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INTRODUCTION

1.1

Introduction of Textile Industry:

The Textile industry in India traditionally, after agriculture, the only industry that has generated huge employment for both skilled and unskilled labor in textiles. The textile industry continues to be the second largest employment generating sector in India. It offers direct employment to over 35 million in the country. India is the second producer but India will lead in all. According to the Ministry of Textiles, the sector contributes about 14% to industrial production, 4% to the country's gross domestic product (GDP) and 17% to the country's export earnings. The share of textiles in total exports was 11.04% during AprilJuly 2010, as per the Ministry of Textiles. It is estimated that India would increase its textile and apparel share in the world trade to 8% from the current level of 4.5% and reach US$80 billion by 2020. During 2009-2010, Indian textiles industry was pegged at US$55 billion, 64% of which services domestic demand. 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. Archaeologists 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 chemists laboratory. Experimentation with the synthesis of dyestuffs in the laboratory rather than from natural plant materials led to the development and use of synthetic dyes in the latter half of the nineteenth century. Other experiments proved that certain natural materials could be dissolved in chemical solvents and reformed 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. The textile industry occupies a unique place in our country. One of the earliest to come into existence in India, it accounts for 14% of the total Industrial production, contributes to nearly 20% of the total exports. Being the largest foreign exchange earner, accounting for more than 5 per cent of GDP and providing direct employment to 38 million people, primarily the weaker sections, it is the second most important sector only after agriculture. The No.1 exporter of textiles, China, has a share of more than 10 per cent followed by Korea with 8.1 per cent; India's hovers at 3.5-4 per cent. In clothing exports, China holds a share of 18.5 per cent followed by Italy (6.7 per cent) and India (3 per cent). India's share may look small but in monetary terms it is large. It has a unique position as a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing; it is a major contribution to the country's economy. The industry is composed of handlooms, power looms and mills. While the mill sector is well-organized and modern, the same cannot be said of the power loom and handloom segments. The mill sector has managed to grab a reasonable share of the world export market. Although the development of textile sector was earlier taking place in terms of general policies, in recognition of the importance of this sector, for the first time a separate Policy Statement was made in 1985 in regard to development of textile sector. The textile policy of 2000 aims at achieving the target of textile and apparel exports of US $ 50 billion by 2010 of which the share of garments will be US $ 25 billion. The main markets for Indian textiles and apparels are USA, UAE, UK, Germany, France, Italy, Russia, Canada, Bangladesh and Japan.

The main objective of the textile policy 2000 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.

1.2 Introduction of India Textile Industry:

The Indian textile industry has a great legacy, which is perhaps unmatched in the history of Indias industrial development. Indias textile industry evolved and developed at a very early stage and its manufacturing technology was amongst the best. Prior to colonization, Indias manually operated textile machines were among the best in the world, and served as a model for production of the first textile machines in newly industrialized Britain and Germany.

Indian textiles were sought after for their finesse, quality and design. According to Chouta-Kuan, the Chinese observer preference was given to the Indian weaving for its and delicacy Prestige trade textiles such as Patola from Patan and Ahmedabad, coast were sought after by the Malaysian royalty and wealthy traders of the Philippines. Textiles have historically formed an important component of Indias exports. Marco Polos records show that Indian textiles used to be exported to China and South-East Asia. Textiles have also comprised a significant portion of the Portuguese trade with India. These included embroidered bedspreads, wall hangings and quits of embroidered wild silk on a cotton or jute ground.

A Study of Productivity and Financial Efficiency of Textile Industry of India

The attractiveness of the fast dyed, multi-colored Indian prints on cotton (chintz) in Europe led to the formation of the London East India Company in 1600, followed by Dutch and French counterparts. By the late 1600s there was overwhelming demand for their governments to ban the import of these cottons from India.

The legacy of the Indian textile industry stemmed from its wealth in natural resources silk, cotton and jute. The textile industry stemmed from its wealth in natural resources silk, cotton and jute, the technology used was superior and the skills of the weavers gave the finished product a most beautiful and ethnic look. The Indian textile industry with such a great pedigree could have gone only on way from here. But same did not happen.

The textile industry is the largest industry of modern India. It accounts for over 20 percent of industrial production and is closely linked with the agricultural and rural economy. It is the single largest employer in the industrial sector employing about 38 million people. If the employments in allied sectors like ginning, agriculture, pressing, cotton trade, jute, etc. are added then the total employment is estimated at 93 million. The net foreign exchange earnings in this sector are one of the highest and, together with carpet and handicrafts, account for over 37 percent of total export earnings at over US $ 10 billion. Textiles, alone, account for about 25 percent of Indias total Forex earnings. Indias textile industry since its beginning continues to be predominantly cotton based with about 65 percent of fabric consumption in the country being accounted for by cotton. The industry is highly localized in Ahmedabad and Bombay in the western part of the country though other centers exist including Kanpur, Calcutta, Indore, Coimbatore, and Sholapur.

The structure of the textile industry is extremely complex with the modern, sophisticated and highly mechanized mill sector on the one hand and the hand spinning and hand weaving (handloom) sector on the other. Between the two falls the small-scale power loom sector. The latter two are together known as the decentralized sector. Over the years, the government has granted a whole range of concessions to the non-mill sector as a result of which the share of the decentralized sector has increased considerably in the total production. Of the two sub-sectors of the decentralized sector, the power loom sector has shown the faster rate of growth. In the production of fabrics the decentralized sector accounts for roughly 94 percent while the mill sector has a share of only 6 percent. Being an agro-based industry the production of raw material varies from year to year depending on weather and rainfall conditions. Accordingly the price fluctuates too. The Ministry of

Textiles under the Government of India has taken some significant steps to arrest these problems. It has framed "The National Textile Policy 2000" to address the aforesaid issues. This policy aims at negating these problems and increasing the foreign exchange earnings to the tune of US$ 50 billion by the year 2010. It includes rational road-maps for the development and promotion of all the sectors involved directly or indirectly with the textile industry of India. Further, the policy also envisages bringing the unorganized decentralized textile sector (which accounts for 76% of textile production) at par with the organized mill sector. Furthermore, the policy also aims at introducing modern and efficient manufacturing machineries and techniques in the Indian textile sector. India being the second biggest textile manufacturer worldwide, possesses all the strong features of being addressed as a well established textile industry. Textile manufacturing is not only a pioneer activity in the manufacturing sector but it is also a main source of revenue. Indian textiles have a huge demand globally because they are being exported to various countries. Extensive range of Indian products are extremely elegant and are a reflection of Indian culture.

This industry is the major employment generator by employing almost 35 million people in textile industry. In today's world,the Indian textile industry is one of the most booming sectors in the industrial world. One can experience it by viewing the increase in demand of apparel and clothing among the consumers. The Government of India has guidelines in the form of Indian textile acts, Indian textile policies, etc for the Indian textile industry. Browse to know more about Indian textile and its relevant acts. Tags:- Indian Textile, Indian Textile Industry, Textile Manufacturer

Indian Textile

Indian Textile Acts

Central Silk Board Act, 1948

The Handlooms (Reservation of Articles for Production) Act, 1985

Yarn, Fabrics and Made-ups Export Entitlement (Quota)

Pee System Annexure-v

Pee System Annexure - IV

Policy 2000-2004

Indian textile industry holds the prestigious status in India. Textile industry caters to one of the most essential needs of the people, that is clothing. Moreover, textile industry of India 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 for its ethnicity, earthy colors, loads of variety and textures available in each type of fabric.

India is now a fast emerging market inching to reach half a billion middle income population by 2030. All these factors are good for the Indian textile industry in a long run. Even though the global economic crisis seams to be worsening day-by-day, as long as economies are emerging and growing as those in South and South East Asia, textile industry is here to grow provided it takes competition and innovation seriously. Read below to have an insight of the stand of the Indian Textile Industry in the economy. Where Does the Indian Textile Industry Stand Now? A general impression I get talking to the Indian textile industry leaders in the past few days make me understand that the industry is in a pinch. Why so? These are the reasons: 1. Global recession 2. Less export orders due to reductions in inventories by global retail giants like Wal-Mart 3. Price of raw materials like cottons and 4. Infrastructure bottlenecks such as power, particularly in Tamil Nadu. It has been recently reported that textile exports in 2009-10 period will be equal or could be even lower than the one achieved in 2008-09. In this global financial meltdown situation, what should the Indian textile industry do? In the times of adversity, it is an immediate task for all stake holders to pause for a moment and take stock of the difficulties and chart plans for sustainability and growth of the Indian textile industry.

Road Ahead for the Indian Textile Industry As the saying goes in the financial sector, it is not advisable to put all eggs in one basket. This is what happened somewhat in the case of the Indian textile industry. With the opening of world markets and the abolition of textile quotas since 2005, there came a negative situation as well. But, hindsight is always 20-20. Indian textile industry should have focused on all major sectors right from fibre to fashion and planned for an organized growth across the supply chain so as to compete with China and even countries such as Pakistan, Vietnam and Thailand. Instead, the industry had put majority of its stock in the spinning sector. This is clearly evident in the utilization of Technology Upgradation Fund Scheme effectively by the spinning sector. Although it is a positive outcome, in my opinion, the industry turned a blind eye on value-adding sectors such as weaving and finishing. Indian powerloom sector, which enables value-addition is a highly unorganized industry and needs major upgradation. Not only India does not have world quality indigenous shuttleless looms, but also investments are not adequate to cope with the quality and quantity to cater to the export market. Technical textiles sector is still in its infancy and a tangible growth will be highly visible by 2035 when the growth in this sector will be exponential. Is there a panacea to the complexities surrounding the India Textile Industry? Some Solutions for the Growth of Indian Textile Industry: A couple of points given below will give food for thought for all the stake holders in the Indian textile industry: 1. The weak links in the Indian conventional industry such as weaving and finishing have to be strengthened. A major thrust here is to have consolidated efforts by Indian Textile Machinery Manufacturers Association, end-users and the Government to undertake a moonshot and come-up with alternatives to European Machinery, which the weaving sector can afford. This should be doable within the next five years, if dedicated efforts are undertaken with the financial support for R & D by the Government through its various schemes.

2. Inch forward in the non-commodity textile sector, i.e., technical textiles sector from a non crawling phase to at least a crawling industry in the next three years. General awareness on nonwoven and technical sectors has been created with the recent marathon training workshops and conferences such as, "Advances in Textiles, Nonwoven and Technical Textiles", organized for the past five years in Coimbatore by Texas Tech University, USA and those such as the Texcellance and IIT's Technical Textiles conferences. These have put India on the international map in technical textiles. These conferences are of less use if they do not translate into investments and new projects. This aspect has been slow. Why is it so? Although the awareness on the broad-based technology know-how and end products has been created, less to no awareness has been created among industrialists on the marketability of non-commodity textile products.

1.3 History of India Textile Industry:

Map of handlooms in India, 1985 The archaeological surveys and studies have found that the people Harappan civilization knew the weaving and the spinning of cotton four thousand years ago. Reference to weaving and spinning materials is found in the Vedic Literature also. There was textile trade in India during the early centuries. A block printed and resist-dyed fabrics, whose origin is from Gujarat is found in tombs of Fostat, Egypt. This proves that Indian export of cotton textiles to the Egypt or the Nile Civilization in medieval times were to a large extent. Large quantities of north Indian silk were traded through the silk route in China to the western countries. The Indian silks were often exchanged with the western countries for their spices in the barter system. During the late 17th and 18th century there were large export of the Indian cotton to the western countries to meet the need of the European industries during industrial revolution. Consequently there was development of nationalist movement like the famous Swadeshi movement which was headed by the Aurobindo Ghosh. There was also export of Indian silk, Muslin cloth of Bengal, Bihar and Orissa to other countries by the East Indian Company.

The history of textiles in India dates back to nearly five thousand years to the days of the Harappan civilization. Evidences that India has been trading silk in return for spices from the 2nd century have been found. This shows that textiles are an industry which has existed for centuries in our country. Recently there has been a sizeable increase in the demand for Indian textiles in the market. India is fast emerging as a competitor to China in textile exports. The Government of India has also realized this fact and lowered the customs duty and reduced the restrictions on the imported textile machinery. The intention of the governments move is to enable the Indian producers to compete in the world market with high quality products. The results of the governments move can be visible as Indian companies like Arvind Mills, Mafatlal, Grasim; Reliance Industries have become prominent players in the world. The Indian textile industry is the second largest in the world-second only to China. The other competing countries are Korea and Taiwan. Indian Textile constitutes 35% of the total exports of our country. The history of apparel and textiles in India dates back to the use of mordant dyes and printing blocks around 3000 BC. The foundations of the India's textile trade with other countries started as early as the second century BC. A hoard of block printed and resist-dyed fabrics, primarily of Gujarati origin, discovered in the tombs of Fostat, Egypt, are the proof of large scale Indian export of cotton textiles to the Egypt in medieval periods. During the 13th century, Indian silk was used as barter for spices from the western countries. Towards the end of the 17th century, the British East India Company had begun exports of Indian silks and several other cotton fabrics to other economies. These included the famous fine Muslin cloth of Bengal, Orissa and Bihar. Painted and printed cottons or chintz was widely practiced between India, Java, China and the Philippines, long before the arrival of the Europeans.

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. Structure of Indian Textile Industry

Production: India is the second largest producer of fibre in the world and the major fibre produced is cotton. Other fibres produced in India include silk, jute, wool, and man-made fibers.60% of the Indian textile Industry is cotton based.

The strong domestic demand and the revival of the Economic markets by 2009 have led to huge growth of the Indian textile industry. In December 2010, the domestic cotton price was up by 50% as compared to the December 2009 prices. The causes behind high cotton price are due to the floods in Pakistan and China. India projected a high production of textile (325 lakhs bales for 2010 -11). There has been increase in India's share of global textile trading to seven percent in five years. The rising prices are the major concern of the domestic producers of the country.

Man Made Fibers: These include manufacturing of clothes using fiber or filament synthetic yarns. It is produced in the large power loom factories. They account for the largest sector of the textile production in India. This sector has a share of 62% of the India's total production and provides employment to about 4.8 million people.

The Cotton Sector: It is the second most developed sector in the Indian Textile industries. It provides employment to huge amount of people but its productions and employment is seasonal depending upon the seasonal nature of the production.

The Handloom Sector: It is well developed and is mainly dependent on the SHGs for their funds. It market share is 13% of the total cloth produced in India.

The Woolen Sector: India is the 7th largest producer of the wool in the world. India also produces 1.8% of the world's total wool.

The Jute Sector: The jute or the golden fiber in India is mainly produced in the Eastern states of our country like Assam, West Bengal. Indian is 3rd largest producer of jute in the world.

The Sericulture and Silk Sector: India is the 2nd largest producer of silk in the world. India produces world's 18% total silk. Mulberry, Eri, Tasar, and Mugas are the 3 main types of the silk produced in the country. It is a labor-intensive sector.

Indian Textile Policy: Government of India passed the National Textile Policy in 2000 Textile Organization: The Indian Textile industries are mainly dominated by some government, semi government and private institutions. The major functions of the ministry of Textile are: Textile Policy & Coordination Man-made Fiber Industry Cotton Textile Industry Jute Industry Silk and sericulture Industry Wool Industry Decentralized Power loom Sector Export Promotion

Planning & Economic Analysis Finance Matters Information Technology(IT) The advisory boards include: All India Handlooms Board All India Handicrafts Board All India Power looms Board Advisory Committee under Handlooms Reservation of Articles for Production Co-ordination Council of Textiles Research Association Jute Advisory Board

The major export promoting councils include: Apparel Export Promotion Council, New Delhi Carpet Export Promotion Council, New Delhi Cotton Textiles Export Promotion Council, Mumbai

The major PSU or Public Sector Undertaking are: National Textile Corporation Ltd. (NTC) British India Corporation Ltd. (BIC) Cotton Corporation of India Ltd. (CCI) Jute Corporation of India Ltd. (JCI) National Jute Manufacturers Corporation (NJMC) Handicrafts and Handlooms Export Corporation (HHEC) National Handloom Development Corporation (NHDC) Export Promotion Council for Handicrafts, New Delhi Handloom Export Promotion Council, Chennai Indian Silk Export Promotion Council, Mumbai Power loom Development & Export Promotion Council, Mumbai Synthetic & Rayon Textiles Export Promotion Council, Mumbai

Wool & Woolen Export Promotion Council, New Delhi

Other autonomous bodies in this industry are:

Central Wool Development Board, Jodhpur National Institute of Fashion Technology, New Delhi National Centre for Jute Diversification

The textile Research Associations are:

Ahmadabad Textiles Industrys Research Association Bombay Textiles Research Association, Mumbai Indian Jute Industries Research association, Kolkata Man-made Textiles Research Association, Surat Synthetic and art silk Mills Research Association, Mumbai Wool Research Association, Thane Northern India Textiles Research Association, Ghaziabad South India Textiles Research Association, Coimbatore

Organized sector: According to Kearneys Retail Apparel Index India ranked as the fourth most promising market for apparel retailers in 2009. There is large scope of improvement in the textile industry of India as there is a huge increase in personal disposable income among the Indians after the 1991 liberalization. There is also a large growth of the organised sector in the Indian textile industries. The foreign brands along with the collaboration of the Indian companies established business in India. Some of these are Puma, Armani, Benetton, Esprit, Levi Strauss, Hugo Boss, Liz Claiborne, Crocs etc. The major Indian Industries include Bombay Dyeing, Fabindia, Grasim Industries, JCT Limited, Lakshmi Machine Works, Lakshmi Mills and Mysore Silk Factory.

1.4 Global Scenario:

The textile and clothing trade is governed by the Multi-Fiber Agreement (MFA) which came into force on January 1, 1974 replacing short-term and long-term arrangements of the 1960s which protected US textile producers from booming Japanese textiles exports. Later, it was extended to other developing countries like India, Korea, Hong Kong, etc. which had acquired a comparative advantage in textiles. Currently, India has bilateral arrangements under MFA with USA,

Canada, Australia, countries of the European Commission, etc. Under MFA, foreign trade is subject to relatively high tariffs and export quotas restricting Indias penetration into these markets. India was interested in the early phasing out of these quotas in the Uruguay Round of Negotiations but this did not happen due to the reluctance of the developed countries like the US and EC to open up their textile markets to Third World imports because of high labor costs. With the removal of quotas, exports of textiles have now to cope with new challenges in the form of growing non-tariff / non-trade barriers such as growing regionalization of trade between blocks of nations, child labour, anti-dumping duties, etc. Nevertheless, it must be realized that the picture is not all rosy. It is now being admitted universally and even officially that the year 2005 AD is likely to present more of a challenge than opportunity. If the industry does not pay attention to the very vital needs of modernization, quality control, technology up gradation, etc. it is likely to be left behind. Already, its

comparative advantage of cheap labour is being nullified by the use of outmoded machinery. With the dismantling of the MFA, it becomes imperative for the textile industry to take on competitors like China, Pakistan, etc., which enjoy lower labour costs. In fact the seriousness of the situation becomes even more apparent when it is realized that the non-quota exports have not really risen dramatically over the past few years. The continued dominance of yarn in exports of cotton, synthetics, and blends, is another cause for worry while exports of fabrics are not growing. The lack of value added products in textile exports do not augur well for India in a non-MFA world.

Textile exports alone earn almost 25 percent of foreign exchange for India yet its share in global trade is dismal, having declined from 10.9 percent in 1955 to 3.23 percent in 1996. More significantly, the share of China in world trade in textiles, in 1994, was 13.24 percent, up from 4.36 percent in 1980. Hong Kong, too, improved its share from 7.06 percent to 12.65 percent over the same period. Growth rate, in US$ terms, of exports of textiles, including apparel, was over 17 percent from 1993-94 to 1995-96. It declined to 10.5 percent in 1996-97 and to 5 percent in 1997-98. Another disconcerting aspect that reflects the declining international

competitiveness of Indian textile industry is the surge in imports in the last two years. Imports grew by 12 percent in dollar terms in 1997-98, against an average of 5.8 percent for all imports into India. Imports from China went up by 50 percent while those from Hong Kong jumped by 23 percent.

CHINA:China's investment spending in the textile industry slumped 20 percent in the first two months of this year from the same period in 2008, the National Bureau of Statistics said. Textile industry spending accounted for 0.9 percent of the nation's overall investment of 1.03 trillion yuan, down 0.5 percentage point from a year earlier, the statistics bureau said. China's garment and textile exports tumbled 15 percent to $21.9 billion in the two months from a year earlier, customs data show. Exports of yarn, fabrics and textile products totaled $7.29 billion, down 21 percent, while apparel exports fell 11 percent to $14.6 billion, the Beijing-based Customs Bureau said on March 11. Textile firms, once an export engine of China, are fighting for their survival this year with rising costs and dismal overseas market hit by the subprime crisis. Those firms wooing foreign buyers at the 103rd China Import and Export Fair, the largest trade fair in the country also called the Canton Fair, felt the pinch. Few buyers visited their exhibition stall, and fewer still signed contracts. Chinese product competitiveness was not much as it was. The reduction in tax rebates and the devaluation of the dollar have made Chinese products 20 percent higher than what it was. The Chinese currency has ventured below the seven Yuan mark since the government loosened

the units peg to the dollar in 2005. The Yuan has gained about 18 percent since then. This has made Chinese textile products more expensive and its price advantage has almost vanished compared with products from Vietnam and India. The Yuan appreciation, together with the rising material and labor costs, has driven some textile firms to the brink of bankruptcy. The global textile and clothing industry is estimated to be worth about US$ 4,395 bn and currently global trade in textiles and clothing stands at around US$ 360 bn. The US market is the largest, estimated to be growing at 5% per year, and in combination with the EU nations, accounts for 64% of clothing consumption. The Indian textile industry is valued at US$ 36 bn with exports totalling US$ 17 bn in 20052006. At the global level, Indias textile exports account for just 4.72% of global textile and clothing exports. The export basket includes a wide range of items including cotton yarn and fabrics, manmade yarn and fabrics, wool and silk fabrics, madeups and a variety of garments. Quota constraints and shortcomings in producing valueadded fabrics and garments and the absence of contemporary design facilities are some of the challenge that have impacted textile exports from India. Indias presence in the international market is significant in the areas of fabrics and yarn. India is the largest exporter of yarn in the international market and has a share of 25% in world cotton yarn exports India accounts for 12% of the worlds production of textile fibres and yarn In terms of spindle age, the Indian textile industry is ranked second, after China, and Account for 23% of the worlds spindle capacity Around 6% of global rotor capacity is in India The country has the highest loom capacity, including handlooms, with a share of 61% in world loom age.

US market

US imports of textiles and clothing fell for the first time in seven years in 2008 by 5.2% to 50.4 billion square meters after growing by an average of 8.4% per annum between 2001 and 2007. Within the 2008 total, imports of apparel fell by 2.7%, imports of made-up textiles by 5.4%, fabric imports by 9.3% and yarn imports by 11.1%. Of these four categories, apparel continued to account for the highest share of total imports. Furthermore, at 45.1%, this share was up from 43.9% a year earlier. By contrast, the share of made-up textiles fell for the first time in 11 years although, at 33.6%, it was still double the share held by these items in 1997. Meanwhile, the share of fabric imports fell for the sixth consecutive year and that of yarn imports for the fourth consecutive year. US import prices rise for a third successive year in 2008, following several years of decline. The rise in 2008 was led by China. By contrast, there were falls in the average prices of imports from Vietnam and India -- the USA's second and third largest suppliers of textiles and apparel respectively. China strengthened its lead as the USA's biggest supplier in 2008, in both value and volume terms. However, growth in imports from China slowed to just 1.1% in value terms -- and in volume terms imports from China actually fell by 3.6%.

Despite these developments, China's share of the US import market grew slightly in 2008 from 33.5% to 35.1% in value terms and from 40.3% to 40.9% in volume. The fastest growing supplier, however, was Vietnam, and the country became the USA's second largest supplier in terms of value. In South Asia, US imports from India and Pakistan fell in value terms, although imports from Bangladesh increased by 11.1%.

Bangladesh Swedish Firms have Expanded Outsourcing in Bangladesh. Swedish firm engaged in outsourcing home textiles and home furnishing items is planning to expand its operations in Bangladesh. RMG Exports is expected to Surge despite global recession. The readymade garment sector, one of the pillars of the Bangladesh economy, is definitely in a positive mode despite global financial meltdown. The three-day Bangladesh Apparel and Textile Exposition (BATEXPO) wooed foreign buyers to buy apparel products.

Bangladesh announced a 1.14 trillion taka ($ 16.5 billion) budget for the 2009/10 fiscal year aimed at shielding the economy from the global economic crisis. Gross Domestic Product was expected to grow about 6 per cent in the year to June 2010, after 5.9 per cent growth in the year to June 2009. Inflation was fore cast to ease to around 6% to 7% in the year 2008 - 09. Global recession impacted in Bangladesh economy on three fronts: Exports, Imports and Remittances. Finance minister of Bangladesh said Except for readymade garment and the domestic textile sector, exports for all other commodities have declined compared to previous year. The budget, which assumes revenues of 795 billion taka, allocates 21 billion taka to finance public private partnerships, and 36 billion taka in subsides to agriculture, which contributes 21% of GDP.

Pakistan

Pakistan government plans to spend Rs 40 billion in fiscal year 2009 - 10 for value added textile sector. The export refinance has been increased from last year Rs 140 billion to Rs 250 billion in the budget 2009 - 10. The SMEs would have access to credit through Rs 10 billion credit guarantee fund while the new entrepreneurs would get venture capital without collateral from a separate Rs 10 billion funds established for this purpose. Government has allocated a substantial amount of Rs 60 billion in the federal budget to assist the industries involved in value addition, SMEs and revival of industrial activity in the country.

CAMBODIA:Cambodia's garment industry is the country's biggest industrial employer, and is now struggling against stiffer global competition and slowing demand. Many Chinese and Korean companies have established a presence in Cambodia for years. Now, more than 10 Chinese-owned factories have moved to cheaper markets, leaving hundreds of thousands of garment workers from the provinces facing destitution, reported Phnom Penh Times in early 2008.The garment industry earns 80 percent of Cambodia's foreign exchange earnings and employs an estimated 350,000 people in more than 300 factories. The industry began to grow after a the country passed a new labor laws encouraging labour unions and allowed the International Labour Organization (ILO) to inspect factories and publish its findings. In turn, the United States agreed to cut tariffs on Cambodian garment exports, buying 70 percent of all of the country's textiles in the 1990s.

Cambodia maintained its higher working conditions after the deal expired in 2005, and garmentmaking has made the national economy one of the fastest growing in the region. The World Bank reported that the industry grew only 8.0 percent in 2007 compared to the growth of up to 20 percent previously. The Cambodia Ministry of Commerce said that the apparel exports had declined since October 2007, mainly due to the US economic slowdown. Exports to the United States slipped 1.44 percent in the first quarter of 2008, compared with the same period in 2007. Predicted Trend .The Cambodia's Free Trade Union (FTU) said that the factory owners are looking abroad for greater productivity and lower costs. Kaing Monika, Manager at the Garment Manufacturers Association of Cambodia, commented that many manufacturers could move to Vietnam, Bangladesh or India if they could get lower costs. Production costs, oil and power, are high in Cambodia, and the demand for higher wages also put the country's garment industry in danger, he said. Factory owners are also facing a proliferation of labor unions and illegal strikes. Experts predict that in 2009 Cambodia would even see more competition when US restrictions on Chinese textile exports are scheduled to end. China and Vietnam are still Cambodia's direct competitors. Cambodia's labor ministry said that to counter this competition, Cambodia must increase productivity, quality and extend their reputation as having high labor standards. 1.4.1 Major Manufacturing countries and their Market Share: In 2008, the largest apparel manufacturers and exporters were countries from the Asia-Pacific region which included countries like China, Hong Kong, Philippines, Malaysia, Indonesia, Bangladesh, Sri-lanka, Pakistan, Thailand and India. The other major apparel manufacturing nations were USA, Italy, Germany and Mexico.

Graph No: 1.1 Country wise Market Share

The end of the quota regime, which marks the phasing out of the MFA from January 1, 2005, has ushered a new phase of l\global opportunity for the Textile & Clothing Sector. The removal of quotas could witness the World Trade in Textile, which is at present US $ 395 billion to surge to over US $ 650 billion by 2010. The expected future CAGR is expected to be 8% with Textiles Accounting for 5.8% and Clothing being the real driver of growth with an expected CAGR of a Study of Productivity and Financial Efficiency of Textile Industry of India 9.6%. Hence, there lies a distinct opportunities for countries possessing competitive advantages resulting from labour, technology, and raw materials, rather than for those arising from favourable trade agreements.

1.4.2 Global Trade Volume and Trends As the apparel manufacturing industry has become more labor intensive and requires less capital investment, its concentration is shifting more towards the developing countries and even constituting large amount of their exports. They are concentrating more on developing countries as the labour cost is very less in such countries. This can be analyzed by the fact that the apparel production in industrialized countries decreased between 1980 and 1996, where as the production increased in developing countries during the same period. Similar trend was seen in exports, the apparel exports of developing countries increased six times between 1980 and 1997, and that of developed economies rose by 150%. The global apparel industrys total revenue in 2011-12 was US$1,252.8 billion, which was approximately 68% of the overall industry value. Asia Pacific constitutes the largest amount of production and trade in the apparel industry worldwide. Region wise Share of Total Trade Revenue (2011-2012) Region Asia Pacific Europe USA Rest of the world % Share 35.40% 29.40% 22.30% 12.90%

China had captured 65% of the global market share towards the end of 2011-12 in total apparel exports. The other major apparel exporting nations include USA, Germany, Hong Kong, Italy, Malaysia, Pakistan, Thailand and India. Some of the apparel trade statistics are presented below. Exports of Apparels in 2011-2012 Country China Hong Kong Italy Malaysia Germany Pakistan Thailand USA India US $ Billion 8,260.921 1,723.210 1,353.586 1,255.069 669.130 618.830 597.758 595.171 522.463

According to the provisional DGCI&S data, textile exports during fiscal 2005 06 stood at around US$17 billion, recording a 22% growth yearonyear. Except for manmade textiles, all segments in the textile industry, including handicraft carpets, wool and silk, have recorded a growth in exports during 200506 the first year since the phasing out of the quota system in the global market. A readymade garment (RMG) is the largest export segment, accounting for a considerable 45% of total textile exports. This segment has benefited significantly with the termination of the MultiFibre Arrangement (MFA) in Jan 05. In 200506, total RMG exports grew by 29%, touching US$ 7.75 bn. In 200304 and 200405, the growth in RMG exports was 8.5% and 4.1% respectively. The jump in 200506 exports has been largely due to the elimination of quotas.

Exports of cotton textiles which include yarn, fabric and madeups constitute over 2/3rd of total textiles exports (excluding readymade garments). Overall, this segment accounts for 26% of total textile exports. According to the Ministry of Textiles, in 200506, total cotton textile exports Source: Ministry of Textiles, GoI Source: Ministry of Textiles, GoI XVI were worth US$ 4.5 bn, implying a growth of 27% over the exports in 200405, which were worth US$ 3.5 bn. Manmade textiles exports have witnessed a decline of 2.5% in 200506. Between 19992000 and 200203, manmade textiles exports were growing at around 30% per annum.

The slowdowns began since 2003-04 and have been on the decline since. Major export destinations for Indias textile and apparel products are the US and EU, which together accounted for over 75% of demand. Exports to the US have further increased since 2005, post the termination of the MFA. Analysis of trade figures by the US Census bureau shows that postMFA, imports from India into the US have been nearly 27% higher than in the corresponding period in 200405. 1.4.3 Global Factors Influencing Textile Industry The history of the textile and clothing industry has been replete with the use of various bilateral quotas, protectionist policies, discriminatory tariffs, etc. by the developed world against the developing countries. The result was a highly distorted structure, which imposed hidden costs on the export sectors of the Third World. Despite the fact that GATT was established way back in 1947, the textile industry, till 1994, remained largely out of its liberalization agreements. In fact, trade in this sector, until the Uruguay Round, evolved in the opposite direction. Consequently, since 1974 global trade in the textiles and clothing sector had been governed by the Multi-fibre agreement, which was the sequel to an increasingly pervasive quota regime that began with the Short-term arrangement on cotton products in 1962 and followed by the Long-Term arrangement. After the successful conclusion of the Uruguay Round in 1994, the MFA was replaced by the Agreement on Textiles and Clothing (ATC), which had the same MFA framework in the context of an agreed, ten year phasing out of all quotas by the year 2005. The section that follows takes a brief look at the history of these protectionist regimes as also a more detailed look at the MFA and the ATC.

1.5 Market Segmentation Criteria Fashion and non-Fashion: Fashion Apparel with low price sensitivity Non-Fashion Apparel with price sensitivity Age group:- (infants, children, teenagers, adult, ) Product Type: Female suit, coat, tailored jacket and skirt Female lingerie, loungewear and nightwear Female blouse and Shirt Female dress Male Suit, Coat and Overcoat Male Shirt Male underwear and nightwear Socks and hosiery Trouser, Slack and Jean Accessories

 Occasion and Formality: Sports outfit Casual wear Business clothing Formal clothing Material:- (wool, cotton, linen, synthetic fiber, leather, ) Production Type:-(Cut and Sew, Knitting, ) 1.6 Segment Analysis Indias textile industry comprises mostly small-scale, non-integrated spinning, weaving, finishing, and apparel-making enterprises. The figure below depicts the overall value chain and the number and type of units within the industry. Readymade garments Jute industry Cotton textiles Silk textiles Man made textiles Woolen textiles Coir and jute

Moreover the cottage industry of India produces average dress material, with the cheapest of threads which costs only about 200 INR featuring fine floral and other patterns.

Indian 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. Indian 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. Indian textile industry is also the largest in the country in terms of employment generation. It not only generates jobs in its own industry, but also opens up scopes for the other ancillary sectors. India textile industry currently generates employment to more than 35 million people. It is also estimated that, the industry will generate 12 million new jobs by the year 2010. Indian textile industry can be divided into several segments, some of which can be listedasbelow: Cotton Textiles Silk Textiles Woolen Textiles Readymade Garments Hand-crafted Textiles Jute and Coir

1.7 Current Scenario:

Textile exports are targeted to reach $50 billion by 2010; $25 billion of the amount will go to the US. Other markets include Japan, Russia, UAE, Germany, France and Italy. 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 sold the garment at Rs 600, making the value addition to be profitable by 300 %.

The Indian Textile Industry is a vertically integrated industry which covers a large gamut of activities ranging from production of its own raw material namely, cotton, jute, silk and wool to providing to the consumers high value added products such as fabrics and garments. India also produces large varieties of synthetic and manmade fibers such as a Study of Productivity and Financial Efficiency of Textile Industry of India. The textile sector plays a significant role in Indian economy by contributing to the Gross Domestic product, generating employment and earning foreign exchange. An estimated 35 million people are directly employed in the Indian Textile Industry, which contributes to 4% of GDP and 21% of total export earnings. India is globally a significant player in the textile sector and is globally the Third largest producer of cotton and cellulose fiber/yarn. Second largest producer of cotton yarn. Largest producer of jute, second largest producer of silk. Fifth largest producer of synthetic fiber/yarn.

Cotton is one of the major corps cultivated in India. India has the largest cotton acreage in the world and cotton is the dominant fiber in Indian Textile Industry. About 75% of the total yarn and about 56% of the total fabric produced in India was cotton in 2004-05. Almost all cotton used in India is grown locally and a tiny amount is imported. Cotton textiles account for 2/3rd of Indias textile exports.

During the last five decades, the production of cotton in India increased from 30 lakhs bales of 170 kgs each in 1950-51 to an estimated a Study of Productivity and Financial Efficiency of Textile Industry of India 213 lakhs bales (170 kg each) in 2004-05. There has also been a rise in area under cultivation from 58.9 lakhs hectares in 1950-51 to an estimated 89.7 lakhs hectares in 2004-2004.

1.8 Production and Exports:

India has been experiencing strong performance in the textile industry, across different segments of the value chain, from raw materials to garments. Domestic production has been growing, as well as exports. Textile Exports:The Indian textile industry contributes substantially to Indias export earnings. The export basket consists of wide range of items containing cotton yarn and fabrics, man-made yarn and fabrics, wool and silk fabrics, made-ups and variety of garments. Indias textile products, including handlooms and handicrafts, are exported to more than hundred countries. However, USA, EU Member States, Canada, U.A.E., Japan, Saudi Arabia, Republic of Korea, Bangladesh, Turkey, etc are the major importers of our textile goods. During the year 2007-08, the share of textiles exports including handicrafts, jute, and coir in Indias total exports was 16.63%. Indias textiles exports have registered strong growth in the post quota period. Textiles exports grew from US$ 14.03 billion in 2006-07 to US$ 17.08 billion in 2007-08, recording a growth of 21.8 per cent.

1.9 The Agreement on Textiles and Clothing: Since 1 January 1995, international textiles and clothing trade has been going through fundamental change under the 10-year transitional programmed of the WTO's Agreement on Textiles and Clothing (ATC). Before the Agreement took effect, a large portion of textiles and clothing exports from developing countries to the industrial countries was subject to quotas

under a special regime outside normal GATT rules. Under the Agreement, WTO Members have committed themselves to remove the quotas by 1 January 2005 by integrating the sector fully into GATT rules. While the WTO is still young, the multilateral trading system that was originally set up under GATT is well over 50 years old. The past 50 years have seen an exceptional growth in world trade. Merchandise exports grew on average by 6% annually. Total trade in 2000 was 22-times the level of 1950. GATT and the WTO have helped to create a strong and prosperous trading system contributing to unprecedented growth. The system was developed through a series of trade negotiations, or rounds, held under GATT. The first rounds dealt mainly with tariff reductions but later negotiations included other areas such as anti-dumping and non-tariff measures. Multi-fiber Arrangements (MFA) 1974-1994 Agreement on Textile and Clothing (ATC) 1995-2004 Under the Agreement, WTO Members have committed themselves to remove the quotas by 1 January 2005 by integrating the sector fully into GATT rules. MFA: The Multi-fiber Arrangement was a major departure from the basic GATT rules and particularly the principle of non-discrimination. This provided for the application of selective quantitative restrictions when surges in imports of particular products caused, or threatened to cause, serious damage to the industry of the importing country.

ATC: - The ATC is a transitional instrument, built on the following key elements: The product coverage, basically encompassing yarns, fabrics, made-up textile products and clothing A programmed for the progressive integration of these textile and clothing products into GATT 1994 rules A liberalization process to progressively enlarge existing quotas (until they are removed) by increasing annual growth rates at each stage A special safeguard mechanism to deal with new cases of serious damage or threat thereof to domestic producers during the transition period Establishment of a Textiles Monitoring Body (TMB) to supervise the implementation of the Agreement and ensure that the rules are faithfully followed Other provisions, including rules on circumvention of the quotas, their administration, treatment of non-MFA restrictions, and commitments undertaken elsewhere under the WTO's agreements and procedures affecting this sector. 1.10 General Implications of WTO on Textile Industry Worldwide: Exports of textile products will be quota free and will only be based on market considerations, namely product attributes, pricing, promotion such as advertising, brand building and other sales promotion means and physical distribution its cost an logistics decisions, the market will be purely competitive. It may be unlikely that the developed countries will open their doors after MFA phase out. The restrictions on imports into these countries may come in many forms such as Non-tariff barriers based on environmental health, labour standard related issues and so on. Formation of regional trade arrangement, which implies higher degree of labialisation among the regions as compared to rest of the world, for E.g., EU, NAFTA. Initiating anti dumping and countervailing measures.

 In the wake of WTO regime, one needs specialization and the globalization is impending to take place as to produce where it is cheap and will sell where it is profitable. FDIs and technology transfer may take place in the developing countries. Removal of quotas will increase market access and thereby stimulate exports from the developing countries like India, but it will also increase competition amongst exports, with the prospects that there could be both winners and losers among the exporters. There is a likely emergence of outward processing concept by manufacturers in advance countries on their attempts to counteract the textile suppliers from countries like India which could be termed as dislocation of production. It would be observed that there is increasing role of NGOs in influencing trade related issues across countries. There would be increasing clout of developed countries as evident from reports on ministerial levels meetings of WTO, in pursuing their interests.

1.10.1 Implication of WTO on Indian Textile Industry: Due to the removal of quota restriction as per WTO agreements on market access, import of woven fabrics, mainly synthetics are on the increasing trend. Imported textiles already have a large presence in the retail network across the country. Power loom sector with largest synthetic predominance will have to face these imports. Further due to reduction in import tariffs added textiles from developed countries and low-end fabrics from low cost production countries into India may affect domestic production. In the apparel sector, Ludhiana, Tirupur, Delhi, Bangalore, Mumbai and Chennai are all remarkably unique and dynamic centers of production and developing as a textile hub centers, this gross generalization is only indicative of the relative strengths of the various locations, as individual companies with comparable or greater strengths do also exist outside this organization.

1.11 Interesting Facts about Indian Textiles: About 6% contribution to GDP Second largest employment providing sector after agriculture and providing employment to about 35million people. Constitute only 3% of the total world textile exports. Currently Indian textile export is 13 $ bn and target of 50 $ bn by2010 Constitute 27% of India's total exports and 35% of the gross export earnings. A ready-made garment contributes to 41% of the total textile exports and about 15% of the country's total exports. Indian textile exports are increasing at the rate of 20% annually. Contributes to almost 14% of the industrial production Organized mills constitutes just about 3.1% of total production of textile Highest area under irrigation for cotton in the world about 9million hectares (26% of the world total growing area) and productivity is 300kg/hectare as compare to 550 kg/hectare average of the world, third largest producer of the cotton. First largest producer of cotton yarn and jute in the world Second largest producer of the raw silk after the china Fifth largest producer of polyester yarn. Out of 1227 cotton/man-made fiber mills, 188 mills are in public sector, 124 mills in cooperative sector and 915 are in the private sector. 37 Mn spindles accounted 23.6% of the world, largest spindle capacity in the world 1.78 Mn power looms accounted 43.63% of the world's and highest in any country 3.9 Mn handlooms accounted 84.78% of the world and highest in the world India has the second largest spinning capacities in the world. Also, this is continuing to grow and modernize - the current strength is at around 38 million spindles and 400,000 rotors.

1.12Government Regulations and Support:

1.12.1 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. 1 The Technology Up gradation Fund Scheme (TUFS):Recognizing that technology is the key to being competitive in the global market, the Government of India established the Technology Up gradation Fund Scheme (TUFS) to enable firms to access low-interest loans for technology up gradation. 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 up gradation 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. 2 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.

3 Schemes 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. 4 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 Government proposed to enhance the allocation for the sector from Rs.2.41 billion in 2006-07 to Rs.3.21 billion next year. 1.12.2 Quality Improvement:The Textile Commission, under the Ministry of Textiles, facilitates firms in the industry to improve their quality levels and also get recognized 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. 1.12.3 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 organizations 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. 1.12.4 Foreign Investment Scenario:Foreign investment and market presence was not very high in Indias textile and apparel sector. With liberalization in investment and the subsequent the removal of quantitative restrictions on several textile products, the Indian market now has the presence of several international brands. However, the presence is more in the nature of brand licensing with Indian players rather than direct investment. U.S. brands have a larger presence in the market than others. According to official data from the Secretariat of Industrial Assistance (SIA), the total foreign investment approved in the sector since 1991 is in the region of US $80 million, of which E.U. investment is estimated to be US$ 16.5 million a little over 20 percent of total approvals, from 46 applications. The largest number of approvals was of investments from UK (16) and Italy (14), together representing more than 75 per cent of the cases and 86 per cent of the value approved. A few companies have also set up export-oriented manufacturing facilities in India. Notable names include La Perla, and Brinton, a leading carpet manufacturer from the U.K. Besides investment, brand licensing and marketing joint ventures have been on the rise in the 1990s, with some of the worlds most popular apparel brands entering the Indian market. Some of the highly visible names include: Levis, Lee, Wrangler, Benetton, Pepe, Reid and Taylor, Zegna, Arrow, Louis Philippe, Van Heusen, Lacoste, and Ralph Lauren. 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.

1.12.5 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) manmade fiber 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 fibers 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 globalization 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 centers of excellence for manufacture of technical textiles.

1.13 Role of government in the past and in present:

1. Regulatory disadvantages:One of the most insidious is the historical reservation of manufacturing for very small companies. While the original political intention might have been to spread self-reliant industry across a large political base, this reservation has created the fragmentation that shackled the competitiveness of Indian textile industry. Most of the sectors have not been de reserved and entrepreneurs and co-operates are investing significantly sums of money in setting up new, large factories or expanding their existing manufacturing plants

2. Foreign Investment:The government has in the past kept foreign investment out of textile an apparel manufacturing. It has gradually removed these restrictions and has also brought down import duties on capital equipment creating grounds for foreign investor to set up manufacturing plants competitively in India 3. Excise and Tax:Some of the other problem remains such as excise and other tax imbalances. The political diversity of Indias 35 states and union territories and the coalition of ruling party have led to slow progress in rationalizing these imbalances due to debate and discussions. However a framework of VAT in beginning to be put in place through in fits and start5s, which sill clear those imbalances once it is implemented fully and create truly unified economic space. 4. Labor Laws:Labor laws are still seen to be relatively unfriendly to business with companies having less than ideal flexibility to follow a hire and fire policy. To avoid any potential trouble with unionization of labor companies have often broken their business down into small units, which have in turn, lost the efficiencies of economic of scale. In recent years, these are been movement towards labor reform and one hope that this will make the business environment even more conductive. 1.14 Step proposed to safeguard the domestic textile industry:-

1. Tariff and non- tariff barriers:In the wake of WTO quota regime doesnt mean abolition of tariff completely, but the purpose to reduce the quota so that free trade across the country is possible. India can protect the domestic industry in the form to non-tariff barriers such as health, safety and labour standards, environmental friendliness, and rules of origin and so on.

2. Anti dumping:If a company exports a product at a price lower than the price it normally charges on its own market it is said to be dumping the product. India as a major threat from neighbour country like china, which would dump the product to destroy domestic market so, antidumping law, should have to be strengthened. 3. Unregulated trade:Import of cotton is not possible for small-scale organization in large quantity. So, Indian government should have to play a role of intermediary to help the small-scale industry and reduce regulated trade. 4. Open data source:Indian government should have to create the facility to access the proper data from global like price, demand of the product and disseminate to the domestic industry.

1.15 CONTRIBUTION OF TEXTILE INDUSTRY IN GDP The contribution of textile industry to the total GDP was 2.28% during the year 2007-08, 2.25% during the year 2008-09 and 2.22% during the year 2009-10. Textiles and Clothing Industry contributed 11.46% of countrys total exports in 2008-09, 12.54% in 2009-10 and 10.63% in 2010-11. Exports of Textiles & Clothing is USD 21.22 billion, USD 22.42 billion and USD 26.82 billion during 2008-09, 2009-10 and 2010-11 The Indian textile industry is one of the major sectors of Indian economy largely contributing towards the growth of the countrys industrial sector. The textile sector contributes 14 per cent to industrial production, 4 per cent to National GDP, and 10.63 per cent to countrys export earnings. Textile sector in India provides direct employment to over 35 million people and holds the second position after the agriculture sector in providing employment.

2.

MAJOR PLAYERS OF AN INDIAN TEXTILE INDUSTRY

2.1 Arvind Mills:

HISTORY Arvind Mills Limited was incorporated on 1930 under the Companies Act,1956 The year 1930 was when the world suffered the great depression. Companies across the globe began closing down. In UK and in India, the textile industry in particular was in trouble. At about this time, Mahatma Gandhi championed the Swadeshi Movement and at his call, people from all across India began boycotting fine and superfine fabrics, which had so far been imported from England. In the midst of this depression one family saw opportunity. The Lalbhais reasoned that the demand for fine and superfine fabrics still existed. And any Indian company that met this demand would surely prosper. The three brothers, Kasturbhai, Narottambhai and Chimanbhai, decided to set up a mill to produce superfine fabric. Next they looked around for state-of-the-art machinery that could produce such high quality fabric. Their search ended in England. The best technology of that time was acquired at a most attractive price. And a company called Arvind Limited was born. Arvind Limited started with a share capital of Rs 2,525,000 ($55,000) in the year 1931. With the aim of manufacturing the high-end superfine fabrics Arvind invested in very sophisticated technology. With 52,560 ring spindles, 2552 doubling spindles and 1122 looms it was one of the few companies in those days to start along with spinning and weaving facilities in addition to full-fledged facilities for dyeing, bleaching, finishing and mercerizing. The sales in the year 1934, three years after establishment were Rs 45.76 lakh and profits were Rs 2.82 lakh. Steadily producing high quality fabrics, year after year, Arvind took its place amongst the foremost textile units in the country.

In the mid 1980s the textile industry faced another major crisis. With the power loom churning out vast quantities of inexpensive fabric, many large composite mills lost their markets, and were on the verge of closure. Yet that period saw Arvind at its highest level of profitability. There could be no better time, concluded the Management, for a rethink on strategy. The Arvind management coined a new word for it new strategy Reno vision. It simply meant a new way of looking at issues, of seeing more than the obvious and that became the corporate philosophy. The national focus paved way for international focus and Arvinds markets shifted from domestic to global, a market that expected and accepted only quality goods. An in-depth analysis of the world textile market proved an eye opener. People the world over were shifting from synthetic to natural fabrics. Cottons were the largest growing segments. But where conventional wisdom pointed to popular priced segments, Reno vision pointed to high quality premium niches. Thus in 1987-88 Arvind entered the export market for two sections -Denim for leisure & fashion wear and high quality fabric for cotton shirting and trousers. By 1991 Arvind reached 1600 million meters of Denim per year and it was the third largest producer of Denim in the world. In 1997 Arvind set up a state-of-the-art shirting, gabardine and knits facility, the largest of its kind in India, at Santej. With Arvinds concern for environment a most modern effluent treatment facility with zero effluent discharge capability was also established. Year 2005 was a watershed year for textiles. With the muliti-fiber agreement getting phased out and the disbanding of quotas, international textile trade was poised for a quantum leap. In the domestic market too, the rationalizing of the cenvat chain and the growth of the organized retail industry was likely to make textiles and apparel see an explosive growth. Arvind has carved out an aggressive strategy to verticalize its current operations by setting up worldscale garmenting facilities and offering a one-stop shop service, by offering garment packages to its international and domestic customers. With Lee, Wrangler, Arrow and Tommy Hilfiger and its own domestic brands of Flying Machine, Newport, Excalibur and Ruf & Tuf, Arvind set its vision of becoming the largest apparel brands company in India.

2.2 Arrow Textile: Arrow Webtex Limited was incorporated on November, 5 1990 under the Companies Act, 1956 under the name Creole Holdings Company Private Limited. Pursuant to it becoming a deemed Public Limited Company, the name was changed to Creole Holdings Company Limited on June 2, 1992. Subsequently, on becoming a Private Limited Company, the name was again changed to Creole Holdings Company Private Limited vide Second Certificate of Incorporation dated October 22, 2003 issued by the Registrar of Companies, Pune. The name was then changed to Creole Holdings Compan Limited vide fresh Certificate on change of name dated December 14, 2006. Thereafter, the name was changed to Arrow Webtex Limited vide fresh Certificate of incorporation upon change of name dated May 18, 2007. Prior to de-merger, Delta Corp Limited (formerly Arrow Webtex Limited) was engaged in various businesses, inter-alia of manufacture of narrow woven fabrics (Textiles Business), Real Estate Consultancy etc. In accordance with the Scheme of Arrangement between Arrow Webtex Limited (now Delta Corp Limited) and Arrow Textiles Limited and their respective Shareholders and Creditors as sanctioned by Honble Bombay High Court dated 22nd August, 2008. Textiles Division of Arrow Webtex Limited was transferred to Arrow Textiles Limited.

2.3 BOMBAY DYEING: HISTORY:

Bombay Dyeing & Manufacturing Company Limited (BDMCL) was incorporated in 23rd August of the year 1879 at Mumbai under the house of Wadias. It manufactures cotton textile goods, non-woven fabrics and Dimethyl Terephthalate (DMT). Unrivalled in its reputation for quality, the Bombay Dyeing range of fabrics and ready-mades has been growing and evolving with changing trends and also has a wide range of industrial fabrics that include microdot interlining; fabrics for shoe uppers, adhesives, abrasives, leather cloth and filters. A modest beginning for a company, that was to grow in the following years into one of India's largest producer of textiles. Along the path of growth and diversification, Bombay Dyeing has spawned dozens of other companies. Textile is a dominant activity for which the company has advanced facilities. Each of Bombay Dyeing's five manufacturing facilities is of International standards. Weaving facilities include technology from world leaders such as Sulzer. Bombay Dyeing has 519 Sulzer Projectile Machines in widths of 130', 142', 153' and 169'. The Spinning and Winding facilities are equipped with Schlafhorst Autocore Rotors, Auto Corner Winding Spindles and Schweiter CA - 11 Spindles with an installed capacity of 135,336 Ring Spindles

Archway Investment Company (P) Limited became a wholly owned subsidiary of the company during the incorporation year itself. The company had entered into an agreement with Tootal Broadhurst Lee Company Limited of Manchester during the year 1961 for the technical knowhow and use of their patented crease resistant and minimum ironing processes under which the company was permitted to brand its goods with marks Tebilized and Tebilized Double. Subsequently, in the year 1962, the negotiations were concluded with Heberilein & Company of Wattil, Switzerland, for the right to use their Hecowa finish on processed goods. Nowrosjee Wadia Ginning & Processing Company Limited was amalgamated with the company with effect from 1st October of the year 1967. BDMCL made an agreement with Hercofina of USA during the year 1978 for the purchase of equipment and machinery and for technology and technical service.

During the year 1988, the company installed 2 open-end spinning machines, 3 auto coners, 7 high-speed combers, 1 hot air stenter and some jiggers in the processing house in Mumbai also in the same year a caustic recovery plant was installed. A year after, in 1989, 2 new Blow Room lines with cards, 7 auto coners and 48 new Air-jet Weaving machines were installed. At the processing house, in Mumbai, some Polywool processing machinery and new fusible interlining machines were also installed. During the same year 1989, BDMCL had entered into a contract with 20th Century Foods Pvt Ltd of Singapore to render technical services to Thulhiriya Textile Mills (Sri Lanka) a Government owned textile mill of Sri Lanka, having 1,30,000 spindles and 560 looms. In 1990, The Company installed a blow room line with high production cards, 6 open-end spinning machines, 16 sulzer weaving machines and 2 auto coners at its manufacturing mills.

The Capital Equipment installed included 72 air jet weaving machines, 8 trutschler cards, 9 draw frames, 5 open end spinning machines, 6 auto coners, 1 warping machine and 2 sizing machines during the year 1992. In 2nd December of the year 1993, the company had launched the Euro Issue in the international markets. During the period of 1995, BDMCL had increased its capacity from 1,12,000 TPA to 1,45,000 TPA. The Company introduced three new brands for Home collection in the year 1997 and also in the same year, BDMCL had introduced various projects in its mills to improve the quality of yarn and fabric and reduce rejects. The Company had signed up with fieldstone Cannon of the US to setup a 50:50 joint venture to make terry towels.

In 1998, the company introduced two new brands viz Princeton and Forest Hills in Apparel and Tulip and Harmony in the home collection segment almost seven years after the launch of its Vivaldi brand. The Company had won the SRTEPC and TEXPROCIL Gold Trophies for its outstanding export performance for poly cotton blended fabrics and made-ups for the year 199899. BDMCL made a terry towel joint venture project with the US-based Fieldcrest Cannon in 1999. The Jamnagar Spinning unit of the company, which was situated in Gujarat, closed down with effect from July 29th of the year 2000. The Company had acquired the 51% of stake in Proline India for a sum of Rs.4 cr during the year 2002 and changed its Readymade Garment Business to the same Proline India Limited. Bombay Dyeing unveiled 150 new designs in bed

and

bath

linen

and

home

towel

category

in

the

same

year

of

2002.

BDMCL made tie up with Nickleodeon for a merchandising arrangement in the year 2005. The real estate division of the company had commenced the development of the two properties Spring Mills, Dadar and Textile Mills, Worli during the year 2005-06. The DMT Plant operations had been suspended from 6th March of the year 2006 to enable implementation of the Polyester Stable Fibre (PSF) in the same site of the company. In January 2007, commissioning of PSF plant in sections commenced and by 31st, 2007, part of the plant was under operational testing. The Company committed a major part of the total capital expenditure of Rs.206 crores in 31st March of the year 2007 for a new state-of-the-art processing unit along with in-house stitching facilities at Ranjangaon.

2.4 GRASIM LIMITED: Grasim Industries Limited was incorporated in 1948; Grasim is the largest exporter of Viscose Rayon Fiber in the country, with exports to over 50 countries. This, along with Aditya Birla Nuvo can be considered as companies of the AV Birla Group. Grasim is headquartered in Nagda,Madhya Pradesh and also has a huge plant at Kharach ([[Kosamba, Gujarat, India Company Ltd was incorporated in 1969 in Thailand, started operations in 1970, this was Aditya Birla Groups first foray into international venture. Aditya Birla Group incorporated P.T. Elegant Textiles in 1973 in Indonesia. Thai Rayon incorporated in 1974, this was the second company in Thailand, operating in Viscose Rayon Staple Fiber. Century Textiles Co. Ltd. is taken over by Aditya Birla Group in 1974; this company is a weaving and dyeing plant manufacturing and exporting variety of synthetic fabrics. PT Sunrise Bumi Textiles incorporated in 1979, it produces yarn exported over 30 countries in 6 continents. P.T Indo Bharat Rayon incorporated in 1980 produces Viscose Staple Fiber in Indonesia to become a dominant player in the domestic market as well as export markets. Thai Polyphosphates and Chemicals was started in 1984 in Thailand to produce Sodium Phosphates, presently merged with Thai Epoxy and Allied Products Company Limited (1992), Thai Sulphites and Chemicals Company Limited (1995) to form Aditya Birla Chemicals Ltd. This company supplies to sectors such as food, textiles, electrical and electronics, composites, leather, plastics and automobiles. PT Indo Liberty Textiles was incorporated in 1995 to manufacture synthetic spun yarn. In 2004, the Staple Fibre Division of Grasim Industries Ltd was presented with the Stockholm Industry Water Award for the company's efforts to reduce water usage and improve their overall environmental impact.

Focus of Growth Post MFA In late 1990s and later, the focus was the textile business because of the end of Multi-Fiber Arrangement (MFA) which opened a host of opportunities to Indian exporters. In this period, Aditya Birla Group took a three route strategy for growth.

Rapidly enhance existing capacities Acquire and Build Garment brands for local and international markets

Jayashree textiles was acquired by Aditya Birla Nuvo (formerly Indian Rayon), is a leading producer and exporter of yarns and fabrics to 50 countries with a turnover of $413 million. It acquired Madura Garments in 2000 to enter the branded garments business. Have brands such as Louis Philippe, Van Heusen, Peter England, Allen Solly, and SF Jeans among others and also a global supplier to global buyers such as Marks & Spencers, Polo etc.

Vertical integration to get cost advantage

AV Cell Inc., a joint venture between Aditya Birla Group and Tembec, Canada, established operations in 1998 to produce softwood and hardwood pulp for the purpose of internal consumption among different units of the Group. Together, Aditya Birla Group and Tembec, Canada have acquired AV Nackawic Inc., which produces dissolving pulp, as a further step to integrate. Grasim industries Ltd. is a leading player in the Viscose Staple Fiber (VSP). The Aditya Birla Group's VSF manufacturing plants straddle Thailand, Indonesia, India and China. At each of these locations, further capacity expansions are under way in Thailand by 31 ktpa; in Indonesia by 37 ktpa; in India by 64 ktpa and in China by 30 ktpa. These brown field expansions, slated to be completed by the second quarter of 2008, will further notch up the Group's VSF production from 566 ktpa to 727 ktpa and entail an investment close to US$ 260 million. Grasim wants to follow a strategy of backward integration, right from plantation stage to the final VSF stage. The Group's VSF business operates through its three companies Grasim

Industries in India, Thai Rayon Corporation in Thailand and Indo Bharat Rayon in Indonesia, which also oversees its Chinese operations at Birla Jingwei Fibres, China. Joint ventures Thai Rayon Promoted in 1974 by the Aditya Birla Group, Thai Rayon is the sole manufacturer of Viscose Rayon Staple Fibre (VSF) in Thailand. More than 50 per cent of Thai Rayon's VSF throughput is directly exported to more than 20 countries worldwide. The VSF meets the stringent quality expectations of customers in USA, Mexico, Europe, Turkey, Canada, Israel, Australia, South Korea, Philippines, Indonesia, Pakistan, Bangladesh and Sri Lanka.

PT Indo Bharat Rayon Marketed under the brand name of 'Birla Cellulose', the company produces a wide range of VSF in engineered specifications for textiles and non-woven applications. The company's strong focus on environmental protection is reflected through its investments in a sophisticated state-of-the-art waste-water treatment plant and scientific waste disposal systems.

2.5 FABINDIA LIMITED: History The company was incorporated in the year 1976. The company opened their first retail store in New Delhi. The company started as a wholesale export and successfully established itself as a major retail player in the Indian market. During the year 2004, the company received the award 'Best Retail Brand' by The Economic Times of India.

During the year 2006-2007, the company opened retail outlets at Leh, Anna Nagar (Chennai), Amritsar, Lucknow, Bhubhaneshwar, Shimla, Ahmedabad, Dwarka, Kamla Nagar, Raja Garden (New Delhi), Mangalore, Jayanagar (Bangalore), Bay Pride-Cochin, Fort Cochin, Coimbatore, Secunderabad, Goa, Vadodara, Shipra Mall, Ghaziabad, and Calicut. During the same year, the company opened the Central Ware House (CWH), which is fully operational.

In April 2007, the company successfully completed Vision Plan 11. During the year 2007-2008, the company opened 27 retail outlets in the country. The company further opened retail outlets at Siliguri, Pune and Raipur. During the year, the company set up a wholly owned subsidiary company namely, Artisans Micro Finance Artisans Private Limited.

During the year 2008-2009, the company introduced a new line of business by launching Handcrafted jewelers range at select stores in major cities in India. During the year, the company opened 18 new retail outlets across the country. During the year, the company acquired 25.1% stake in EAST Ltd. The year 1976, saw major equity restructuring within the company, as adhering to Reserve Bank of India's rules instructing foreign companies to limit their foreign equity to 40 percent, Fabindia offered its shares to close family members, associates, and suppliers like Madhukar Khera, an early supplier to the company. This was also the height of the Indian Emergency period(1975-1976), and the rule which barred commercial establishments to run from residential properties was implemented, the company were forced out of its second premises, a

house on the Mathura Road. This prompted it to open the first Fabindia retail store in Greater Kailash, N-Block market in New Delhi, in 1976, which remains its register office. Now catering to the urban India as well, in the coming decade Fabindia differentiated itself from other government-owned and often subsidized players, in handloom fabrics and apparel sector, like KVIC and various state emporiums by adapting its fabrics and designs to urban taste. For this designers were accessed to modernize its line of home linens and most importantly introduced a range of ready-to-wear garments, including churidar-kurta suits for women, men's shirts etc. Even today, its team of designers provides most of the designs and colors, executed by village-based artisans. At the other end, these artisans learnt the basics of quality, consistency and finish, for instance avoiding frayed edges on handwoven shawls. The result was that traditional apparel and products became mainstream and fashionable, fast adapted by a growing middle-class and became identified as the brand for the elite and intellectual as well as affordable ethnic chic. Fabindia lost its biggest customer Habitat in 1992, when the latter was bought by Ikea, which then decided to appoint its own buying agent in India; in the following year John Bissell suffered a stroke, and his son William, gradually stepped into the helm of affairs, taking over completely after the death of father in 1998, at age 66. Till then William, an undergrad from Wesleyan University, who had majored in philosophy, political science and government, had spent several years in Jodhpur, since completing his education in 1988. William, working with rural artisans and crafts co-operatives across Rajasthan, was instrumental in the setting up of various weavers' cooperatives. One of first tasks taken up by William was shifting Fabindia's focus to the domestic market, en route to becoming a retail chain, for till then it only had two stores in Delhi. In time Fabindias retail business overtook its exports. Fabindia added its non-textile range in 2000, organic foods in 2004, followed by personal care products in 2006; finally it launched its range of Handcrafted jewellery in 2008. Fabindia sells a variety of products ranging from textiles, garments, stationery, furniture, home accessories, ceramics, organic foods, and body care products, besides exporting home furnishings. Fabindia's retail expansion plans started taking shape 2004 onwards, it opened multiple and larger stores in metros like Mumbai, Chennai and Delhi, while at the same time

spreading out beyond metros. It opened stores in cities like Vadodara, Dehradun, Coimbatore and Bhubaneswar, Durgapur soon as revenues also grew from Rs 89 crore in 2004-05 to Rs 129 crore in 2005-06, reaching Rs 200 crore in 2007, in the year when it sourced its products from 22,000 artisans in 21 states. Usually, the village-based artisan gets barely 5% of the tag price of their products as the rest is taken away by the middlemen. To counter this, Fabindia introduced an artisan-shareholder system through "supply-region companies" incorporated as subsidiaries. Here the craftspeople collectively own 26% of the equity in each company, based in nationwide centres, with Artisans Micro Finance, a Fabindia arm holding 49%, and employees and other private investors holding the balance. Also as part its expansion plans, 6% in Fabindia was sold in 2007, at an estimated $11 million, to Wolfensohn Capital Partners, a private equity firm founded by former World Bank president James Wolfensohn. In 2009, it acquired a 25% stake in UK based 30 million ethnic women wear retailer, EAST. Today the company has retail outlets in all major cities of India - 137 at last count - in addition to international stores in Dubai, UAE; 3 stores in Bahrain; Doha, State of Qatar; Rome, Italy and one in Guangzhou, China. Philanthropy William and John Bissell established "The Fabindia School" in 1992 in Bali, in Pali district of Rajasthan; today it is co-educational, senior secondary school with 600 students including 40% girls. The school subsidized tuition fees of the girl students and offers them scholarships, in partnership with "The John Bissell Scholars Fund", established in 2000. Awards and recognition Fabindia was awarded Best Retail Brand in 2004 by The Economic Times. In 2004, Fabindia was featured as part of a CNBC special TV report on India. Fabindia brand does not advertise, and largely works through word of mouth publicity, and then in 2007 the craftconscious enterprise concept of Fabindia became a Harvard Business School (HBS) case study. 2010 marked 50 years of the foundation of Fabindia, and release of the book, The Fabric of Our Lives: the Story of Fabindia, by Radhika Singh.

3. STRATEGIC ANALYSIS 3.1 PESTL ANALYSIS:It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning. The organization's marketing environment is made up from:

The internal environment The micro-environment The macro-environment e.g. Political (and legal) forces, Economic forces, Socio-cultural forces, and Technological forces. These are known as PESTL factors.

A PEST analysis is one of them that are merely a framework that categorizes environmental influences as political, economic, social and technological forces. Sometimes two additional factors, environmental and legal, will be added to make a PESTL analysis, but these themes can easily be subsumed in the others. The analysis examines the impact of each of these factors (and their interplay with each other) on the business. PEST is useful when a company decides to enter its business operations into new markets and new countries. The use of PEST, in this case, helps to break free of unconscious assumptions, and help to effectively adapt to the realities of the new environment.

3.1.1 POLITICAL & LEGAL FACTORS:-

Political factors are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Political factors may also include goods and services which the government wants to provide or be provided and those that the government does not want to be provided. Furthermore, governments have great influence on the health, education, and infrastructure of a nation. The political area has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses.

Environmental regulation and protection:Since 1 January 1995, international textiles and clothing trade has been going through fundamental change under the 10-year transitional programme of the WTO's Agreement on Textiles and Clothing (ATC). Government Initiatives:

Government of India established the Technology Up gradation Fund Scheme (TUFS) to enable firms to access low-interest loans for technology up gradation.

The Central Government as well as various States has executed Schemes such as, Schemes for Integrated Textile and Apparel Parks.

The scheme will also be enlarged to include ancillary workers.

Quality Improvement:The Textile Commission, under the Ministry of Textiles, facilitates firms in the industry to improve their quality levels and also get recognized quality certifications. Foreign Direct Investment (FDI) Policy:100% FDI is allowed in the textile sector under the automatic route. 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 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. Labour Laws:Labour laws are still seen to be relatively unfriendly to business with companies having less than ideal flexibility to follow a hire and fire policy.

3.1.2 ECONOMIC FACTORS:Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy. With liberalization in investment and the subsequent the removal of quantitative restrictions on several textile products, the Indian market now has the presence of several international brands. About 6% contribution to GDP Constitute 27% of India's total exports and 35% of the gross export earnings A ready-made garment contributes to 41% of the total textile exports and about 15% of the country's total exports. Highest area under irrigation for cotton in the world about 9million hectares (26% of the world total growing area) and productivity is 300kg/hectare as compare to 550 kg/hectare average of the world, third largest producer of the cotton. First largest producer of cotton yarn and jute in the world. Second largest producer of the raw silk after the china. Fifth largest producer of polyester yarn. 3.9 Mn handlooms accounted 84.78% of the world and highest in the world.

3.1.3 SOCIAL FACTORS:The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. For example, an ageing population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers). Income distribution:India is contributes to almost 14% of the industrial production. So, India is second largest players in Textile industry all over the world. So, the contribution of textile income is higher for national income. Demographics, Population growth rates, Age distribution:India has a largest population all over world. 3.9 Mn handlooms accounted 84.78% of the world and highest in the world. So, it is raise employment opportunities for people. The government has declared special Park for textile industry. Lifestyle changes:The life style of people has changed every time so, they demand different varieties of product. The trend of fashion is affecting the textile industry. The companies of Indian textile industry have to launch wide range of product for people.

3.1.4 TECHNOLOGICAL FACTORS:Technology is vital for competitive advantage, and is a major driver of globalization. Technological factors include ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation. Research and development Activities:Research and development activities are affected the Indian textile industry. The China, Srilanka, Bangladesh, Pakistan and U.K. are major players in textile industry. They all have benefit of low cost raw material and low labour cost. Technology incentives:Technological changes are not major affected to Indian textile industry. India has built adequate infrastructure throughout the various stages in textile development, that is, design, sourcing, merchandising and production. Institution for textile technology development:Apart from institutes such as NIFT (National Institute of Fashion Technology) and Apparel Training Institutes, there are several colleges, including the Indian Institutes of Technology and National Institutes of Technology that offer courses in Textile Engineering. Thus, India has the infrastructure in place to produce qualified and skilled manpower in areas of textile design and engineering Indian firms have leveraged this strength to develop a competitive advantage the ability to contribute to the design, not only in preparing samples and prototypes, but also in translating concepts into varieties of finished designs, as well as introducing designs of their own.

Several Indian firms have their own design departments and in the last five years have begun to work closely with overseas designers and/or agents. High value, up-market specialty buyers such as Gap, banana republic and J. Crew value such expertise and have been leveraging this while buying from India. 3.2 OT ANALYSIS:OPPORTUNITIES: The global textile trade has been rather muted for a few years now is set to triple to $856 Billion over the next decade. This growth would be driven by dismantling of quotas in January 2005, as mandated by WTO. The biggest beneficiaries of this growth would be cost competitive manufacturers in china, Mexico, Turkey and India (whose share of global trade is a minuscule 3%). Market share of other countries such as Italy, Germany, Korea and France on the other hand would fall form the current level of 25% With the phasing out of restrictive trade policies- MFA and other QRs, substantial increase in size of the markets is expected. Besides the developed countries, new markets would be opened up in developing countries. Post GATT, the trade of Textiles and clothing is expected to rise by US$ 24 Billion per year One of the biggest opportunities in the export trade in home textiles. The market which is estimated to grow from US $9 billion in 2004 to US $23 billion in 2012 The Federated Group, Wal-Mart, Target, Russell Corp, Sears Roebuck and The Limited figure are among American retail majors that are looking for additional orders from India With overseas companies increasingly realizing the need to diversify their sourcing basket and not focus on one or two countries like China, the Indian textile industry is all set to reap major dividends.

 Growth rate of Domestic Textile Industry is 6-8% per annum. Large, Potential Domestic and International Market. Product development and Diversification to cater global needs. Elimination of Quota Restriction leads to greater Market Development. Market is gradually shifting towards Branded Readymade Garment. Increased Disposable Income and Purchasing Power of Indian Customer open new Market Development. Emerging Retail Industry and Malls provide huge opportunities for the Apparel, handicraft and other segments of the industry. Greater Investment and FDI opportunities are available. Indias strong performance and growth in the textiles sector is aided by several key advantages that the country enjoys Easy availability of labour and material Presence of supporting industries and supporting policy initiatives from the government. Elimination of Quota Restriction leads to greater Market Development. Market is gradually shifting towards Branded Readymade Garment. Emerging Retail Industry and Malls provide huge opportunities for the Apparel, handicraft and other segments of the industry.

THREATS: Non-Tariff Barriers (e.g. in the name of anti-dumping, consumer safety, eco-labelling etc.) are fast replacing quotas. Phasing out of Quotas also mean countries to export on their comparative advantage only; Competition in international market to increase manifold. The domestic turf too would be threatened by increased imports as custom tariffs fall. The big markets of the world are increasingly becoming inaccessible to India due to the proliferation of regional/bilateral arrangements that exclude India from the preferential benefits accorded to other member countries. Threat from countries like China, Pakistan and Bangladesh are major competitor for the supply of textiles. Competition from other developing countries, especially China. Continuous Quality Improvement is need of the hour as there are different demand patterns all over the world. Elimination of Quota system will lead to fluctuations in Export Demand. Threat for Traditional Market for Power loom and Handloom Products and forcing them for product diversification. Geographical Disadvantages. International labour and Environmental Laws. To balance the demand and supply. To make balance between price and quality.

3.3 PORTERS FIVE FORCE MODEL:"Porter's five forces" is a framework for the industry analysis and business strategy development developed by Michael E. Porter of Harvard Business School in 1979. It uses concepts developing Industrial Organization (IO) economics to derive five forces which determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one where the combination of forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition". Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their core competences, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models have been able to make a return in excess of the industry average. Strategy consultants occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position. However, for most consultants, the framework is only a starting point or 'check-list' they might use. Like all general frameworks, an analysis that uses it to the exclusion of specifics about a particular situation is considered naive.

Porter's five force include three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers, bargaining power of customers. According to Porter, the five forces model should be used at the industry level; it is not designed to be used at the industry group or industry sector level. An industry is defined at a lower, more basic level: a market in which similar or closely related products and/or services are sold to buyers. Firms that compete in a single industry should develop, at a minimum, one five forces analysis for its industry. Porter makes clear that for diversified companies, the first fundamental issue in corporate strategy is the selection of industries (lines of business) in which the company should compete; and each line of business should develop its own, industry-specific, five forces analysis. The average Global 1,000 Company competes in approximately 52 industries (lines of business). Figure No: 3.1 Porters five force model

Threat of New Entrants

Industry Competitors
Bargaining power of Suppliers Bargaining power of buyers

Intensity of rivairy

Threat of New Substitute s

One of the worst hit sectors during the skyrocketing interest rate scenario in the late 90, the debtladen Indian textile industry has spun many turn-around stories since then. Aided by lower interest rates, restructuring packages from financial institutions and the recent dismantle of quotas; the sector is today well poised to capture growth opportunities. In 2012, the sector contributed 20% to industrial production, 9% to excise collections, 18% of employment in industrial sector, nearly 20% to the country's total export earnings and 4% to the GDP. The textile sector employs nearly 35 m people and is the second highest employer in the country. In fact, it is estimated that one out of every six households in the country directly or indirectly depends on this sector. Here we analyse the sector's dynamics through Porter's five-factor model. Figure No: 3.2 Porters five force model for Indian Textile Industry

Bargaining power of Buyer (demand scenario) (Strong):Global textile & clothing industry is currently pegged at around US$ 440 bn. US and European markets dominate the global textile trade accounting for 64% of clothing and 39% of textile market. With the dismantling of quotas, global textile trade is expected to grow (as per Mc Kinsey estimates) to US$ 650 bn by 2015 (5 year CAGR of 10%). Although China is likely to become the 'supplier of choice', other low cost producers like India would also benefit as the overseas importers would try to mitigate their risk of sourcing from only one country. The twofold increase in global textile trade is also likely to drive India's exports growth. India's textile export is expected to grow to US$ 40 bn, capturing a market share of close to 8% by 2015. India, in particular, is likely to benefit from the rising demand in the home textiles and apparels segment, wherein it has competitive edge against its neighbour. Nonetheless, a rapid slowdown in the denim cycle poses risks to fabric players. Buyer purchase trend The purchase trend of buyers is always changing; the buyers are demanding more products varieties so it is on fastest growing market. Buyer switching costs relative to firm switching costs Buyers switching cost is low so, the bargaining power of buyer is strong. In market many competing brands are available and buyers are moving from one brand to another brand at low cost. Availability of existing substitute products There are many substitute products are available and products available at different varieties.

 Buyer price sensitivity The wide range of products is available into market at different price and different quality. So, buyers are more sensitive for price of textile products. Differential advantage (uniqueness) of industry products Bargaining power of suppliers (supply scenario) (Weak):India is the third largest producer of cotton in the world after China and US and has the largest area under cultivation. Cotton, a key raw material in the textile and garment industry, accounts for about 30% of the fabric cost and 13% of the garment cost. India has an abundant supply of locally grown long staple cotton, which lends it a cost advantage in the home textile and apparels segments. Other countries, like China and Pakistan, have relatively lower supply of locally grown long staple cotton. Moreover, low cotton prices due to a bumper cotton crop would enable India to lower its production cost and sustain pricing pressure. Further, efforts on improving the yield per hectare would ensure higher productivity and production, thereby providing the muchneeded security of raw-material supply to textile producers. India also enjoys a significant lead in terms of labour cost per hour (US$ 0.6 in 2012), over developed countries like US (US$ 15.1) and newly industrialized economies like Hong Kong (US$ 5.1), Taiwan (US$ 7.1), South Korea (US$ 5.7) and China (US$ 0.9). Also, India is rich in traditional workers adept at value-adding tasks, which could give Indian companies significant margin advantage. Supplier switching costs relative to alternative suppliers There are many suppliers are available for textile industry. The switching cost of one supplier to another suppliers is very low because of raw material are availability is very high and at low cost.

 Degree of differentiation of inputs Raw materials are differing from product to product for textile industry so, there are need different raw material from different suppliers so, it is wide degree of differentiation of inputs. Presence of substitute inputs There are many suppliers are in market for raw material provide. So, the bargaining power of suppliers is low.

Threat of new entrants (Strong):In the quota free regime, capacity expansion is the name of the game in the textile sector. Resultantly, smaller players who cannot venture into the global markets are flooding the domestic markets with excess supply, thus weakening the pricing scenario. Be it denim (Arvind Mills), home textiles or branded apparels (Raymond), new capex and consolidation with international players is also not likely to safeguard margins for the larger players, unless they can tap a significant pie of the overseas markets. The existence of barriers to entry is not existing The existence of barriers to entry does not exist in textile industry. There is less barriers to enter in to textile industry. Switching costs Capital requirements There is less capital requirement for entering in to textile industry comparing to other industry. There is less initial capital needed for starting company in textile industry because there is required less fixed assets and human resources.

 Buyers Demand Buyers demand is growing rapidly in garment segment and also silk segment so, the demands of customer are increasing so, it is possible to come new competitors in to market. Government policies Government policies are also supporting to textile industry for expanding it. Government is declared many policies for encouraging textile industry.

Threat of substitutes (Strong):Low cost producing countries like Pakistan and Bangladesh (labour cost 50% cheaper) are also posing a threat to India's exports demand. In fact, players like Arvind Mills have already started feeling the pinch as overseas buyers have started shifting to 'alternative sources', thus impacting their incremental volume off-takes. Relative price performance of substitutes Low cost producing countries like Pakistan, sri lanka are providing better quality product at low cost. Lower buyer switching costs The consumers have low cost for switching from substitute products, so it can strong threats of substitute product of textile to enter in to market. Perceived level of product differentiation Sri lanka, Bangladesh, china have provide wide range of product of textile in different segment. So, it is also increasing threats of substitute product from foreign market.

Competitive rivalry (Strong):India's logistic disadvantage due to its geographical location can give it a major thumbs-down in global trade. The country is distant from major markets as compared to its global competitors like Mexico, Turkey and China, which are located in relatively close vicinity to major global markets of US, Europe and Japan. As a result, high cost of shipments and longer lead-time coupled with lack of infrastructure facility may prove to be major hindrances. The fragmented structure of the industry has also stood in the way of achieving true integration between the various links in the supply chain. The sector has one of the longest and most complex supply chains in the world, which the larger players are trying to correct by integrating their operations and improving efficiency levels. Number of competitors There are many number of competitor are available in textile industry and also increasing rivals of textile. The rivals are also same size and competitive capabilities. Rate of industry growth Textile industry is going on growth stage so the rivalries among competitor are becoming strong because of higher demand of product in to market. Fixed cost allocation per value added There is low cost incurred for fixed assets of textile industry. It can require less fixed assets comparing to other industry so, competitors are tried to reduced cost of production and competing in to market.

 Level of advertising expense The textile companies are making high advertisement for its product and so they can make awareness about product in to mind of consumers and attract them for purchasing the textile product. Buyers switching cost The buyers switching cost for textile product is very low and the buyers are also ready to purchase other brand at low cost. 3.4 CHALLENGES OF TEXTILE INDUSTRY A major gap in Indian industry is its fragmented industry structure with a dominance of small scale. The fragmentation of supply base also creates barriers in achieving true integration between the various links in the supply chain. This creates issues of lack of control and lack of consistent or reliable performance. The huge geographical spread further complicates this issue. Low productivity at all levels, from growing to ginning to spinning to weaving (capacity utilization as low as 50% in most of the sub-sectors), poor infrastructure-both externally (basic infrastructure ports, roads, power etc) and internally (90% of units being very small or in tiny sector), absence of productive economy of scales in most sub-sectors, absence of VAT, too much regulations and control on dynamics of sub-sectors, restrictive import regime and trade policy environment, technological obsolescence and lack of term strategy. Lack of transparency in legal requirements and complicated paperwork" which led to an increase in producer costs and necessitated the appointment of a broker instead of the muchpreferred direct-dealing with manufacturers Problems such as excise and other tax imbalances. The political diversity of India's 35 states and Union Territories, and a coalition of ruling parties have led to slow progress in rationalizing these imbalances due to debate and discussion. The Indian RMG sector is still largely dependent on the power loom sector and the independent process houses, for their input requirements, which do not always meet the international quality standards. The RMG sector has to gain control of its production

processes, to have control over quality, and delivery schedules, areas where it is sadly lacking in the international market. Indian Textile Industry is highly Fragmented Industry. Industry is highly dependent on Cotton. Lower Productivity in various segments. There is Declining in Mill Segment. Lack of Technological Development that affect the productivity and other activities in whole value chain. Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and transportation Time. Unfavorable labour Laws. Lack of Trade Membership, which restrict to tap other potential market. Lacking to generate Economies of Scale. Higher Indirect Taxes, Power and Interest Rates.

3.6 Driving Forces 3.7 Strategic Group Mapping Strategic Groups: In some industries, groups of competitors are constrained by similar resource positions and follow similar strategies. The groups or clusters of similar competitors are called strategic groups. The alliance dynamics among the 35 largest firms in the worldwide textile industry indicates that the likelihood of an alliance between any two firms depends on the local density of alliances among the members of their strategic groups, rather than on the global density of alliances in the industry. These results suggest that firms most closely observe and imitate the strategic behavior of firms who occupy the same strategic niche rather than the behavior of firms in their industry defined more broadly. Over time, the resource positions and strategies are converging, and the sharp differences between strategic groups are eroding.

 Strategic Group Mapping A strategic group is a concept used in strategic management that groups companies within an industry that have similar business models or similar combinations of strategies. For example, the restaurant industry can be divided into several strategic groups including fast-food and finedining based on variables such as preparation time, pricing, and presentation. The number of groups within an industry and their composition depends on the dimensions used to define the groups. Strategic management professors and consultants often make use of a two dimensional grid to position firms along an industry's two most important dimensions in order to distinguish direct rivals (those with similar strategies or business models) from indirect rivals. Strategy is the direction and scope of an organization over the long term which achieves advantages for the organization while business model refers to how the firm will generate revenues or make money. Strategic Group Analysis Strategic Group Analysis (SGA) aims to identify organizations with similar strategic characteristics, following similar strategies or competing on similar bases. Such groups can usually be identified using two or perhaps three sets of characteristics as the bases of competition.

Examples of Characteristics

Extent of product (or service) diversity Extent of Geographic coverage Number of Market segments served Distribution Channels used Extent of Branding Marketing Effort Product (or service) quality Pricing policy

 Use of Strategic Group Analysis This analysis is useful in several ways:

Helps identify who the most direct competitors are and on what basis they compete. Raises the question of how likely or possible it is for another organization to move from one strategic group to another.

Strategic Group mapping might also be used to identify opportunities. Can also help identify strategic problems.

There are five steps to make strategy group:

1. Identify two important competitive characteristics that strategically differentiate firms in an industry from one another: So here there are two factors identify are reported net profit and net assets of the company they are taken on X axis and Y axis 2. Plot the firm in two variable In the chart sawn different companies are plotted in X axis and Y axis in respect to their performance. 3. Draw circles around the firms that are cluster together. In this step actually find out the close firms which are nearby similar factor that we have taken in X, Y axes. 4. Indicate potential movement of firms with arrows. At the last have to saw the potential movement means the strategy for future movement.

(Year 2012)
Arvind Mills

Reported net profit

151.76

Net current assets

1644.79

Arrow Textile Ltd

50.76 469.07

Bombay Dyeing
57.71 1,952.80

Grasim Limited FabIndia Limited

1,056.88 21.02

1587.26 146.54

C U R R E N T A S S E T

1400 1200 1000 800 600 400 200 0 -200 0

STRATEGIC GROUP MAPPING

Grasim Limited

Arvind Mills
1

Arrow Limited
2

Bombay Dyeing
3 4

FabIndia Limited
5 6

NET PROFIT ( in crores)

1400 1200 1000 800 600 400 200 0 0 -200 1 2 3

Grasim Limited

Arvind Mills

Arrow Limited

Bombay Dyeing
4 5

FabIndia Limited
6

3.8 Key Success Factors It is among the world's largest producers of fabrics and it produces a wide range of apparel articles and is considered a particularly competitive source for home textiles (bed linens, towels, etc). It has impressive design expertise. One of the largest producers of cotton yarn, jute, silk and manmade fabrics. Presence of entire chain of manufacturing e.g. in cotton, from growing, ginning, spinning, weaving, processing to clothing garments/made-ups and also presence of vibrant Textiles machinery sector and support Institutions as NIFT. Indian Textile Industry is an Independent & Self-Reliant industry. Abundant Raw Material availability that helps industry to control costs and reduces the lead-time across the operation. Availability of Low Cost and Skilled Manpower provides competitive advantage to industry. Availability of large varieties of cotton fiber and has a fast growing synthetic fiber industry. India has great advantage in Spinning Sector and has a presence in all process of operation and value chain. India is one of the largest exporters of Yarn in international market and contributes around 25% share of the global trade in Cotton Yarn. The Apparel Industry is one of largest foreign revenue contributor and holds 12% of the countrys total export. Industry has large and diversified segments that provide wide variety of products. Growing Economy and Potential Domestic and International Market. Industry has Manufacturing Flexibility that helps to increase the productivity.

4. FINANCIAL ANALYSIS

Financial analysis is an assessment of the (1) effectiveness with which funds (investment and debt) are employed in a firm, (2) efficiency and profitability of its operations, and (3) value and safety of debtors' claims against the firm's assets. It employs techniques such as 'funds flow analysis' and financial ratios to understand the problems and opportunities inherent in an investment or financing decision. Tools of Financial Analysis Ratio Analysis Trend Analysis

4.1 RATIO ANALYSIS:Ratio analysis involves establishing a relevant financial relationship between components of financial statement. Two companies may have earned the same amount of profit in a year, but unless the profit is related to sales or total assets, it is not possible to conclude which of them is more profitable. Ratio analysis helps in identifying significant relationship between financial statement items for further investigation. If used with understanding of industry factor and general economic conditions, it can be powerful tool for recognizing a companys strengths as well as its potential trouble spots.

Industrial Aggregate Ratio Analysis:The list of Indian Textile Companies for aggregate ratio analysis is as below; Arvind Mills Ltd. Fabindia overseas Pvt. Ltd. Arrow textiles Ltd. Grasim industries Ltd. Bombay Dyeing textile Ltd.

4.2

Profitability Ratio:-

4.2.1 Net profit Margin ratio:Table No: 4.2 Arvind Fabindia mills overseas Pvt. Ltd. 1.29 5.26 -1.96 6.92 2.25 8.76 5.02 15.09 12.36 22.29 Arrow Textiles Ltd. 5.46 -19.56 1.86 -6.70 3.01 Grasim Industries Ltd. 36.79 23.94 25.57 25.45 23.69 Bombay bying 1.75 14.91 1.13 1.15 2.66 In (%) Industry

2007-08 2008-09 2009-10 2010-11 2011-12

10.11 4.85 7.91 8.00 12.80

Graph No: 4.2.1

14 12 10

Net Profit Ratio

8 6 4 2 0 2007-08 2008-09 2009-10 2010-11 2011-12

Year

Net Prifit Ratio (%)

14 12 10 8 6 4 2 0 2007-08 2008-09 2009-10 Industry 2010-11 2011-12

Interpretation:This ratio indicates how well industry is performing. It is the basic criteria for measuring the performance of the industry. It measures how many percentage of net profit generated by sales. Net profit is also known as the net margin. It measures the relationship between net profit and sales of the firm. An industry with high net profit would be in advantageous position to survive in the face of falling selling prices, rising operating and administrative cost or declining demand. The net profit margin ratio shows fluctuation in 2007-08 it 10.11%, but, its falling to 4.80% in 2008-09. It can recover and increase in 20011-12 to 12%. The ratio shows Arvind mills and Arrow textiles has negative profit in year 2008-09. So, its effect on industry net profit margin. The other three companies have no negative income and hence it represents good profit margin ratio. Net profit margin for all companies is fluctuating trend, so net profit margin ratio of industry also fluctuating but it on somewhat declining trend.

4.2.2 Return on net worth ratio:Table No: 4.2.2 In (%) Arvind Fabindia mills overseas Pvt. Ltd. 2.44 13.70 -6.06 24.21 3.45 29.73 7.80 24.77 9.41 18.14 Arrow Textiles Ltd. 2.90 -3.86 0.85 12.60 4.68 Grasim Industries Ltd. 27.92 18.71 21.16 15.47 12.27 Bombay bying -4.41 -67.50 9.71 7.64 15.54 Industry

2007-08 2008-09 2009-10 2010-11 2011-12

21.27 6.90 12.98 13.65 12.01

Graph No: 4.2.2

Return on Net Worth(%)

25 20 15 10 5 0 2007-08 2008-09 2009-10 2010-11 2011-12

Year

Return on Net Worth(%)

25 20 15 10 5 0 2007-08 2008-09 2009-10 Return on net worth 2010-11 2011-12

Interpretation:Rate of return measures profitability from a given level of capital investment. It is excellent indicator of overall performance of an industry. It shows how efficiently the company has utilized its assets. The ratio shows fluctuation trend in every year. It is 21.27% in 2007-08. It is drastically decline in year 2008-09 to 6.90% because of increase in operating cost and decline of profit. It is also increase in 2009-10 to 12.98% so; it can show the efficient use of net worth. The ratio shows that Arrow textiles Ltd. and Bombay dying has negative return on net worth in year 2008-09 because of high administrative and other cost. Grasim industries has highest return on net worth ratio for every year in 2007-08 it is 27.92% and in 2009-10 it is 21.16%. So, it indicates increasing trend for industry.

4.3

Leverage ratios:-

4.3.1 Debt/equity ratio:Table No: 4.3.1 Arvind Fabindia mills overseas Pvt. Ltd. 1.37 0.36 1.49 0.45 1.54 0.66 1.30 0.31 1.11 0.13 Arrow Textiles Ltd. 0.60 0.87 1.12 1.12 1.18 Grasim Industries Ltd. 0.43 0.37 0.27 0.12 0.09 Bombay bying 3.07 5.42 9.19 5.39 3.33 Industry

2007-08 2008-09 2009-10 2010-11 2011-12

1.17 1.72 2.56 1.65 1.17

Graph No: 4.3.1

3 2.5

Debt - Equity Ratio

2 1.5 1 0.5 0 2007-08 2008-09 2009-10 2010-11 2011-12

Year

Interpretation:Debt-Equity ratio indicates the relationship between total long-term debt and net worth. Debt/equity ratio indicate the how much of debt should able to cover by equity. How much of debt in comparing to equity capital. The ratio shows it is increasing continuous from 2007-08 to 2009-10. So, it is considerable and can be said it is not under control and it is not good for industry to increasing in debt. But, it is declining in year 20010-11 to 1.65. So, it can say industry has to reduce its debt and it is favorable for industry. The ratio indicates fluctuating trend in debt/equity ratio. Bombay dying has highest debt/equity ratio for every year. Fabindia and Grasim Industries Ltd. has lowest ratio so, it is good for companies to safeguard on debt. Overall industry debt equity ratio is fluctuating. It is drastically increase in year 2009-10 because of companies raise more debt for expansion of companys growth.

4.3.2 Fixed assets turnover ratio:Table No: 4.3.2 Arvind Fabindia mills overseas Pvt. Ltd. 2007-08 2008-09 2009-10 2010-11 2011-12 0.80 0.79 0.78 0.93 1.15 3.38 4.01 4.10 4.36 4.33 Arrow Textiles Ltd. 1.04 0.92 0.79 0.87 1.06 Grasim Bombay Industries bying Ltd. 1.62 1.30 1.25 1.65 1.76 1.15 1.34 1.57 2.46 15.05 Industry

1.60 1.67 1.70 2.05 4.67

Graph No: 4.3.2

5

Fixed Asset Turnover Ratio

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2007-08 2008-09 2009-10 2010-11 2011-12

Year

Interpretation:The Fixed asset turnover ratio indicates the relationship between turnover and utilization of fixed assets like building, plant and machinery, land etc. Higher the ratio, higher the utilization of fixed assets. Meanwhile industry is able to utilize more and more fixed assets to generate sales. The ratio shows increasing trend in fixed assets turnover. In 2011-12 it is highest 4.67 times. And in 2010-11 it is 2.05 times so; it is good for industry to utilize maximum resources for generating sales.

The ratio shows relationship between sales and fixed assets. Fabindia Oversease Pvt. Ltd. has highest ratio for every year so, it is good for utilizing maximum fixed assets for companys growth, in year 2011-12 it is 4.33 times. Arvind mills, Bombay Dying and Grasim industries ltd has turnover of fixed assets around 1.5 times since last five years. fabindia ltd is indicates increasing trend so it is shows effective utilization of fixed assets.

4.4

Liquidity ratios:-

4.4.1 Current ratio:Table No: 4.4.1 Arvind Fabindia mills overseas Pvt. Ltd. 1.50 1.45 1.29 1.35 1.18 1.14 1.10 1.42 0.95 1.81 Arrow Textiles Ltd. 1.41 1.46 1.54 1.34 1.00 Grasim Industries Ltd. 0.91 0.86 0.86 0.93 1.10 Bombay bying 0.82 0.94 1.20 1.35 1.61 Industry

2007-08 2008-09 2009-10 2010-11 2011-12

1.22 1.18 1.18 1.23 1.29

Graph No: 4.4.1

1.3 1.28 1.26

Current Ratio

1.24 1.22 1.2 1.18 1.16 1.14 1.12 2007-08 2008-09 2009-10 2010-11 2011-12

Year

Interpretation:It is generally believed that 2:1 shows a comfortable working capital condition that is current assets should be twice to the current liabilities. Current ratio means ability of the firm to meet its obligation. Here the above ratios are said to be ideal level ratio. The ratio shows minor fluctuating trend. It is considerable for industry to it can maintain current assets more than current liabilities. So, it can say that all the companies have sufficient current assets to meet current liabilities. Current ratio indicates the relationship between current assets and current liabilities. The ratio of industry is in fluctuating because of companies ratios are also in fluctuating. The current ratio of Fabindia and Arrow textiles Ltd. are better than comparing to other companies, in each year. An Arrow textile has lower ratio in the year 2012 comparing with industry ratio so, its shows negative effect on industry current ratio. Arvind mills ltds, Grasim industries and Bombay dying shows fluctuating so, it is good for industry to major companies ratios is not declining so that shows effective utilization of current assets.

4.4.2 Inventory turnover ratio:-

Table No: 4.4.2 Arvind Fabindia mills overseas Pvt. Ltd. 3.76 5.67 4.07 5.86 4.58 4.90 4.75 4.79 4.92 4.58 Arrow Textiles Ltd. 4.38 4.18 4.32 4.29 4.36 Grasim Industries Ltd. 12.90 10.30 9.86 11.95 10.17 Bombay bying 6.25 5.17 6.40 3.34 1.82 Industry

2007-08 2008-09 2009-10 2010-11 2011-12

6.59 5.92 6.01 5.82 5.17

Graph No: 4.4.2

7 6

Inventory Turnover Ratio

5 4 3 2 1 0 2007-08 2008-09 2009-10 2010-11 2011-12

Year

Interpretation:Inventory turn over ratio indicates the relationship between total sales and invetory. The ideal ratio is more than 1. It can indicates how much time invetories are turn over based on sales. Above ratio are ideally for industry. In year 2007-08 it is 6.59 times so it is good for industry. And the ratio is maintain continuos to year 2009-10 to 6.01 times. So, the trend for inventory turn over is fluctuating. The ratio can shows that industry will going on growth rate trend. The inventory turnover ratio indicates relationship between sales and inventory. The ratio of industry is somewhat constant trend. Grasim Industries ltd has highest inventory turnover ratio than comparing to other companies, in year 2011-12 it is 10.17 times which is higher than industry ratio. Arvind mills, Fabindia, and Bombay dyeing has fluctuating trend since last five years. Alok ltd has shows worst ratio and it also in declining trend in year 2009-10 it is 3.05 times so its shows negative effect on industrys ratio.

4.5

Payout ratios:-

4.5.1 Dividend payout ratio (net profit):Table No: 4.5.1 Arvind Fabindia mills overseas Pvt. Ltd. 1.21 19.60 0.00 19.47 0.00 16.47 0.00 17.78 0.00 15.98 Arrow Textiles Ltd. 0.00 0.00 0.00 0.00 0.00 Grasim Industries Ltd. 1.17 1.90 1.07 0.80 0.86 Bombay bying 2.85 2.98 2.26 4.78 4.31 Industry

2007-08 2008-09 2009-10 2010-11 2011-12

4.97 4.87 3.96 4.67 4.23

Graph No: 4.5.1

6

Divident Payout Ratio

5 4 3 2 1 0 2007-08 2008-09 2009-10 2010-11 2011-12

Year

Interpretation:Dividend payout ratio indicates the how much percentage of profit should pays for dividend from profit. It is relationship between dividend paid and earnings of company. In year 2007-08 4.97% of profit is declared for dividend. This is very sufficient level for share holder to getting more dividends. In year 2008-09 it is 4.87% dividend payout ratio and in year 2009-10 it is paid 3.96%. so, it shows that the companies are reducing to paid more dividend to share holders and industry can invest earnings for further expansion of industry growth. Dividend payout ratio indicates the relationship between dividend per share and earning per share. The ratio for industry is shows on declining trend. Fabindia Oversease Pvt. Ltd shows highest dividend payout ratio comparing with other companies. Arvind mills can shows ratio in drastically declining after the year of 2005-06 because of declining in profit margin. Bombay dying, and Grasim Industries show the fluctuating in dividend payout ratio. It is notable that Arrow textiles was not declaring dividend from 2007-08 to 2011-12.

4.6.TREND ANALYSIS:-

4.6.1 AGGREGATE INDUSTRY SALES TREND:Table No: 4.6.1 Year 2007-08 2008-09 2009-10 2010-11 2011-12 Sales (Rs in million) 12350.4 11682.09 10850.05 12446.1 14219.24

Graph No: 4.6.1

Sales
16000 14000 12000 10000 8000 6000 4000 2000 0 2007-08 2008-09 2009-10 2010-11 2011-12 Sales (Rs in million)

Explanation:The above graph shows fluctuating trend for sales. It is declining from 2007-08 to 2009-10 but after that it is increasing trend, so it is good for Indian textile industry to increase in sales of companies. The sales of textile industry are shows growing trend.

4.6.2 AGGREGATE INDUSTRY EARNING PER SHARE TREND:-

Table No: 4.6.2 Year 2007-08 2008-09 EPS (Rs.) 11.28 12.86

2009-10 2010-11 2011-12

10.97 10.37 13.41

Graph No: 4.6.2

EPS (Rs.)
16 14 12 10 8 6 4 2 0 2007-08 2008-09 2009-10 2010-11 2011-12 EPS (Rs.)

Explanation:Above graph of Earning per share shows textile industry is going on growth trend. In year 200708 it is 11.28 and after year 2008-09 it is declining up to year 2009-10 and it is drastically increase in year 2011-12 to Rs. 13.41. so it is good for covering earnings per share.

4.6.3 AGGREGATE INDUSTRY EQUITY TREND:-

Table No: 4.6.3 Year 2007-08 2008-09 2009-10 2010-11 2011-12 Equity ( Rs. In crore) 109.04 116.76 121.45 123.08 141.75

Graph No: 4.6.3

Equity ( Rs. In crore)

160 140 120 100 80 60 40 20 0 2007-08 2008-09 2009-10 2010-11 2011-12 Equity ( Rs. In crore)

Explanation:Above graph shows the trend of equity is on growing trend. It is indicates constant growth of equities are available in market of textile industry. In year 2007-08 it is 103.04 crore and in year 2011-12 it is 141.75 crore. So it is says that equity of textile industry is more fluctuated on market.