists are steadily expanding the types of body parts whose function can

be mimicked. The artificial kidney is made from 7,000 hollow fibres, each of which is about

the size of a human hair. Patients whose kidneys no longer function normally must have their

blood freed by dialysis of metabolic wastes and excess water about every three days. This is

accomplished by pumping the blood through a textile, hollow-fibre module while clean-sing

solution rinses the blood free of urea. Patients with diabetes have a tendency to suffer from

cholesterol blockage of arteries leading to their feet. If not corrected, poor circulation can lead

to gangrene and loss of limbs. Artificial arteries that look like pencil diameters are surgically

inserted to bypass the blockages, thus restoring circulation and saving limb functions. These

implants require crucial textile technology to prevent clotting and rejection. It is estimated

that more than 150,000 people in the United States have now had these artificial arteries for

over five years.

SPACE

NASA space suits for launch and for space walks require zero-defect performance. The

launch suits are made from PBI non-flammable high-performance fibres. The space-walk

suits have different requirements. They require air-purifying, cooling, and pressurizing

systems. Each suit is tailor-made for a particular astronaut and costs $1-1.5 million. Since the

astronaut is under an oxygen pressure of eight pounds per square inch in this suit, special

flexibility is needed to allow him or her to bend an elbow or grasp an article. Rocket exhausts

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and nose-cone covers for space shuttles are made of carbon and other high-performance

fibres. These protect the vehicles from heat from air friction during launch and re-entry. The

flames generated on the launch pad do not ignite the rocket because of the flame-resisting

properties of graphite carbon-fibre-textile exhaust shields. Similarly on re-entry, the white-hot

temperatures from atmospheric friction do not consume the shuttle because high-performance

fibre and ceramic structures provide protection.

AERONAUTICS

Airplane parts, other than body construction, are also made of textiles. All U.S. commercial

jets have brakes made from carbon composites. These are the only materials that can

withstand the extreme high temperatures generated if takeoff is aborted. Stopping a planeweighing many tons in a short distance generates temperatures high enough to melt metals,

making carbon brakes indispensable for heavy jets. Kevlar non-woven felt liners are now used

as fire barriers to cover the urethane foam seats on all aircraft to prevent the production of

highly toxic cyanide gases when such foams burn during airplane accidents.

PURIFICATION OF WATER AND AIR

Whole-body gas suits are required to protect soldiers from the chemicals used in gas warfare

today. These chemicals can kill by absorption into the bloodstream through skin. The suits

allow for transport of perspiration moisture to prevent soldiers from being overcome

internally as would occur from a non-permeable film covering. It is well known to chemists

that a cube of activated charcoal powder measuring one inch on each side has an adsorptive

capacity equal to a football field. It was therefore believed that properly constructed porous

carbon fibres could exhibit superior gas-adsorption capability. Drinkable sea water is now

available through properly prepared hollow fibre reverse osmosis modules. Sea water isforced through these modules under a pressure of 400 pounds per square inch. Pure drinking

water passes through the hollow fibre wall while concentrated salt water exudes out of the

end. Concentration of liquids that normally deteriorate from heating is possible with reverse

osmosis fibres and membrane systems. Many liquids, including orange juice and tomato juice,

can be concentrated by pressure without heat to preserve the thermally unstable flavour

ingredients. Most orange-juice concentrate on the market today is prepared this way.

Similarly concentration of gases can be achieved by proper use of membrane and fibre

composition. Gas-separation systems are currently in use at most U.S. petroleum refineries.

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CONSTRUCTION MATERIALS

Super domes and stadiums are being constructed with roofs of silicone-coated fibreglass. This

is particularly important in northern areas where heavy snowfall has caused the collapse of

heavy concrete roofs. At the Hubert Humphrey dome in Minnesota, 800,000 square yards of

such material in two layers allow warm air to be circulated to melt the snow. At an air

terminal in Saudi Arabia, a multi-funnel design allows circulation by convection of the air up

through hollow top ports. Many shopping malls are turning to these flexible composites to

allow for more freedom in architectural design, improved aesthetics, better air circulation, and

better light transmission.

Rapid technological advances in the textile industry have opened now opportunities for manytechnical disciplines, but have resulted in a shortage of textile chemists, textile engineers, and

textile-management executives. Some U.S. colleges with textile-engineering programs report

that they could place nearly three times as many students in well paying jobs as they are

currently graduating. Together with a bright outlook for further rapid advances and new

products with unusual but useful properties, this shows that textiles remain among the most

dynamic contemporary sectors in technology.

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TRADE REFORMS AND EFFICIENCY OF FIRMS

The cotton textile industry is one of the oldest and most highly regulated of Indias industries.

Inefficiency, relative to the frontier, is therefore likely to be widespread in this industry. The

last two decades have seen a number of reforms that may be expected to decrease this

inefficiency. This paper, however, is mainly concerned with the impact on firms of the

reforms undertaken in 1991.

Liberalization increased overall welfare by increasing output in sectors with excess profits;

allowing firms in sectors with unexploited scale economies to increase output; and by

increasing technical efficiency, increasing competition and decrease market power, increasing

the elasticity of demand facing domestic firms while at the same time shifting their demand

curve to the left. Second, it is expected that the domestic sector will become more efficient as

firms exit the industry in the face of increased competition. Surviving firms, in their turn, may

experience an increase in technical efficiency because liberalization increases competition.

Another dynamic benefit from liberalization is expected to be an increase in technological

innovation

Firms locating in certain regions may benefit from external economies of scale and scope,

dynamism of a certain location as against the inertia displayed by firms in other locations.

We also find that these changes in efficiency do have a regional dimension: while all firms

fared less well after the reforms, those in Gujarat the fared less well than that in Tamil Nadu.

The paper indicates that geographythe location of the firm within a state and its proximity

to a major urban centre influences the efficiency levels of firms within it. The paper indicates

that average efficiency seems to have increased in the post-reform period. We find that the

behavior of many of these variables changed considerably in the post-reform period and led to

changes in efficiency levels. This framework enables us to consider whether efficiency has

increased because of factors such as market shares, exports, imports and capital.

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GLOBAL TRADE VOLUME AND TRENDS

As the apparel manufacturing industry has become more labour intensive and requires lesscapital investment, its concentration is shifting more towards the developing countries and

even constituting large amount of their exports. They are concentrating more on developing

countries as the labour cost is very less in such countries. This can be analyzed by the fact that

the apparel production in industrialized countries decreased between 1980 and 1996, where as

the production increased in developing countries during the same period. Similar trend was

seen in exports, the apparel exports of developing countries increased six times between 1980

and 1997, and that of developed economies rose by 150%.

The global apparel industrys total revenue in 2006 was US$1,252.8 billion, which was

approximately 68% of the overall industry value. Asia Pacific constitutes the largest amount

of production and trade in the apparel industry worldwide.

Region wise Share of Total Trade Revenue (2006)

Region % Share

Asia Pacific 35.40%Europe 29.40%

USA 22.30%

Rest of the world 12.90%

Source:www.fashionproducts.com(http://www.fashionproducts.com/fashion-apparel-overview.html)

China had captured 65% of the global market share towards the end of 2006 in total apparel

exports. The other major apparel exporting nations include USA, Germany, Hong Kong, Italy,

Malaysia, Pakistan, Thailand and India. Some of the apparel trade statistics are presented

below.

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Exports of Apparels in 2006

Country US $ Billion

China 8,260.921

Hong Kong 1,723.210Italy 1,353.586

Malaysia 1,255.069

Germany 669.130

Pakistan 618.830

Thailand 597.758

USA 595.171

India 522.463

Source:www.fashionproducts.com(http://www.fashionproducts.com/fashion-apparel-overview.html)

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INDIAS COMPETITIVENESS

CONTRIBUTION TO ECONOMY:

With 3.9 million handlooms, India is the highest handloom producing country in the World.

30% of the total export income is generated by textile alone, it is second largest Employer

industry after agriculture. The textile industry constitutes approximately 14% of country's

total industrial production.

THE WORLD MARKET SHARE

In spite of the Chinese dominance, India has a fair opportunity to grab a substantial stake in

the projected garment market share. According to PHD Chamber of Commerce and Industry

(PHDCCI), post-MFA, India's market share in the US is expected to go up to 15 per cent from

the present 4 per cent. In the EU, the market share increase is expected to be 50 per cent from

the current 6 per cent to 9 per cent

Table showing the Indias Competitiveness with Other Country

There is no denying India is competitive enough and will become even more competitive once

its infrastructure issues are sorted out. China has probably already reached its peak and further

improvements may not be as dramatic, henceforth

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Key countries / regions Key positives Key negatives

China Efficient, low cost,

vertically integrated

Growth at the cost of

profits

India, Pakistan Vertically integrated,low cost Lacks economies ofscale and infrastructure

support

Mexico (NAFTA),

Turkey

Proximity to market,

duty and quota free

Lack China and Indias

degree of

competitiveness

ASEAN (Vietnam,

Cambodia, Indonesia)

Cheap labor No other cost or

locational advantage

AGOA (African)countries, Bangladesh

Quota and tariff free,cheap labor

Lacks integration andChina and Indias degree

of competitiveness

Hong Kong, Korea,

Taiwan

Trading hubs proximity

to China

No cost advantage,

protected currently by

quotas

USA and EU Non-quota barriers

likely to prove irritant to

imports

US$ 400 bn trade loss

likely

Source - Industry, I-SEC Research

Countries and their positive and negative aspects with regard to textiles

Indian Textiles targets- 11th Five year Plan (2007-2012)

Market size of US$ 115 Billion

Export target US$ 55 Billion

Domestic market US$ 60 Billion

Indias market share in world textiles trade to grow from 3% to 8 %

12 Million additional jobs

Investment Rs.150,600 Crs

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Textiles Export Target (In Billions)

Year ( April March) Target Achievement

2006-07 19.73 19.62

2005-06 15.565 17.80

2004-05 15.16 13.04

2003-04 16.31 13.16

2002-03 15.05 12.41

2001-02 13.72 10.76

Source: Textile India Progress

Top 10 Exporters (Textile)

Country 1990 1997

Billion US$ % share Billion US$ % share

Hong Kong 7.99 7.68 14.6 9.42

China 7.10 6.82 13.83 8.92

South Korea 6.04 5.81 13.35 8.61

Germany 14.00 13.46 13.05 8.42

Italy 9.80 9.43 12.9 8.32

Taiwan 6.13 5.90 12.73 8.21

USA 5.03 4.83 9.19 5.93

France 7.21 4.65 5.86 5.64

Belgium-

Luxembourg6.54 6.29 7.01 4.52

Japan 5.88 5.65 6.75 4.35

Top 10 Exporters (Apparel)

Country 1990 1997

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Billion US$ % share Billion US$ % share

China 9.41 9.14 31.8 21.06

Hong Kong 15.37 14.92 23.11 15.30

Italy 12.07 11.72 14.85 9.83

USA 2.57 2.49 8.68 5.75

Germany 7.82 7.59 7.29 4.83

Turkey 3.44 3.34 6.7 4.44

France 4.65 4.51 5.34 3.54

UK 3.08 2.99 5.28 3.50

South Korea 8.11 7.87 4.19 2.77

Thailand 2.86 2.78 3.77 2.50

Total (top 10) 69.38 67.36 111.01 73.52

World 103.00 100.00 151.00 100.00

Multifibre Arrangement (1974-94) under which countries whose markets are disrupted by

increased imports of textiles and clothing from another country were able to negotiate quota

restrictions. The MFA was introduced in 1974 as a short-term measure intended to allow

developed countries to adjust to imports from the developing world. The textiles and clothing

industry was, until recently, the only major manufacturing industry that was not subject to the

rules of the General Agreement on Tariffs and Trade (GATT). Instead, it was subject to

extensive use of quotas by the major importing countries. The quota system started with the

Long Term Agreement Regarding International Trade in Cotton Textiles (LTA) under theauspices of the GATT in 1962. In 1974 the LTA was extended to cover other materials than

cotton, and became known as the Multi-Fibre Agreement (MFA). At the end of the Uruguay

Round of negotiations it was agreed that t countries wishing to retain quotas would commit

themselves to phasing them out gradually over a 10 year period, with the last quotas being

lifted 1st of January 2005, as stated in the Agreement on Textiles and Clothing

(ATC).Developing countries have a natural advantage in textile production because it is labor

intensive and they have low labor costs. According to a World Bank/International Monetary

Fund (IMF) study, the system has cost the developing world 27 million jobs and $40 billion a

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year in lost exports. At the General Agreement on Tariffs and Trade (GATT) Uruguay Round,

it was decided to bring the textile trade under the jurisdiction of the World Trade

Organization. The textiles and clothing (T&C) industry is considered to be an opportunity for

the industrialization of developing countries in low value added goods. The industry is labor

intensive and thus requires a large number of unskilled workers, including a high share of

female workers. The end of the MFA in 2005 will change international trade significantly and

lead to a restructuring of the sector worldwide. This restructuring process will result in major

employment shifts within and between countries. However, the last three decades have seen

various changes in the clothing and textile sector, thus forcing many countries to adjust to a

constantly altering environment. Now, a number of countries fear that a new wave of cheap

textile and clothing products will flood their markets, threatening their domestic industries

that are not adequately prepared to face the new challenge. There are also those countries that

hope for new export opportunities as a result of a free quota trade environment and a third set

of countries that will lose their preferential access to the US or EU markets, thus facing higher

competition for their exports to them. However, large tariffs remain in place on many textile

products. However, the last three decades have seen various changes in the clothing and

textile sector, thus forcing many countries to adjust to a constantly altering environment.

Now, a number of countries fear that a new wave of cheap textile and clothing products will

flood their markets, threatening their domestic industries that are not adequately prepared to

face the new challenge. There are also those countries that hope for new export opportunities

as a result of a free quota trade environment and a third set of countries that will lose their

preferential access to the US or EU markets, thus facing higher competition for their exports

to them.

CONCLUSION:

India has been repeatedly cited as a major potential beneficiary of the post-quota regime. The

implementation of the ATC, meant as a transition period to full integration of the T&C sector,

occurred in a back-loaded fashion. Before the ATC took effect, a significant portion of textile

and clothing exports from developing countries to the industrial countries was subject to

quotas under a special regime outside normal rules of the General Agreement on Tariffs and

Trade (GATT). These former Multi-Fiber Agreement (MFA) quotas, when carried over into

the ATC on January 1, 1995, represented the starting point for an automatic liberalization

process. Liberalization was to be in four stages, with half of the integration to take place in the

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first three stages (1995-2005) and the second half to take place in the final phase in

2005.Famously inward-looking till the 1980s, the Indian textile and clothing industry has

become increasingly integrated into global markets since the late-1980s and 1990s, emerging

as one of the top ten global exporters of textiles and clothing after 1998. Indias apparel

exports grew at an average compound rate of 22% per year throughout the 1980s (Chatterjee

and Mohan 1993), and by about 13% in the 1990s (United Nations Statistical Division, 2005).

By 2003, India exported more than $13.5 billion worth of textile and apparel, up fifteen-fold

from the $0.9 billion it exported in 1985, when apparel exports were just taking off (United

Nations Statistical Division, 2005). This export growth, though slow in comparison to

exporters like China, is impressive because it occurred despite the persistence of many of the

factors that observers have cited as shackling Indian productivity in textiles and apparel:

technological obsolescence, fragmented capacities, low scales of operation, lack of an exit

policy, and rigid labor laws. The domestic reforms of the mid-1980s were critical in triggering

growth in the apparel and textile sector. Their initial focus on investment and technical

upgrading in the textile and apparel sector created a tier of strong domestic firms in the

spinning and apparel sector that increased investment, modernized their technical base,

diversified their product mix and over time emerged as leading exporters. Trade liberalization

of the 1990s deepened the processes that had the process of deregulation had already begun in

1985 and thus Indias textile and apparel industry went through many transitions and in the

present context is impressive.

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BIG INDIAN TEXTILE MANUFACTURERS

COMPANY PROFILEIndia being one of the fastest growing economies of the world, which has both positively and

negatively, affected the Indian apparel industry. On one hand it has become a major retailing

hub and a host for various multinational companies on the other hand this has a negative

effect on the domestic players. The emergence of mall, brand slavery, fashion awareness, rise

in the income level has further reinforced the competition among the multinationals and the

domestic players and has lead to opening of number of retail outlets in India.

The introduction of VAT and the growth of organized retail industry are also likely to push up

growth in the textiles and apparel sector domestically too. While the garments business will

pose its own set of challenges in terms of providing flexibility in operations and dealing with

labor productivity issues, an increasing contribution to revenues from the garments business,

which is less capital-intensive and margins-accretive, would augur well for earnings growth.

GOKALDAS EXPORTS

Incorporated in 1979, based in Bangalore, its one of India's largest manufacturers and

designer of garments for men, women and children and caters to the needs of several

international fashion brands and retailers. Gokaldas Exports has been a major player in the

readymade garment industry across the globe.

In the present Indian fashion retailing, Gokaldas has grabbed a distinguished place for itself in

the form of "The Wearhouse" catering to the specific fashion needs of the people. The

Wearhouse has high profile outlets in Bangalore, Chennai, Hyderabad and Coimbatore.

An ISO 9001:2000 Certified Company has a capacity to produce and export 2.5 million

garments a month.

The Group's products include coats, suits, jackets, parkas, windcheaters, ski wear; warm-ups,

surf wear, swim wear; trousers, shorts; casual wear shirts, ladies blouses and dresses for

customers in international market. It mainly operates in India but exports its products to

countries like the United States of America, Canada, Mexico, United Kingdom, Germany,

Austria, Spain, Italy, France, Netherlands, Middle East, South Africa, Japan, Denmark,

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Taiwan and Hong Kong. A few of the manufacturing units are 100% export units with

capabilities of mass production. They have the license to import duty-free fabrics and

accessories from all over the world for re-export. It has over 48,000 employees who work in

around 48 fully equipped, modern, manufacturing factories.

ARVIND BRANDS

Arvind Mills Ltd. was incorporated in 1931 with share capital Rs.2525000 ($55000) in

Ahmedabad by the Lalbhai group. The Company's operations are divided into the Textile

Division, telecom division and garments division. We will be majorly concentrating on the

garments division. Products manufactured are dhoties, sarees, mulls, dorias, crepes, shirtings,

coatings, printed lawns & voiles cambrics, twills gabardine etc. Arvind Brands is part of the

Lalbhai Group, which holds licenses for leading international brands such as Arrow, Lee,

Wrangler, Gant and Tommy Hilfiger for retail and wholesale sales in the local market. Its

mainstream brands are Excalibur and Flying Machine.

In addition, it owns an array of casual sportswear and denim brands marketed in India,

including Flying Machine, Newport and Ruf & Tuf jeans and Excalibur shirts along with

licensed relationship with various international brands like Nautica, Jansport, Kipling, Hero

by Wrangler, Lee Riders and Tommy Hilfiger, and joint ventures with VF Corporation andDiesel.

But the company is facing severe competition from major brands like Louis Philippe, Park

Avenue and small brands like Trigger and Blackberrys.

It produces about 110 million meters of denim every year and the garment section is doing

extremely well because of the customer loyalty it enjoys. The demand for jeans, in particular,

is expected to rise, as manufacturing companies in the US have shut operations.

KOUTONS

The winner of best retailer leadership award 2008 organized by retail congress, Mumbai,

Koutons Retail India Limited engages in the design, manufacture, and retail of mens wear

and integrated apparel in India. It currently sells its apparel using the Koutons and Charlie

Outlaw brands. Mr. Kohli along with his brother in law Mr. Sawheny partnered to set upCharlie's Creation.

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In 1997 the Company diversified its business by introducing non-denim trousers in the

existing product range of denim apparel.The company has inaugurated its 89th family Store

in Hyderabad, which it claims to be its largest store in the country. Koutons India has an

annual finishing and manufacturing capacity of 22.92 million pieces and 12.36 million pieces

of apparel, respectively. The capacity utilization for the same was 41.21% and 21.99%

respectively at the end of FY2007.Koutons has 18 manufacturing/finishing units and 14

warehouses spread across various locations in and around Gurgaon. The company's strategy is

to have small, but more stores. This helps to save costs and at the same increase reach of the

company. The company has a phenomenal growth record.

ZODIAC

Zodiac Clothing Company Ltd manufactures, exports and imports garments, textiles

accessories etc. Zodiac has been in the apparel business for a period of 50 years by now and is

known for its quality shirts. Zodiac, is today, the largest selling shirts & tie brand at Shopper's

Stop according to Brand Equity (The Economic Times)

The Company started business in 1954 and export of readymade garments to Europe started in

early '60s, which included mainly ties and shirts. For many decades, Zodiac has been

synonymous with ties. The business of ties is a high fashion business and Zodiac has taken

this to new highs in India and across the globe. In fact, one can say that in India Zodiac is

generically associated with ties. Following Zodiac's huge success with ties, the company

entered the arena of men's accessories with Cuff links, Belts, Wallets and Handkerchiefs.

In 1973, Zodiac had a stand-alone exclusive shirt shop in Hotel Taj in Mumbai. The company

then entered the domestic shirt segment in late '80s.It employs around 3500 people in 7

manufacturing units in 16 offices located in UK, US, Germany, UAE etc. Each manufacturing

unit is spread over 35000 sq.ft and has modern equipment to spread 60 yards of cloth at a

time. All the manufacturing units are same in design and layout. Quality is maintained

throughout the 40 stages of assembly line. All the units have their own power generating units

in order to be efficient. It has its own 80 exclusive outlets and around 2000 multibranded

outlets. Its continuously showing profit and has a consistently growing export business.

HOUSE OF PEARL

House of Pearl Fashions Limited is a multinational ready to wear apparel manufacturingcompany. The company also provides supply chain solutions for the fashion industry globally

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along with warehousing & distribution networks in the UK & US. It operates in 11 strategic

locations in six continents. It has two brands Kool hearts, DCC in the United States of

America. The brand Kool hearts focuses on the young fashion, where as the focus of DCC is

more towards the Missy segment

It basically deals with 3 streams which are manufacturing to Retailers, souring solutions for

retailers, Marketing, Distribution & Branding for Retailers. It takes care of the whole process

from design & development, manufacturing or sourcing till offering a range of pre retailing

services, warehousing to delivering at the door step on a call off basis. It manufactures a

broad range of products comprising of knits, woven, sweaters and bottoms in basic as well as

complex designs.

It has a good manufacturing capacity; the present in-house manufacturing capacity of the

company is twenty million pieces. Per annum spread over more than 725,000 sq feet of built

up area with efficiently designed layouts to ensure smooth flow of materials. The company is

planning to double the capacity by expanding the operations in Chennai, Bangladesh &

Indonesia. It intends to have a capacity of 30million pieces by the end of 2009.

The company adopts integrated marketing techniques and has merchandising teams in

Canada, Europe, HK, UK, and US, closely interacting with existing and potential customers attheir doorstep.

The Company shares were listed on the stock exchanges first time in Feb, 07. It recently went

for a joint venture with LERROS, a premium apparel brand from Germany.

HARIA EXPORTERS

Haria Exports Ltd. is a leading garment exporter in the country for the last twenty four years.

It is a Star Trading Company and has won the golden status certificate in the year 1999. This

company occupies a unique place in the industry of the by its contribution to Industrial output,

employment generation and Foreign exchange earnings. Even though the textile industry has

the distinctive advantage in respect of raw material and skilled labor, the industry is

suffering from technology obsolescence which in turn affects the quality, productivity and

cost effectiveness. The high capital cost is impeding the process of Hi- Tech up gradation.

Therefore, the Government of India, Ministry of Textile has launched Technology Up

gradation Fund Scheme for Textiles & Jute Industries of Rs.25000.00 crores at aconcessional rate of interest of appx.5%. In order to compete with the outside world, the

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company is paying attention to the application of technology, closely following up the fashion

trends and improved product quality. In order to be more cost efficient the company has

acquired latest machinery which ascertained exact material consumption depending upon the

style and pattern. The Government policies, interest rates, export incentives etc may also

affect the overall performance of the company.

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BUSINESS ANALYSIS

SWOT Analysis of textile industry

Strengths

Removal of quota restrictions to give a major boost to the exports.

Export target in textiles in 2010 at USD is 50 billion.

Low per capita consumption of textiles in India as the world consumption

is 6.8, India only consume 2.8 of it. Thats why there is large scope of

manufacturing and exports.

Availability of the cheap labour in India would help the development of

the textiles at the lower cost.

Cost competition is not much in India as majority of Indian population is

not dependent on the big brands like Armani, United Colours of Beneton

etc, so India itself does not hold much competition with these brands.

The large cotton production in India would lead to the development of the

textile mills in the better way, as India does not have to import the raw

material from outside.

There are well established production bases for made ups export as well as

for domestic purpose.

Weakness

The most serious problem of the industry is the lack of adequate

processing facilities; there is over-dependence on hand processors and

traditional items.

The Indian textile industry is fragmented. Most of the SMEs are tiny and

cottage type units without sufficient capital back-up.

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The government policies in India for the textile industries are traditional

as they are not upgraded like the up gradation of the policies for the IT

industries.

The quality of wider-width fabrics for meeting the export demand is

lacking in many respects, which is acting as a disadvantage to the growth

of the industry.

The technology used in the most of the textile mills is old enough that they

cant be modified, but there have to be new machineries imported to give

the edge in technological advancements in this sector.

Opportunities

As per available information, the market for processed cotton fabric will

increase in the European and other markets and, therefore, the powerloom

industry may benefit and expand substantially. Further the growth in the

export segment will be mainly from cotton made-ups and garments along

with processed fabrics.

Grey fabric export is continuing to grow and will show increasing trends.

Value added products will have greater demand and, therefore, processing

will play an important role.

India with traditional designs and craftsmanship can command a greater

market share for niche products in made-ups and garments.

Indian companies need to focus on the product development and this

could easily be possible as there is the greater scope in the Indian Market.

As the new generation is keen towards the western culture the training for

specially textiles could be provided to them and they could be encouraged

to develop the efficient sector of India.

Increased use of computer aided designing to develop the designingcapabilities of the textile. Using new technologies and softwares ease the

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use of virtual design on the computer and then choosing from various

alternatives.

Threats

Increased competition in the domestic market yield to the development of

the more SMEs which invest more to survive in the market.

The working area of most of the industries in the textile industries is not

hygienic enough to give the workers more comfortable area to work in. so

this condition has to be improved.

Need to revamp consumer consciousness

Chinese goods are cheap as well as the machinery provided by them is

also cheap. So the threat for the export and designing is the Chinese

Aggression over the International market.

Continuously quality improvement is needed to make sure that people

would rely on Indian goods not on the foreign goods.

Traditional items like terry towels are manufactured in EOUs all over the

country with superior quality. This has been eroding the traditional

markets for powerloom and handloom products forcing them to go for

product diversification.

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BCG MATRIX

BCG Matrix is also called the Boston Matrix because it was created by Bruce Hendeson for

the company Boston Consulting Group in 1970. The BCG matrix method is based on the

product life cycle theory that can be used to determine what priorities should be given in the

product portfolio of a business unit.

Star

The high growth and high market share brands that exist in Indian market and are the marketleaders. This category consists of the companies like Zodiac, Du Pont etc. These companies

are regularly investing in R&D and gaining market share as time passes. These stars try to

become the cash cows of the future and want to remain in the market.

Cash Cows

The companies which have low business growth and high market share are the cash cows that

generate milk continuously with the small investment to be as the mature company in the

market.

Question marks (also known as Problem Childs)

The companies that have high growth rate and lower market share are the question mark as

they could be new ventures started or they are companies that do not have liquidity enough to

increase their share in the market. But these companies have potential to be the star in the

market due to good growth rate and thus they could invest more into their business to expand

as the star and then becoming the cash cows.

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Dogs

The dogs are more charitable pets that exist in the market and have the low market share and

low growth rate so these companies are better to get out of the market or much cash is

required to set them up. These companies have the cash traps which ties up the money in a

business with the lower potential.

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FUTURE PROSPECTS

The global apparel manufacturing industry is expected to grow more than ever in times to

come. According to an estimate, the global apparel industry will reach a value of US$ 1,781.7

billion by the end of 2010. The apparel manufacturers are now adopting new techniques to

increase their trade. New business models and competitive strategies are used to enhance

profits and growth. The consumer is more aware and more demanding with the development

of media like television and Internet. They have more choices in quality, price and design.

This is the reason why apparel chains all over the world are focussing more on improving the

quality of the product and offering in varied range of fashion designs. Apparel manufacturers

are developing methods to keep up with the pace of change like offering on wholesale prices

to survive in the global competition.

Though the above trends show a very positive picture but according to some experts, the

dilution of MFA (Multi Fibre Agreement)1 will make a lot of apparel workers to loose their

jobs, in many regions of USA, Asia, Central and Latin America and these jobs will shift to

China. The World Bank report says, this will be one of the largest short-term transfers in

history. Despite these developments the apparel industry is estimated to grow at very high

pace and will provide employment to a large number of people all across the world.

The Textiles Ministry headed by Union Textile Minister Shankersinh Vaghela has set an

ambitious cumulative annual growth rate (CAGR) of over 20 percent to be achieved by the

year 2010. This will be achieved through aggressive exports of textile from $50 billion to

$130 billion.

CONCLUSION

Indiais now a fast emerging market inching to reach half a billion middle income population

by 2030. All these factors are good for the Indian textile industry in the long run. Even though

the global economic crisis seams to be worsening day-by-day, as long as economies are

emerging and growing as those in South and South East Asia, textile industry is here to grow

provided it takes competition and innovation seriously.

opportunity analysis in textile industry

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