People And Their Problems

New Delhi, 30 March 2007      

India’s Textile Industry

Effective STEPS For Growth Needed

By Dhurjati Mukherjee

The textile industry is expected to grow into a $110 billion industry by 2010-12 from the present level of $ 52, riding on the back of abundant fibre supply, favourable demography and emphasis on innovation. This envisages an investment upwards of $ 50 billion, observed Nikhil Meswani of Reliance Industries (RIL) at the recent Asian Textile Conference. Sufficient supply of paraxylene and PTA, backed by refining capacity could double or triple man-made fibre production, benefiting textile industry’s growth.

Currently the country’s textile sector adds about 14 per cent to industrial production and about 4 per cent to the GDP. The production by all sectors---mill, powerloom, handloom and khadi, wool and silk---has shown an upward trend in recent years.

Meanwhile, an authoritative report has pointed out that the Technology Upgradation Fund Scheme (TUFS) for the Indian textile industry should continue with some modifications. It suggested the continuance of the Scheme for the weaving and processing segments but thought that it could be discouraged for the spinning sector. Keeping in view the request of various textile bodies, the Finance Minister, in his Budget speech, rightly decided to continue the TUFS during the Eleventh Plan period with handlooms also being covered. It may be mentioned here that the TUFS was started in 1999 to uplift the declining textile industry and was later extended to March 2007.

If the Scheme was terminated by March, the efforts to provide financial assistance to the textile sector would have been a half-done affair. However, the scheme needs to be modified to achieve the goals in the post-quota global supply chain for textiles. Quotas in the pre-2005 arrangement guaranteed access to the US and the EU markets for small textile companies. However with the removal of quotas, integrated textile players are now preferred in the new global sourcing paradigm.

Underdeveloped weaving and processing, the report said, resulted in somewhat poor quality fabrics. This sometimes forced domestic garment exporters to rely go in for imports. Though a subsidy cut cannot be ruled, even a reduction from say 5 per cent to 3 per cent would be helpful but the subsidy component should be allowed to continue for a few more years to allow Indian companies to modernize and effectively face global competition.

The formulation of the textile policy in 2000 for developing a globally competitive industry through modernization and consolidation signaled a new era for developing a globally competitive textile sector. Subsequently, the Government formulated the Vision 2010 plan for textile industry to increase India’s share in world textile trade from around 3.30 per cent in 2003 to 8 per cent by achieving export turnover of $ 50 billion by 2010. This would also create 12 million additional employment opportunities in the textile sector.  

It is thus imperative at this juncture to take recourse to IT, which is not only essential but indispensable for modernization and becoming competitive. Given that around 85 per cent of the industry consists of small units, the rising trend of textile units going in for IT-related infrastructure is indeed a positive sign. Many owners have felt that increasingly complex production mixes and longer processing sequences are intensifying the need for IT infrastructure. In composite mills (spinning, weaving, garmenting etc.), these are becoming inevitable.     

The IT infrastructure in textile firms is at a nascent stage. Though the ERP is proving helpful for many units, broadband connectivity is equally in high demand. Manufacturing and processing require IT assistance and more and more firms are going for it. Experts believe that information technology can streamline processes by organizing information from manufacturing, sales and finance and enabling data sharing for improved decision making.

There is a sustained effort to make the organized mill industry globally competitive. The following measures have been initiated and need to be carried further: integration of production efforts on technology-driven lines; encouragement in setting up large integrated textile complexes; strategic alliances with international textile majors with focus on new products and retailing strategies; and creation of awareness and supportive measures for application of IT, enhancement of efficiency, productivity and quality, better working environment and HRD.

While technology would play a key role in India’s growth of the textile sector, there is also need for the subsidy component to continues under the TUFS, provide 10 per cent capital subsidy for processing under TUFS and encourage banks to proactively invest in the textile sector. There is also need for accelerating labour reforms and ensuring power availability to meet the desired standards of this sector.  

As a fallout of the quota regime there is an immediate necessity of consolidation of production and distribution in supplying countries, which would necessarily mean improved scales of operation. Indian players would also have to integrate to achieve operating leverage and demonstrate high bargaining power. It is expected that Chinese textile firms have already invested heavily to expand and grab huge market share in the quota-free world.

According to a research report by EXIM Bank, Textiles Exports: Past MFA Scenario, it is estimated that the industry would require Rs 1.5 trillion ($ 35 billion) new capital investment in the next ten years (by 2014) to tap the potential export requirements of $ 70 billion. It is estimated that the USA and the European Union together would offer a market of $ 42 billion fir Indian textiles and garments in the year 2014. 

The opening of the international markets has thrown open unique set of challenges. The competition will not only intensify in the external as also in the domestic markets. Various countries, specially the developed countries may, however, increasingly resort to protectionist measures or regional trade agreements to protect their textile of clothing industry, which has been severely impacted by the imports of low-cost products from China. Despite all-round positive developments, the Indian textile sector faces a number of challenges, foremost being infrastructure and inflexible labour laws, inflow into the country of spurious material, counterfeit, fake and misleading selvedge description continues.

However, recognizing the threat of these spurious imports poses, if continued unchecked, the government has taken a number of steps to check the inflow of such products. Simultaneously, modernization and automation measures with proper technology could make Indian products cost competitive and ensure economies of scale so as to enable increased exports and international presence in a bigger way.---INFA

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