Prepared by: Tanveer Sahab (06BS3690) KIRANMAYE AYSOLA (06BS1552)

Introduction

Economy

Industry linkage

Conclusion

Introduction

Presence in Indian Economy

Value Chain of the Industry

Cost Competitiveness & Competitor

Presence in Indian economy

Total market size (2006-07): USD 49 bn

Domestic market ~ USD 30 bn Exports ~ USD 19 bn Apparel constitutes 50% of export

Strong contribution to Indian Economy

14% contribution to industrial production 5% contribution to GDP 16% contribution to export earnings Direct employment to more than 35 million people

Industry functions in the form of clusters (roughly 70 in number) across India, producing 80% of the countrys total textile 95% of the apparel manufacturers are in the micro, small and medium enterprises sector and operate on slim margins Sector is diverse, with the hand-spun and hand woven sector at one end of the spectrum, and the capital intensive, sophisticated mill sector at the other end Source: Ministry of Textiles Annual Report bharattextile.com

Value chain of Textile (apparel) industry in India

Of the 2300 processors in India, only 200 units are integrated with spinning, weaving or knitting units Bulk of apparel and home textile manufacturing accounted for by 77,000 small scale units The textile industry across the value chain is largely decentralized Units mostly independent and small scale in nature, rather than composite units undertaking all activities together Large scope for entry of organised integrated textile manufacturers
Source-www.ibef.org , India resource center

Cost competitiveness & Competitors

India is cost competitive vis--vis competing countries in textile production, except in case of textured yarn and fabric
Source-www.ibef.org , India resource center

Economy Industry linkage Indicators

Rupee Appreciation Government policy

Increase in purchasing power

Index of Industrial production Inflation Merchandise Trade Technology Retail in apparel Fiscal reforms HR issues

Rupee appreciation

Reduction in profit margin Loss of competitive advantage Loss of Business particularly in U.S.A. Textile export went down by 14% in Q1 of 2007-08

Source- www.ibef.org, India resource center

Government policy

Pro industry Supportive Offerings of relief packages Reduction in import duty of manmade fiber Additional subvention of 2% in pre & post shipment credit Refund of service tax to exporters

Source- www.ibef.org, India resource center

Increase in purchasing power

Rise in income level

Domestic garment sales to grow by 14% Higher penetration of Organized retail giving boost to the apparel industry

source-Crisil report on sector analysis

Index Of Industrial production

Weight of Textile products(apparel)-2.5%
Growth rate-11.5% (2006-07) Growth rate-19.4%( April August 2006-07) Projected Contribution in IIP- 3.8% Increase in Incremental non food credit taken by textile industry (from 16117 crore rupees to 17378 crore rupees in corresponding period but in % term it has com down from 39% to 28% ( aug 2006 to aug 2007)

Source- Central statistical organization

Inflation

All Commodity WPI-5.4% Oct.7, 2006-07 Cotton Textile Inflation-6.4% Weighted Contribution-3.8% All Commodity WPI-3.1% Oct.7, 2007-08 Cotton Textile Inflation- -.5% Weighted Contribution- -.5% Price of Cotton textile as a manuf. Product came down

Source- Central statistical organization

Merchandize Trade

Export of Textile & textile Products came down as a whole Export of Textile & textile Products -19 Billion $ ( 2006-07) Reduction in export from $2.8 billion to $ 2.6 Billion from April-may 06-07 to April-may 07-08

Source- Central statistical organization

Technology

The Indian textile industry still lags behind when it comes to latest technology.
CAD is the most popular tool used in the textile and apparel industry. The government of India has a Technology Upgradation Fund (TUF) for the textile and jute industry

Fiscal Reforms

Government has done away with multiple taxes.

Whole value addition chain has been given an option of excise duty exemption.

Import of certain textile machinery items-spinning, weaving , processing, readymade garment sectors: concessional duty of 5% and 10%.
Announcement in the reduction of interest rate in preshipment and post-shipment credit SIDBI has given these special lending rates: 5% reimbursement on interest actually charged or 15% Credit Linked Capital Subsidy on eligible or investment made for modernization

Retail in apparel

There are 12 million retail outlets in India. Mens apparel market is 46% and women's apparel market is 17%. Many brands for apparel are present in India eg: Arrow, Van Heusen, Peter England etc. Growth of retail expected to be at 25%-30% The branded apparel is now worth USD 1 billion.

HR Issues

Indian textile industry is highly labour intensive

It employs 35 million next to agriculture

The Indian textile industry needs a workforce of 64.5 million people by 2010. Indian textile and apparel industry to make it a child labour free industry. Launching of HR development scheme (NATIJA) Neighbourhood apparel Training Institutes for Job Assurance

Conclusion
Negative impact

Positive Impact

Rupee appreciation Technology Fragmented industry HR issues Reduction in employment

Favourable govt. policy Fiscal reforms Retail penetration High income level High weight in IIP Reduction in cotton prices

It is clear that rupee appreciation has hit hard to Indian textile industry w.r.t. export business , reduction in employment but it seems to recover with the help of favourable government policy & reforms , retail growth but initiatives need to be taken by the industry also w.r.t. better technology , consolidation of business & economy of scale.