Textile Industry Overview

Textile Industry is one of the largest and oldest industries in India. It has a significant role in
India as it fulfils the essential and basic need of people. Textile Industry in India stands at
unique place and has maintained a sustainable growth over the years. This is a self-reliant and
independent industry and has great diversification and versatility. Textile Industry in India
provides great contribution for the development of economy. It is the second largest textile
industry in the world after China. It provides ample employment opportunities to people
belonging to all classes. After agriculture this industry provides employment to maximum
number of people in India employing 35 million people.

Textile Industry represents the rich culture, tradition, heritage & economic well-being of
country with diversified range and versatility. At the same time industry is competitive
enough to fulfill different demand patterns of domestic and global markets. Indian Textile
Industry plays vital role in country's economic development and contributes 14% to industrial
production in the country. Textile Industry contributes around 4% of GDP, 9% of excise
collections, 18% of employment in industrial sector, and 16% share in country’s export.
Indian Textile Industry is valued at US $36 bn. The development of Indian Textile Industry
started in 1985. This was the year, for the first time Textile sector was considered as an
important industry and a separate policy was formulated for sector’s development. In the year
2000, National Textile Policy was announced.

With further development Textile Industry came out of Quota Regime of Import Restrictions
under the Multi Fiber Arrangement (MFA). This development came on 1st January 2005
under the World Trade Organization (WTO) Agreement on Textiles and Clothing. Because of
the elimination of quota restrictions, most of the developing countries now can develop the
potential market at both domestic and international level. These countries can develop the
industry expertise and can have competitive advantage through implementing new
technology, more skilled labor will improved distribution channel, cost effective operation
and production with greater value addition in each step of value chain. Moreover it will help
for Foreign Direct Investment in industry that will create great opportunity to strengthen the
sector. Some of the strengths of Indian Textile Industry are large and potential domestic and
international market, large pool of skilled and cheap labor, well-established industry,
promising export potential etc.
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 important
source 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
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 chemist‘s
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.

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.

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 government‘s move is to
enable the Indian producers to compete in the world market with high quality products. The
results of the government‘s 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.

India Textile Industry is one of the largest textile industries in the world. 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.

Indian Textile Industry Market

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 15 million
new jobs by the year 2015

India is a traditional textile -producing country with textiles in general, and cotton in
particular, being major industries for the country. India is among the world’s top producers of
yarns and fabrics, and the export quality of its products is ever increasing. Textile Industry is
one of the largest and oldest industries in India. Textile Industry in India is a self-reliant and
independent industry and has great diversification and versatility. The textile industry can be
broadly classified into two categories, the organized mill sector and the unorganized
decentralized sector.

The organized sector of the textile industry represents the mills. It could be a spinning mill or
a composite mill. Composite mill is one where the spinning, weaving and processing
facilities are carried out under one roof. The decentralized sector is engaged mainly in the
weaving activity, which makes it heavily dependent on the organized sector for their yarn
requirements. This decentralized sector is comprised of the three major segments viz., power
loom, handloom and hosiery. In addition to the above, there are readymade garments, khadi
as well as carpet manufacturing units in the decentralized sector.
The Indian Textile Industry has an overwhelming presence in the economic life of the
country. It is the second largest textile industry in the world after China. Apart from
providing one of the basic necessities of life i.e. cloth, the textile industry contributes about
14% to the country's industrial output and about 17% to export earnings. After agriculture
this industry provides employment to maximum number of people in India employing 35
million people. Besides, another 50 million people are engaged in allied activities. India is the
largest producer of Jute, the 2nd largest producer of Silk, the 3rd largest producer of Cotton
and Cellulosic Fibers/Yarn and 5th largest producer of Synthetic Fibers/Yarn.

The main objective of the textile policy 2011 is to provide cloth of acceptable quality at
reasonable prices for the vast majority of the population of the country, to increasingly
contribute to the provision of sustainable employment and the economic growth of the nation;
and to compete with confidence for an increasing share of the global market. India's textile
industry is considered a pioneer in the industry, as the industrialization of India in other areas
is managed by funds generated by the textile machinery industry. However, since the
beginning of liberalization in 1992 to 1970, the industry tends to protect domestic producers
of cotton with a clear objective continuous erosion of its prosperity.

Prospect

Considering the continual capital investments in the textile industry, the Govt. of India may
extend the Technology Upgradation Fund Scheme (TUFS) by the end of the 11th Five Year
Plan (till 2011-2012), in order to support the industry. Indian textile industry is massively
investing to meet the targeted output of $85bn by the end of 2010, aiming exports of $50bn.
There is huge development foreseen in Indian textile exports from the $17bn attained in
2005-06 to $50bn by 2009-10. The estimation for the exports in the current financial year is
about $19bn. There is substantial potential in Indian exports of technical textiles and home
textiles, as most European companies want to set up facilities near-by the emerging markets,
such as China and India.

The global demand for apparel and woven textiles is likely to grow by 25 percent by year
2010 to over 35mn tons, and Asia will be responsible for 85 percent output of this growth.
The woven products output will also rise in Central and Southern American countries,
however, at a reasonable speed. On the other hand, in major developed countries, the output
of woven products will remain stable. Weaving process is conducted to make fabrics for a
broad range of clothing assortment, including shirts, jeans, sportswear, skirts, dresses,
protective clothing etc., and also used in non-apparel uses like technical, automotive, medical
etc.

It is been forecasted that the woven textile and apparel markets will sustain their growth from
current till 2010. The imports of apparel and textiles will rise from developed economies like
the USA and the western countries of Europe and Japan, along with some newly emerged
economies, such as South Korea and Taiwan. Certainly, import growth has been witnessed
vertical rise in the previous year.

Apparel is the most preferred and important of all the other applications. Woven fabrics are
widely used in apparel assortments, including innerwear, outerwear, nightwear and
underwear, as well as in specialized apparels like protective clothing and sportswear. Home
textile also contributes considerably in woven fabric in products assortments like curtains,
furnishing fabrics, carpets, table cloths etc.

Special kind of woven fabrics are utilized in medical as well as industrial applications. The
medical applications include adhesives, dressing bandages, plasters etc.

The Indian Industry foresees huge demand for industrial woven products for medical and
automotive applications. Demand for woven fabrics is anticipated to be rise vertically in the
sector of home textiles.

Non woven sector has great future in terms of global demand, thus major facilities of cotton
yarn are currently concentrating just on home textiles. It is mandatory, that the peak
management of the cotton yarn manufacturers analyze the future prospect and growing graph
of demand for non woven products.

Anticipating massive growth in medical and automobile sectors, these sectors assures
substantial demand for non woven facilities in India. Albeit, home textiles also will lure
higher demand, there are specific demands for home textile facilities also.

The 7th Five Year Plan has huge consideration on agricultural growth that also includes
cotton textile industry, resulting a prosperous future forecast for the textile industry in India.
Indian cotton yarn manufacturers should rush forward for joint ventures and integrated plans
for establishing processing and weaving facilities in home textiles and technical textiles in
order to meet export target of $50bn, and a total textile production of $85bn by 2009-2010.
 Expectations are high, prospects are bright, but capitalising on the new emerging
opportunities will be a challenge for textile companies. Some prerequisites to be included in
the globally competing textile industry are:

• Imbibing global best practices

• Adopting rapidly changing technologies and efficient processes
• Innovation
• Networking and better supply chain management
• Ability to link up to global value chains.

The Indian textiles industry has established its supremacy in cotton based products, especially
in the readymade garments and home furnishings segment. These two segments will be the
key drivers of growth for Indian textiles. Readymade garment exports were worth US$ 8 bn
in FY06 and will cross US$ 16 bn by the end of 2010, assuming a conservative growth of
15% per annum. According to estimates, investments in textiles are expected to touch US$ 31
bn by 2010.

The readymade garment segment will be the principal driver of growth even in the domestic
industry. The changing preferences of Indian consumers -- from buying cloth to readymade
garments -- have prompted several companies to move up the value chain into the finished
products segment.

Strategic Initiatives

Business integration -- especially forward integration -- by the larger textile companies has
been prominent among Indian companies. Several companies that are engaged in fabric
manufacturing are now keen to enter the readymade garments space. A recent entrant is
Siyaram, which launched its readymade garments range in Nov 06, following suit with other
majors like Century Textiles and Raymond.

Most of the large textile companies have opted for an inorganic growth strategy to scale up
operations. Acquisition is the most logical step towards integrating operations and building
the value chain. Domestic acquisitions are on the rise, while acquiring foreign assets is yet to
gain traction. Some recent domestic acquisitions that have been executed in 2006 include
KSL & Industries’ acquisition of Deccan Cooperative, and Ambattur Clothing taking over
Celebrity Fashions. Another growing phenomenon observed among Indian textile companies
is the setting up of manufacturing facilities in strategic regions outside India, where they can
avail of duty concessions and reduce export lead-time. Zodiac and Ambattur Clothing have
set up facilities in the Gulf region to cut down on export delivery schedules to the European
and US markets. Raymond has set up a unit in Bangladesh to avail of the zero duty access to
the EU.

This trend is seen primarily among the large domestic players, who are trying to achieve
sizable scales in order to win orders from the large retailers in the US and EU. Global
retailers prefer large-sized companies that can scale up capacities consistently, keep up with
delivery schedules and meet their growing demand. They have clear preferences for
companies with integrated design, process and manufacturing facilities.

An interesting commonality in countries with successful garment exports is that they have a
much lower level of sub-contracting than India. A study during the 1990s found that apparel
firms Future Outlook XXXIII in India subcontracted 74% of their output, as compared to
only 11% in Hong Kong, 18% in China, 20% in Thailand, 28% in South Korea and 36% in
Taiwan. Consequently, these countries have a wider base of exports and have done very well
in the market for large volumes of uniform products.

Foreign Acquisitions by Indian Textile Companies

Period Acquirer Acquired Company

License Of ‘Healthtex’ Kidswear
May 01 Arvind Mills
Brand Of Vf Corpn (USA)
Jun 01 Ambattur Clothing Colour Plus (UK)
Regency Texteis Portuguesa
Sep 01 Raymond’s
Limitada (Portugal)
Sep 03 Jindal Polyester Rexor Group (France)
Dec 04 JCT Ltd CNLT Malaysia (Synegal)
May 05 Reliance Group ICI Pakistan Ltd (Pakistan)
Shirting Company Located In
Jun 05 Zodiac Clothing
Alqoze Industrial Area (Dubai)
Dec 05 GHCL Dan River (USA)
Emmetre Tintolavanderie
May 06 Malwa Industries
Industrial (Italy)
May 06 Malwa Industries Third Dimension Apparels (Italy)
Jul 06 Welspun India CHT Holding (UK)
 Tashkent-To’yetpa Tekstil Ltd
Jul 06 Spentex Industries
(Uzbek)
Jul 06 GHCL Rosebys (UK)

The exports market will remain favourable for India till 2008, when quota restrictions on
China end. Post 2008, competition will become tougher. This will be the phase in which
Indian textile companies will come under tremendous pricing pressures and tighter product
delivery schedules. Nevertheless, the value-added segments of readymade garments, home
furnishings and made-ups will continue to grow.

Implications for SMEs

The new business dynamics have varying undertones across the value chain. The segment
that is likely to be hit is weaving. The SMEs in the Powerloom and handloom sector will face
significant churn in the future. Spinning mills that account for 95% of the yarn and fibre
production, will move up the value chain into weaving. This will erode the viability of the
hitherto protected Powerloom and handloom operators numbering over 400,000, who have
remained insulated from competitive forces so far. A possible remedy could be for these
weavers to align with bigger players or integrate operations that would ensure off-take of
their products.

The fragmented industry structure has in the past been beneficial in generating employment,
but will be difficult to sustain in a globally competitive environment. For fabric
manufacturers in the unorganised segment, this will mean inefficient units losing out
eventually, while the more efficient and dynamic ones aligning with manufacturers or buyers.
For readymade garment SMEs, rising demand and preference for ready-to-wear outfits in the
domestic market will sustain a large number of units in this sector. This will be the most
thriving segment in the industry and SMEs will play a key role.

India’s key assets include a large and low-cost labour force, sizable supply of fabric,
sufficiency in raw material and spinning capacities. On the basis of these strengths, India will
become a major outsourcing hub for foreign manufacturers and retailers, with composite
mills and large integrated firms being their preferred partners. It will thus be essential for
SMEs to align with these firms, which can ensure a market for their products and new orders.
Weaknesses of the Indian textile industry include fragmentation of the industry, lengthy
delivery times, delays in customs clearance and high transportation and input costs. To tackle
these factors, the Government will have to play a key role. Infrastructure development,
reforms in labour laws and significant policy support will be essential.

Textile Sectors in India:

The Man-Made Fiber / Yarn and Powerloom Sector: This part of industry includes fiber
and filament yarn manufacturing units. The Power looms sector is decentralized and plays a
vital role in Indian Textiles Industry. It produces large variety of cloths to fulfill different
needs of the market. It is the largest manufacturer of fabric and produces a wide variety of
cloth. The sector contributes around 62% of the total cloth production in the country and
provides ample employment opportunities to 4.86 million people.

The Cotton Sector: Cotton is one of the major sources of employment and contributes in
export in promising manner. This sector provides huge employment opportunities to around
50 million people related activities like Cultivation, Trade, and Processing. India’s Cotton
sector is second largest producer of cotton products in the world.

The Handloom Sector: The handloom sector plays a very important role in the country’s
economy. It is the second largest sector in terms of employment, next only to agriculture.
This sector accounts for about 13% of the total cloth produced in the country (excluding
wool, silk and Khadi).

The Woolen Sector: The Woolen Textile sector is an Organized and Decentralized Sector.
The major part of the industry is rural based. India is the 7th largest producer of wool, and
has 1.8% share in total world production. The share of apparel grade is 5%, carpet grade is
85%, and coarse grade is 10% of the total production of raw wool. The Industry is highly
dependent on import of raw wool material, due to inadequate production.

The Jute Sector: Jute Sector plays very important role in Indian Textile Industry. Jute is
called Golden fiber and after cotton it is the cheapest fiber available. Indian Jute Industry is
the largest producer of raw jute and jute products in the world. India is the second largest
exporter of jute goods in world.

The Sericulture and Silk Sector: The Silk industry has a unique position in India, and plays
important role in Textile Industry and Export. India is the 2nd largest producer of silk in
world and contributes 18% of the total world raw silk production. In India Silk is available
with varieties such as, Mulberry, Eri, Tasar, and Muga. Sericulture plays vital role in cottage
industry in the country. It is the most labor-intensive sector that combines both Agriculture
and Industry.

The Handicraft Sector: The Indian handicrafts industry is highly labor intensive, cottage
based and decentralized industry. It plays a significant & important role in the country’s
economy. It provides employment to a vast segment of craft persons in rural & semi urban
areas and generates substantial foreign exchange for the country, while preserving its cultural
heritage.

Structure of India’s Cotton Textile Industry

Unlike other major textile-producing countries, India’s textile industry is comprised mostly of
small-scale, non-integrated spinning, weaving, finishing, and apparel-making enterprises.
This unique industry structure is primarily a legacy of government policies that have
promoted labor intensive, small-scale operations and discriminated against larger scale firms:

• Cotton farming and harvesting: Cotton is grown in tropical as well as sub tropical
area in India. Mostly the cotton grown in India is from dry lands and crops mostly
depend on the irrigation systems available and not only on the rain water.
• Ginning: Ginning is the process where cotton fiber is separated from the cotton seed.
The first step in the ginning process is when the cotton is vacuumed into tubes that
carry it to a dryer to reduce moisture and improve the fiber quality. Then it runs
through cleaning equipment to remove leaf trash, sticks and other foreign matter.
Ginning is accomplished by one of two methods. Cotton varieties with shorter staple
or fiber length are ginned with saw gins. This process involves the use of circular
saws that grip the fibers and pull them through narrow slots. The seeds are too large to
pass through these openings, resulting in the fibers being pulled away from the seed.
Long fiber cottons must be ginned in a roller gin because saw gins can damage their
delicate fibers.
• Oil mill: in the operation the oil is extracted from the cotton seeds that are coming
from the ginning process. The cotton seeds coming from the ginning unit are then
passed through the pressing unit and crude cotton oil is produced. The pressed cotton
seed oil cake is supplied as the cattle feed. The crude is further modified as the bio-
diesel which could be used as the one of the energy source. The refined cotton oil is
also used as the edible oil but it is proved to be unfit for the human health.
 • Spinning: Spinning is the process of converting cotton or manmade fiber into yarn to
be used for weaving and knitting. 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: Weaving and knitting converts cotton, manmade, or blended
yarn into woven or knitted fabrics. India’s weaving and knitting sector remains highly
fragmented, small scale, and labor-intensive. This sector consists of about 3.9 million
handlooms, 380,000 “Powerloom” enterprises that operate about 1.7 million looms,
and just 137,000 looms in the various composite mills. “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, or knitting units.
• Clothing: Apparel is produced by about 77,000 small-scale units classified as
domestic manufacturers, manufacturer exporters, and fabricators (subcontractors).
• 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.”

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. Following are area,
production and productivity of cotton in India during the last six decades:
 Area in lakh Production in lakh bales of 170 Yield kgs per
Year
hectares kgs hectare

1950-51 56.48 30.62 92

1960-61 76.78 56.41 124

1970-71 76.05 47.63 106

1980-81 78.24 78.60 170

1990-91 74.39 117.00 267

2000-01 85.76 140.00 278

2001-02 87.30 158.00 308

2002-03 76.67 136.00 302

2003-04 76.30 179.00 399

2004-05 87.86 243.00 470

2005-06 86.77 244.00 478

2006-07 91.44 280.00 521

2007-08 94.39 315.00 567

2008-09 93.73 290.00 526

Though during the year 2008-09, the industry had to face adverse agro-climatic conditions, it
succeeded in producing 290 lakhs bales of cotton comparing to 315 lakhs bales last year, yet
managed to retain its position as world's second highest cotton producer.

Economic issues
Prices of Cotton
The Minimum Support Prices of Kapas (Seed cotton) for fair average quality announced for
the cotton season 2005- 2006 (Oct – Sept), was fixed at last year’s level (2004-05) i.e.
Rs.1760/- per quintal for medium staple variety (F-414/J-34/H- 777). The support price for
H-4 (Long staple variety) has been fixed at Rs.1980/ - per quintal, an increase of Rs.20/- per
quintal over support price of 2004-05. The MSP fixed for F-414/H-777/J-34 variety of kapas
will be applicable only to Rajasthan. The price of this variety, grown in Haryana and Punjab
has been fixed keeping in view the respective quality differential, vis-à-vis Rajasthan,
obtaining in these States. The Cotton Corporation of India Ltd. (CCI) undertook massive
MSP operations throughout 2004-05 in all the cotton growing states, and procured kapas
equivalent to lint cotton of 27.52 lakhs bales. In 2004-05, due to favourable seasonal
conditions, there was a sharp rise in productivity, which peaked to a record 463 Kg.
Lint/hectare, as compared to 399 kg. / lint per hectare during 2003-04, the cultivated area
increased to 89.20 lakhs hectares in 2004-05, as compared to 76.30 lakhs hectares in 2003-04,
and the production touched 243 lakh bales in 2004-05, as compared to 179.00 lakh bales in
2003-04.
Present Scenario

Textile Industry is offering one of the most basic requirements of community and it possess
importance; preserve continued growth for developing quality of life. From the
manufacturing of raw materials to the delivery of end products, it has gain it’s kind of
position, as a self-dependent sector and with considerable value-addition at every stage of
dealing; it is a key input to the country’s economy.

Today the textiles and clothing industry engages an important position in India’s economy.
Being the major foreign exchange earner having about 35% in its torso, contributing to about
30 % of India’s exports and 14% of industrial productions, expecting above 6% GDP in
2005, and it considered as the second largest vital sector of employment initiator after
agriculture sector.

Under the World Trade Organization (WTO) Agreement on Textiles and Clothing, the textile
quota scheme of quantitative import limitations under the multi-fiber arrangement (MFA)
came to an end on 1st January, 2005, hence developing countries like India will flourish in
the new competitive atmosphere and as a result, the Indian textile industry will have a
stronger place in both their export and domestic markets.

All along with its usual yarn and fabrics, at present India is exporting more than 100 garment
product range. Many worlds’ leading brands like Tommy Hilfiger, Gap, Liz Claibome, Polo
etc are sourcing products from India.

With huge investments, persistence innovations, latest product mix and planned marketing,
today, India has come out as a flourishing outsourcing centre for textiles and apparel industry
to meet the global requirement of the manufacturing fibers and yarns products. In a view of
the rising rapport with major global brands, dismantling of quota system from 2005 era
would hit upon India as a main global outsourcing hub.

Competitive advantage & possible growth in Synthetic Textiles Sector India’s synthetic
textile sector is relatively modern and has a high growth potential which will help India to
coming out as a major outsourcing hub. With a compounded annual growth rate of more than
22% the exports of MMF textiles have stretched out to a level of US $1.62 billion in 2002-03
starting from small exports in 1954. The export growth in 2002-03 matches up to the
preceding year was in the harmony of 30 percent, and the MMF textile sector is the only
sector where the performance has exceeds by the target fixed for this year by US $ 115
million.

Indian synthetic textiles are more and more accomplishing new markets along with keeping
the market share in the existing markets. At present Indian synthetic textile exports are
targeting more than 175 countries worldwide, where Middle East accounted for over 32
percent of our exports and the share of the extremely quality conscious in European Union,
approximately 23 percent.

Over the years, the Indian MMF textile sector has built-up an export base; and the share of
MMF textile exports in the total Indian textile export has also been raised, the share moved
up from 10.38% in 2000-01 to 11.46% in 2001-02 and more to about 14% in 2002-03.

At present Indian exports of synthetic textiles to USA are rising at more than 90% yearly. It
has also been observed that export growth will be striking for major MMF textile items after
dismantling of quota system from 2005.

Furthermore, Indonesia, Korea’s export of synthetic textiles are turning down compared to
previous year. Manufacturing capacity of Korea has declined by more than 30% in the
polyester filament sector in 2002 and in 2003 and it is expected to turn down further more,
which will end with a turn down in their exports of polyester filament fabrics. Due to anti-
dumping duty on the polyester filament fabrics obtained from Taiwan and Korea, countries
like Brazil, gaining of more opportunity for India will exists as a larger synthetic fabrics
exporter.

In the world, synthetic textile trade’s share of India is also seeing increasing. The export
share of Indian synthetic textiles in worldwide increased from 0.11% in 1971 to 1.12% in
 1991 and more to about 3% in 2002. This suggests the rising performance of Indian synthetic
textile items in the worldwide market.

Still there is an opportunity to explore new market segments like Latin America and Africa
all along with maintaining the share in the established markets like European Union and
USA. At this stage an annual growth expected to 15% for synthetic textiles and exports are
expected to touch US$ 2.5 billion in 2005-05 and US$ 4.3 billion in 2009-10.

SWOT analysis of the textile industry

Strengths
• Strong and diverse raw material base
 Third largest producer of cotton
 Fifth largest producer of man-made
fibre and yarn
• Vertical and horizontal integrated textile
value chain
• Strong presence in entire textile value
chain from raw material to finished goods
• Globally competitive spinning industry
 Average cotton yarn spinning cost at •
US$ 2.5 per kg. Which is lower than all
the countries including China
• Low wages: rate at 0.75 US$ per operator
hour as compared to US$ 1 of China and
US$ 3 of Turkey
• Unique strength in traditional handlooms
and handicrafts
• Flexible production system
• Diverse design base
Weaknesses
• Structural weaknesses in weaving and
processing
 2 percent of shuttleless looms as
percentage of total looms as against
world average of 16 percent and China,
Pakistan and Indonesia 15 percent, 9
percent and 10 percent respectively.
• Highly fragmented and technology
backward textile processing sector
• Highly fragmented garment industry
Except spinning, all other segments are
predominantly in decentralized sector.
• The rigid labour laws: proving a bottleneck
particularly to the garment sector. Large
seasonal orders cannot be taken because the
labour strength cannot be reduced during the
slack season.
• Inadequate capacity of the domestic textile
machinery manufacturing sector.
• Big demand and supply gap in the training
facilities in textile sector.
• Infrastructural bottlenecks in terms of
power, utility, road transport etc.

Employment Generation

The textile sector itself has the potential to create 1.2 crore employment opportunity over the
next five years. The government would continue to encourage growth within the textiles
industry as it holds huge potential for employment and exports.
Textile Sector Contribution:

According to the Annual Report 2009-10 of the Ministry of Textiles, the Indian textile
industry contributes about 14 per cent to industrial production, 4 per cent to the country's
gross domestic product (GDP) and 17 per cent to the country’s export earnings. It provides
direct employment to over 35 million people and is the second largest provider of
employment after agriculture. According to the Ministry of Textiles, the cumulative
production of cloth during April’09-March’10 increased by 8.3 per cent as compared to the
corresponding period of the previous year. Total textile exports increased to US$ 18.6 billion
during April’09- January’10, from US$ 17.7 billion during the corresponding period of the
previous year, registering an increase of 4.95 per cent in rupee terms. Further, the share of
textile exports in total exports has increased to 12.36 per cent during April’09-January’10,
according to the Ministry of Textiles. As per the Index of Industrial Production (IIP) data
released by the Central Statistical Organization (CSO), cotton textiles have registered a
growth of 5.5 per cent during April-March 2009-10, wool, silk and man-made fibre textiles
have registered a growth of 8.2 per cent and textile products including wearing apparel have
registered a growth of 8.5 per cent.

Technical Textile Segment:

According to the Ministry of Textiles, technical textiles are an important part of the textile
industry. The Working Group for the Eleventh Five Year Plan has estimated the market size
of technical textiles to increase from US$ 5.29 billion in 2006-07 to US$10.6 billion in 2011-
12, without any regulatory framework and to US$ 15.16 billion with regulatory framework.
The Scheme for Growth and Development of Technical Textiles aims to promote indigenous
manufacture of technical textile to leverage global opportunities and cater to the domestic
demand.

Current Status

The textile industry holds significant status in the India. Textile industry provides one of the
most fundamental necessities of the people. It is an independent industry, from the basic
requirement of raw materials to the final products, with huge value-addition at every stage of
processing.

Today textile sector accounts for nearly 14% of the total industrial output. Indian fabric is in
demand with its ethnic, earthly colored and many textures. The textile sector accounts about
30% in the total export. This conveys that it holds potential if one is ready to innovate.
The textile industry is the largest industry in terms of employment economy, expected to
generate 12 million new jobs by 2010. It generates massive potential for employment in the
sectors from agricultural to industrial. Employment opportunities are created when cotton is
cultivated. It does not need any exclusive Government support even at present to go further.
Only thing needed is to give some directions to organize people to get enough share of the
profit to spearhead development.

Segments

Textile industry is constituted of the following segments

• Readymade Garments
• Cotton Textiles including Handlooms (Millmade / Powerloom/ Handloom)
• Man-made Textiles
• Silk Textiles
• Woollen Textiles
• Handicrafts including Carpets
• Coir
• Jute

The cottage industry with handlooms, with the cheapest of threads, produces average dress
material, which costs only about 200 INR featuring fine floral and other patterns. It is not
necessary to add any design to it. The women of the house spin the thread, and weave a piece
in about a week.

It is an established fact that small and irregular apparel production can be profitable by
providing affordable casual wear and leisure garments varieties.

Now, one may ask, where from the economy and the large profit comes in if the lowest end
of the chain does not get paid with minimum per day labour charge. It is an irony of course.
What people at the upper stratum of the chain do is, to apply this fabric into a design with
some imagination and earn in millions. The straight 6 yards simple saree, drape in with a
blouse with embroideries and bead work, then it becomes a designer¡¦s ensemble. For an
average person, it can be a slant cut while giving it a shape, which can double the profit.
Maybe, the 30 % credit that the industry is taking for its contribution to Indian economy as
good as 60 % this way. Though it is an industry, it has to innovate to prosper. It has all the
ingredients to go ahead.
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.

The application that comes under technical textiles are filtration, bed sheets and abrasive
materials, healthcare upholstery and furniture, blood-absorbing materials and thermal
protection, adhesive tape, seatbelts, and other specialized application and products.

Strengths

• India enjoys benefit of having plentiful resources of raw materials. It is one of the
largest producers of cotton yarn around the globe, and also there are good resources of
fibres like polyester, silk, viscose etc.
• There is wide range of cotton fibre available, and has a rapidly developing synthetic
fibre industry.
• India has great competitiveness in spinning sector and has presence in almost all
processes of the value chain.
• Availability of highly trained manpower in both, management and technical. The
country has a huge advantage due to lower wage rates. Because of low labor rates the
manufacturing cost in textile automatically comes down to very reasonable rates.
• The installed capacity of spindles in India contributes for 24% share of the world, and
it is one of the biggest exporters of yarns in the global market. Having modern
 functions and favourable fiscal policies, it accounts about 25% of the world trade in
cotton yarn.
• The apparel industry is largest foreign exchange earning sector, contributing 12% of
the country's total exports.
• The garment industry is very diverse in size, manufacturing facility, type of apparel
produced, quantity and quality of output, cost, requirement for fabric etc. It comprises
suppliers of ready-made garments for both, domestic or export markets.

Weakness

Massive Fragmentation:

A major loop-hole in Indian textile industry is its huge fragmentation in industry structure,
which is led by small scale companies. Despite the government policies, which made this
deformation, have been gradually removed now, but their impact will be seen for some time
more. Since most of the companies are small in size, the examples of industry leadership are
very few, which can be inspirational model for the rest of the industry.

The industry veterans portrays the present productivity of factories at half to as low as one-
third of levels, which might be attained. In many cases, smaller companies do not have the
fiscal resources to enhance technology or invest in the high-end engineering of processes.
The skilled labor is cheap in absolute terms; however, most of this benefit is lost by small
companies.

The uneven supply base also leads barriers in attaining integration between the links in
supply chain. This issue creates uncontrollable, unreliable and inconsistent performance.

Political and Government Diversity:

The reservation of production for very small companies that was imposed with an intention to
help out small scale companies across the country, led substantial fragmentation that distorted
the competitiveness of industry. However, most of the sectors now have been de-reserved,
and major entrepreneurs and corporate are putting-in huge amount of money in establishing
big facilities or in expansion of their existing plants.

Secondly, the foreign investment was kept out of textile and apparel production. Now, the
Government has gradually eliminated these restrictions, by bringing down import duties on
capital equipment, offering foreign investors to set up manufacturing facilities in India. In
recent years, India has provided a global manufacturing platform to other multi-national
companies that manufactures other than textile products; it can certainly provide a base for
textiles and apparel companies.

Despite some motivating step taken by the government, other problems still sustains like
various taxes and excise imbalances due to diversification into 35 states and Union
Territories. However, an outline of VAT is being implemented in place of all other tax
diversifications, which will clear these imbalances once it is imposed fully.

Labour Laws:

In India, labour laws are still found to be relatively unfavorable to the trades, with companies
having not more than ideal model to follow a 'hire and fire' policy. Even the companies have
often broken their business down into small units to avoid any trouble created by labour
unionization.

In past few years, there has been movement gradually towards reforming labour laws, and it
is anticipated that this movement will uphold the environment more favourable.
Distant Geographic Location:

There are some high-level disadvantages for India due to its geographic location. For the
foreign companies, it has a global logistics disadvantage due the shipping cost is higher and
also takes much more time comparing to some other manufacturing countries like Mexico,
Turkey, China etc. The inbound freight traffic has been also low, which affects cost of
shipping - though, movement of containers are not at reasonable costs.

Lack of trade memberships:

India is serious lacking in trade pact memberships, which leads to restricted access to the
other major markets. This issue made others to impose quota and duty, which put scissors on
the sourcing quantities from India.

Opportunities

It is anticipated that India's textile industry is likely to do much better. Since the consumption
of domestic fibre is low, the growth in domestic consumption in tandem is anticipated with
GDP of 6 to 8 % and this would support the growth of the local textile market at about 6 to 7
% a year.
India can also grab opportunities in the export market. The industry has the potential of
attaining $34bn export earnings by the year 2010. The regulatory polices is helping out to
enhance infrastructures of apparel parks, Specialized textile parks, EPZs and EOUs.

The Government support has ensured fast consumption of clothing as well as of fibre. A
single rate will now be prevalent throughout the country.

The Indian manufacturers and suppliers are improving design skills, which include different
fabrics according to different markets. Indian fashion industry and fashion designers are
marking their name at international platform. Indian silk industry that is known for its fine
and exclusive brocades, is also adding massive strength to the textile industry.

The industry is being modernized via an exclusive scheme, which has set aside $5bn for
investment in improvisation of machinery. International brands, such as Levis, Wal-Mart, JC
Penny, Gap, Marks & Spencer and other industry giants are sourcing more and more fabrics
and garments from India. Alone Wal-Mart had purchased products worth $200mn last year
and plans to increase buying up to $3bn in the coming year. The clothing giant from Europe,
GAP is also sourcing from India.

Anticipation
As a result of various initiatives taken by the government, there has been new investment of
Rs.50,000 crore in the textile industry in the last five years. Nine textile majors invested
Rs.2,600 crore and plan to invest another Rs.6,400 crore. Further, India's cotton production
increased by 57% over the last five years; and 3 million additional spindles and 30,000
shuttle-less looms were installed.

Forecast till 2010 for textiles by the government along with the industry and Export
Promotion Councils is to attain double the GDP, and the export is likely attain $85bn. The
industry is anticipated to generate 12mn new jobs in various sectors.

Recent Trends

The mood in the Indian textile industry given the phase-out of the quota regime of the Multi-
Fibre Arrangement (MFA) is upbeat with new investment flowing in and increased orders for
the industry as a result of which capacities are fully booked up to April 2005. As a result of
various initiatives taken by the government, there has been new investment of Rs.500 billion
in the textile industry in the last five years. Nine textile majors invested Rs.26 billion and
plan to invest another Rs.64 billion. Further, India's cotton production increased by 57% over
the last five years; and 3 million additional spindles and 30,000 shuttles-less looms were
installed.

The industry expects investment of Rs.1,400 billion in this sector in the post-MFA phase. A
Vision 2012 for textiles formulated by the government after intensive interaction with the
industry and Export Promotion Councils to capitalise on the upbeat mood aims to increase
India's share in world's textile trade from the current 4% to 8% by 2012 and to achieve export
value of US $ 50 billion by 2012 Vision 2012 for textiles envisages growth in Indian textile
economy from the current US $ 37 billion to $ 85 billion by 2012; creation of 12 million new
jobs in the textile sector; and modernisation and consolidation for creating a globally
competitive textile industry. The textile industry is undergoing a major reorientation towards
non-clothing applications of textiles, known as technical textiles, which are growing roughly
at twice rate of textiles for clothing applications and now account for more than half of total
textile production. The processes involved in producing technical textiles require expensive
equipments and skilled workers and are, for the moment, concentrated in developed
countries. Technical textiles have many applications including bed sheets; filtration and
abrasive materials; furniture and healthcare upholstery; thermal protection and blood-
absorbing materials; seatbelts; adhesive tape, and multiple other specialized products and
applications.
 Vision Statement for textile industry
(2007-2012)

 To build world class, state-of-the-art, manufacturing

capacities and achieve a predominant global standing in
manufacture and export of textiles and clothing.

 To ensure the growth of the Indian textile industry at 16

percent per annum in value terms, to US$ 115 billion, by
the end of the Eleventh Five Year Plan.

 To secure a 7 percent share in global textile trade by the

end of the Eleventh Five Year Plan.

 To equip the textile industry to withstand the pressures of

import penetration, and maintain dominance of the
growing domestic market.
 To enable Small & Medium Enterprises (SMEs) to achieve
competitiveness to face the global scenario with
confidence.

 To provide a conducive policy environment which will

encourage innovation, augment R&D efforts, and enhance
productivity through the upgradation of technology,
manufacturing processes and the development of human
resources.

 To establish the Indian textiles industry as a producer of

internationally competitive value added products.
Future of Textile Industry in India

The textile industry in India is one of the flourishing sectors of Indian economy. It contributes
more than 13% to industrial output, 16.63% to export revenues and 4% to the nation’s GDP.
In the year 2010, the industry is estimated to produce 12 million jobs with an investment of
US$ 6 billion in the fields of textiles equipments and structure, and garment manufacturing
by the end of 2015.

Union Ministry of Textiles certified Apparel Export Promotion Council (AEPC) has taken the
responsibility to motivate the foreign investors to invest in Indian Textile industry by
exhibiting it massive unexplored domestic market. It has also formulated and endorsed the
motto of “come, invest, produce and sell in India”. Under this the ministry has decided to
send it representatives to Germany, Switzerland, France, Italy and US. The objective is to
trigger the foreign investment towards instituting textile units in India by offering numerous
allowances to global investor like low-priced workforce and intellectual right fortification.

The government of India has also taken few initiatives to promote the textile industry by
permitting 100% Foreign Direct Investment in the market. Owing to the upright and straight
incorporated textiles price chain, the Indian textile industry symbolizes a strong existence in
the complete value chain from raw commodities to finished products. The Synthetic and
Rayon Textile Export Promotion Council (SRTEPC) has taken all the required steps to meet
the target of doubling the synthetic textile exports in India to US$ 6.2 billion by seizing 4%
of market share by FY 2011-12.

Global TextileMarket Overview

The global textile market value is estimated to be US$ 4.50 trillion during the year 2008. It is
observed that clothing accounted for about 60% of the market, while textile accounted for the
balance 40%. The global textile industry grew at an estimated average annual rate of about
2.5% during 2000-2008. The global slowdown has also affected Textile industry adversely.
The global fibre demand has decreased by one percent in 2008. It is also observed that the
global textile and clothing industry can be broadly divided into Natural Fibre and Manmade
Fibre industry. The Natural Fibre industry includes Cotton, Wool, Silk and Jute; while the
manmade Fibre Industry includes Polyamides, Polyester, Polyethylene, Viscose and Acrylic.

Global Fibre Scenario

The global fibre demand in 2003 was 641 Lacs MT. The demand for fibre grew at a CAGR
of 5.05% to reach an estimated 807.50 Lacs MT during 2008. It is noted that during the same
period, demand for natural fibre grew at a CAGR of 4.65%, while the demand for manmade
fibre grew at CAGR of 5.38%.

PFY Demand in India

The domestic demand for PFY stood at 1014755 Tons during the year 2003. The demand for
PFY grew at CAGR of 4.21% to reach an estimated 1288523 Tons by the years 2008.

PFY industry, as we know, had faced difficult market conditions during the years 1999-2002
due to excess capacity over demand which lead to cut throat unhealthy competition causing
substantial erosion in profitability of these companies. However, as now new capacities came
up during this period, the gap between supply and demand got gradually bridged up and POY
manufacturing units/companies are doing reasonably well since beginning of 2002 and are
expected to do much better during the next few years in view of the sustained demand
growth.

As per detailed survey conducted by 'CRISINFAC' the domestic Polyester industry is likely
to witness robust demand growth and higher profit margins in the next five years due to the
following positive factors favouring Polyester Industry.

• Price Competitiveness of Polyester: viz-a-viz other substitutes like cotton, silk and
woollen yarns.
• Excise duty reduction to encourage demand: Excise duty on POY has been
progressively reduced over the previous few years to 16% and is expected to be
reduced further which will further increase the price competitiveness of POY.
• Increase of PFY in non-appeal segments: In India, fibre is mostly used for textile
applications i.e. 93% and only 7% for non-apparel applications like home textiles,
automotive an industrial segments as against 59% worldwide. The demand of non-
apparel segment is expected to grow @ 20% p.a. as Polyester offers high tenacity an
strength which is most suitable for such applications.
• Lower per capita consumption: The average per capita consumption (PCC) of fabric
in India is much lower than in its neighbouring countries. India has a huge potential
market, given that its PCC is as low as 1.4 kg as compared China (5 kgs), Pakistan (3
 kgs) and Indonesia (5 kgs). India has the advantage of a large an growing domestic
market, and a good GDP growth.
• Rapid urbanization: higher spend on clothing: In India, out of the total population,
about 70% is rural. Behaviour patterns suggest that most of the fabric demand in this
segment is need-based. The urban demand, on the other hand, is also driven by
fashion trends and favours more sophisticated textiles, and variety in designs and
colours. The average urban spend on apparel is higher than rural spend.
However, over the years, the clothing pattern in India has shifted. Men's clothing
consumption has moved from the traditional cotton based wear to synthetic fabrics.
Cotton dhotis are giving way to trousers (mostly made of polyester or polyester
blends). Likewise, women are moving from cotton saris to synthetic saris/dresses.
• Levy of Anti-dumping duty on import of POY to lower threats of import leading to
availability of better contribution to domestic manufacturers.
• Rapid additions in downstream processing facilities leading to incremental
demand.
• Manufacturing of manmade fibres globally is getting shifted mainly to China and
India. As China's domestic consumption almost matches its production, India will be
able to increase its presence in the International market.

Keeping in view the strong fundamentals mentioned above, CRISINFAC has projected the
POY industry grew at a healthy 7.8% Compounded Annual Growth Rate (CAGR).

Raising concern over India's share in the US imports of technical textiles and non-woven
fabric which is way behind China, industry body Ficci today said domestic industry needs
research and development (R&D) support.

"India's share in the US imports of special purpose fabric (technical textiles) and non-woven
fabrics was merely 2.6 per cent and 1.2 per cent, respectively in 2009 compared to China's
share of 15 per cent and 12 per cent," a Ficci study said.

India needs to strengthen its capabilities to tap this growing market as technology-intensive
products are the future, it said.

The study said there is a need to formulate a comprehensive research and development
(R&D) policy for the Indian textile industry. The chamber has submitted its
recommendations to the Ministry of Textiles in this regard. The study pointed out that only a
small portion of revenue of the Indian textile industry is derived by innovative or technology
intensive products. "The policy should aim at increasing the country's share of advance
technology-based products and high value-added items in global market to seven per cent in
next five years from less than two percent currently.

The chamber has also recommended setting-up of a National Textiles Research Council with
seed money of Rs 30 crore and an annual grant of Rs 10 crore. The council could be the apex
body for undertaking and providing direction to research in textiles in the country, the study
said.

Ficci said that the policy should provide a special focus on eco-friendly textiles that would
help in reducing carbon footprint. "Development of eco-friendly and sustainable linkages is
key to competitiveness. Also, the competitive edge for Indian textile industry will come from
adoption of new and advance materials with functional properties (like anti-microbial fabrics
for patients dress) in the textiles sector," it said.

Government Initiative for Textile Industry:

According to the Ministry of Textiles, investment under the Technology Upgradation Fund
Schemes (TUFS) has been increasing steadily. During the year 2009-10, 1896 applications
have been sanctioned at a project cost of US$ 5.23 billion. The cumulative progress as on
December 31, 2009, includes 27,477 applications sanctioned, which has triggered investment
of US$ 45.5 billion and amount sanctioned under TUFS is US$ 18.9 billion of which US$
16.4 billion has been disbursed so far till the end of April, 2010.

Moreover, in May 2010, the Ministry of Textiles informed a parliamentary panel that it
proposes to allocate US$ 785.2 million for the modernization of the textile industry.

The Scheme for Integrated Textile Park (SITP) was approved in July 2005 to facilitate setting
up of textiles parks with world class infrastructure facilities. 40 textiles park projects have
been sanctioned under the SITP. According to the Minister of State for Textiles, Panabaaka
Lakshmi, under the SITP, a cumulative expenditure of US$ 204.3 million has been incurred
against allocation of US$ 220.7 million in the last three years.

In the Union Budget 2010-11 presented in February 2010, the Finance Minister made the
following announcements to benefit the textile industry:
 • The central plan outlay for the industry has been enhanced to US$ 1.03 billion. Of this
US$ 521.4 million is for TUFS, US$ 76 million for SITP, US$ 80.2 million for
handlooms, US $ 69.3 million for handicrafts and US$ 98.4 million for sericulture.

• Allocation for textiles and jute industry is US$ 713.4 million.

• The total allocation for village and small enterprises sector which include handicrafts
and handlooms is US$ 210.3 million.

• US$ 31.5 million has been provided for development of mega clusters in handlooms,
handicrafts and powerloom sectors.

• Customs duty at 4 per cent for import of readymade garments for retail sales has been
withdrawn.

• The micro small medium enterprises in textiles sector have been given full CENVAT
credit on capital goods in one installment in the year of receipt of such goods and the
facility of payment of excise duty in quarterly basis.

Investments

According to the Minister for Textiles, Mr Dayanidhi Maran, around US$ 5.35 billion of
foreign investment is expected to be made in India in the textile sector over the next five
years.

The textiles industry has attracted foreign direct investment (FDI) worth US$ 817.26 million
between April 2000 and March 2010, according to data released by the Department of
Industrial Policy and Promotion.

• S Kumars Nationwide has formed a joint venture (JV) with Donna Karan
International to design, produce and distribute the entire range of DKNY menswear
apparel across the world except Japan for 10 years. The new venture will invest US$
25 million for expansion of Donna Karan’s menswear brand and expects to record
sales of about US$ 140 million in the next three years.

• The Andhra Pradesh government has allocated over 1000 acres of land for the
Brandix India Apparel City (BIAC) in the state’s special economic zone (SEZ), which
was inaugurated in May 2010. The apparel city is expected to attract an investment of
US$ 1.2 billion (around Rs 5,400 crore).

• Private equity firms TPG and Bain Capital have picked up stakes in children apparel
retailer Lilliput Kidswear for US$ 27 million and US$ 60.7 million respectively.
 • Italian sportswear maker Lotto is planning to invest US$ 10 million over the next five
years to capture 7 per cent of India’s branded sports apparel and equipment market.
The brand, which started its stand-alone retail chain in India in 2008, has 31 stand-
alone stores across the country and plans to open 200 more such stores by 2015.

World's leading lingerie brand, Germany-based, Triumph International, plans to invest over
US$ 217 million in India to open 12 more flagship outlets and 30 additional EPS (Exclusive
Partner Stores) during 2010.

Government policies relating to textile industries in India

The Indian textile industry is one of the largest industries in the world. The Ministry of
Textiles in India has formulated numerous policies and schemes for the development of the
textile industry in India. Some of them are detailed in the following sections.

National Textile Policy

The National Textile Policy was formulated keeping in mind the following objectives:

• Development of the textile sector in India in order to nurture and maintain its position
in the global arena as the leading manufacturer and exporter of clothing.
• Maintenance of a leading position in the domestic market by doing away with import
penetration.
• Injecting competitive spirit by the liberalisation of stringent controls.
• Encouraging Foreign Direct Investment as well as research and development in this
sector.
• Stressing on the diversification of production and its Upgradation taking into
consideration the environmental concerns.
• Development of a firm multi-fibre base along with the skill of the weavers and the
craftsmen.

Such goals are set to meet the following targets:

• The size of textile and apparel exports must reach a level of US $50 billion by the
year 2010.
• The Technology Upgradation Fund Scheme should be implemented in a strict manner.
• The garments industry should be removed from the list of the small scale industry
sector.
• The handloom industry should be boosted and encouraged to enter into foreign
ventures so as to compete globally. The National Textile Policy has also formulated
 rules pertaining to certain specific sectors. Some of the most important items in the
agenda happen to be the availability and productivity along with the quality of the raw
materials. Special care is also taken to curb the fluctuating price of raw materials.
Steps have also been taken to raise silk to the international standard.

Preamble

• To comprehend the purpose of textile industry that is to provide one the most basic
needs of the people and promote its sustained growth to improve the quality of life.
• To acknowledge textile industry as a self-reliant industry, from producing raw
materials to delivery of finished products; and its major contribution to the economy
of the country.
• To understand its immense potentiality for creating employment opportunities in
significant sectors like agriculture, industry, organized sector, decentralized sector,
urban areas and rural areas, specifically for women and deprived.
• To recognize the Textile Policy of 1985, this boosted the annual growth rate of cloth
production by 7.13%, export of textile by 13.32% and per capita availability of fabrics
by 3.6%.
• To analyze the issues and problems of textile industry and the guidelines provided by
the expert committee set up for this specific purpose.
• To give a different specification to the objectives and thrust areas of textile industry.
• To produce good quality cloth for fulfilling the demands of the people with
reasonable prices.
• To maintain a competitive global market

Thrust areas

Government of India is trying to promote textile industry by giving emphasis on several areas
of textile, which are as below:

• Innovative marketing strategies

• Diversification of product
• Enhancement of textile oriented technology
• Quality awareness
• Intensifying raw materials
• Growth of productivity
• Increase in exports
• Financing arrangements
• Creating employment opportunities
 • Human Resource Development

Efforts

Government of India has set some targets to intensify and promote textile industry. To
materialize these targets, efforts are being made, which are as follows:

• Textile and apparel exports will reach the US $ 70 billion mark by 2015
• All manufacturing segments of textile industry will come under TUFS ( Technology
Upgradation Fund Scheme)
• Increase the quality and productivity of cotton. The target is to increase 50%
productivity and maintain the quality to international standards
• Establish the Technology Mission on jute with an objective to increase cotton
productivity of the country
• Encourage private organization to provide financial support for the textile industry
• Promote private sectors for establishing a world class textile industry
• Encourage handloom industry for producing value added items
• Encourage private sectors to set up a world class textile industry comprising various
textile processing units in different parts of India
• Regenerate functions of the TRA (Textile Research Associations) to stress on
research works.

Government policy on cotton and man-made fiber

One of the principal targets of the government policy is to enhance the quality and production
of cotton and man-made fiber. Ministry of Agriculture, Ministry of Textiles, cotton growing
states are primarily responsible for implementing this target.

Other thrust areas

1. Information Technology: Information technology plays a significant role behind the

development of textile industry in India. IT (Information Technology) can promote to
establish a sound commercial network for the textile industry to prosper.
2. Human Resource Development: Effective utilization of human resource can
strengthen this textile industry to a large extent. Government of India has adopted
some effective policies to properly utilize the manpower of the country in favour of
the textile industry.
3. Financing arrangement: Government of India is also trying to encourage talented
Indian designers and technologists to work for Indian textile industry and accordingly
 government is setting up venture capital fund in collaboration with financial
establishments.

Acts

Some of the major acts relating to textile industry include

• Central Silk Board Act, 1948

• The Textiles Committee Act, 1963
• The Handlooms Act, 1985
• Cotton Control Order, 1986
• The Textile Undertakings Act, 1995

Government of India is earnestly trying to provide all the relevant facilities for the textile
industry to utilize its full potential and achieve the target. The textile industry is presently
experiencing an average annual growth rate of 9-10% and is expected to grow at a rate of
16% in value, which will eventually reach the target of US $ 115 billion by 2012. The
clothing and apparel sector are expected to grow at a rate of 21 %t in value terms.

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 on 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, Government 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 %

India agreed to bind its tariffs on 265 textile & apparel products (Textured Yarns of Nylon &
Polyester, Filament Fabrics, Sportswear, and Home Textiles.)

Apparel products are free from Excise Duties & various Taxes.
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%.

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, Labelling, and Packaging Requirements: Marking, Labelling, and Packaging
Requirements for Textile products are technically complex and difficult to implement.
According to textile regulation passed on 22nd July 1998 by GOI, Yarns, and Fabrics to have
the statutory markings and these markings should not mislead the consumers. For instance,
Cloths must be remarked with the name & address of manufacturer, a description of cloth,
sort number, length in meters and width in centimetres, and washing instructions. The Man
made fiber cloth must indicate whether it is made by spun or filament yarn. The month &
year of packaging, the exact composition of cloth. The Marking must appear on the face plate
of each piece of cloth. The language for marking must be in Hindi and English with
international numerals.

EXIM Policies:

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%
Foreign 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.
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.

Reform measures and Policy initiatives:

The Textile Industry came out of Quota Regime of Import Restrictions under the Multi Fibre
Arrangement (MFA). This development came on 1st January 2005 under the World Trade
Organization (WTO) Agreement on Textiles & Clothing. In an effort to increase India's share
in the world textile market, the Government has introduced a number of progressive steps.

• 100 per cent FDI allowed through the automatic route.

• De-reservation of readymade garments, hosiery and knitwear from the SSI sector.
• Technology Mission on Cotton has been launched to make available quality raw
material at competitive prices.
• Technology Up gradation Fund Scheme (TUFS) has been launched to facilitate the
modernization and up gradation of the textiles industry.
• Scheme for Integrated Textile Park (SITP) has been started to provide world-class
infrastructure facilities for setting up their textile units through the Public Private
Partnership model.
• The Indian Textile Plaza is being built, in the city of Ahmedabad to encourage exports
to overseas markets.
• 50 textile parks are being established to enhance manufacturing capacity and increase
the industry's cost competitiveness.
• A cluster approach for the development of the handloom sector has been adopted
from the year 2005-06 onwards.
• Measures have been initiated for protection of handloom items like Banarasi
brocades, Jamdani of Bengal etc., under the Geographical Indications of Goods
(Registration and Protection) Act, 1999. So far sanctions to register 20 items have
been issued under the Act.
• For the handicraft sector, some of the new initiatives include the facility center for
exporters and entrepreneurs in the Public Private Partnership (PPP) mode on build,
own and operate model with the government meeting 40% of the total cost of setting
up the centre with maximum investment of Rs. 24 lakhs.
 • In the Wool Sector, a project in public private partnership mode was approved for
setting up processing and finishing facilities for shawl manufacturers at Ludhiana in
Punjab.
• In the Jute Sector, the Jute Technology Mission was started during the year 2006-07
with Mini Missions being implemented by the Ministry. The focus of the mission is
on improvement of the yield and quality of Jute Fibre, establishing market
infrastructure, storage godowns, developing prototypes of machinery with private
sector involvement, development of human resources for the jute industry etc.

GOVERNMENT POLICIES, SCHEMES AND CORPORATIONS FOR

PROMOTING TEXTILE INDUSTRY IN INDIA:

The Multi-Fibre Agreement (MFA)

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

National Textile Policy 2000

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

National Jute Policy-2005:

The objectives of the policy are to:

• Enable millions of jute farmers to produce better quality jute fibre for value added
diversified jute products and enable them to enhance per hectare yield of raw jute
substantially;
• Facilitate the Jute Sector to attain and sustain a pre-eminent global standing in the
manufacture and export of jute products;
 • Enable the jute industry to build world class state-of-the-art manufacturing
capabilities in conformity with environmental standards, and, for this purpose, to
encourage Foreign Direct Investment, as well as research and development in the
sector;
• Sustain and strengthen the traditional knowledge, skills, and capabilities of our
weavers and craftspeople engaged in the manufacture of traditional as well as
innovative jute products;
• Expand productive employment by enabling the growth of the industry;
• Make Information Technology (IT), an integral part of the entire value chain of jute
and the production of jute goods, and thereby facilitate the industry to achieve
international standards in terms of quality, design, and marketing;
• Increase the quantity of exports of jute and jute products by achieving a CAGR of
15% per annum;
• Involve and ensure the active co-operation and partnership of State Governments,
Financial Institutions, Entrepreneurs, and Farmers’ Organizations in the fulfilment of
these objectives.
Export Promotion Capital Goods (EPCG) scheme

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

Export-Import Policy

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

Duty Entitlement Passbook Scheme (DEPS)

DEPS is available to Indian export companies and traders on a pre- and post-export basis.
The pre-export credit requires that the beneficiary firm has exported during the preceding 3
year period. The post-export credit is a transferable credit that exporters of finished goods can
use to pay or offset customs duties on subsequent imports of any unrestricted products.
The Agreement on Textiles and Clothing (ATC)

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

Guidelines of the revised Textile Centres Infrastructure Development Scheme (TCUDS)

TCIDS Scheme is a part of the drive to improve infrastructure facilities at potential Textile
growth centres and therefore, aims at removing bottlenecks in exports so as to achieve the
target of US$ 50 billion by 2010 as envisaged in the National Textile Policy, 2000. Under the
Scheme funds can be given to Central/ State Government Departments/ Public Sector
Undertakings/ Other Central /State Government’s agencies/recognized industrial association
or entrepreneur bodies for development of infrastructure directly benefiting the textile units.
The fund would not be available for individual production units.

Technology Upgradation Fund Scheme (TUFS)

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

Scheme for Integrated Textile Parks (SITP)

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

National Textile Corporation Ltd. (NTC)

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

Cotton Corporation of India Ltd. (CCI)

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

GOVERNMENT REGULATIONS AND SUPPORT

Government Initiatives

The textile industry, being one of the most significant sectors in the Indian economy, has
been a key focus area for the Government of India. A number of policies have been put in
place to make the industry more competitive.

• The Technology Upgradation Fund Scheme (TUFS): Recognising that technology

is the key to being competitive in the global market, the Government of India
established the Technology Upgradation Fund Scheme (TUFS) to enable firms to
access low-interest loans for technology upgradation. Under this scheme, the
Government reimburses 5 per cent of the interest rates charged by the banks and
financial institutions, thereby ensuring credit availability for upgradation of the
technology at global rates. Under the TUF Scheme, launched on April 1, 1999, loans
amounting to Rs. 149 billion have been disbursed to 6,739 applicants. In consonance
with the industry, the TUF Scheme has been continued during the Eleventh Plan
(2007-2012). Allocation for TUF has been raised from Rs.5.35 billion in 2006-07, to
Rs.9.11 billion in 2007-08. Handlooms will now be covered under the TUF scheme.
• Integrated Textile Parks Scheme: Manufacturing is a thrust area for the
government, as Indian industry and the government see foreign companies more as
partners in building domestic manufacturing capabilities rather than a threat to Indian
businesses. Following this through, the Central Government as well as various States
has executed Schemes such as, Schemes for Integrated Textile and Apparel Parks.
Under the Scheme for Integrated Textiles Parks (SITP), 26 parks have been approved
 so far out of 30 sanctioned. The Budget provision for these parks has been increased
from Rs.1.89 billion in 2006-07 to Rs.4.25 billion in 2007-08.
• Scheme for Handlooms: For Handlooms a cluster approach for the development of
the handloom sector was introduced in 2005-06 and 120 clusters were selected. 273
new yarn depots are opened up till now and the Handloom Mark was launched. The
Government proposes to take up additional 100-150 clusters in 2007-08.
• Health Insurance Scheme: The Health Insurance Scheme has so far covered
3,00,000 weavers and will be extended to more weavers. The scheme will also be
enlarged to include ancillary workers. The Corporate Catalyst India A report on
Indian Textiles Industry Government proposed to enhance the allocation for the sector
from Rs.2.41 billion in 2006-07 to Rs.3.21 billion next year.

Quality Improvement

The Textile Commission, under the Ministry of Textiles, facilitates firms in the industry to
improve their quality levels and also get recognised quality certifications. Out of 250 textile
companies that have been taken up by the Commission, 136 are certified ISO 9001. The other
two certifications that have been targeted by the Textile Commission are ISO 14000
Environmental Management Standards and SA 8000 Code of Conduct Management
Standards.

Foreign Direct Investment (FDI) Policy

100% FDI is allowed in the textile sector under the automatic route. FDI in sectors to the
extent permitted under automatic route does not require any prior approval either by the
Government of India or Reserve Bank of India (RBI). The investors are only required to
notify the Regional Office concerned of RBI within 30 days of receipt of in word remittance.
Ministry of Textiles has set up FDI Cell to attract FDI in the textile sector in the country. The
FDI cell will operate with the following objectives:

○ To provide assistance and advisory support (including liaison with other organisations
and State Governments).
○ Assist foreign companies in finding out joint venture partners.
○ To sort out operational problems.
○ Maintenance and monitoring of data pertaining to domestic textile production and
foreign investment.

Foreign Investment Scenario

A new trend in recent years has been the arrival in India of expatriate and western designers
(from France, Italy, UK) who are beginning to form joint ventures with Indian designers to
cater to the domestic and export markets. Italian companies are investing in capacity
expansion and striking manufacturing, distribution and franchising deals with India Inc.
Carrera is to invest US$ 252.7 million in textile projects in India. Although direct investment
in retail remains closed to FDI as of now, companies have found alternative structures
through which they can approach Indian consumers (examples include Levi Strauss, Marks &
Spencer, Royal Sporting House, Adidas, Nike and Reebok in fashion products). There is
certainly a broader opportunity to “grow the market from inside” as companies can freely set
up fully-owned sourcing (liaison) offices, as well as marketing operations. The number of
FDI approved between 1991 and 2004 was 641 which amount to over US$ 1.02 billion.

Other legislations regarding the Textile sector

Ministry of finance has added 165 new textile products under duty drawback schedule. The
new products included wool tops, cotton yarn, acrylic yarn, viscose yarn, various blended
yarn/fabrics, fishing nets etc. Further, the existing entries in the drawback schedule relating to
garments have been expanded to create separate entries of garments made up of

(1) Cotton

(2) Man-made fibre blend and

(3) MMF

Separate rates have been prescribed for these categories of garments on the basis of
composition of textiles. After the phasing out of quota regime under the MFA, India can
envisage its textile sector becoming $100 billion industry by 2010. This will include exports
of $50 billion. The proposed targets would be achieved provided reforms are initiated in
textile sector and local manufacturers adopt measures to improve their competitiveness. A 5-
pronged strategy aiming to attract FDI by making reforms in local market, replacement of
existing indirect taxes with a single nationwide VAT, liberalization of contract norms for
textile and garments units, elimination of restrictions that cause poor operational and
organizational performance of manufacturers, was suggested.

The Union Minister said that the Board for Industrial and Financial Reconstruction (BIFR)
had approved rehabilitation schemes for sick NTC mills at a cost of Rs 39 billion. Of the 66
mills, 65 unviable mills have been closed after implementing Voluntary Retirement Scheme
(VRS) to all employees. According to him, the government has already constituted assets sale
committees comprising representatives of Central and state governments, operative agency,
BIFR, NTC and the concerned NTC subsidiary to effect sale of assets through open tender
system. Proposals for modernization of NTC mills have been made to the consultative
committee members, including formation of a committee of experts to improve management
of these mills. Even the present status of jute industry was under the scanner of the
consultative committee.

The Government had announced change from the value-based drawback rate hitherto
followed to a weight-based structure for textile exports that will discourage raw material
exports and also curtail the scope for misusing the drawback claims by boosting invoice value
of exports. NCDEX has launched its silk contract (raw silk and cocoon). With this launch, the
total number of products offered by NCDEX goes up to 27. The launch of the silk contract
will offer the entire suite of fibres to the entire value chain ranging from farmers to textile
mills. With the objective of protecting the interests of those affected by the WTO agreements
and globalisation process, Government of India jointly with NCDEX has adopted a policy of
encouraging future contracts of silk. The Government will run during the Eleventh Plan
period a Scheme for the Development and Growth of Technical Textiles (SDGT) at an outlay
of Rs 960 million to promote indigenous manufacture of technical textiles. The scheme
would also provide infrastructure support by setting up centres of excellence for manufacture
of technical textiles.

Highlights of the Foreign Trade Policy

The Hon’ble Union Minister of Commerce & Industry, Government of India, had announced
the Foreign Trade Policy on 8th April’05. Some of the Salient Features / Highlights of the
proposals pertaining to Textile Industry in general and Handlooms in particular are.

1. Formulation of Inter-State trade Council to engage State Governments in providing an

enabling environment for promotion of international trade.
2. Proposed removal of export cess on export of all agricultural and plantation
commodities levied under various Commodity Board Acts.
3. Realizing that great potential and opportunities exist in the manufacturing sector,
Annual supplement introduces a number of measures to enhance the competitiveness
of manufacturing sector.
 • No safeguard and antidumping duty to be levied on inputs under advance
licence for deemed export supplies made to ICB (International Competitive
Bidding) projects.
• To promote accelerated export performance, balance export obligation will be
waived for the exporters completing 75% of their export obligation in half the
prescribed export obligation period.
• Reduced export obligation and enhanced time available for exports under the
EPCG Scheme for the imports made by the agriculture sector.
• Reduced obligation at six times the duty saved amount as against the normal
eight times for imports made by the SSI sectors under the EPCG Scheme.
• EPCG Scheme will facilitate the modernization of retail sector by allowing
concessional duty imports. For this the retailer should have a minimum
covered shopping area of 1000 square meters.
1. Export of poultry and dairy products and their value added products facilitated by
granting them duty credit @ 5% of the FOB value of the exports under the Vishesh
Krishi Upaj Yojna.
2. Package has been developed for modernizing the marine sector Package allows duty
free import of inputs based on the past export performance, import of mono filament
long line system for tuna fishing at concessional duty and establishes a self removal
for clearance of waste of perishable commodities.
3. Gems & Jewellery exports –
• Entitlement of duty free imports of samples enhanced to Rs. 3 lakhs.
• Supply of gold of 0.995 and above purity allowed for release for export
purposes.
1. Package for EOU sector: For units debonding from EOU’s, a simplified procedure is
being worked out. Similarly, capital goods can be transferred to other units by simply
intimating Central Excise & Development Commissioner. EOUs can claim IT
exemption within a period of 12 months from the date of exports.
2. Reducing congestion at the major ports. The facility for export obligation discharge in
rupee payment under the EPCG has been extended to the minor ports, ICDs and CFS
also.
3. Procedural simplification:
• Single common application form called Aayaat Niryaat Form introduced
reducing the size of the form by more than 60%.
• The categories of advance licences merged into a single category
 • Annual advance licence, which was available only to status holders, will now be
available to all the exporters with some export performance.
• Export obligation extension for five years under advance licence based on BIFR
rehabilitation package.
• Bank guarantee threshold reduced for units in Agri export zones and established
service providers and a category of manufacturer exporters.
• Simplified clubbing norms under the advance licence and EPCG Scheme will
help exporters in regularizing their cases.
• Chartered Engineer Certificate in lieu of Central Excise Certificate for non-
excisable units and those importing spares will be accepted as installation
certificate. This will reduce the transaction time.
• Imports made under Served from India Scheme can be transferable within the
group companies and managed hotels. The provision will allow bulk sourcing and
better utilization of the entitlement.
1. Handlooms:
• Government has decided to develop a trademark for Handloom on lines similar to
‘Woolmark’ and ‘Silkmark’. This will enable handloom products to develop a
niche market with the distinct identity.
• All Export Promotion Council shall open a separate Cell to involve and
encourage youth and women entrepreneurs in export effort.
• Minister of Commerce and Industry invited Suggestions on a proposal to change
the names of Export Promotion Councils to ‘Trade Promotion Council.
• All actions by Income Tax authority on DEPB benefits have been stopped by
Prime Minister with immediate effect. The matter is to be decided at economic
advisory council headed by Prime Minister in the next 30 days

Environmental Analysis and Concerns of Indian Textile Industry.

If we analyze the textile industry, the major determinants of competitiveness are both policy
and politics in the international trade and commerce. Further, the industry performance is
influenced by domestic institutional, policy, infrastructure and managerial dynamics.

In textile industry, voluntary initiatives such as Worldwide Responsible Apparel Production

(WRAP) and Apparel Industry Initiative (AIP) are attempting to instill social and
environmental standards in textile and clothing sectors. It is in this ‘buyer-driven global
commodity chain’ that India has to position itself.
Based on our experience of working with the textile industry, this article is an attempt to
briefly outline the environmental concerns and identify ways to enhance internal and external
competitiveness of textile sector.

Like every product, clothes and other textiles products affect the environment to varying
degrees throughout their life cycles, through use of chemicals, solvents and huge quantities of
water. This apart, use of energy, solid waste and effluent discharge, emit dust, fumes, etc. to
the atmosphere are major environmental concerns of textile industry.

Before textiles reach the consumer, they go through many different physical and chemical
processes. For example they may be treated with chemicals to dye, make them more hard-
wearing or wrinkle-resistant, or less flammable.

Studies have shown that some of the chemicals used in textile industry are carcinogenic and
others may trigger allergic reactions. Some flame retardants that are used in certain textiles
contain organic bromine compounds that are persistent (break down very slowly in the
environment). Textile industry is known to use restricted chemicals such as azo dyes and
formaldehyde.

Manufacturing of all variants of textiles have an impact on the environment. Usage of raw
material and other natural resource inputs such as water etc have not only resource depleting
impacts but release of effluents or emissions have natural resource degrading impacts. The
industry is known to use large quantities of water during its processing.

For example, to grow the fiber for one cotton diaper requires 105.3 gallons of water, one T-
shirt needs 256.6 gallons of water, one bath towel needs 401.4 gallons of water, a man’s dress
shirt requires 414.5 gallons of water, and 987 gallons of water are required for one pair of
jeans.

An average integrated textile mill produces 15 tons of finished cloth per day. It uses a total of
approximately 3,840 cubic meters of water per day, including 1,680 cubic meters for
finishing and processing, another 960 cubic meters for steam generation, and an equivalent
volume for serving the workers colony and other domestic uses of water. The water used for
finishing and processing results in contaminated liquid effluent of approximately 1,500 cubic
meters per day.

In Tirupur of Tamilnadu, India, annually the textile industries alone utilize around 28.8
billion liters of ground water.
Further, usage of synthetic dyes puts environmental limitation because production of these
dyes requires strong acids, alkalis, solvents, high temperatures, and heavy metal catalysts.
Since production of these dyes need very toxic and hazardous chemicals.

Environmental issues can no longer be ignored by the textiles industry and the Government.
Indian textile industry needs to realize that to remain competitive, operating costs have to be
reduced and environmental compliance has to be enhanced. Government should not only
strive to integrate environmental goals into the national textile policy but also in the plans and
programmes. Textile sector cannot have independent growth strategies that are bereft of
environmental concerns arising at various points of value chain because environmental costs
are proving to be a drag on its own long term growth and development.

To drive home the criticality of integrating environmental concerns Tirupur industrial cluster
in Tamilnadu, India is being used as illustration.

The textile industry in Tirupur was expected to achieve the targeted export of US$ 50 Billion
by the year 2010. But, such growth is now greatly hampered due to immense environmental
damage due to the effluents released from the textile units to cause to the Noyyal river,
ground water system and agricultural fields mainly due to the textile wet processing
industries in Tirupur. Textile manufacturers use energy as a raw material input to the
manufacturing process or for some other purpose usually referred to as non-fuel use.

Electricity consumption is increasing in textile mills. Textile manufacturers have to deal with
rising energy and other supply costs. For e.g. Dow Chemical Co. and DuPont both raised
prices on nearly everything they sell, from chemicals used in bathroom cleaners to freezer
bags and kitchen counter tops, because of high raw materials costs.

Understanding the value chain of textile industry will enable identifying and addressing all
sources of environmental impacts in a life cycle process. Such an integrated approach has not
been undertaken in India on environmental impacts of textile manufacturing. A
comprehensive analysis of the environmental impact of textile manufacturing activity is a
critical need of the hour and it needs to be initiated at the earliest, which includes an analysis
of the degradation by air pollution, wind, water and other agents.

A complete survey of how developments in the textile industry and consumers of its products
have affected the environment in the past needs to be taken up. This should also cover the
most recent solutions adopted by the industry to alleviate the problems. This is important
given the high textile production targets post 2005, and the ways in which the industry is
responding to the environmental challenges.
Fortunately, unlike any other country in the world, India has hand-loom sector, where
production is relatively environmentally benign. Thus, for Indian textile sector, the main
drivers for environmentally benign growth can be:

• Growth of hand-loom sector

• Competition
• Pressure exerted down the supply chain by the consumer
• Reducing production costs
• Meeting current and anticipated legislative requirements
• Concern for the global and local environment

Professionals at Green Stratos are currently part of several initiatives in the textile sector such
as promoting organic cotton and creating market linkages for handloom sector, use of
environment friendly dies and promotion of energy efficiency in the textile sector.

General Environment Impacts of Textile Industries

Textile processing industry is characterised not only by the large volume of water required
for various unit operations but also by the variety of chemicals used for various processes.
There is a long sequence of wet processing stages requiring inputs of water, chemical and
energy and generating wastes at each stage. The other feature of this industry, which is a
backbone of fashion garment, is large variation in demand of type, pattern and colour
combination of fabric resulting into significant fluctuation in waste generation volume and
load. Textile processing generates many waste streams, including liquid, gaseous and solid
wastes, some of which may be hazardous.

The nature of the waste generated depends on the type of textile facility, the processes and
technologies being operated, and the types of fibres and chemicals used. The textile
industry is a significant contributor to many national economies, encompassing both small
and large-scale operations worldwide. In terms of its output or production and employment,
the textile industry is one of the largest industries in the world. The textile manufacturing
process is characterised by the high consumption of resources like water, fuel and a variety
of chemicals in a long process sequence that generates a significant amount of waste. The
common practices of low process efficiency result in substantial wastage of resources and a
severe damage to the environment. The main environmental problems associated with
textile industry are typically those associated with water body pollution caused by the
discharge of untreated effluents. Other environmental issues of equal importance are air
emission, notably Volatile Organic Compounds (VOC)’s and excessive noise or odour as
well as workspace safety.

Air pollution:

Most processes performed in textile mills produce atmospheric emissions. Gaseous

emissions have been identified as the second greatest pollution problem (after effluent
quality) for the textile industry. Speculation concerning the amounts and types of air
pollutants emitted from textile operations has been widespread but, generally, air emission
data for textile manufacturing operations are not readily available. Air pollution is the most
difficult type of pollution to sample, test, and quantify in an audit.

Water pollution:

The textile industry uses high volumes of water throughout its operations, from the washing
of fibres to bleaching, dyeing and washing of finished products. On average, approximately
200 litres of water are required to produce l kg of textiles. The large volumes of wastewater
generated also contain a wide variety of chemicals, used throughout processing. These can
cause damage if not properly treated before being discharged into the environment. Of all
the steps involved in textiles processing, wet processing creates the highest volume of
wastewater.

The aquatic toxicity of textile industry wastewater varies considerably among production
facilities. The sources of aquatic toxicity can include salt, surfactants, ionic metals and their
metal complexes, toxic organic chemicals, biocides and toxic anions. Most textile dyes
have low aquatic toxicity. On the other hand, surfactants and related compounds, such as
detergents, emulsifiers and dispersants are used in almost each textile process and can be an
important contributor to effluent aquatic toxicity, BOD and foaming.

Solid waste pollution:

The primary residual wastes generated from the textile industry are non-hazardous. These
include scraps of fabric and yarn, off-specification yarn and fabric and packaging waste.
There are also wastes associated with the storage and production of yarns and textiles, such
as chemical storage drums, cardboard reels for storing fabric and cones used to hold yarns
for dyeing and knitting. Cutting room waste generates a high volume of fabric scraps,
which can often be reduced by increasing fabric utilisation efficiency in cutting and sewing.

Cleaner production is an attractive approach to tackle environmental problems associated

with industrial production and poor material efficiency. Since the cleaner production
approach has been successfully implemented in some areas in the textile sector, it shows
that significant financial saving and environmental improvements can be made by relatively
low-cost and straightforward interventions. This improves the quality of products and
minimises the cost of production, enabling the branch to compete in the global market.
Moreover, Cleaner Production also improves the company’s public image by highlighting
the steps it has taken to protect the environment.
Low Yields in Cotton
The relatively rapid gains in productivity in the predominately rainfed Central zone since
1990 are due to technological advances that, if combined with a continuation of recent
modest growth in the North and South zones, could lead to a substantial hike in national
average yields and production. While this productivity gap indicates that significant further
on farm yield improvements are possible, a range of technical, economic, and institutional
factors prevent realization of the potential of the varieties cultivated
Following are the few factors which contributes towards the low yield
• Delayed Sowing. Late sowing of cotton reduces yields by providing less optimal sunlight
conditions for crop development and, in some areas, by allowing less time for picking the
mature crop before clearing the field for the following crop. Sowing delays are caused either
by the late arrival of seasonal rainfall needed for sowing or by delays in harvesting the
preceding crop. Yield losses associated with late sowing and shortened harvest times may be
reduced by new shorter duration varieties and better management, but crop competition will
likely continue to limit yields in some areas.
• Monsoon Dependence. Erratic monsoon rainfall affects 60-70 percent of cotton area,
reducing yields through moisture stress and creating risk that reduces investment in seed,
fertilizer, and pesticide inputs. Even with improved varieties and management, average yields
in the mostly rainfed Central and South zones are likely to remain below those achieved in
other countries with more reliable rainfall.
• Poor Seed Quality. Poor seed quality is a pervasive problem in cotton cultivation. Only
about 35 percent of cotton area is sown with certified seed with assured varietal purity and
germination. Commercially available seeds are often of poor quality, with sale of uncertified,
substandard, and second generation (F2) hybrid seeds not uncommon. Although supplies of
certified seed are generally available, financial constraints lead most farmers to use retained
seeds or lower priced uncertified seeds from the market.
The proliferation of cotton varieties in markets and farmers’ fields confounds efforts to
improve seed quality, maintain varietal purity, and improve crop management practices.
Roughly 100-130 cotton varieties developed in both the public and private sectors are now
cultivated in India. A study by the Central Institute for Cotton Research (CICR) indicates that
the average cotton farmer in the Central and South zones plants 3-4 varieties on farms
averaging about 2 hectares, a practice that greatly complicates crop and seed management.
• Plant Protection. Insect and disease infestations, including bollworms, white fly, jassids,
and leaf curl virus, are significant problems in India’s three cotton production zones.
Although per hectare use of pesticides is higher for cotton than for any other crop, effective
plant protection is constrained by poor farm management, pesticide subsidies that encourage
indiscriminate use, and problems with pesticide quality. Improved on farm pest management
practices, including appropriate crop rotations, pest surveillance, pesticide applications, and
adoption of Integrated Pest Management (IPM) practices have proved difficult to implement
on small, resource constrained farms.
• Crop Management. Large gaps between average on farm yields and the potential of
existing varieties also stem from poor management practices, including use of inappropriate
varieties, seed rates, seed spacing, and fertilizer dosages. As in the case of plant protection,
improvement of crop management practices is complicated by the need to extend
recommended practices to large numbers of small, limited-resource farmers.
• Lack of Suitable Varieties. Cotton yields are affected by lack of varieties— or genotypes
— suitable for some agronomic conditions. Indian scientists cite three priorities for plant
breeding efforts: (1) higher yielding, short-duration, and pest-resistant cultivars for the
irrigated North zone, (2) higher yielding varieties for the drought-prone Central zone, and (3)
varieties suited for the soils on rice fallow common in the South zone.
Water Management issues
Water resources need to be protected from unsustainable use and pollution – between 1970
and 1995, 25% of the world’s freshwater ecosystems were lost. Agriculture takes up about
69% of global freshwater withdrawal and rice, wheat and cotton together account for 58% of
the worldwide irrigated area, making these three crops the major consumers of freshwater
(WWF, 1999). Approximately 73% of cotton is produced in irrigated fields and only 27%
under rain-fed conditions. Most irrigation systems in cotton production rely on the technique
of flood irrigation – freshwater is drawn from its source and transported to the place of its
consumption. Losses of freshwater can occur through evaporation, seepage and poor water
management. Water losses can be drastically cut through good water management practices
which are integral to the farming approach taken in the Fair trade cotton standard including
input of organic matter, crop rotation, and appropriate irrigation methods (if needed). In areas
of water shortage, appropriate measures should be taken to improve water storage and
collection systems.
Bt cotton issue
Bt cotton is one of the variety of cotton which gives the lager yield and the less quantity of
pesticides are needed because of its inbuilt pest resistance capacity. But the research was
carried out and it was found that the cotton growers who are using the Bt cotton at their farm
need to use more the amount of pesticides compared to the other normal cotton growers after
third year of the Bt cotton and the yield of the cotton goes down compared to the normal
cotton growers. So it has a major impact on the cotton growers and also the resistance of the
insect increases with the frequent use of Bt cotton.
Soil Pollution
Soil in the cotton growing region and near-by region is getting polluted because of the
excessive use of the chemical pesticides resulting into the low yield. This can be avoided by
using the organic pesticides for growing the cotton.
Pollution due to Lint
The pollution due to lint in the cotton ginning industry is very
hazardous to health. Most of the worker working at this place suffers
from the lungs diseases because of the pollution problems.

Manufacturing industries often cause a great deal of damage to the

environment through the release of both toxic and nonhazardous
wastes. As the damaging effects of chemicals become more
apparent, our society is demanding cleaner and more efficient production methods. The U.S
Environmental Protection Agency details environmental consequences, regulations, and
proposed solutions in the Office of Compliance Sector Notebook Project: Profile of the
Textile Industry.

Pollution Outputs

Wastewater is one of the largest sources of waste produced by the textile and apparel
industries. Because the production of textile and apparel goods requires many different steps,
wastewater is produced throughout the manufacturing process. High volumes of wastewater
are produced in manufacturing operations such as resizing, dyeing, rinsing, printing,
bleaching, finishing, and cleaning. In fact, each pound of goods produced can be the source
of approximately 15 gallons of waste from dyeing and rinsing processes alone. Facilities that
are involved in the dyeing of goods often turn out more than one million gallons of
wastewater each day.

The textile and apparel industries also release waste in the form of air emissions. However,
the amount of polluted air produced is relatively small in comparison to other manufacturing
industries. Small amounts of waste are emitted at various stages of production, each stage
releasing a different type of emission. Due to the high number of manufacturing stages, there
are many different types of air pollutants generated by these industries. Because there are so
many different components to the emissions of these industries, it is usually difficult to
control and measure air pollution.

Wastewater and air emissions generally receive the most attention from politicians and
consumers due to their hazardous nature. Yet, there is another set of nontoxic, residual wastes
that results from the production of textiles and apparels. A large amount of fabric waste and
other scraps are left over at the end of production. For e.g. most production methods waste
anywhere from 28 to 6 percent of fabric. Furthermore, packaging materials are not always
able to be reused or recycled.

Environmental Problems

A number of different environmental problems have been caused by the textile and apparel
industry. As previously stated, a large amount of wastewater and polluted air is generated
during production. A number of other problems arise that are not simply related to the output
waste produced. For example, a large amount of water, energy, and other valuable resources
are consumed during the production process.

Additionally, many facilities are not as environmentally sound as they could

be due to outdated equipment that is difficult and extremely expensive to
replace. Machinery is often very loud and disrupts surrounding communities.
Many employees are unqualified for their jobs and lack the training
necessary to understand the most efficient way of carrying out an assigned task. Moreover,
they do not have the skills needed to improve or recognize harmful practices. The assistance
of the government is crucial if this industry is to continually make strides in decreasing waste.
However, most businesses are currently limited by the lack of support expended by the
government.

Prevention Methods and Proposals

In order to make significant changes in the wastes generated by textile and apparel
manufacturing facilities, several preventative measures must be taken. To begin with,
companies should begin to set improved regulations for the raw goods used in manufacturing.
Reusable containers should be required, and the use of harmful substances should be limited.
Individuals should be employed by company and industry executives to research and develop
new ways of producing goods using less harmful chemicals or wholly alternative treatments
altogether. Simple improvements can be made by ensuring optimal settings of equipment and
the optimal environment for the facility.

Additionally, organizations should take every step possible to reduce input amount by
recycling as much as possible and by continually updating equipment. In order to achieve a
new level of environmental responsibility, better training programs for employees must be
established. The government needs to become more involved in assisting individual facilities
and in the regulations set forth for the industry. Organizations should be encouraged to create
"eco" friendly goods.

Regulations

Like any industry, textiles and apparel must adhere to several standards so that our
environment will be preserved. The Resource Conservation and Recovery Act of 1976
regulate the treatment of hazardous materials and waste. Regulations are set for determining
what should be classified as a hazardous material, where and for how long such materials can
be stored, and treatment of the land where hazardous materials will be disposed.

A number of debates have arisen in recent years concerning cancer rates in communities
located near various manufacturing facilities. The Emergency Planning and Community
Right-To-Know Act addresses these issues by improving the knowledge of possible dangers
to surrounding communities. Furthermore, the Clean Water Act serves to keep American
bodies of water safe and clean. No other industry act is as important to our environment. The
closely related Safe Water Drinking Act requires a certain level of quality in our drinking
water. Industry businesses are limited in the wastes they produce so that drinking water will
not reach a contaminated level.

The Clean Air Act encourages safe emissions and is an attempt by the government to
improve air quality. The act has the ability to suggest emission standards that are apply to the
entire textile industry. It also allows these emissions to be screened and companies must keep
detailed records of their pollutants.

Textile Industry Sponsored Initiatives Concerning the Environment

The American Textile Partnership brings together researchers at leading universities with the
United States Department of Energy, among others. While the top priority for AMTEX is
concerned with national competitiveness, some aspects of the group deal with environmental
issues. For instance, the Textile Resource Conservation (TRec) falls under the umbrella of
AMTEX. TRec's main goal is to encourage manufacturing processes that will do as little
harm to the environment as possible. Specifically they aim to employ fewer input resources,
without creating any net waste.

Another initiative taking by many companies is called the Encouraging Environmental

Excellence (E3) program. Involvement with the program is voluntary. To be considered by
inclusion in the E3 program, companies must show a strong commitment to improving the
environment. Goals must be set, steps should be taken to prevent excessive waste and
pollution, and recycling policies improved.

Technological Environment Analysis

• To continue the growing investment trend in the textiles sector and to achieve a
growth of 16 percent in value terms, it is proposed to continue with the Technology
Upgradation Fund Scheme (TUFS), which has proved to be highly successful in
increasing investment in the textiles sector.

• As on 31.07.2006, projects worth Rs.44,686 crore were sanctioned under TUFS. The
growth of the TUFS has been significant during the last two years, registering a
growth of 123 percent and 127 percent over the previous years. In order to maintain
the pace of investment that has come in during the last 2 – 3 years, it is essential to
continue the Technology Upgradation Fund Scheme (TUFS) in its present form until
the end of Eleventh Five Year Plan. The Working Group is of the view that even a
slight modification in TUFS at this juncture may have an adverse psychological
impact, disrupting the investment plans of the industry and also may result in
distortion which will not be conducive for the long term growth of the industry.

• Even with the capacities envisaged for the terminal year of the Eleventh Five Year
Plan, India will be significantly behind China in all the segments, especially spinning,
weaving, processing and garmenting. Currently, over 20 percent of the total
production of cotton in the country is being exported as raw cotton. Export of cotton
yarn has been simultaneously declining. Obviously, there is significant scope to
convert the raw cotton currently being exported into yarn, both for the export market
and for domestic consumption. Investments in the downstream segments of weaving
and processing is necessary to ensure that the maximum quantity of yarn produced in
the country is domestically converted into finished products, in order to meet the
increasing requirements of the garment industry. Sufficient supply of yarn and fabrics
internally will reduce the dependence of the garment industry on imported yarn and
fabrics. In short, if the country aims to move up the value chain in textiles, increasing
 investment is a must. TUFS has emerged as a successful instrument in leveraging
investment in the private sector.

• In China, Pakistan, Spain and several other competing countries, policy support to the
textiles and clothing industry and targets for growth in the sector have been
announced by the Government. China has proposed substantial expansion during the
next five years from its present capacities, which already are about 5 times that of
India. In order to remain competitive in the international market and to withstand
increasing competition in the domestic market, it is necessary to ensure the large
investment in modernization and expansion as envisaged in this report. This will be
possible only if the TUFS continues in its present form.

• The interest rates currently applicable to the textiles and clothing industries of major
competing countries are substantially lower than the present Primary Lending Rate
(PLR) in India. Interest rates are increasing in the country and the PLR may continue
to increase during the Eleventh Plan period. Interest rates applicable to term loans in
some of the competing countries are given below:

(i) South Korea 4.50 percent p.a.

(ii) Malaysia 3.50 percent p.a.
(iii)Taiwan 2.50 percent p.a.
(iv)Thailand 5.00 percent p.a.

As against this, the current PLR in India is around 11.00 percent p.a.

• The Working Group has aimed at 12 percent growth in production and 22 percent in
exports. To achieve this growth, incremental production facilities would have to be set
up. It is estimated that the requirement of funds for setting up these incremental
facilities will be approximately Rs.1,50,600 crore during the Eleventh Plan period.
This investment will not come without support from Government in the form of the
extension of TUFS.

• The financial outlay during the Eleventh Plan for TUFS may appear to be high at
Rs.11,315 crore, but considering the contribution of the industry in terms of exports
and employment it is negligible.

Social Issues
Linda Golodner's "Apparel Industry Code of Conduct: A Consumer Perspective on Social
Responsibility" addresses a number of social concerns evident in the apparel industry.
Golodner’s is president of the National Consumers League.

Child Labor

Child labor is one of the leading social concerns for the apparel industry. American
companies are constantly looking for ways to reduce production costs. Child labor
specifically refers to jobs that prevent children from attaining education or jobs that could be
detrimental to the child. The increased minimum wage level and increased import costs make
it increasingly difficult for Americans to compete with overseas firms. Many apparel goods
are either produced by foreign companies or by American companies whose manufacturing
facilities are abroad.

Many foreign countries do not have restrictions on child labor laws. There are several reasons
why employing children is a common practice in many nations. Children do not need to be
paid as much as adults, they are more easily manipulated, school is not always an option, and
it is a tradition in many nations.

Labels

Labels are the key source of information available to consumers about various textile and
apparel products. Information on labels is far more likely to be looked at than information on
company websites because the contents are available immediately when looking at a product
label. Labelling often includes country of production. However, it is important to disclose
more information that this on the label - shoppers want to know other details about the
production process such labor practices, environmental consequences, and testing procedures.

Sweatshops

The apparel industry is one industry particularly affected by

sweatshops. Sweatshops infringe upon some of the most basic
rights of individuals concerning working conditions such as wages,
safety, and overtime. Furthermore, sweatshops often employ
children. Unfortunately, it is often difficult to monitor the practices
of overseas companies. Our government does not have the ability
to analyze the labor practices of all foreign plants and cannot force them to adhere to
American standards.

Branding
Building Indian brands in global apparel market is necessary, because the marketers can
increase the value of their products by branding. As we all know, there are very few apparel
exporters who had attempted to create brands in the global market. Others, still supply to
international buying houses or retail chains as per the specifications and designs provided by
the buyers and most importantly the exporters put the label or brand name as stipulated by the
buyer wherein the exporters voluntarily hide their identity in the global market.

Although, the apparel exporters do have the capability to produce as per the requirement of
global market, their main lacuna is strategic thinking in creating their own brands. Let’s see
the scenario of apparel branding in domestic market.

There is cut throat competition in the market, many brands enter the market and with a short
run success they become obsolete.

This is because consumer tastes are changing fast due to the influence of cultural,
psychological and global trends and hence they are less loyal. To put salt on the wound, many
global brands are also entering the Indian market, making Indian brands clueless as to how to
survive the competition. This situation necessitates the marketers to strengthen their brands
for their stay in the market. This might be possible only when the marketers consider
branding not as a set of activities, but as a strategic thinking.

To compete in domestic as well as global market place in the long run, the marketers must
create and manage strong brands. The brand value will become a vital factor in creating loyal
customers which would pose a formidable defence in the competitive market. For example
consider the Polo Ralph Lauren brand; there are customers who would like to wear (Polo)
horse on their shirt so that people around them know that they can afford to buy a Polo Ralph
Lauren shirt. It has the stylish component, but it has also something a little extra. In reality,
the customer can purchase an almost identical shirt somewhere else, without the labelling on
it, for quite a bit less. It is the status and the reputation that the brand carries which really
promotes the brand value and encourages people to purchase the brand against the plethora of
competing brands.

Brands are cultures

Many people think that branding is nothing but just creating a brand name, advertising it, and
building the image of the brand. According to Prof Douglas B Holt of Harvard Business
School, branding is not a selected set of activities but it is a strategic point of view. Branding
requires managers to put conscious efforts to build the society’s perceived value of the
product.

Society attributes meaning to the products which would eventually become facts about the
product over the years. These facts make up the culture of the product. A brand need not just
be a name or a logo; it can also be unique design features. These features become material
markers of the brand. Customer experiences, advertisements, sponsoring activities to the
events, newspaper articles evaluating the brand and conversations with friends and colleagues
that mention the brand establish the brand culture.

Brand value

Brand culture facilitates the customer to form perceptions about the value of the brand. The
value of the brand is nothing but the difference between what a consumer will pay for a
branded product and a physically identical product without brand culture. In consumer
markets, brand value has components such as reputation, experiential and symbolism.

Reputation value

Consumers often feel the risk of unknown and also they have the tendency to reduce it by
some way or other. For example, if the consumers don’t know about the quality of the fabric
that they intend to purchase, they would perceive the purchase decision as risky. In such
situations, reputation of the brand in terms of quality offers confidence to the consumers to go
ahead with the purchase. The stories about product experiences which they hear from various
sources also act as a base for building the reputation of the brand.

Experiential value

Consumers don’t value the product on all parameters. They often jump into conclusion very
fast and become regular in buying and using particular brands based on faith. Becoming
regular with a particular brand help the customers in reducing the search costs and need for
straining the brain in analysis and decision making.

They often are not interested to investigate the evidences for the claims the brands make.
They tend to attribute certain benefits for which they buy the particular brand. Raymond
constantly promotes ’Complete man’ benefit for their suiting which is the key benefit for
which consumers go for Raymond. That’s why Raymond still remains above competition
with a leading value and volume share in the organised ready-to-stitch (RTS) market.
IMPORTANCE OF BRAND

The constantly changing market poses new challenges to clothing enterprises, and the clients’
demands are also continually rising, and so it is necessary every now and again to offer them
a higher added value. This added value is a properly planned brand strategy, the so-called
branding. Firms without any distinct features, without a clear vision or specific mission, or
without permanent values, will sink in the mass of messages hitting the market. A brand
image is defined through its selected symbolic patterns. The most important among these are
the brand’s name, logo, and composition of graphic elements and colours all associated with
the company. It is crucial for a brand built on these elements to give a clear message to the
customer about the kind of company he is dealing with, what its product is and who the
clients are. All the elements comprising a brand image have to be closely related to the idea
and goals of the company. This certainly helps its positive identification, and as a result a
strong and distinct image is created in the customers’ mind. It is important that the customer’s
mind should absorb and retain as much information about a brand as possible; some time
later this is translated into the reconcilability and prestige of a brand on the market. A brand
product offers a sense of safety, and guarantees quality and reliability. Brand values are
features that appeal to the emotional sphere of human perception

Hence a brand is the most valuable asset of a company, and customer satisfaction is the key
to a long-term success. As consumers must have a reason for selecting this given brand from
among many others, each brand should have a motto apart from its distinctive usability. It is
necessary to define why it is different and what its position is. A brand is not an
advertisement, but rather a whole philosophy underlying a set of combined actions fixed on
the company’s success. It is certainly an indispensable tool allowing effective conquest of
markets, retention of the market position, and international competition

SWOT ANALYSIS IN BRAND BUILDING

Opportunities

Indian apparels accounted for a tiny fraction of less than 3 per cent of overall world export of
apparel, suggesting an opportunity for considerable growth. There is a very large domestic
market for Indian apparel manufactures. As per McKinsey study, the market size is of Rs
20,000 crore, out of which only Rs 4,000 crore is catered to by branded apparel. So there is
still an Rs 16,000 crore market, which is catered by the unorganised small size units. The
developed nations, which are the destinations for Indian textile products, use textiles in the
form of apparel. Therefore, in order to improve the presence in these markets and capture
larger values of the chain the focus needs to be shifted towards the effective performance of
the textile apparel supply chain network, rather than looking at textile industry in isolation.

Threats

Various regulatory, technological and marketing changes were expected to affect India’s
textile industry over the next few years. For a product line characterised by unpredictable
demand pattern and seasonality on one end and highly labour intensive on other, it is
necessary to have flexibility to balance the labour force employment from time to time. There
are few factors such as infrastructure and government policies that have caused wide gap in
the economic development between India and other nations for textile industry in particular,
in spite of enjoying the benefits of abundant cheap labour, low manufacturing cost, available
raw materials and a large domestic market.

Strengths

The Indian textile industry is globally more competitive than other industries in the country
on relative terms. Most of the inputs required for this sector being available from domestic
sources and there are very little requirements of imports and precious foreign exchange. From
middle of 1990s, manufacturing units of larger capacity with upgraded technology, mostly in
collaboration with a joint venture partner were established. During the same period, Indian
consumers could see availability of international brands in domestic market, which were
made by Indian garment manufacturers. This had raised the expectation level of discerning
consumers and apparel industry faced the challenge to improve its performance from this set
of demanding consumers. Importers of Indian apparels were generally satisfied with price
and enthusiastic about the ability to source small production quantities. With the entry of
international garment companies into India, they

• Determining the identity and building desirable brand image

• Choosing the best project
• Introducing brand to the market by means of marketing activity
• Law protection of brand
• Determine the needs of the customers
• Controlling introduced brand on the market
• Testing the product bring in new designs, new craftsmanship, modern scientific
management and also the marketing strategies.
These all can strengthen the competition mechanism so that the industry will gain more
resources for developing new products, new brand names, technology development and staff
training in order to increase the market competitiveness.

Weaknesses

The small manufacturing units lacked sophisticated planning and information system and
failed to offer scale economy. The present labour policy in a way discourages Indian apparel
units to set up large size manufacturing set up and achieve economies of scale. A large size
unit, by Indian standard, could well be the smallest in size in the competing countries like
China, Indonesia, Thailand, Bangladesh, and Sri Lanka. One major area of concern for the
Indian apparel exporters is the declining average unit value realization, which has dropped
from $ 4.44 in 1994 to $ 3.70 in 2000. This clearly reflects the Indian exporters’ inability to
move up the value chain and the threats of being branded as supplier of low end products in
the international apparel market. This leads to the question of whether it makes sense to
promote the brand image that exists at present or improve all on the weaknesses substantially
before we think of further promotion. Buyers were frustrated by delivery and production lead
times, the absence of large capacity garment manufacturers, and difficulties associated with
freight handling. The long and uncertain lead times seem to be the most serious problem,
faced by the buyers of finished textile products and apparels. At times, products are delayed
by three months, missing a season totally. In such situation, buyers normally ask for
discounts, sharing of airfreight burden or full payment of the airfreight, and in worst case
cancel the order.

Well integrated and lean supply chains: Shorter cycle and delivery times
The Indian textile industry has a long and complex supply chain. This affects not only the
cycle times, but also the delivery times. The average cycle time in the Indian textile industry
is about 45-50 days, which sometimes extends to 80 days. The mean delay in the supply
chain from procurement of raw materials and to export of finished goods is 15.5 days. Shelf
life of fashion driven products is very short (approximately 45days), hence such delays are
untenable. These delays not only affect time-to-market, but also Work-in- Progress (WIP),
variability of supply chain and hence the cost. Therefore strong deployment of industrial
engineering with particular emphasis on cellular manufacturing and JIT systems, in order to
establish lean supply chains is extremely crucial for manufacturers. Presence across the value
chain, vertical integration and investment in captive power units helps in effective demand
assessment, resulting in greater control over the supply chain and cost reduction.
Brand promotion

• Brands, in today’s consumer oriented market, play an important role in terms of

market penetration and higher unit value realization. Brands assure consumers that
products are of a certain quality, durability, and conform to several social,
environmental, and quality standards. The markets of USA and Europe, which
account for more than 90 percent of Indian Apparel Exports, are entirely dominated
by various global brands, and Indian exporters are merely suppliers to such brands.

• It is estimated that the final retail value of an apparel product sold to consumers in
export markets is 5-10 times higher than its ex-factory price. As a result, the country
is losing a significant amount of export earnings.

• Brand development, therefore, will deepen the market share and acceptability of
Indian apparel, thereby leading to increased export earnings. However, brand
promotion is not only an expensive proposition, but also requires very carefully
designed multi-stakeholder strategy, on a sustainable basis. The capacity of Indian
industry, by virtue of being SME oriented, fragmented and decentralized, to design
and launch brand promotion efforts on its own is limited. Therefore, a Public-Private
Partnership (PPP) approach is the appropriate strategy to develop globally acceptable
Indian apparel brands.

• The Indian apparel industry will be encouraged to create a Special Purpose Vehicle
(SPV) for the purpose of brand creation and promotion. The role of the SPV will
include need assessment, mobilization of resources, assistance to enterprises to design
and launch the brands in selected markets, to forge linkages with key stake holders,
and other hand-holding support. The SPV will be a Corporate body with the majority
stake being held by user apparel industry enterprises through associations / councils.
The SPV, in consultation with the Government, would develop detailed guidelines
and strategy for brand promotion.

DISTRIBUTION

The Indian Textile industry is highly fragmented sector.

• Industry is fully vertically integrated across the whole value chain and interconnected
with various operations.
• Textile Industry comprises small-scale, medium-scale, large-scale, non-integrated,
spinning, weaving, finishing, and apparel-making firms and enterprises.
 • This is an unorganized sector and includes Handlooms, Powerloom, Hosiery,
Knitting, Readymade Garments, Khadi, Carpet and Handicrafts manufacturing units.
• The organized Mill Sector comprises of spinning Mills, and Composite Mills where
spinning, weaving, and processing activities are done.
• The Fibre and Yarn Sector of the textile industry includes Textile Fibers, Natural
Fibers such as Cotton, Jute, Silk and Wool; Synthetic / Man-Made fibers such as
Polyester, Viscose, Nylon, Acrylic and Polypropylene.
• The Man-Made Textile Sector includes Fibre and Filament Yarn manufacturing units
of Cellulosic and Non-Cellulosic origin. The Cellulosic Fibre/yarn Industry is
controlled by the Ministry of Textiles, and the Non-Cellulosic Industry is controlled
by the Ministry of Chemicals and Fertilizers.
• India is the largest producer of Jute, the 2nd largest producer of Silk, the 3rd largest
producer of Cotton and Cellulosic Fibre/Yarn and 5th largest producer of Synthetic
Fibers/Yarn.

The Textile and Apparel Supply Chain

The Textile and Apparel Supply Chain comprises diverse raw material sectors, ginning
facilities, spinning and extrusion processes, processing sector, weaving and knitting factories
and garment (and other stitched and non-stitched) manufacturing that supply an extensive
distribution channel. This supply chain is perhaps one of the most diverse in terms of the raw
materials used, technologies deployed and products produced.

This supply chain supplies about 70 per cent by value of its production to the domestic
market. The distribution channel comprises wholesalers, distributors and a large number of
small retailers selling garments and textiles. It is only recently that large retail formats are
emerging thereby increasing variety as well as volume on display at a single location.
Another feature of the distribution channel is the strong presence of ‘agents’ who secure and
consolidate orders for producers. Exports are traditionally executed through Export
Houses or procurement/commissioning offices of large global apparel retailers.

It is estimated that there exist 65,000 garment units in the organized sector, of which about 88
per cent are for woven cloth while the remaining are for knits. However, only 30–40 units
are large in size (as a result of long years of reservation of non-exporting garment units for
the small scale sectors – a regulation that was removed recently). While these firms are
spread all over the country, there are clusters emerging in the National Capital Region
(NCR), Mumbai, Bangalore, Tirupur/Coimbatore, and Ludhiana employing about 3.5 mn
people. According to our estimate, the total value of production in the garment sector is
around Rs.1050–1100 bn of which about 81 per cent comes from the domestic market. The
value of Indian garments (e.g. saree, dhoti, salwar kurta, etc.) is around Rs.200–250 bn.
About 40 per cent of fabric for garment production is imported – a figure that is expected to
rise in coming years.

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 per cent was cotton cloth, 41 per cent was
100% non-cotton including khadi, wool and silk and 13 per cent was blended cloth. Three
distinctive technologies are used in the sector – handlooms, powerlooms and knitting
machines. They also represent very distinctive supply chains. The handloom sector
(including khadi, silk and some wool) serves the low and the high ends of the value chain –
both mass consumption products for use in rural India as well as niche products for urban &
exports markets. It produces, chiefly, textiles with geographical characterization (e.g., cotton
and silk sarees in Pochampally or Varanasi) and in small batches. Handloom production in
2003-04 was around 5493 mn.sq.meters of which about 82 per cent was using cotton fibre.
Handloom production is mostly rural (employing about 10 million, mostly, household
weavers) and revolves around master-weavers who provide designs, raw material and often
the loom.
Weaving, using powerlooms was traditionally done by composite mills that combined it with
spinning and processing operations. Over the years, government incentives and demand for
low cost, high volume, standard products (especially sarees and grey cloth) moved the
production towards powerloom factories and away from composite mills (that were
essentially full line variety producers). While some like Arvind Mills or Ashima transformed
themselves into competitive units, others gradually closed down. In 2003-04, there remained
223 composite mills that produced 1434 mn. sq. mts. of cloth. Most of these mills are located
in Gujarat and Maharashtra. Most of the woven cloth comes from the powerlooms (chiefly at
Surat, Bhiwandi, NCR, Chennai). In 2005, there were 425,792 registered powerloom units
that produced 26,947 mn. sq. mts of cloth and employed about 4,757,383 workers. Weaving
sector is predominantly small scale, has on an average 4.5 power looms per unit, suffers from
outdated technology, and incurs high co-ordination costs. Knits have been more successful
especially in export channels. Strong production clusters like Tirupur and Ludhiana have led
to growth of accessories sector as well, albeit slowly. The hosiery sector, on the other hand,
has largely a domestic focus and is growing rapidly.

The spinning sector is perhaps most competitive globally in terms of variety, unit prices and
production quantity. Though cotton is the fibre of preference, man-made fibre (polyster fibre
and polyster filament yarn) is also produced by about 100 large and medium size producers.

Spinning is done by 1566 mills and 1170 Small and Medium Enterprises (SME). Mills,
chiefly located in North India, deploy 34.24 mn. spindles and 0.385 mn rotors while the SME
units produce their yarn on 3.29 mn spindles and 0.119 mn. rotors producing 2270 mn kg of
cotton yarn, 950 mn kg of blended yarn and about 1106 mn kg of man-made filament yarn
every year. Worsted and non-worsted spindles (producing woolen yarn) have also
progressively grown to 0.604 mn and 0.437 mn respectively. Spinning sector is technology
intensive and productivity is affected by the quality of cotton and the cleaning process used
during ginning.

The processing sector, i.e., dyeing, finishing and printing is mostly small in scale. The
largest amongst these would dye and finish about 5000 m/day. The remaining are
independent process houses (or part of composite mills) that use automated large batch or
continuous processing and have an average scale of about 20,000 m of cloth daily. About
82.5 per cent or 10,397 units are hand processors who dye cloth or yarn manually and dry in
open sunshine. Of the remaining (and these use automated and semi-automated equipment),
2076 are independent process houses.
Cotton remains the most significant raw material for the Indian textile industry. In 2003-04,
3009 mn kg of cotton was grown over 7.785 mn acres. Other fibres produced are silk (15742
tonnes), jute (10985000 bales), wool (50.7 mn kg) and man-made fibres (1100.65 mn kg).
Cotton grows mostly in western and central India, silk in southern India, jute in eastern and
wool in northern India. Significant qualities of cotton, silk and wool fibres are also imported
by the spinning and knitting sectors. (Except for garments, all data in this section was
obtained from OTC 2004 and Texmin 2005.)

Managing such a complex supply chain requires coordination through excellent managerial
practices, technology and facilitating policies.

Competitiveness of Indian Textile & Apparel Industry

India is one of the few countries that own the complete supply chain in close proximity from
diverse fibres to a large market. It is capable of delivering packaged products to customers
comprising a variety of fibres, diverse count sizes, cloths of different weight and weave, and
panoply of finishes. This permits the supply chain to mix and match variety in different
segments to deliver new products and applications. This advantage is further accentuated by
cost based advantages and diverse traditions in textiles.

Indian strength in spinning is now well established – on unit costs on ring yarn, open-ended
(OE) yarn as well as textured yarn, Indian firms are ahead of their global competitors
including China. Same is true on some woven OE yarn fabric categories (especially grey
fabrics) but is not true for other woven segments. India contributes about 23 per cent of world
spindles and 6 per cent of world rotors (second highest in the world after China). Fifty five
per cent of total investment in technology in the last decade has been made in the spinning
sector. Its share in global shuttleless loom, however, is only about 2.8 per cent of world
looms (and is ranked 9th in the world). The competitiveness in the weaving sector is adversely
affected by low penetration of shuttleless looms (i.e., 1.69 % of Indian looms), the
unorganized nature of the sector (i.e., fragmented, small and, often, un-registered units, low
investment in technology & practices especially in the powerloom, processing, handloom and
knits) and higher power tariffs. There is, however, a recent trend of investment in setting up
hi-tech, stand-alone mid-size weaving companies focusing on export markets. India also has
the highest deployment of handlooms in the world (handlooms are low on productivity but
produce specialized fabric). While production and export of man-made fibre (and filament
yarn) has increased over the years, Indian industry still lags significantly behind US, China,
Europe, Taiwan etc. (Texmin, 2005.)
Indian textile industry has suffered in the past from low productivity at both ends of the
supply chain – low farm yields affecting cotton production and inefficiency in garment sector
due to restriction of size and reservation. Add to this, contamination of cotton with
consequent increase in cost (as it affects quality and requires installation of additional
process to clean and open cotton fibres before carding operations), poor ginning (most
equipment dates back to 1940s), high average defect rates in production process (which also
leads to increase in effective labor and power costs), hank yarn requirement, etc. and its
competitiveness gets compromised severely. Similarly, processing technology is primarily
manual and small batch oriented with visual color matching and sun drying. This leads to
inconsistency in conformance quality. Lead times across the sector continue to be affected
by variability in the supply chain – defect rates average over 5%, average % of orders on time
is about 80%, variance in order size across firms is high (e.g., the coefficient of variability of
average order size for spinning firms is about 2.6), and on an average, 16 days of sales as
work-in-process inventory (the highest for garment firms) and an average of 30 days of sales
in raw material inventory (the highest for spinning firms) (Chandra 2004). Some of the
hurdles (e.g., reservation in the garment sectors) including tariff distortions between the
organized and unorganized sectors have now been systematically removed by policy
initiatives of Government of India and have opened avenues for firms to compete on the basis
of their capabilities.

Trade data of post-MFA performance reveals some interesting trends – Indian firms
registered a 27 per cent growth in exports to US (against China’s 52 per cent) during the Jan-
April 2005 time period. Most of this growth has been in textiles while apparels show
marginal gains. Apparels & accessories constituted 78% of global exports to USA (FICCI
2005). (India is still a relatively small yet growing player in the global apparel market.) It is
expected that India will soon replace Mexico as the second largest apparel supplier to the US.

Challenges facing Indian Textile and Apparel Industry

Textile supply chains compete on low cost, high quality, accurate delivery and flexibility in
variety and volume. Several challenges stand in the way of Indian firms before they can own
a larger share of the global market:

Scale: Except for spinning, all other sectors suffer from the problem of scale. Indian firms are
typically smaller than their Chinese or Thai counterparts and there are fewer large firms in
India. Some of the Chinese large firms have 1.5 times higher spinning capacity, 1.25 times
denim (and 2 times gray fabric) capacity and about 6 times more revenue in garment than
their counterparts in India thereby affecting the cost structure as well as ability to attract
customers with large orders. The central tendency is to add capacity once the order has been
won rather than ahead of the demand. Customers go where they see both capacity and
capabilities. Large capacity typically goes with standardized products. These firms need to
develop the managerial capabilities required to manage large work force and design an
appropriate supply chain. For the size of the Indian economy, it will have to have bigger
firms producing standard products in large volumes as well as small and mid size firms
producing large variety in small to mid size batches (the tension between the organized and
un-organized sectors will have to be addressed first, though). Then there is the need for
emergence of specialist firms that will consolidate orders, book capacities, manage
warehouses and logistics of order delivery.

Skills : Three issues must be mentioned here : (a) there is a paucity of technical manpower –
there exist barely 30 programmes at graduate engineering (including diploma) levels
graduating about 1000 students – this is insufficient for bringing about technological change
in the sector; (b) Indian firms invest very little in training its existing workforce and the skills
are limited to existing processes (Chandra 1998); (c) there is an acute shortage of trained
operators and supervisors in India. It is expected that Indian firms will have to invest close to
Rs. 1400 bn by year 2010 to increase its global trade to $ 50 bn. This kind of investment
would require, by our calculations, about 70,000 supervisors and 1.05mn operators in the
textile sector and at least 112,000 supervisors and 2.8mn operators in the apparel sector
(assuming a 80:20 ratio of investment between textiles and apparel). The real bottleneck to
growth is going to be availability of skilled manpower.

Cycle Time: Cycle time is the key to competitiveness of a firm as it affects both price and
delivery schedule. Cycle time reduction is strongly correlated with high first pass yield, high
throughput times, and low variability in process times, low WIP and consequently cost.
Indian firms have to dramatically reduce cycle times across the entire supply chain which is
currently quite high (Chandra, 2004). Customs must provide a turnaround time of ½ day for
an order before Indian firms can they expect to become part of larger global supply chains.
Indian firms need a strong deployment of industrial engineering with particular emphasis on
cellular manufacturing, JIT and statistical process control to reduce lead times on shop
floors. Penetration of IT for improving productivity is particularly low in this sector.

Innovation & Technology: A review of the products imported from China to USA during
January–April 2005 reveals that the top three products in terms of percentage increase in
imports were Tire Cords & Tire Fabrics (843.4% increase over the previous year), Non-
woven fabrics (284.1% increase) and Textile/Fabric Finishing Mill Products (197.2%
increase) (FICCI, 2005). None of these items, however, figure in the list of imports from
India that have gained in these early days of post-MFA. Entry into newer application
domains of industrial textiles, Nano-textiles, home furnishings etc. becomes imperative if we
are to grow beyond 5–6% of global market share as these are areas that are projected to grow
significantly. Synthetic textiles comprise about 50 per cent of the global textile market.
Indian synthetic industry, however, is not well entrenched. The Technology Upgradation
Fund of the government is being used to stimulate investment in new processes.
However, there is little evidence that this deployment in technology has accompanied
changes in the managerial regimes – a necessary condition for increasing productivity and
order winning ability.

Domestic Market: The Indian domestic market for all textile and apparel products is
estimated at $26 bn and growing. While the market is very competitive at the low end of the
value chain, the mid or higher ranges are overpriced (i.e., ‘dollar pricing’). Firms are not
taking advantage of the large domestic market in generating economies of scale to deliver
cost advantage in export markets. The Free Trade Agreement with Singapore and Thailand
will allow overseas producers to meet the aspirations of domestic buyers with quality and
prices that are competitive in the domestic market. Ignoring the domestic market, in the long
run, will peril the export markets for domestic producers. In addition, high retail property
prices and high channel margins in India will restrict growth of this market. Firms need to
make their supply chain leaner in order to overcome these disadvantages.

Institutional Support: Textile policy has come long ways in reducing impediments for the
industry – sometimes driven by global competition and, at other times, by international trade
regulations. However, few areas of policy weakness stand out – labor reforms (which is
hindering movement towards higher scale of operations by Indian firms), power availability
and its quality, customs clearance and shipment operations from ports, credit for large scale
investments that are needed for upgradation of technology, and development of manpower
for the industry. These are problems facing several sectors of industry in India and not by
this sector alone.

In conclusion, competitive strategies are developed by sector level firms and its their
individual and collective initiatives that secure higher market share in global trade. While one
has to be ever vigilant of non-tariff barriers in the post MFA world, the new market will be
won on the basis of capabilities across the supply chain. Policy will need to facilitate this
building of capabilities at the firm level and the flexible strategies that firms will need to
devise periodically.
Textile Industry Concerns

• Indian Textile Industry is highly fragmented Industry that is lead by several small-
scale industries. Because of this, there is lack of Industry Leadership. These small
companies do not have fiscal resources to invest in technological up-gradation and
they are not able to generate economies of scale. This leads to inability to establish a
world-class competitive player.
• Despite many policies Industry is bound with historical regulations that are reason for
Complex Industry Structure.
• Though Industry has cheap and skilled manpower but they are less productive.
• Industry is unable to generate economies of scale, as a result, it is tough to balance the
demand and supply equation.
• There is lack of technological up-gradation in various steps of value chain that affect
the quality, cost and distribution.
• There are high Costs like, High Indirect Taxes, Power and Interest Rates.
• Inadequate Research & Development.
• There is less FDI in this industry that is hurdle to make industry more competitive on
global basis.
• Industry has unfavourable labor Laws.
• India has disadvantage in terms of Geographic Locations. Because of this there is
Global Logistic Disadvantage as shipping cost is higher.
• There is uneven supply chain model and inbound freight traffic is low which affects
cost of shipping.
• India lacks in various trade memberships, which restrict to tap potential market.
• Inappropriate energy supplies to rural and sub-urban areas.
• Industry needs to compete on the basis of Price, Quality and Delivery for the different
segments.
THE CHALLENGES AND STRATEGY FOR GROWTH OF THE INDIAN TEXTILE
INDUSTRY

• The Indian textile industry is in a stronger position now than it was in the last six
decades. The industry which was growing at 3 – 4 percent during the last six decades
has now accelerated to an annual growth rate of 9 – 10 percent. There is a sense of
optimism in the industry and textiles sector has now become a ‘sunrise’ sector.
• The catalysts which have placed the industry on this trajectory of exponential growth
are a buoyant domestic economy, a substantial increase in cotton production, the
 conducive policy environment provided by the Government, and the expiration of the
Multi Fibre Agreement (MFA) on 31st December’2004.
• The buoyant Indian economy, growing at the rate of 8 percent, has resulted in higher
disposable income levels. The disposable income of Indian consumers has increased
steadily. The proportion of the major consuming class (population that has an annual
income of more than US$ 2000) has risen from 20 percent in 1995-96 to 28 percent in
2001-02. This is expected to move up to 35 percent by 2005-06, and to 48 percent by
2009-10. This translates into a growth of 9.3 percent over the next 8 years, and will
result in higher spending capacity, manifesting itself in the greater consumption of
textiles.
• The Indian textile industry consumes a diverse range of fibres and yarn, but is
predominantly cotton based. A significant increase in cotton production during the
last two – three years has increased the availability of raw cotton to the domestic
textiles industry at competitive prices, providing it with a competitive edge in the
global market.
• The Government has also provided industry a conducive policy environment and
initiated schemes which have facilitated the growth of the industry. The Technology
Mission on Cotton has increased cotton production and reduced contamination levels.
The Technology Upgradation Fund Scheme (TUFS) has facilitated the installation of
the state-of-the-art / near state-of-the-art machinery at competitive capital cost. The
rationalization of fiscal duties has provided a level playing field to all segments,
resulting in the holistic growth of the industry.
• Quotas which have restrained the export growth of the Indian textile industry for over
four decades were eliminated with effect from 01.01.2005. This has unshackled
Indian exports, and this is evident from the growth registered in the quota markets.
Apparel exports to USA during 2005 have increased by 34.2 percent, while textiles
exports have increased by 16 percent. Similarly, in Europe, apparel exports have
increased by 30.6 percent and textiles exports by 2.2 percent, during the
corresponding period. In 2006 also the export growth in these two markets is
continuing with the same trend. This increasing trend in exports is expected to
continue as major global players are not inclined to source exclusively from China.
India is considered as the second most preferred destination for major global retailers
due to its strength of vertical and horizontal integration.
 • At this juncture, a strong foundation for industry has been laid on which world class
manufacturing units can realize their full potential and make a mark in the
international economy.

Human Resources Development

• The non-availability of quality manpower is a dampener to growth in many textile

clusters. It is not only a weakness of the sector, but is fast emerging as a major threat
to the growth which has been envisaged.

• The Working Group has estimated the incremental manpower requirement at 17.37
million, comprising of 12.02 million direct and 5.35 million indirect in the ancillary
industry. The maximum requirement is estimated in the clothing and apparel sector.

• The current training infrastructure in the country consists of engineering colleges,

polytechnics, IITs, and agencies like Apparel Training & Development Centers
(ATDCs), Powerlooms Service Centers (PSCs), Weaving Service Centers (WSCs),
Textiles Research Associations (TRAs), ITIs, Private Vocational Training institutes
etc.

• It is estimated that the output of trainees from the entire existing training
infrastructure is not even adequate to meet existing requirements. One of the critical
factors which would impact adversely on the growth process of the textiles industry is
the inadequacy of training facilities in the country. To meet the incremental
requirement for training, the Working Group suggests the following measures:-

Increasing availability of textiles machinery

The domestic textiles machinery manufacturing industry is projected to triple its capacity
during the Eleventh Five Year Plan with adequate support from the Government. However,
even with enhanced capacity, the indigenous textiles machinery industry would not be able to
meet the demands of the textile industry. For example, during the Eleventh Plan, the
incremental spindle requirement is 29.25 million (21 million incremental + 8.25 million for
replacement), at the rate of 5.85 million spindles per annum. However, the indigenous textiles
machinery industry has projected a capacity of 3.85 million spindles per annum by the end of
Eleventh Plan. Similarly, an incremental 1.09 lakh shuttleless looms are required to be
installed by the industry (20,000 by the organized sector + 88,851 by powerloom sector).
Against this requirement, the textiles machinery industry has projected a capacity of 20,000
shuttleless looms by the terminal year of the Eleventh Plan. Further, the indigenous textiles
machinery industry does not produce knitting and garmenting machinery. The Working
Group has critically examined this issue and has suggested the following three-pronged
strategy –

(i) Transfer of textile machinery industry from the Ministry of Heavy Industries to the
Ministry of Textiles – This will help to provide adequate support to domestic textiles
machinery manufacturing industry in the implementation of a time-bound action plan
to increase the availability of indigenous machinery to meet the demand from
different segments of the textiles industry. A scheme on the lines of TUFS should be
initiated, with 5 percent interest reimbursement and 10 percent capital subsidy to
encourage modernization.

(ii) Aggressive wooing of the Foreign Direct Investment (FDI) in the textiles machinery
sector - To attract reputed manufactures of textiles machinery - spinning, weaving
and processing – and invite them to set up facilities in India to meet the growing
requirements of Indian industry. One of the biggest factors that has triggered the
growth of the Chinese industry is the domestic availability of the textiles machinery.
Globally reputed textiles machinery manufacturers have set up units in China, and
have developed models which are suitable to the Chinese industry. We should also
encourage the global manufacturers to set up similar units in India to meet the
requirement of the Indian textile industry. To increase the FDI, the Working Group
recommends that Government may consider FDI proposals from textiles machinery
manufacturers on a selective basis, independent of laid down stipulations in the Press
Note No. 18.

(iii) A critical relook at importing second hand machinery – Permission to import recent
vintage (technologically comparable, and with a significant residual life) may be
given to importers along with benefits at par with those given to the import of new
machinery. Sufficient care will have to be taken that while accepting such machinery,
India should not become a technology junk yard.

Labour reforms

• Rigid labour laws are now emerging as a constraint to the growth of the industry,
particularly the clothing and apparel segment. There is need to liberalise labour laws
on the following lines:
 • Permit use of contract labour in Export Oriented Units (EOUs): The export business
is seasonal and contractual in nature. Excess labour during lean periods or during the
initial stages of developing an export market(s), when the uncertainty of orders is
high, can lead to financial difficulties. Section 10 of the Contract Labour (Regulation
and Abolition) Act, 1970 needs to be amended. The section should exclude textile
units engaged in export related activity (where exports / deemed exports comprising
50 percent or more of their sales) to facilitate outsourcing of activities without any
restriction, as well as to offer contract appointments. Protection of the rights of these
labour will be ensured in terms of their health, safety, welfare, social security, etc.
For example, countries such as China, Bangladesh and Sri Lanka have allowed
contract labour in the textiles sector.

• Permitting firms to adjust their workforce: Units employing over 100 people
currently fall under the purview of Industrial Disputes Act, 1956. The Act stipulates
that employers must obtain necessary approvals for lay-offs. This proves to be a
hindrance, especially for medium sized enterprises. There is need to relax the norms
of the Industrial Disputes Act (Chapter VB), by keeping units employing up to 500
people (presently 100) outside its purview. For example, Malaysia regards the right
to hire, assign work, reward, transfer, promote and adjust the workforce as managerial
rights. Workforce adjustment (ILO Convention on Termination of Employment) at
the instance of employer due to structural and other changes should be permitted.

• Extending work hours: The Government also needs to consider the demand of labour
intensive sections of the textiles industry such as made-ups and garmenting industry
to increase the hours in a shift from nine at present to twelve, and also increase the
working hours in a week from forty eight to sixty, in order to cater to the peak season
requirements of customers, and to compensate for lower labour productivity.

Employment Conditions and Job Satisfaction

The liberalization policies of the Indian government, begun in 1991, assisted in opening up
the economy to domestic and international competition. Autarkic policies of the past decades
had limited foreign investment and prioritized the growth of domestic industry through
import substitution and public ownership of much of the means of production. Emphasis on
self-reliance had eventually led to an economic crisis, which did not help to improve working
conditions for the majority of the Indian labor force. During this period, many skilled and
unskilled workers among the population had opted for better employment opportunities in
other countries.
Despite the benefits of economic liberalization, it has not quickly solved the problem of
unemployment and other social and economic ills. Short-and long-term job losses as a result
of competition, for example, have been common, especially among the unprofitable firms.
One of the main areas of employment for many of the poor has been the cotton textile
industry with its traditional concentration of mills in the cities of Bombay, Ahmedabad, and
Coimbatore. Along with mills that use the most advanced technology to process raw cotton
and form cotton fiber, there also have existed a large number of small-scale workshops and
households that use traditional handlooms (the type used by Mahatma Ghandi) and rely on
manual labor for the processing of cotton. India's market liberalization led to the foreclosure
of much of the traditional handloom cotton industry and resulted in nearly 2.3 million
workers losing their jobs. Many of these workers have remained unemployed. Managers of
the modern mills attribute this to the older age of hand-loom workers and their inflexibility or
inability to adjust to the mechanized cotton mills.

As opposed to neighbouring China, trade unions in India play a very prominent role in the
business community. Every industry has a trade union that advocates the rights and
employment opportunities of its members. Trade unions strive to obtain the best deal for their
members in terms of wages, working conditions, acceptable remuneration, and welfare
packages. As much as 92 percent of the labor force in India is unionized. Some of the
laborers of the cotton industry have gained employment in the textile industry, which with its
labor force of 39 million is among the largest unionized industries.

Women constitute an important segment of the Indian labor force whose working conditions
have not made significant progress. Despite some noticeable advances for a small percentage
of women, women as a whole have been relegated largely to agricultural and menial pursuits
that pay the lowest wages. In some ways, as the overall economy has grown, the situation of
working women in India has even deteriorated. In 1911, for example, three-quarters of the
working women of India were agricultural workers; in 1991, the proportion was over 80
percent. Nearly 70 percent of the population as a whole derives its livelihood from land
resources, and women contribute an estimated 55 to 66 percent of the total farm labor force.

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.
 Employment in textile and allied sectors

Employment

(In Mn. Nos.)

Sr. Projected for
Sector / Industry As on
No.
the terminal Increas
March year of the e
2006 Eleventh Plan

I. Textile sector
1. Cotton/Man-made Fibre/Yarn
Textile/Mill Sector (including SSI 0.94 1.40 0.46
spinning & exclusive weaving units)

2. Man-made Fibre/Filament Yarn

Industry (including texturising 0.16 0.24 0.08
industry)

3. Decentralised Powerlooms Sector 4.86 5.08 0.22

4. Handloom Sector 6.50 7.00 0.50

5. Knitting Sector 0.43 0.45 0.02

6. Processing Sector 0.29 0.44 0.15

7. Woollen Sector 1.50 3.20 1.70

8. Ready Made Garment Sector

5.57 11.22 5.65
(including Knitwear Sector)

9. Sericulture 5.95 7.70 1.75

10. Handicraft Sector 6.57 8.00 1.43

11. Jute Industry

i) Organised Jute Industry 0.26 0.26 0.00

ii) Decentralised Jute Industry 0.14 0.20 0.06

Total (I) 33.17 45.19 12.02

II. Allied Sector
1.
Cotton
i) Cotton Agriculture 18.60 20.00 1.40

ii) Cotton Ginning/Pressing 1.00 1.30 0.30

iii) Cotton Trade 18.00 19.00 1.00

Sub - Total 37.60 40.30 2.70

2. Sheep rearing 1.20 2.80 1.60

3. Jute Agriculture 16.00 17.00 1.00

4. Textile machinery industry & 0.05 0.10 0.05

accessories

Total (II) 54.85 60.20 5.35

Grand Total (I + II ) 88.02 105.39 17.37