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SUMMER TRAINING PROJECT REPORT

ON

“STUDY OF EXPORT POTENTIAL IN JKM


OVERSEAS PVT. LTD. (COTTON TEXTILE AT USA)”

Submitted in Partial Fulfilment of the requirement for the


Award of degree of

MASTER OF BUSINESS ADMINISTRATION


of
GautamBuddh Technical University, Lucknow

By
ASHISH KUMAR SINGH

Under the Supervision of


MR ARUN KUMAR
(SENIOR MERCHANDISER)

United Institute Of Management


Greater Noida
Roll No. 0921270021 2010
CERTIFICATE
TRAINING CERTIFICATE
PREFACE

The training report is based upon the lecture notes. I prepared this

report during my vocational training (12th June `10 to 29th July `10) in

“JKM OVERSEAS PVT. LTD.”, GURGAON. During this period I

have the opportunity to gain knowledge about my project.

It is an attempt to prepare MBA training report. Again since this

training report is based upon the work experience during very short

time, many long or detailed descriptions have been emitted. The

project report is totally about the future and capability of our textile

industry to survive in the USA market.

The sequence of chapters was selected keeping in view of the training

schedule made by the training instructor and also keep in view of

process.

ASHISH KUMAR SINGH


ACKNOWLEDGEMENTS

At the onset I would like to extend my sincere gratitude to Ms.

Fouzia (Faculty Guide) for giving me an opportunity to work on this

project.

And last but not the least, I would like to thank all my friends and

colleagues for their valuable advices and encouragement


DECLARATION

I, “ASHISH KUMAR SINGH” to declare that the Summer training

report entitled “Study of Export Potential in JKM Overseas

Pvt. Ltd. (Cotton Textile at USA)” being submitted to the

U.P.T.U. for the partial fulfilment of the requirement for the degree of

Master of Business Administration is my own endeavours and it has

not been submitted earlier to any institution/university for any degree.

Place:

Date: ASHISH KUMAR SINGH


TABLE OF CONTENTS

TOPICS PAGE

NO.

Introduction to the Topic…………………………1-4

Objectives………………………………………………

..5-6

Literature

Review……………………………………….7

Company Profile…………………………………….8-

11

Research Methodology……………………………..12

Product Introduction……………………………13-25

Global Scenario……………………………………26-

31

Indian Textile Industry……………………….32-35


Indian Textile-Policies and………………...36-46

Agreement And their implication

US Cotton Textile Industry…………………47-59

Textile Visa and exports license…………60-75

requirements

India’s Exports of Cotton Textile………..76-92

Conclusion……………………………………………

93-94

Limitations……………………………………………

……95

Recommendation………………………………96-100

Annexure…………………………………………101-

125
INTRODUCTION TO THE TOPIC

The topic taken by me i.e., “EXPORT POTENTIAL OF COTTON

TEXTILES TO USA” is mainly to learn the scope and future of cotton

textiles in foreign market and mainly in the market of major buyer i.e.

USA. The project will help my organization JKM OVERSEAS to

build up the strategy accordingly and plan for the future. Is the USA

market will be as much potential as it was in the past or not, if yes

than to plan for upgrading the quality and increase the production. But

in other case if the future of the market is in down shape than to plan

accordingly and start looking for other major markets or potential

markets where the company could find growth chances.

The United States constitutes a rich and prosperous market. The

region also holds a prominent place in India’s export and import trade.

One of the major products which India exports to these countries are

the cotton textiles. Indian export to U.S in Jan./Mar. 2008 was RS.

8828.56 million i.e. 24.03% of the total export of cotton textile and in

Jan./Mar.2009 it declines to RS. 8485.55 million i.e. 20.37% of the

total export of the cotton textile in that particular period.


This trend shows a little bit of pessimistic picture of the cotton textile

export from India to U.S. India shows an up trend in the rest of the

world covering considerably good market share but in U.S as the

quota restriction are still on and the other too many qualitative

restriction on the Indian products helps to bring down the market

share. But only others are not responsible for the situation. We here in

India did not pay much attention on the quality of the cotton used in

manufacturing of the product. The spinning mills here are as old as

our earth and neither the entrepreneurs nor the government has taken

much care to improve the condition of the mills.

We all know that the U.S. is a buyers market and it provides

maximum support to its customers. As socio economic objectives, the

consumer is ensured the best quality product at the most competitive

prices. As a buyer'’ market, consumer is the king in the true sense of

the term.

The consumer protection does not remain c

onfined to national boundaries. It extends the national frontiers. The

product liability clause applicable to wide ranging products or


consumer durable is the best form of protection and safeguard the

interests of consumers and it also applicable to textiles.

Therefore, in order to stay in the international market and to survive,

India has to make the quality product irrespective of fibre, fabric or

the made-ups, come what may. As the market is going to open in

20012 and there will be no quantitative restrictions but there are

several other non-tariffs barriers waiting for us.

So, this is the time to start taking action in this regard to safeguard the

interest of our country in the field of textile.


OBJECTIVE

Primary objective of the Project is to carry out a study to assess the

export potential opportunity of Cotton yarn, Fabrics and Made-ups in

the U.S.

The secondary objective of the study is:-

• To collect data on production of cotton yarn within the country,

• To collect data on the world cotton supply and distribution.

• To identify the emerging the trends in the Indian cotton textile

industry.

• To find out the implications of the Arrangement on Textiles and

Clothing (ATC) and Multi-Fibre Arrangement (MFA).

• To understand the rules and regulations pertaining to the impact of

Cotton yarn, Made-ups a fabrics in the U.S.

• Finally, to study the market potential of these products in the U.S.


LITERATURE REVIEW

• Data has been gathered from MINISTRY OF COMMERCE

AND TRADE.

• Data from DGFT (Directorate general of foreign trade)

website.

• Data from FIEO (Federation of import and export organization).

• Data from Apparel export promotion council.

• Studied the process and procedures by analyzing the course

books.

• Data studied from USA trade ministry.


COMPANY PROFILE

JKM OVERSEAS (P) LTD. Located at 242, Gurgaon sohna road,

bhondsi, Haryana (INDIA) was established in 1992. The founder of

the company Mrs.Indu Modi a designer and painter by training and

vocation started JKM OVERSEAS with her passion for cashmere,

pashmina and rare exotic skills of india. We at JKM believe in

excellence and quality in products. To this end, we have invested

heavily in our designs, quality systems and people to produce the

finest fashion collections.

JKM`s business segment include home products, garments, fabrics,

scarves, accessories. The company has an annual turnover of more

than $50 million and its business presence in about more than 20

countries which include USA, FRANCE, UK, AUSTRALIA, SPAIN,

ITALY, BELGIUM, HONG KONG, SINGAPORE, JAPAN, CHINA,

KOREA, NETHERLANDS, TURKEY and GREECE etc.

Our client list includes some of the leading names of fashion world

like houses of Fraser, Anichini, Catstudio, Armani, Max marra,

Bellerose, Nolita, Rare, Toppy Trading Group Hong Kong, Cortefiel

etc.
PRODUCT RANGE:

Our product range includes:-

Fashion Graments: High fashion value added and hand made

garments for women, men, and kids. We do in both Tops and

Bottoms. The value addition on these fashion garments includes

prints, unique embroidery, special accessories, stitching techniques

and much more.

Home Collections: This includes Blankets, Quilts, Cushion covers,

Curtains, Coverlets, Throws, Tableclothes and Runners. Cashmere

products are one of our unique high end products.

Fashion Accessories: Scarves, Mufflers, Stoles, Shawls, Bags and

other fashion accessories are also included in our product range.

PRODUCTION FACILITIES

Our manufacturing capacity is more a function of the complexity of

the style being handled. To cater to our clients requirements, we

presently have a labor pool of over a thousand workers at our

disposal. Our factory is an integrated unit where all processes are in


house including weaving, dyeing, embroidery(hand/machine), sewing,

washing, quality checking, finishing and packing etc. Each step of the

intricate process is supervised via a meticulous quality assurance

system.

We have a state of art 70,000 sq.ft. integrated manufacturing set up

near NEW DELHI(GURGAON), India a smaller 10,000 sq.ft. set up

in banglore. We are in the process of setting up a large integrated unit

in Banglore over a three acre campus to cater to our clients expanding

requirements. We value our people and thus we have maintained a

clean, comfortable and pollution free set up.


RESEARCH METHODOLOGY

The methodology adopted for doing this project encompasses a

detailed study of both primary and secondary source of information in

order to find out the export potential.

The information from primary sources has been gathered by primary

interviews and discussions with exporters of textiles and garments to

United States market. Personal interviews with personnel’s in

‘Texprocil’ and Ministry of Textiles helped a lot to collect the

information.

The secondary sources of include various data available in the various

libraries, by way of desk research. This also includes the printed and

published data available in the PHD Chamber of Commerce and

Industry-Escort Library, Texprocil and Internet. All the

information thus collected and was carefully studied and analyzed

before the final report was framed.


PRODUCT INTRODUCTION

COTTON YARN

With the world's largest spinning capacity (over 32.10 million

spindles) the finest varieties of raw cotton in abundance and a vast

pool of skilled manpower,

India produced 27,891 million kgs. of cotton yarn (2000-2001). These

large numbers are matched by equally superior and consistent quality

and manufacturing practices.

Whatever your specific need, open-end or ring spun, combed or

carded, electronically cleared and auto-coned in greys, dyed, bleached,

mercerised or gassed and signed varieties are available in all counts.

Cotton Yarn Types

Cotton yarn is classified on the basis of counts. Typically the higher

count is of superior quality.

Coarse yarn (less than 17s) is used for low cost fabric, industrial

garments etc. Medium quality yarn (20-40s) is used for shirtings,

knitting and other textiles. Super fine yarn (above 40s) is used for

premium shirting and other sophisticated fabrics.


PRODUCTION OF SPUN YARN

Unit: Million Kgs

Fibre 2006 -2007 2007-2008 2008-2009

Cotton 1894 2148 2213

Blended 395 484 583

100% Non-cotton 196 162 177

Total 2485 2794 2973

Source: Textile Commissioner's Office

COTTON YARN MANUFACTURING

Raw cotton is ginned (impurities removed) and pressed in bales (of

170 kg each) for supply to mills where it is fed into the blow room and

is blown into loose form. The loose cotton is passed through a roller to

form cotton layers or laps. The laps are taken through carding/

combing process where short fibers are removed and cotton is

converted into a loose fibrous rope (called sliver). The slivers are

stretched through roving machines and further twisted, strengthened

and drawn in ring frame (spindles) to form yarn. The yarn can be

packed on cone winders or on reeling machines. The latter packing is

called hank yarn used by handloom operators. Cotton/ blended yarn is


woven into fabric on looms, which can be automatic (in the organized

sector) or hand/ power operated mechanical looms in the unorganized

sector. The woven fabric is dyed, processed and finished to make the

final cloth. Due to insular government policies, there exists a big

unorganized sector for textile production, consisting of khadi, cottage

industries, handloom, etc.Two basic technologies are being used in the

cotton textile industry - mechanical processing for the conversion of

fiber into yarn and yarn into gray cloth and chemical processing for

converting gray fabrics into finished fabrics.

Two spinning technologies - ring spinning and rotor (open end -

OE) spinning are popular. Ring spinning uses a slightly longer

process. It gives a softer finish to the yarn and is versatile in spinning

yarns of different counts. The basic technology of ring spinning has

remained almost unchanged for almost a century though evolutionary

developments leading to higher speeds and better quality have taken

place in the past two decades.

Though invented earlier, OE spinning has become popular since the

1970s. More than 10% of world yarn is currently produced through

this technology. OE yarns, using a shorter process sequence, have a

somewhat harsher handle. The yarn feel and techno-economic factors


have meant that OE, is largely adopted for coarser counts; ie counts

below 20s. OE can also handle short fibers and cotton waste. Indian

mills have in fact used OE extensively as a waste spinning technology.

Since cotton is a natural fiber, a single cotton ball can have fibers of

uneven lengths. Even the same variety of cotton grown in the same

field would have fibers of varying lengths. Besides, it would contain

some foreign matter like broken leaves, seeds and dust since it is a

field-grown crop. The spinning of quality yarn involves three steps :

• The lint has to be cleaned and the fibers have to be made of

relatively uniform length.

• The fibers have to be oriented in the same direction.

• The fiber mass has to be converted into a strand of similarly

oriented fibers with the optimum mechanical force so that it can be

easily drawn out and twisted to form a continuous yarn strand

without rupturing the fibers in the process. To achieve this, sheets

of fiber are gradually drawn out over 2 or 3 stages into a decreasing

mass of fibers per unit length.

The preparatory spinning process is designed to achieve these three

objectives. In this process it generates waste, which can either be


foreign matter or short fibers. These short fibers are extracted, as they

are unsuitable for spinning finer yarn. Normally, such extracted fibers

constitute about 5% in carded yarns and 15% to 20% in combed yarns.

Such waste fibers can however be processed, made uniform and

converted into waste yarn. OE technology is more adept in this area.

Though these yarns are weak, they are quite workable for handloom

products like "dhurries" and "chaddars". OE spinning has been

adopted for superior coarse count spinning only in the last 5 years

with the emergence of denim weaving and furnishing fabric weaving

for export.

FABRICS "The Indian Treasure Chest"

When the high priests of fashion flock to India, need we say more

about our cotton fabrics!Our treasure chest of cotton fabrics is

overflowing with drills, poplins, cambric, twills, gabardines, sateens,

dobby checks and stripes, denims, safari suitings, industrial fabrics &

in a variety of widths, grey or finished-Truly a treasure chest of whose

riches you can partake.


Fabrics Include:

a. Apparel - outer and inner wear.

b. Household fabrics - furnishings, bed linen etc.

c. Accessories- bags, belts, handkerchiefs, etc.

d. Industrial fabrics - filter cloth, parachute cloth etc.

COTTON FABRICS MANUFACTURING

Weaving is interlacing of vertical yarn (warp) and horizontal yarn

(weft). Depending on the type of weave, warp yarn sheet is divided

and lifted. An opening is created through which weft yarn is inserted.

Then the other portion of the warp sheet is lifted and weft yarn is

passed again. This gives the binding as interstices are created through

this process. Weft yarn is carried across in a bobbin held in a shuttle.

This is the basic weaving process. Over the years, different techniques

of weft insertions have been developed. Age-old method is to use the

shuttle. In the handloom it is thrown from one end of the warpsheet to

another by hand. In powerloom the same is done through use of

power. In an automatic loom when the yarn on weft bobbin (pirn) is


exhausted it is changed automatically. These are all shuttle looms.

There are other methods of insertion like through rapier, projectile and

jet of water or air. Such weaving machines are known by their system

of weft insertion eg rapier loom, projectile loom or machine and air

loom. In the last 50 years the rates of weft insertion have gone up

considerably. From a modest 200 m/ minute in 1950's to about 1,000-

1500 m/ minute today.

The approximate production rates of different types of looms for a

basic sheeting fabric of 20s count, with 60 threads in warp as well as

weft and 63" wide are given below:

Rpm m/ 8 hour

Handloom 20 4

Ordinary loom 160 24

Modern auto shuttle loom 220 40

Rapier loom 400 73

Projectile loom 600 110

Air jet loom 800 146

Source: Textile Commissioner's Office

New projects for weaving plain fabrics are based on air jet weaving

while weaving of patterned fabrics such as suiting, use either rapier or


projectile "Sulzer" looms. The project costs are evaluated with

reference to a basic quality like 20x20 (yarn count), 60x60 (number of

threads in an inch in warp and weft) of 63" width, A modern air jet

weaving project for 10,000 meter per day of such a basic fabric costs

approximately Rsl00mn.

The basic plain weave fabric still constitutes 70% of total fabric

production. Different weaves can be created by changing the number,

pattern and sequence of the yarn threads that are lifted up and down

from the warp sheet. The more popular weaves are drills, satins and

jacquards in addition to the plain weave. Different designs are created

by using colored yarns in the warp and the weft. A multitude of

fabrics can be created by combining colored yarns and different

weaves, limited only by a designer's imagination.

MADE UPS "A Touch of the Master's Hand"

From time immemorial Indain craftsmen have created exotic fantasies

woven from the finest cotton. Their counter parts have created an even

larger and more exquisite range of cotton made-ups-table linen, bed

linen, kitchen linen, toilet linen, furnishings, decorative fabrics &and

much more.
Competitive scenario

Textile mills have cultivated strengths in particular product lines and

markets over the years. For example

Products company

Fine counts above 40s GTN, Ginni, Premier

Medium counts 20-40s Vardhman, GTN, Premier

Coarse counts 6-20s Coats Viyella, Loyal

Sewing threads Coast Viyella, Mahavir

Upmarket shirting Arvind, Coats Viyella

Upmarket trousers material cotton Coats Viyella, Mafatlal

Denim Arvind

Blended shirtings Mafatlal, Bhilwara

Sarees Reliance, Khatau

Household fabrics Bombay Dyeing

Source: PHD Chamber of Commerce, Journal.


GLOBAL SCENARIO

WORLD COTTON SCENARIO

World cotton prices re fallen are moving higher. After five years of

almost continuous decline, during which daily values of the Cotlook A

Index $ 1.10 per pound in 2000 to 44 cents at the end of

2005, the Index increased to 51 cents in January 2007. Not since the

1950s has the Cotlook A Index fallen for more than two consecutive

seasons, and despite the upturn in January, 2007/08 will be the fifth

consecutive season in which average prices have fallen. As is often the

case when trends change and the rise in prices is proceeding faster

than many expected and further gains during the second half of

2007/08 and into 2008/09 are likely.

World cotton production is forecast to drop from an estimated 19.3

million tons this season to less than 19 million tons in 2008/09 and

consumption is expected to climb to a record 19.5 million tons next

season. Reflecting improved health in the cotton economy, world

exports are rising from 5.3 million tons last season to nearly six

million tons this season and a forecast of 6.3 million tons in 2008/09.

World cotton ending stocks are changing little this season, but a
decline to less than nine million tons is forecast next season. Exports

by China are estimated at 300000 tons this season, double last

season’s level and China’s exports may remain significant through

next season. Imports by China, essentially zero this season, may rise

in 2000/01.
WORLD COTTON SUPPLY

(Million tons)

2006-07 2007-08 2008-09

Production 18.66 19.41 18.90

Consumption 19.02 19.75 20.01

Exports 5.30 5.90 6.47

Ending Stocks 9.69 9.07 7.96

Cotlook A 59 53* 62*

Index

Source: ICAC press release for March, 2009

WORLD COTTON DISTRIBUTION

(Million Bales)

2006-07 2007-08 2008-09

Production 85.7 87.9 86.8

Consumption 87.4 90.7 91.9

Exports 24.4 27.1 29.7

Ending Stocks 44.5 41.7 36.5

Cotlook A 59 53* 62*

Index
* US cents per pound. Statistical estimates are based on current

estimates of supply and use; 95% confidence intervals extend 15 cents

per pound above and below each point estimate.

Source: ICAC press release for March, 2008

WORLD TEXTILE FIBRE CONSUMPTION

World end-use textile fibre consumption is expected to increase 0.5%

in 2007, not a very different scenario than the one registered in 2006.

With higher expected growth rates for the world economy, textile fibre

consumption is likely to grow 1.1% in 2008. Textile fibre

consumption is expected to reach 45.7 million tons in 1999 and 46.2

million tons in 2008.

The projections for 2007 takes into account 0.6% increase in industrial

countries and 0.3% in developing countries and in eastern Europe and

the former USSR. Within industrial countries, expected increases in

North America (1.3%) and Western Europe (0.3%) are offset by a

0.7% decline in the Japan, Australia and New Zealand group of

industrial countries. In developing countries, growth in Asia (0.7%),

the Middle East and Europe (1.6%) and America and the Caribbean, a

region that entered into economic recession in 2007.


The projections for 2008 takes into account increases of 0.9% in

developing countries, 1.2% in industrial countries and 2.4% in

Eastern Europe and the former USSR, a region which is expected to

experience 2.8% GDP growth in 2008, the highest economic growth

since the transition to a market economy began. The projected

increase in developing countries is the result of economic recovery

since expected for Latin America and the Caribbean, which will likely

translate into an increase of 1.5% in textile fibre consumption in the

region and strengthening of GDP growth in other regions. Textile fibre

consumption is expected to increase 1.9% in the Middle East and

Europe, 2% in Africa and 0.5% in Asia in 2008.


INDIAN TEXTILE INDUSTRY

The textile industry is one of the largest segments of the Indian

economy accounting for over one fifth of the industrial production.

The combination of traditional art and contemporary design has

produced a variety of yarn, fabrics, home textile and other textile

products sought after the world over. With over 1 million hectors of

cotton cultivation and an annual crop of over 3000 million kg. India is

among the world largest reservoirs of this popular fibre. In addition

the 80 odd varieties of different description being grown in India,

enables the industry’s produce cover almost every conceivable count

and construction of fabric, in a width of choice.

The process of liberalisation begun in the last decade has seen the

industry become globally competitive not only in terms of price but

also quality. Modernisation has not been restricted to the installation

of sophisticated processing machinery, looms, auto corners, electric

cleaner, and system conforming to ISO 9000 standards.

Today with over 1500 spinning mills over 278 composite units and

around 1.5 million registered looms providing employment to 15

million people, the Indian textile industry is a force to reckon.


But we should also not forget that the market is going to open in 2010

with the end of ATC and the competition is going to increase

tremendously, its high time for us to start thinking in terms of

providing the world class product. As the EU will remove the quota

restriction but there are going to be several non-tariff barriers for the

country like India, especially against the four major players such as

U.K., France, Germany and Italy. Our main competitors are going to

be China, Pakistan, Bangladesh and other surrounding countries.

It is true that the textile industry has shown a great potential in the last

few years and achieved the growth of about 30% including yarn,

fabrics and the made-ups but if now we have not taken the advantage

of the TECHNOLOGY UPGRADATION FUND provide by the

Government to rejuvenate the industry, we are not going to survive in

the international market.

INDIAN COTTON TEXTILE INDUSTRY

India’s cotton textile industry occupies a unique position. It accounts

for about seven per cent of gross domestic product (GDP), 20 per cent

of the industrial output, and over 30 per cent of the export earnings.

The industry contributes over Rs. 5,000 million in terms of excise duty
to the exchequer. After agriculture, this industry is the second largest

employment provider in the country as it provides gainful employment

to about 38 million people. A considerable number of people also get

benefited through its indirect employment.

At the time of independence, textile industry, the largest organized

industry in the country, comprised an estimated 2.5 million handloom

weavers and 356 mills, with an installed capacity of about 10.3 million

spindles, 200,000 looms and 700,000 workers. After that, the increase

in fabric production is mainly because of availability of major raw

materials, namely, cotton and man-made fibers. However, the share of

cotton gradually declined from 99 per cent in the 1950s to 69 per cent

in 2006. As an aftermath of partition of the country, 30 per cent of

cotton- growing area went to Pakistan. But, through concerted efforts,

the country could achieve self –sufficiency.

Progress so far

The per capita domestic availability of fabrics, excluding exports, has

increased from 11.53 sq. meters in 1951 to about 28 sq. meters in

1996. It was placed at 30.92 sq. meters in 1997-98.


The year 2006-07 witnessed a bumper crop of 17.5 million bales of

170 kg each). But, since the global prices are low, it is unlikely to

prevent cotton imports. The non-availability of good quality cotton

and high contamination are also encouraging cotton imports.

The Cotton Advisory Board has estimated the opening stock in the

new cotton year at 3.65 million bales and closing stock at 4.9 million

bales. The board has also projected an import fall of 500,000 bales in

final supply statistics and an increase of some 150,000 bales in

demand.

COTTON TEXTILE INDUSTRY, SECTOR WISE OUTPUT

(In million sq. meters)

2006-07
2001- 2003- 2004- 2005-
Sector 2002-03 (April –
02 04 05 06
February)

Mills 2,000 1,990 2,271 2,019 1,957 1,798

Power 14,644 15,994 15,976 17,201 19,352 18,830

looms

Handlooms 5,219 5,851 6,180 7,202 7,456 7,263

Total 21,863 23,835 24,427 26,422 28,765 27,891

Source: magazine, Facts for you, Feb, 2008


Technology up gradation

The textile policy of 1985 provided the necessary impetus to forward

looking mills to upgrade their technology by installing state-of-the-art

machinery. Currently, a number of mills and garment units are

equipped with such high-tech spinning, weaving, knitting and

processing machinery.

Increase in number of mills

The number of cotton man-made fibre textile mills which was 383 in

1951 steadily increased to 1,624 in 1997. Also, the number of

spinning mills rose from 107 in 1951 to 1,349 in 197, with the

spinning capacity increasing from 11.25 million spindles to 32.22

million spindles during the same period.

Good growth rate

The production of spun yarn has also gradually increased from 602

thousand tonnes in 1951 to about 2.7 million tons in 2005-06,

registering a compound annual growth rate of about 3.3 per cent.

The fabric production also increased substantially from six billion sq.

meters in 1951 to about 33 billion sq. meters in 2005-06, recording a


compound annual growth rate of 3.7 per cent. It was placed at 37,436

million sq. meters in 2006-07.

Increase in share of powerloom sector

The dominant share of mill sector in cloth production has steadily

declined and has been replaced by powerloom sector. Share of

handloom sector remained almost stagnant.

The powerloom sector accounts for around 72 per cent of the total

cloth production, and its share has been growing over a period. The

number of powerlooms installed increased from 1.04 million units in

1990 to 1.52 million units in 2005-06. These are concentrated in

Maharashtra, Gujarat, Andhra Pradesh, and in the Punjab region.

Significant changes

From the mid 1980s onwards, the mill cotton textile segment has been

experiencing significant changes caused by market resurgence, mill

restructuring, deregulation and the economic reforms.

In recent years, the market for cotton cloth has grown rapidly, and the

average rates of profit and value added per worker improved. Over the

years, the fibre mix pattern of cloth has also undergone change. In the
1950s, cloth was mainly cotton-based, now, cotton cloth accounts for

only 60 per cent of the total production. The remaining 40 per cent is

contributed by blended and 100 per cent non-cotton cloth. Of course,

there has been improvement in the quality of fabrics.

The WTO textiles and clothing agreement has provided for a ten year

phase-out for textile quota system under multi-fibre arrangement

(MFA) which ends on December 31, 2009. Thereafter the world trade

in textiles will be totally free without quota to integrate it into the

WTO regime.

Problems faced

The textile industry is not free from problems. The major problems

include skewed fiscal duty structure, exemptions, evasion of duties,

the rigid attitude of banks, redundant regulations, and an unequal

competition from imports.

The raw material cotton itself is under pressure from cheaper

alternatives such as polyester. The cotton textile units are suffering

from increasing raw material prices and declining margins because of

global competition. The demand for polyester and intermediates grew

at about 30 per cent in 2006-07 because of the growing tendency to


substitute polyester for cotton. The cost of polyester too has come

down because of fall in international prices and also reductions in

customs and excise duties. The industry is thus made to rely on

exports, that too on non-quota countries.

There is a stipulation that spinning mills make half their yarn sales in

the form of banks to handlooms which are exempted from excise and

sales tax. This only encourages misdeclaration, diversion, etc.

There are endless procedural bottlenecks and transaction costs in

textile exports. For instance, getting a duty-free advance license often

takes a few month’s time. It is the spinning sector which is the worst

affected. It has been continuously experiencing declining profits and

even losses. The main reason for this is the rise in the costs of inputs-

cotton, power, interest, and overheads. About 60 per cent of them are

in the red, and those with low productivity are becoming sick.

The central budget for 2008-2009 increased the excise duty on cotton

yarn from 5.75 per cent to 9.2 per cent. The units trying for large value

additions are also adversely affected by the customs levy of 5.5 per

cent on imported cotton.


It was surplus capacity, particularly in China, India and Russia, that

was really affecting the world markets. According to some studies, the

excess capacity in China. India and Russia was more of a domestic

problem than global. It was estimated that these three countries had in

all 29 million spindles either as obsolete or unused capacity. While

India and China had accounted for 10 million spindles each, the

balance (nine million spindles) was with Russia.

It is assumed that once quota curbs are removed, as envisaged in the

WTO talks, exports would surge. But, this may not happen. After all,

exports of other countries are also limited by quotas. Indeed, the

Indian textile industry is facing an uncertain future and might soon

begin to be buffeted by competition.

The “Textile Quota Export Policy” has not been able to promote the

sector’s long-term competitiveness. It does not address issues like the

closure of unviable mills, the unequal advantage possessed by power

looms over composite mills (or spinners), or even remove the

continuing tax bias against man-made fibers. The past performance

entitlements (PPEs) stay at 70 per cent, while quota tenures actually

get lengthened from three years to five.


Future plans

The Sathyam Panel, set up to provide inputs for the proposed new

textile policy, has recommended setting up of textile parks in different

parts of the country. It has suggested that the ministry of textiles may

introduce a suitable scheme to provide infrastructure grants to state

governments for setting up textile parks.

The committee is of the opinion that textile parks should be integrated

and have units covering all stages from spinning, pre-weaving,

weaving, knitting, processing to clothing/made-up manufacturing. It

has also suggested that in some areas only apparel parks could be set

up independently, while in others, apparel parks could be part of the

textile parks.

Another suggestion made by the committee is that the state

governments should declare the units set up in textile parks as public

utilities, provided the units are exporting at least 25 per cent of their

total produce. The state governments should encourage foreign

companies in setting up their units in the textile parks.

The panel also suggested that the government should ensure quality

facilities, particularly uninterrupted power, treated water,


telecommunication, banking and insurance, customs office, and

container services.

The Union Textile ministry had launched the TUF with an amount of

Rs. 250,000 million to modernize the weaving and processing sectors

of the textile industry, besides jute, cotton ginning and pressing units.

The fund came into effect from April 1, 2008.

Financial institutions have already sanctioned more than Rs. 2,650

million under the TUF scheme to over 14 companies. The National

Institute of Fashion Technology (NIFT) will also set up a small group

to help garment manufacturers in getting assistance under TUF

scheme.

As is clear from the above discussion, in the context of globalization

of the Indian economy, the textile industry should go in for

modernization, professionalization, effective quality control and

enhanced training facilities.


LONG TERM PROJECTIONS OF TEXTILES AND COTTON

CONSUMPTION

The set of assumption used to project world textile and cotton

consumption in 2012 includes average growth of GDP since 1980 as

long term GDP growth, population projections from the United

Nations, a continuation of the trend of cotton prices relative to prices

of other textile fibers and increases in the ICAC Textile Fibre Price

Index in tandem with inflation.

Long term projections suggests that world end-use textile

consumption will grow at an average rate of growth of end-use textile

fibre consumption has decreased over the last three decades, from

3.7% during the 1960s to 3.1% during the 1970s. 2.5% during the

1980s and 2.3% between 1990 and 1998. Lower rates of growth of

world GDP (from 5.3% during the 1960s to 3.1% during the 1980s)

and lower growth of the world population (from 2.1% during the

1960s to 1.7% during the 1990s).

World end-use cotton consumption will likely increase at an average

annual rate that of textile fibre consumption and is projected to reach

20.5 million tons in 2012. End use cotton consumption increased


faster than consumption of other fibers during the 1980s. However,

the loss of competitiveness of cotton resulted in the fluctuation of

cotton consumption around 18.5 million tons between 1989 and 1995.

Gains in cotton consumption since 1995 have been far less than the

gains registered by non-cotton fibers. A current projection suggests

that cotton will continue to lose share of the world textiles market

from 41.9% in 1998 to 40% in 2005.

INDIAN TEXTILE – POLICIES & AGREEMENT AND THEIR

IMPLICATION

1. INDIAN EXPORT QUOTA POLICY AND ITS

IMPLICATION

In November 1999, the government unveiled a new five year textile

export quota policy to gear up the Indian industry to face global

competition after the phase out of the MFA in 2010. It is widely

believed that countries like China have a much greater competitive

edge over India once MFA quotes get phased out. The new policy will

be effective from January 1, 2008 to December 31, 2010, coinciding

with the ending of quota regime under MFA. The significant aspect of

the policy is that it has retained high value entitlement for apparels to
check the downward trend in unit value realization. The policy also

takes care of complaints regarding misutilisation of new investors

entitlement.

A two-pronged strategy has been adopted by linking investment with

Technology Upgradation Fund (TUF) and introducing actual user

condition by making the quota non – transferable. In the case of

apparel exports, the transfers could be effected through electronic

transfer system.

New Textile Exports Quota Policy

The new quota policy is expected to benefit the textile industry to the

tune of Rs. 250,000 million mainly through exports. Its important

features are:

• Quota for past performance rationalized;

• Quota for new investment raised to induce modernizations.

• Procedures simplified for better utilization of quota and for

transparency.

• readymade goods entitlement raised to 45 per cent for handloom

made-ups export quota;


• entitlement for mills;

• for handloom made-ups export quota, the ready goods entitlement

raised by five per cent to 45 per cent; and

• in case of mill and powerloom made-ups, the entitlement raised to

15 per cent from the present 10 per cent.

2. AGREEMENT OF TEXTILES AND CLOTHING (ATC) AND

ITS IMPLICATIONS

World Trade in Textiles and Clothing has been subject to an array of

bilateral quota arrangements over the past three decade termed as

Multi Fibre Arrangement (MFA). The arrangement when terminated

in 2005, had a membership of 39 countries 8 (4 from EU, US,

Norway, Finland and Australia) were developed countries or

importing countries and 31 were developing countries or exporting

countries. They had around 90 bilateral restraint agreements in

addition to 29 non-MFA Agreements or unilateral measures, when

Agreement on Textiles and Clothing (ATC) came in force.

The agreements prescribes removed of these restrictions in four phases

within 10 years:
16% of the products on the list be removed in 1st Jan 2006

17% of the products on the list be removed by 1st Jan 2007

18% of the products on the list be removed by 1st Jan 2008

49% of the products on the list be removed by1st Jan 2009

The agreement also requires countries to phase out non-MFA

restrictions within 10 years. The Textile Monitoring Body is to

oversee implementation of phasing out.

Impact of ATC (GATT) on Indian Textiles and Garments Sector

The Agreement has great relevance for India whose exports of the

sector is more than US $ 3 billion, The SWOT analysis of the sector in

the light of GATT could be summarised as:

Strengths: One of the largest producer of cotton, jute, silk and man

made fibres 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. Availability of cheap skilled

labour.
Weaknesses: 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 dynamic of sub-sectors, restrictive impart regime and trade

policy environment, technological obsolescence. Lack of long term

strategy.

Opportunities: With the phasing out of restrictive trade policies-

MFA and other QRs, substantial increase in size of the markets

expected. Besides the other 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.

Threats: Major benefits of ATC agreement under GATT not to be

available before 2002. Quotas are being removed, but non- tariff

barriers (e.g. in the name of anti-duping, 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.


Conclusion: The gains are not there for India to go and claim. It

would require double the effort to even remain at the place where

India now is to textiles and Garment Exports; 3 years down the line.

Gains could be manifold, but only if, the sector gears up to challenge.

IMPLICATIONS

1. The actual effect of the agreement would be noticed by 2002 when

3rd stage begins as it is possible for the major restraining countries

to meet their obligations to integrate their textile trade in first 2

stages without significantly removing restrictions especially by EU

and USA.

2. The ATC permits countries to take safeguard actions during the

transitional period.

3. The agreement has the clause of self-destruction built in. With

completion of phasing out, the agreement will also end in 2005.

Then textile and clothing sector will be totally integrated in GATT.


4. Prices

Price is the most important factor in the cotton textile industry. As

this industry in India is the labour intensive industry,

therefore, almost 80% of the realisation get disposed in the

form of salary and wages. So, in order to be competitive in

the international market a very competitive rates has to be

quote by the Indian exporter.

The Indian exporter face extensive competition from the neighbouring

countries like Pakistan, China and Bangladesh but more from Pakistan

and Bangladesh. As in these countries the local currency is much more

weaker than that of India. Therefore the exporter in this region enjoy

the luxury of selling their goods at the lower rates and because of the

weaker currency the reimbursement is almost equal to that of our

country.

In this Bangladesh is allotted the status of the least developed nation

and therefore the other restrictions which we have to face is totally

exempted for them. There are no quota restriction for them in the Euro

and other foreign markets. The development of jute industry in

Bangladesh is a good example of this.


SIGNIFICANT EXPORT PROMOTION ACTIVITIES

UNDERTAKEN DURING THE YEAR:

During the year under review, the Council had undertaken various

export promotion activities, the most significant of which are listed

below:

• Indian Cotton Textile Show was organised in Colombo, Sri

Lanka. Sixteen leading Indian companies predominantly fabric

manufacturers and exporters, participated at the show. The

show was conducted at the time when EU quota for Sri Lankan

made trousers / shirts / blouses was lifted, thus creating an

opportunity for Indian exporters to cater to the needs of the

expanding raw material requirements of the apparel

manufacturers. It was a well-timed event aimed at creating a

synergy between the Indian manufacturers of textiles and Sri

Lankan apparel producers.

• Around 500 visitors, namely apparel manufacturers,

wholesalers, importers and agents visited the show. Based on

the feedback received from the participants, an anticipated


business to the extent of Rs. 50 crores was generated at the

show.

• A Buyer-Seller-Meet (BSM) was organised for 2 days in

Mumbai for a visiting departmental stores delegation from

Brazil. The event was organised in association with the Ministry

of Commerce under "Focus LAC' programme. The objective of

the show was to display the entire range of textile products

available in India including garments. The Council received a

very good response from the trade and forty companies

participated in the meet. Exporters were able to establish

contracts and had useful business discussions with the

representatives of the departmental stores.

• A meeting with a delegation from All Pakistani Textile Mills

Association (APTMA) was organised in Mumbai to discuss

issues relating to the emerging trends in textile trade worldwide

as well as developments like formation of regional trade blocs

which had the potential to create major hurdles for the textile

manufacturers in both the countries. Leading members of the

Council deliberated various issues with the delegates and even

explored the possibility of mutually increasing trade in the


world market, given the fact that the product lines and markets

were similar for exporters based in the two countries.

• The Council also organised a meeting in Mumbai with a visiting

delegation from the Sri Lankan Apparel Exporters Association.

The objective of the meeting was to discuss possibilities of

increased cooperation between the Indian suppliers of fabrics &

yarns and Sri Lankan Apparel Manufacturers, especially in view

of the free trade agreement signed by the two countries. Indian

exporters and delegates were of the unanimous view that the

textile and clothing industry in both the countries can look

forward to further cooperation in terms of forging alliances and

sourcing raw materials for mutual benefit and thereby develop a

'value added chain' in textile and clothing sector as a strategic

step to boost trade within the region.

• A FTA (Foreign Trade Association) sponsored delegation from

European Union visited India during the month of December

2000. The Council arranged interaction sessions with leading

members of the different sectors of Indian textile industry

namely: cotton, man-made and apparel. The meetings focused

on the following issues:


- Scope of EU investment / joint ventures in processing and

weaving sector

- Possibilities of creating effective supply chain between (i)

Indian spinning units and those weaving & processing units and

(ii) between weaving & processing units and Indian apparel

units.

- Re-export of processed fabrics to EU and world markets.

- Reciprocal market access for EU exporters in Indian market.

Discussions were held in three different sessions and Indian

entrepreneurs & the delegates expressed their views on the

subjects mentioned above and exchanged ideas on how best the

textile industries in India and EU could cooperate to mutually

benefit from reciprocal arrangements.

• A sub-group on 'Trade Policy' under Indo Australia Joint Business

Group on Textiles and Natural Fibres was set up with the

Executive Director of Texprocil as convenor. The objective of the

sub-group was to promote greater understanding on bilateral and

third country policy issues of mutual interest and explore

possibilities of greater regional cooperation consistent with WTO


norms for semi-processing and finishing of Australian raw

materials in India.

• In this connection a presentation was made by the Council, during

the meeting of the Joint Business Group held in New Delhi with a

focus on the possibility of increased market access by India to

Australia and vice-versa. Subsequently a report was submitted to

the Ministry of Textiles.

• A meeting between the Indian Cotton Textile exporters and the

Indian Ambassador to Venezuela, Shri R. Viswanathan was

organized at Mumbai. Shri Viswanathan explained to the exporters

the opportunities available to them to increase their business in

entire Latin America and Venezuela in particular.


U.S. COTTON TEXTILE INDUSTRY

U.S. imports of cotton textiles (yarn and fabric) and apparel have

been rising during 1998 at twice the average rate of the last decade. In

part because of this import surge, U.S. textile mills are expected to use

less cotton fiber in 2007/08. The U.S. milling industry purchases

domestically produced cotton fiber almost exclusively, and farmers

are seeing their best customer reduce its purchases. At the same time,

Asian textile exporters that traditionally ship to the U.S. are now

expected to enter the next century with weaker currencies and with

notably lower wages and incomes than originally expected, making

their exports more price-competitive. Consequently, the coming

termination of U.S. textile import quotas in 2010 could have a larger

impact on textile trade and cotton production than previously

anticipated.

During 2008, the U.S. economy and U.S. dollar have probably been

their strongest against the rest of the world since the mid- 980's. In

particular, the U.S. economy and currency have strengthened

enormously relative to the textile exporting countries affected by the

Asian financial crisis. The volume of U.S. textile imports during

January-June 2008 compared with a year earlier rose 22 percent.


Imports from Thailand, South Korea, and Pakistan rose 40, 30, and

45 percent. Since the system of import quotas originally developed

under the Multi-fibre Arrangement (MFA) will largely remain in

effect through 2010, the potential for imports from these countries has

limits. However, World Trade Organization (WTO) rules schedule a

gradual elimination of quota restrictions through termination of

selected quotas before 2010 and accelerated increases in quantities for

the remaining quotas.

Changes in the nature of the textile industry and in trade policy have

altered the structure of world textile trade since the 1980's. The

increasing technical complexity and vertical integration of the U.S.

textile industry, combined with several decades of global trade

liberalization, suggest that U.S. cotton farmers will continue to find

both domestic and foreign customers for their fiber despite a

continually shrinking U.S. share of apparel sold in the U.S. and

worldwide.

Apparel Imports Grow Despite Quotas

The MFA quotas evolved during the decades before the Uruguay

Round of the General Agreement on Tariffs and Trade


(GATT), largely in response to surging imports of apparel from

developing countries. Although textiles have become increasingly

capital-intensive, apparel remains probably the world's most labor-

intensive industrial good. Thus, apparel industries in high-wage,

developed countries like the U.S. are inevitably vulnerable to

competition from developing countries. The MFA quotas reflected

this-quota levels and growth rates for apparel were more restrictive

than those for yarn and fabric, and apparel quotas to meet WTO obliga

tions are scheduled to terminate later, on average, than yarn and fabric

quotas. Apparel production has steadily migrated to developing

countries despite the use of MFA quota restrictions. When these

export-oriented apparel industries first appear in developing countries,

they are likely to import fabric from more developed countries. Later,

fabric production appears, with yarn imported from more developed

countries. Finally, a yarn industry develops, and fiber is imported. A

number of Asian countries have followed this sequence, beginning

with Japan, followed by Taiwan and South Korea, then China and

Southeast Asia. Bangladesh is at an intermediate stage it is just

beginning to replace its textile imports with a domestic industry-and

Vietnam has only recently begun expanding its apparel exporting


industry. Two generalizations help explain why a growing apparel

industry in a developing country has traditionally resulted in a grow-

ing textile industry there One concerns the reduction of transaction

costs through vertical coordination between apparel and textile

industries sharing a common economic environment. Since

developing countries may accumulate a significant share of their

industrial financial and human capital through foreign trade in apparel,

a logical application for these new resources is producing a familiar

product with an assured market-textiles. Domestic textile production

means the apparel and textile industries share a common currency and

economy, making them less likely to incur the cost of changing

customers (for the apparel industry) or suppliers (for the textile

industry) during periods of economic disruption. This, along with

cultural affinity, can encourage specialized investment within the

industry with less risk that foreign firms-or their governments-will

later appropriate inordinate shares of profits. Specialization permits

economies of scale, and the reduced risk permits greater amounts of

such cost-cutting investment. The other generalization is that

developing countries have traditionally pursued policies that favor

nascent capital-intensive industries, even at the expense of existing

labor-intensive ones. Their underlying premise has been that by


increasing the amount of capital available per member of the labor

force, the wages and wellbeing of the population will increase. To this

end, developing countries have tended to subsidize capital, lowering

the cost of developing a capital-intensive textile industry to supply the

already existing local apparel firms. Also, trade policies have assured

that effective rates of tariff protection for textile products have been

high-often in excess of 100 percent. While firms exporting apparel

products have had widespread access to duty-free textile imports, this

access has not always been consistent. Quantitative restrictions, credit

restrictions, and duty prepayments, among other methods, have been

used to restrict imports. Moreover, sudden policy changes have also

occurred. During the 1970's, for example, Indonesia assessed import

duties on the basis of assumed prices rather than invoices, to avoid the

underinvoicing inspired by currency controls. In 1975, the assumed

prices on textiles were raised 75 percent. In contrast, Indonesia

operated concessionary exchange rates for raw cotton and cotton yarn

to facilitate its imports when the country's currency was overvalued.

Under these circumstances, the shift of apparel production out of a

developed country like the U.S. has eventually resulted also in the

shift of the initial fiber consuming segment of the industry-yarn

production. A continuation of this trend could have negative


implications for U.S. cotton farmers since foreign yarn producers

utilize a lower share of U.S. fiber than do domestic yarn producers.

Indeed, during the 1970's and early 1980's, as the U.S. share of world

cotton yarn production fell, the U.S. share of cotton fiber production

fell as well. However, technical change and restructuring in the U.S.

textile and apparel industry, and a global trend toward trade

liberalization, mean these older relationships are not likely to exert as

strong an influence.

U.S. Cotton: Fiber for a Restructuring Industry

Under competition from imports, and in response to the opportunities

provided by the North America Free Trade Agreement (NAFTA) and

the Caribbean Basin Initiative, the U.S. textile and apparel industry

has become more amenable to undertaking foreign direct investment

(FDI) and exporting from the foreign plants, two strategies that tend to

preserve U.S. fiber consumption despite growing apparel imports.

Attrition in the U.S. apparel industry has fallen more heavily on

smaller firms, leading to an increase in the average firm's capital and

knowledge intensity, making it more likely for the firm to engage in

FDI or in outward processing. Firms engaged in outward processing of

apparel perform only the most capital-intensive steps-like cutting


fabric-in the developed country and contract the labor-intensive steps-

such as sewing-to a developing country. Vertical integration has

proceeded since the 1980's to a greater extent in the U.S. industry than

elsewhere, and a company that pursues vertical integration

domestically is likely to pursue it globally. The same efforts to capture

profits from intangible capital (e.g., brand loyalty, technical expertise)

occur across borders as well as within the home country of the

vertically ntegrated firm. Thus, with vertical interation, the capital-

intensive production ould more likely remain in the firm's some

country than would be the case if the steps were performed by

different firms, even as the labor-intensive steps are moved to low-

wage countries.

These developments have not been confined to the U.S. Relatively

greater rates if vertical integration and FDI are long standing attributes

of Japan's textile industry, and outward processing trade between

Europe and Eastern Europe has also increased. Poland has become the

second largest market for the European Union's fabric (after the U.S.),

resulting in a reduced cotton fabric trade deficit for the EU. Tunisia

and Morocco are also important EU outward processing points. Trade

liberalization may reduce developing countries' ability to limit


imports from developed countries. While it is possible for developing

countries with balance-of-payments problems to maintain quantitative

restrictions on trade and remain in conformity with WTO provisions,

the trend has been toward reducing such barriers. By not subsidizing

and protecting capital-intensive industries, developing countries can

more effectively exploit their comparative advantage in producing

labor-intensive goods. This would imply importing capital-intensive

intermediate products, and under conditions of general global

liberalization of trade and investment, such new patterns are emerging

U.S. Increased Imports of Cotton Textiles and Apparel from Most of

Its Suppliers in 2007 During the first half of 2007, Mexico was the

largest source of textile and apparel imports to the U.S. surging 40

percent from January to June-with a group of Caribbean Basin

countries (led by Honduras and the Dominican Republic) the second

largest, rising 23 percent. U.S. exports of textiles to these regions also

rose substantially, and virtually all of the cotton fiber used by their

industries was U.S.-origin. Liberalization of textile trade with Mexico

and, to a lesser extent, the Caribbean Basin, has permitted increased

FDI by U.S. companies and domestic investment by Mexican,

Caribbean, and Central American firms oriented to using U.S. cotton.

In 2006, Asia accounted for less than half of all U.S. cotton textile and
apparel imports, compared with 65 percent in 2002. North America

(including Mexico and the Caribbean Basin) accounted for 37 percent

of all U.S. cotton textile imports, compared with 19 percent in 2002.

This textile trade shift can be quantified in terms of U.S.-produced

cotton fiber, based on earlier research by USDA's Economic Research

Service on the amount of U.S. sourced cotton fiber embodied in

textile and apparel imports. In 2002, nearly 2.1 billion pounds of

cotton textiles and apparel were imported by the U.S. from the 10

largest import sources, and about 26 percent of that was returning

U.S.-produced fiber. During 2006, 3.1 billion pounds were imported

from the 10 largest sources, and nearly 40 percent was returning U.S.

fiber. Forecasting developments in location of textile production

requires careful examination of each country's domestic investment,

changing industry structure, and changing international trade policies.

With potentially large shifts in apparel production after 2010, this

examination will be crucial in foreseeing the international distribution

of textile production. During most of the 20th century, increased

foreign apparel production also pulled textile production into

countries that utilized a higher proportion of non U.S. fiber, reducing

prospects for U.S. cotton growers. However, a continuation of more

recent trends in industrial organization and trade policy could mean


textile trade rather than production follows shifting apparel

production, sustaining cotton production in the U.S.


TEXTILE VISA AND EXPORT LICENSE REQUIREMENTS

A textile visa is an endorsement in the form of a stamp on an invoice

or export control license which is executed by a foreign government.

It is used to control the exportation of textiles and textile products to

the United

States and to prohibit the unauthorized entry of the merchandise into

this country.

A visa system is the most effective way to prevent illegal

transhipments and quota fraud. It also ensures that both the foreign

government and the United States count merchandise and charge

quotas in the same way so that overshipments, incorrect quota charges

and embargoes can be avoided. If a visa has an incorrect category,

quantity or other incorrect or missing data, or a shipment arrives

without a visa, the entry is rejected and the merchandise is not

released until the importer reports the discrepancy to the foreign

government and receives a new visa or visa waiver from the

government. By issuing a new visa or visa waiver the foreign

government is acknowledging that it has been advised of the category

under which Customs is classifying the merchandise and charging the


quota, if any, and/or the quantity that is being charged. However, a

visa does not guarantee entry of the merchandise into the U.S. If the

quota closes between the time the visa is issued in the foreign country

and the shipments arrival in the U.S. the shipment will not be released

to the importer until the quota opens again.

A visa may cover either quota or non-quota merchandise. Conversely,

quota merchandise may or may not require a visa depending upon the

country of origin. As of this date, the United States has entered into

visa agreements with a number of countries but is enforcing quotas

(administered by the U.S. Customs Service) on merchandise from

additional countries with which the U.S. has no visa agreements.

Therefore, shipments from the countries without a visa agreement do

not require a visa but are charged to the appropriate quota.

On occasion, when bilateral agreements lapse and quotas are not in

force, the visa agreement, which is a separate agreement that remains

in force, requires that shipments continue to be accompanied by a visa.

Each visa agreement is different. Most are comprehensive

agreements. This means that all commercial shipments of textiles or

textile products of vegetable fibers, wool, man-made fibers, and silk

blends covered by a category number from a country with which the


U.S. has such an agreement must be accompanied by a visa in order to

enter the U.S. However, other agreements cover only a specific,

limited number of categories, (e.g., only cotton in categories 300-369).

Also, some agreements have exemptions for commercial shipments

valued at $250 or less (although this exemption is being phased out of

all new or renegotiated agreements), or for traditional folklore cottage

industry products. A further difference can be found in agreements

which require the visa to show the exact category and quantity in the

shipment while others do not. To administer these agreements, textile

products are grouped under 3-digit category numbers. The category

numbers were developed by the Committee for the Implementation of

Textile Agreements (CITA), an interagency committee comprised of

representatives from the Departments of State, Commerce, Labor, and

the Treasury and the Office of the United States Trade Representative.

These category designations cover some several thousand 10-digit

legal/statistical item numbers under which the merchandise is

classified in the Harmonized Tariff Schedule of the United States

Annotated (HTSUSA).

The category system was developed to simplify the monitoring and

control of textile imports and to facilitate the negotiation of bilateral


agreements by aggregating the several thousand htusa item numbers

into a more manageable 167 categories. however, this effort to

simplify the system has been hampered by the fact that these 167

categories have been further subdivided by country into approximately

400-450 subcategories, sub-sub-categories and merged categories in

order to establish quotas on a more narrow range of merchandise.

Each of these subparts has a separate quota. These narrow breakouts

were made to protect specific segments of the market for U.S.

domestic producers who are being affected by the large volume of

foreign imports in these subcategories. When a shipment arrives at a

port in the United States, the Customs import specialist reviews the

visa documents for accuracy and completeness prior to release of the

merchandise. The review ensures that the category number, quantity,

signature, date, and visa number are correct and match the shipment

involved. Only after this action is completed and the merchandise is

charged to the quota (if required) is the shipment released to the

importer.

PERSONAL USE SHIPMENTS:

Merchandise imported for the personel use of the importer and not for

resale, regardless of value, whether or not accompanying the traveler,


except for tailor-made suits from Hong Kong, are exempt from quota,

visa and exempt certification requirements. For Hong Kong, made-to-

measure suits of wool, man-made fiber, silk blend and vegetable fibers

other than cotton, regardless of value, not accompanying the traveller,

will require visas (443/643/843[1] or 444/644/844[1]).

Personal use shipments are defined in Chapter 98, Subchapters IV, V,

VI, VII, and XVI of the HTSUSA, CFR 143.21 and Section 5.2 of the

Customs Inspector's Handbook. To qualify as a personal shipment,

the article must be for the personal or household use of the importer

(including gifts) and not intended for resale or sale on commission.

COMMERCIAL SAMPLES:

PROPERLY MARKED COMMERCIAL SAMPLE SHIPMENTS,

VALUED AT $800 OR LESS, FROM certain countries do not require

a visa or exempt certification and are not subject to quota. These

shipments may also be entered under the informal entry procedures.

The guidelines for what would qualify as "properly marked

commercial samples" can be found in paragraph 4a-h, of Customs

Directive Number 3500-07, dated February 28, 1986, or in telex


#11061, dated August 3, 1988. The guidelines are quoted, in part, as

follows:

a. The invoice for these shipments must contain the statement

"Marked Sample - Not for Resale".

b. The inside of the article must be indelibly stamped with the word

"Sample". This stamping must be in contrasting color to the article,

near the country of origin label, in one (1) inch or greater letters and

physically placed on the article itself.

c. Articles which are transparent or incapable of being marked (such

as briefs, bikinis, hosiery, blouses without collars, sheer or very thin

scarves or garments, etc.) and for which the stamping of "Sample"

would render the article unsuitable for use as a trade sample, the

following guidelines are provided:

1. Fabric labels, not smaller than 2 1/2" by 1/2" containing the words

"SAMPLE-Not to be sold", must be conspicuously and

permanently affixed to the article in close proximity to the country

of origin label.

(Please note that paragraphs d, e and h of the directive are not

pertinent to this section and have been omitted.)


f. The invoice must have been annotated with the notation required in

paragraph 4a above and the article marked in accordance with the

provisions of 4b and c above, prior to importation into the U.S. The

importer will not be allowed to do this after importation.

g. Although these "samples" may be entered under the informal entry

procedures (and are exempt from quota, visa and exempt certification

requirements) they do not qualify for entry under item 9811.00.60,

HTSUSA.

Accordingly, they are subject to duty under the appropriate HTSUSA

item number.

MUTILATED SAMPLES - HTSUSA 9811.00.60:

Samples classified under HTSUSA 9811.00.60 are duty-free, do not

require a visa or exempt certification and are exempt from quota

requirements. See Headquarters telex # 1706, dated February 11,

1987, for the mutilation guidelines.


STANDARDIZED VISA NUMBER:

Visa numbers are required for all visas and export licenses. Certain

countries use the standard nine digit number (e.g., 9IN123456) which

is reported to the Quota Section. If a country is not on the

standardized system, do not report the visa number to the Quota

Section. Prior to the effective dates for countries using the standard

number, report the standardized dummy number when reporting

shipments (i.e. yr, country code, 3 zeros, and then the category

number, 9IN000348).

The standardized visa number is included in reports sent to each

foreign government. A government can then verify the categories and

quantities they authorized for export to the U.S. against the categories

and quantities charged by U.S. Customs at the time of entry. This can

reduce the reverification of discrepancies to the specific shipments at

variance rather than having to review all entries covering a particular

category as had been the case before the creation of the standardized

visa number. It is expected that more countries will adopt the

standardized visa number in the future.

VISA NUMBER REQUIRED ON CF 7501:


Under the authority of paragraph 34 D of Customs Directive No.

3550-03, dated September 28, 1984, the visa number (whether or not

it is the standard nine digit number) must be reported in column 34 on

the CF 7501, Entry Summary, for shipments which require a textile

visa or export license (including Hong Kong). The number must be

shown for each line item covering each separate category number.

Failure to report this number will result in rejection of the entry

summary and if it is a "live entry" (entry/entry summary) the shipment

will not be released until the entry summary is in proper form. The

statistical copy of the CF 7501 or the statistical information reported

by the broker under the ABI program must include this number prior

to transmittal of this information to the Census Bureau. Exempt

certification numbers will not be reported on the CF 7501 or in ABI.

Only one visa number may apply to a single line. If a line could have

more than one visa number, then separate lines must be provided for

each visa number.

DATE OF EXPORT FROM COUNTRY OF ORIGIN

REQUIRED ON CF 7501:

Under the authority of section 12.130(i) of the Customs Regulations,

and paragraph 14 of Change No. 1, dated July 23, 1985 to Customs


Directive No. 3550-03, dated September 28, 1984, for quota, visa or

export license requirements, and statistical purposes, if the country of

exportation is different from the country of origin, THE DATE OF

EXPORT FROM THE COUNTRY OF ORIGIN MUST BE

REPORTED ON THE CF 7501 in column 34, for all textiles and

textile products classified in Chapters 50-63, plus Chapters 42 and 94

of the Harmonized Tariff Schedule of the United States Annotated

(HTSUSA), regardless of whether or not the merchandise requires a

visa or is subject to quota restraints. As in the case of the visa

number, failure to report this date will result in rejection of the entry

summary and may delay release of the shipment.

FOLKLORE PRODUCTS DESIGNATION "F" REQUIRED ON

CF 7501:

Shipments of handloomed fabric, hand-made articles made of

handloomed fabric and traditional folklore products of the cottage

industry, are exempt from quota and visa requirements if they are a

product of a country with which the U.S. has both a bilateral and a

visa agreement which specifically exempts such products, provided

the foreign government has issued a proper and correct exempt

certification. These agreements only waive the quota and visa


requirements. They do not waive the duty. The merchandise must be

reported in column 34 of the CF 7501 by placing the symbol "F" as a

prefix to the appropriate 11-digit HTSUSA item number in accordance

with statistical headnote (1) of Section 11, HTUSA and paragraph 30

of Customs Directive 3550-03, dated September 28, 1984. With the

exception of the HTSUSA numbers for certified folklore products

shown below in the discussion of GSP exemptions for certain rug and

wall hangings, these numbers will be the regular HTSUSA item

numbers for the articles in question. As in the visa number and date of

export requirements, failure to provide the folklore prefix will result in

rejection of the entry summary.

MERGED AND PART CATEGORIES:

Because of the proliferation of merged and part categories in textile

agreements signed over the past several years, it has become necessary

to consolidate this information into a single issuance. This report

includes the merged categories permitted, both for visa and Special

Access Program exempt certification, as well as the part category

designations required to be present on visas from those countries

requiring correct categories. Countries omitted presently have no

merged or part categories for visa or exempt certification purposes.


As such categories become part of future agreements, this guide will

be updated. More recent agreements contain language specifying that

any merged or part categories for quota purposes are automatically

applicable for visa purposes as well. As additional countries agree to

this condition, you will be notified through this report. Previously,

visa and quota agreements had been signed separately and at different

times, so that in some cases, merged and part categories for visa

purposes are not the same as those for quota purposes. Therefore, for

countries other than those indicated in this report, along with visa

book telegrams and other issuances relating solely to visa

requirements, may be used to determine the correct merged and part

categories for visa purposes.


Agreements have provided a "basket" category (e.g. 659-O) for HTS

numbers remaining after specific part categories (e.g. 659-H)

have been blocked off. However, in some agreements this was

not done. In those cases where a "basket" or "other" category is

not shown, only the basic category number (without any suffix)

is required, even though there are suffixes for the specific parts in

the category. Certain merged categories apply to exempt

certifications for the Special Access Program. They are listed

seperately where applicable. For example, look at the merged

categories for Haiti. The list is the same for visa and SAP

purposes, except for categories 349/649 in the SAP list. This

means that the categories 349/649 may be merged for the

purpose of the SAP exempt certification, but they may not be

merged on a textile visa. Descriptive language appears in the

guide, for ease of reference, but is not exhaustive. Only the hts

numbers completely represent the part categories.


INDIA’S EXPORTS OF COTTON TEXTILES

India has made very rapid strides of textiles goods in the last 1-15

decades. In fact the textile sector at present is the single largest net

foreign exchange earner- constituting nearly 30% of the total foreign

exchange earned. What is more, the exports are increasing

phenomenally year after year. However, considering the total textile

exports in the world, our country’s share is a mere 2%. In India, out of

the total earnings from export of textile items made from different

fibres, the share of the items of cotton origin which include woven and

knitted fabrics, garments, sewing threads yarns etc., the highest at

about 65%. Considering that India is a major cotton producing

country, its textile industry is largely cotton based and preference all

over the world for textiles from renewable natural fibres like cotton,

there is great scope for our cotton textile exports in the world market.

Within all the cotton group, the trend in the exports from our mill

sector has been shifting from export of fabrics to that of yarn in the

recent years. This is also indicative of the growing from demand for

cotton yarns in the global market. Accordingly, under the present

liberal industrial policies of the Government, several new, modern


100% export oriented spinning mills are being established in different

parts of the country.

To compete successfully in the world market, our yarns have to meet

the international quality norms. In achieving the desiring quality, all

the 3 M’s-Material, Men and Machines play a very vital role. In what

follows, the cotton produced at present in the country, their qualities,

their superiority’s and deficiencies etc. are discussed and measure to

be adopted for producing world class yarns and fabrics from

indigenous cottons are suggested.

Exports of cotton textiles have made a turnaround this fiscal recording

a growth of 6.5% as against a fall of 2.4% during 2007-2008.

However, exports are still short of the target. Exports of cotton textiles

during 1999-2000 stood at US$ 3646.85 million as against US$

3422.47 million during 2007-2008. The industry has been able to

achieve 93.51% of the overall export target of US$ 3900 million fixed

for the year.

Exports of fabrics and made-ups increased by 4.95% to US$ 2103.92

million as against US$2004.53 million during 1998-1999. These

exports to quota countries declined slightly to US$ 1187.44 million


(US$ 1196.18 million). In contrast, exports to non-quota countries

increased to US$ 916.48 million as against US$ 808.35 million.

Exports of yarn and sewing thread went up by 8.8% to US$ 1542.93

million as against US$1417 million during 1998-99. Exports to quota

countries declined sharply to US$ 167.41 million (US$ 1203.49

million). Exports to non-quota countries went up to US$ 1375.52

million from US$ 1203.49 million during the previous year. Growth in

exports of readymade garments has not been phenomenal either.

Exports during 1999-2000 at US$ 5524.4 million were 4.9% higher

than that in 2008-2009 (US$5268.4 million). Exports to the two main

markets the US and the EU have shown stagnation.


SHIPMENTS OF YARN, FABRICS, MADE-UPS PERMITTED

AGAINST RESTRAINT LIMITS TO USA DURING THE

PERIOD JANUARY - FEBRUARY 2008

Category UNI YEAR A. SHIPT PER VALUE UVAL VALU

Description T LEVEL CENT M. Rs. Rs. E M.

US $

Group I

218 (Yarn MS 2009 21.586 1.63 7.55 66.69 40.91 1.36

Dyed Fabrics) ME

MS 2008 19.121 1.44 7.53 62.51 43.41 1.34

ME

218 (Yarn MS 2009 21.586 2.79 12.93 112.90 40.47 2.32

Dyed Fabrics) ME

MS 2008 19.121 2.59 13.55 106.60 41.16 2.29

ME

219 (Duck) MS 2009 94.506 6.69 7.08 175.97 26.30 3.61

ME

MS 2008 85.102 7.89 9.27 252.32 31.98 5.43

ME

313 (Cotton MS 2009 57.756 2.58 4.47 45.01 17.45 0.92

Sheeting) ME
MS 2008 51.161 3.20 6.25 61.42 19.19 1.32

ME

314 (Cotton MS 2009 11.251 0.26 2.31 12.09 46.50 0.25

Poplin) ME

MS 2008 10.131 0.65 6.42 20.51 31.55 0.44

ME

315 (Cotton MS 2009 18.897 0.40 2.12 11.26 28.15 0.23

Print cloth) ME

MS 2008 17.016 1.74 10.23 42.37 24.35 0.91

ME

317 MS 2009 50.867 2.08 4.09 53.14 25.55 1.09

(Twills/Drills) ME

MS 2008 47.375 1.52 3.21 49.10 32.30 1.06

ME

326 (Sateen) MS 2009 11.561 1.02 8.82 66.14 64.84 1.36

ME

MS 2008 10.767 1.71 15.88 87.58 51.22 1.88

ME

363 (Cotton M.P 2009 67.457 13.77 20.41 1501.45 109.04 30.79

Terry Towels) CS

M.P 2008 59.755 8.66 14.49 1109.15 128.08 23.85


CS

of which

363 M.P 2009 0.000 0.00 0.00 0.14 0.00

(Handloom) CS

(Terry Towels)

M.P 2008 0.07 0.00 4.07 58.14 0.09

CS

369 (S) MS 2009 7.393 2.02 27.32 28.94 14.33 0.59

MM/PL (Shop ME

Towels)

MS 2008 6.657 0.98 14.72 36.12 36.86 0.78

ME

369 (S) HL MS 2009 1.305 0.07 5.36 0.73 10.43 0.01

(Shop Towels) ME

MS 2008 1.175 0.20 17.02 2.15 10.75 0.05

ME

GROUP II

YARN MS 2009 5.000 0.50 10.00 12.17 24.34 0.25

ME

MS 2008 5.000 0.75 15.00 50.53 67.37 1.09

ME

FABRICS MS 2009 20.000 2.86 14.30 137.18 47.97 2.81


ME

MS 2008 20.000 1.53 7.65 97.22 63.54 2.09

ME

Madeups MS 2009 29.000 10.00 34.48 1215.49 121.55 24.93

(MM/PL) ME

MS 2008 27.000 7.26 26.89 1278.85 176.15 27.50

ME

Madeups (HL) MS 2009 3.000 0.52 17.33 26.41 50.79 0.54

ME

MS 2008 3.000 0.53 17.67 42.24 79.70 0.91

ME

MMF Textiles MS 2009 8.000 1.11 13.88 81.19 73.14 1.67

ME

MS 2008 10.000 1.41 14.10 145.69 103.33 3.13

ME

SUMMARY

GROUP I MS 2009 302.105 23.40 7.75 2007.62 0.00 41.17

ME

MS 2008 286.765 23.95 8.35 1767.31 0.00 38.00

ME

GROUP II MS 2009 65.000 15.00 23.08 1472.45 0.00 30.20

ME
MS 2008 65.000 11.48 17.66 1614.53 0.00 34.71

ME

TOTAL MS 2009 367.105 38.40 10.46 3480.07 0.00 71.37

ME

MS 2008 351.765 35.43 10.07 3381.84 0.00 72.71

ME

Exchange rates : Rs. 48.76 & Rs. 46.51/US $ for the years 2009 &

2008 respectively
EXPORTS OF COTTON YARN, FABRICS, MADEUPS, ETC,

(INCLUDING HANDLOOM) FIGURES IN LAKH RUPEES)

Country 2008-2009 Country 2007-2008

USA 243091.42 USA 194062.94

Bangladesh 99120.01 Bangladesh 68034.30

Hong Kong 93171.74 Hong Kong 73665.87

UK 89339.65 UK 84142.42

Italy 69399.98 Italy 56071.52

Germany 65033.10 Germany 55869.50

Korea Rep 59801.99 Korea Rep 82242.53

United Arab Emirates 50585.72 United Arab 42532.03

Emirates

Japan 49598.79 Japan 45114.44

Mauritius 45388.25 Mauritius 39509.12

Others 734240.34 Others 597579.77

Total Exports 1598770.99 1338824.44


INDIA’S EXPORTS OF COTTON TEXTILES IN US DOLLARS

Period Covered: 33.33% (Figures in Million US$)

Fabrics & Yarn & S. Total 2008-2009

Madeups 2006- Thread 2007-

2007 2008

Target Apr/Mar 2400.0 2400.0 1700.0 1500.0 4100.0 3900.0

0 0 0 0 0 0

Performance 759.45 633.17 521.27 535.44 1280.7 1168.6

Apr/Mar 2 1

% target 31.64 26.38 30.66 35.70 31.24 29.96

achievement

Exports to Quota 491.03 366.07 77.41 61.21 568.44 427.28

% of total exports 64.66 57.82 14.85 11.43 44.36 36.56

Exports to non 258.42 267.10 443.86 474.23 712.28 741.33

quota

% of total exports 35.34 42.18 85.15 88.57 55.62 63.44

% growth of 19.94 -2.65 9.59

performance

Source : Textprocil, Newsletter, August, 2008


CONCLUSIONS

After a careful and in-depth disk research we have come to the

following conclusion:-

2. The phase out of the MFA under the WTO agreement will create

an export opportunity of an additional $175 billion a year for the

developing countries. But, how far India would be able to take

advantage of the opportunities would depend on the efforts and

dynamism of the industry, backed up by the encouragement and

support of the government.

3. The Indian cotton industry has shown a considerable self reliance

but this is not enough to compete in the world market.

4. Need for the process of restructuring must be carried forward in

order to make the industry growing.

5. In order to keep pace with the competitors there is no clear cut

policy package which should address to the problem of the sector.

6. In adequate modernisation and transforming technology in the

country.

7. Lack of exposure of the importers to participate in favour and

exhibition in major world market. hence, they lack vision.


8. Government policies are to politics resulting in disparity in various

parts and region of the country.

The study indicates that although India has substantially extended into

the U.S. market and they have shown an increase in volume of

business. But for India to hold an and increase market penetration and

consumer based in the U.S. market. It is in imperative for India not

only to improve its current infrastructure but also the Government of

India should make concerted effort to evolve and implement

appropriate policy measures.


LIMITATIONS

• The study of this project was confined to the National Capital

Region of Delhi.

• Many exporters were able to provide with their views, which

otherwise could have been very helpful in the making of the

project.
RECOMMENDATIONS

The time has come for India to execute both immediate and long term

strategies for export of cotton yarn, fabrics and madeups. India has

shown in the past that it is able to withstand the international

competition in the above categories, there exports having spurted

during the past few years.

The following are the recommendations we suggest for a sustainable

export growth to these markets:-

• The MFA imposition will help India to make its mark in the U.S.

Market. Since the exports of cotton yarn, fabrics and made ups

were restricted by quotas it made sense to try to upgrade the

products inorder to increase the unit value of the export items MFA

has provided a kind of a market share and if India comes up with

better quality and price, preference will be given to it.

• In order to survive with the global competition the Indian cotton

industry has to show considerable self reliance and has to develop

a truly global outlook in order to make a major client in the world

market.
• The cotton industry in India has to make up for the last time . In

order to regain its position in the world the process of restructuring

must be carried. A policy package in required not only tom address

the problem of the mill , powerloom and handloom sector with in

an integrated framework but about attend to the important issues

like fibre use, cotton pricing and cotton yield.

• All restrictions on the imports and exports should be lifted if

liberalisation is to be taken to its logical conclusion. There is also

a need apart from political expedience in some instance, it is also

important to protect some sectors when their survival is threatened

due to the interventions of the government.

• Government should decide in to budgetary provisions, on the

import and excise duty structure, taxation etc. The programme

rationalistion and moderation of the indirect duty structure has to

be carried further to encourage and facilitate greater production as

well as exports and also to stimulate heartily competition and

improvement of quality. All obstacles, infrastructured or

procedural, to exports have to be removed.


• Exports should be encouraged to participate in fairs and exhibitions

in major markets as well as in buyer better meets etc. an addition to

this the research association, the textile committee and the export

promotion councils should help the exporters by creating

awareness about environmental and safety aspects of their

products.

• There is an urgent need for the modernisation and technological

upgradation in the above fields. As this with have a general impact

on improvement of standards of products.

• The industry can become much more internationally competitors

through modernisation and transforming its activities from the

small skill sector to larger units to strengthen their position and get

economics of sale.

• India also needs to improve its research and development efforts,

which can be compared to world standards.

• There is an urgent need for building up a cadre of experts

infighting antidumping efforts measures.


• For India to improve its market share in the U.S. Market, India

exporters must “look for partners instead of buyers” in these

markets. The no. of methods of forging strategic alliances with

their U.S. counter parts and industry must be explored.

• India must also attempt at branding the products atleast at the trade

level.

• Consumer interaction with the users of the raw material or

intermediate textile products marketed by Indian exporters, in a

long run would ensure a closes relationship and better

understanding with their allies.

• Attempts must be made also to export value added fabrics in

finished form, Indian industry also needs to concentrate on

improving the quality of meaning and finishing.

• A area which India has reflected for long, is the market for

technical/ industrial textiles. It is felt that there is a scope for

collaboration between U.S. and Indian industry in this field.


ANNEXURE 1 - GLOSSARY

Staple fiber (man-made)

Man-made fibers of predetermined but variable lengths. (Typically 38

mm for PSF and VSF 51 mm).

Continuous filament yarn

A yarn composed of one or more filaments that run essentially the

whole length of the yarn.

Gray fabric

Woven or knitted fabrics as they leave the loom or knitting machine ie

before any bleaching, dyeing or finishing treatment has been given to

them. Some of these fabrics, however, may contain dyed or finished

yarns.

Count of yarn

Methods of variously expressing the (length per unit mass) of yarn.

Warp

To arrange threads in long lengths parallel to one another preparatory

to further processing.
Weft

• Threads widthways in a fabric as woven

• Yarn intended for use as in (1)


Hok

This is a measure of productivity. It measures the number of man-

hours taken to produce a kg of yarn.

Count of fabric

Count of cloth is indicated by enumerating - first the number of warp

ends per inch, then the number of filling picks per inch. For instance

68 x 72 means there are 68 warp ends per inch and 72 filling inch. In

cotton gray goods when the word "square" is used such as "80 square"

it means the construction or count of the cloth is 80 x 80. In cotton

goods the number of yards to pounds is generally quoted with the end

and pick description. In certain linen cloths such as table damask, the

count is indicated by the total number of threads in one square inch.

This same type of count designation carries over in sheeting for beds

with such designations as "type 160".

Bale of cotton

A bag, sack, square or oblong package usually made of jute or burlap

into which cotton, wool, staple or silk is compressed. The American

cotton bale is usually 54 inches (135 cm) long and (67.5 cm) wide, 26
cubic feet in bulk, covered with bagging and fastened with ties. The

average weight is 500 pounds (225 kg).

Country of origin Average weight (kg)

Peru, Brazil 90-112.5

Egypt, India 315 & 180

ANNEXURE 2 - YARN QUALITY PARAMETERS

The quality of yarn is typically assessed by focussing on certain

general parameter such as strength, evenness (short-term variations in

diameter) and imperfections (thick and thin segments in the fiber

clumps, also referred to as neps).

There are no universally accepted quality standards and they differ to

some extent across buyers and countries. However, certain broad-

based norms have gained international credibility based on\ statistics

collected by Uster (a Swiss manufacturer of quality measurement

instruments).

For fabric quality, standards tend to vary to an even greater extent

depending on the buyer and the country. There is a wide variation in

the fault measurement system, classification system and acceptance.


Some even refer to the initial quality sample and measure bulk against

this sample. Very broadly, however, the following standards are in

use:

For USA: <100 points for fabrics >50" width < 50 points for fabrics <

50" width

For EEC : <10 defects/ 100m.

For made-ups and garments, it differs from buyer to buyer but

generally they are prescribed in terms of an agreed sample piece for

quality ie defects and general appearance.


ANNEXURE 3 - DISTRIBUTION MUCH SCOPE FOR

INNOVATION

Yarn distributionThough the main yarn markets are Mumbai, Surat,

Ahmedabad, Coimbatore, Tiruppur, Salem, Delhi, Amritsar,

Icchalkaranji and Malegaon, all the centers function as one single

market since transport costs from one center to another comprise less

than 1% of the yarn value. Thus mills in Coimbatore send their yarn

all the way to Ahmedabad and mills in Ludhiana to Ichalkaranji. Yarn

is packed in bags of 50 cones, each having 1 kg of yarn. The ease of

yarn transport allows the setting up of weaving units even at centers

without spinning facilities and also enables locational separation of

spinning and weaving units within the same company.

Yarn distribution is organized into two tiers. Mills sell their yarn to

brokers/ dealers who in turn sell it to the handloom and powerloom

weavers. The brokers typically charge between 1% to 2% as

commission. The commission is almost 2% for blended yarn. Cotton

yarn is sold on cash basis while blended yarn is sold on 45 days credit.
Fabric distribution

Fabric has traditionally been distributed through a three-tier channel -

wholesalers, semi-wholesalers and retailers - with facilitating agents

like brokers and "adatiyas". Wholesalers buy and sell in packed bales,

semi-wholesalers buy bales and sell in pieces while retailers buy

pieces and sell in meter. Wholesale cloth markets have grown around

manufacturing centers like Mumbai and Ahmedabad, while semi-

wholesale markets have been scattered. The overall length of the

distribution channels is between 90 to 120 days while the overall

distribution margin is between 40% and 75%. The wholesalers

typically have gross margins of 5% to 8%, the semi-wholesalers 12%

to 20% and the retailers 25% to 50%. These margins vary by product.

They are lower for the lower priced standard products and higher for

the more expensive "fancy" items. For these margins, the distribution

trade serves several functions such as providing market intelligence,

holding inventories and risk taking for trade credit and the notional

risks of product obsolescence and price variation. The wholesalers

also provide design inputs and buy at their own risk. Mills in fact

usually produce fabrics with designs in response to specific wholesale

orders. Thus the risk of design failure as well as trading risk is borne
by the wholesalers. Credit period ranges from 15 - 30 days for

wholesalers and 45 - 60 days for semi-wholesalers and retailers. Credit

terms vary widely between companies, areas and products. In each

case, the credit risk is borne by the channel.

Mills have been experimenting with different distribution systems

since the past few years. There is an attempt to shorten the channel by

eliminating either the wholesalers or the semi-wholesalers or both.

Calico, DCM and Binny are cases in point. When the mills sell

directly to the semi-wholesalers, the design risk rests with the mills, as

manufacturing is not on a pre-sold basis. Many mills have therefore

adopted a three tier system for design fabrics and a two tier system for

plain fabrics. Given the margins and the functions performed,

distribution in the cotton textile industry appears to provide a good

deal of scope for new innovative approaches. Improvements in

communication, infrastructure and the movement of goods have made

a homogenous national market possible. A good deal of information is

available on local differences and more sophisticated market research/

intelligence is now possible. The comparative evaluation - of the costs

of direct retailing vis-a-vis the costs of using a channel would have to

be done on an ongoing basis. With increasing competition,


manufacturers are looking for ways to reducing the distribution

spread. The availability of computers and the relevant software help to

control the logistics better. Central warehouses, which distribute

products directly to the retailers are now feasible and economical.

These would be particularly beneficial in product categories such as

blouse material where hundreds of colors need to be kept in inventory

to be able to service the market countrywide. Central warehouses such

as these would eliminate the inventory carrying and distribution

functions performed by the wholesalers and semi-wholesalers and

render companies more in sync with customer requirements. These

may also prove to be more efficient and economical. Such options

would provide a critical competitive advantage.


ANNEXURE 4 - TEXTILE MANUFACTURING PROCESS

Spinning Blow Room

Cotton bales are opened and fed into it. It opens lumps of cotton,

removes dirt and foreign matter. Rolls cotton fiber mass into sheets for

feeding into cards (In advanced machines such fibers are fed into

cards directly through chutes).

Cards

Further opens fiber lumps, removes dirt and very short fibers,

separates fibers and orients them in a vertical direction. Fibers are then

converted into a sliver to be fed into draw frame.

Draw frame

Several carded slivers are combined and drawn to produce another

sliver. It achieves parallelization, orientation and uniformity in the

sliver.

Combing

This process is optionally used. It is used in case of superior yarns,

which require high degree of uniformity and orientation. It separates


each fiber, removes short fibers and again orients all fibers in the

vertical direction.

Speed frame

Carded or combed sliver of fiber is drawn and twisted into roving.

Roving has less mass per length compared to sliver. It has just enough

twist to hold the fiber together and is very weak.

Ring frame

Roving is fed, detwisted, drawn and twisted again to form yarn. Twist

inserted through a revolving spindle around a ring into a strand of

fiber delivered from a pair of rollers. Twist inserted here is much

higher than at the roving stage and it imparts strength to the resultant

yarn. There is an optimum twist to achieve strength in each count of

yarn. Lower or higher twist reduces the strength. Lower twist makes

the yarn soft, higher twist makes it more lively, crisp and curly.

Optimum twist also depends on the cotton used. For the same count of

yarn, if superior longer staple cotton is used desirable yarn strength is

achieved with less twists. Also for certain uses like hosiery and knit

goods as the process does not put too much tension on yarn like
weaving, weaker yarns are acceptable. As a result, hosiery or knitted

yarns are produced with lower twists than weaving yarns.

Open end spinning (OE)

OE starts with carded or combed sliver. Combed sliver is used in a

very few limited applications. Predominantly it uses carded sliver. It

opens the sliver feeds into a rotor where the open fibers form yarn

around an end of yarn, which is then drawn out. Because of the nature

of the process, all fibers are not oriented in the vertical direction and

as a. result, OE yarns are generally weaker and harsher than ring yarns

from the same raw material and of the same count. OE machine also

winds the yarn into a large conical package.


Weaving

Weaving is done in two stages:

Preparatory - which prepares the yarn for weaving, and actual weaving

which converts the yarn into fabric. The different stages in the

weaving process are specified below:

Winding

Essentially this converts the package of the yarn. In ring spinning yarn

is wound on the bobbin. A bobbin normally holds about 1,000 to

3,000 m of yarn weighing about 60 to 80g. This is too small to handle.

Besides ring yarn would have some faults which can either create

problems in weaving or in the appearance of the fabric. A winding

machine unwinds the yarn from bobbins and winds them on a much

bigger package called cones, A cone normally contains about 1 to

1.25kg of yarn, in other words, about 15 to 20 bobbins are converted

into one cone. It also clears the yarn to remove faults. Modem

automatic machines clear the yarn electronically to remove faults such

as thin and thick places and neps (small lumps of fibers). It also

delivers the yarn in exact metered length. At breaks it produces a knot

free yarn by splicing the broken ends together. The nature of this
package also, makes it transportable over long distances. Thus

spinning mills end product is in this package and this becomes the

terminal manufacturing process. Yarn is sold hi cone forms and to

ensure good weaving it is specified as "Ante coned, electronically

cleared and spliced".

(Note: In case of dyed yarns for pattern weaving cones are dyed

before the next process of warping).

Warping

Cones of yarn are creeled on to a machine and a sheet of yarn on beam

is produced by winding about 500 to 700 threads together. Its length is

precise and preset to avoid wastage at subsequent stage.

Sizing

Warp yarns have to withstand tension and chafing in the weaving

stage. It is therefore necessary to strengthen them and import surface

smoothness. This is done in sizing process whereby several beams of

yarn depending on the number of threads required in a warp sheet

(which is determined in fabric width and density) are passed through a

starch based solution. After passing through this solution it is wound


on beams. This is called weaver's beam and now the final yarn is

ready for weaving.

Weaving

Weaving is interlacing of vertical yarn (warp) and horizontal yarn

(weft). Depending on the type of weave, warp yarn sheet is divided

and lifted. An opening is created through which weft yarn is inserted.

Then the other portion of the warp sheet is lifted and weft yarn is

passed again. This gives the binding as interstices are created through

this process. Weft yarn is carried across in a bobbin held in a shuttle.

This is the basic weaving process. Over the years, different techniques

of weft insertions have been developed. Age-old method is to use the

shuttle. In the handloom it is thrown from one end of the warpsheet to

another by hand. In powerloom the same is done through use of

power. In an automatic loom when the yarn on weft bobbin (pirn) is

exhausted it is changed automatically. These are all shuttle looms.

There are other methods of insertion like through rapier, projectile and

jet of water or air. Such weaving machines are known by their system

of weft insertion eg rapier loom, projectile loom or machine and air

loom. In the last 50 years the rates of weft insertion have gone up
considerably. From a modest 200 m/ minute in 1950's to about 1,000-

1500 m/ minute today.

The approximate production rates of different types of looms for a

basic sheeting fabric of 20s count, with 60 threads in warp as well as

weft and 63" wide are given below:

rpm m/ 8 hour

Handloom 20 4

Ordinary loom 160 24

Modern auto shuttle loom 220 40

Rapier loom 400 73

Projectile loom 600 110

Air jet loom 800 146

Though some weaving projects continue to be based on auto shuttle

looms, they are a dwindling tribe given the unfavorable techno-

economic implications and the stringent demand for maintaining

consistent quality standards. New weaving projects have become

capital intensive. New projects for weaving plain fabrics are based on

air jet weaving while weaving of patterned fabrics such as suiting, use

either rapier or projectile "Sulzer" looms. The project costs are


evaluated with reference to a basic quality like 20x20 (yarn count),

60x60 (number of threads in an inch in warp and weft) of 63" width, A

modern air jet weaving project for 10,000 meter per day of such a

basic fabric costs approximately Rsl00mn.

The basic plain weave fabric still constitutes 70% of total fabric

production. Different weaves can be created by changing the number,

pattern and sequence of the yarn threads that are lifted up and down

from the warp sheet. The more popular weaves are drills, satins and

jacquards in addition to the plain weave. Different designs are created

by using colored yarns in the warp and the weft. A multitude of

fabrics can be created by combining colored yarns and different

weaves, limited only by a designer's imagination.

Weaving speeds have increased significantly in the quest for

improvements in productivity. Machine manufacturers also attempt to

provide flexibility to enable weaving of different types of fabric on the

same machine. There is however a trade-off between the speed and

flexibility and the cost of the machine. Most of the modern machines

ensure a basic quality level. Investment decisions in looms are guided

by the type of fabric to be produced and the degree of flexibility

required to minimize the risk inherent in changing fashions. Projectile


looms are very flexible and therefore very expensive machines. Air

jets are somewhat inflexible hut highly productive enabling reduction

in the cost per unit of production. Auto shuttle looms are the least

expensive, though quite slow by current standards. They are however

the most economical choice for fabrics like voiles. They cost

approximately Rs0.5mn compared to Rs1.5-1.7mn for imported air jet

and Rs2.2-2.5mn for projectile looms with 25% import duty.


ANNEXURE 5 - CHEMICAL PROCESSING

While spinning and weaving have been known and practiced for

centuries, they essentially remain the same, chemical processing is

relatively modern and major developments in this field are more

recent. Gray fabric contains dirt, foreign matter, starch and natural oils

and therefore has a dull appearance. As a consumer product, fabric has

to offer protection, comfort, fashion and convenience in handling and

cleaning. Thus, it has to be cleaned, colored, imparted with the

required handle and other desired properties such as drape,

dimensional stability, crease resistance and stain resistance and soil

release. This is done through the four stages of chemical processing

viz bleaching, dyeing, printing and finishing. Process technology is

mainly developed around temperature, dwell time, pressure, chemical

formula and dosing, and vertical and horizontal forces on fabrics.

Machines are designed to achieve the desired levels on the above

parameter for different fabrics in a standardized and easily

reproducible way.

A brief description of each stage of processing is given below:


Bleaching

Cleaning, removing dirt, natural oils, bringing out the inherent lustre

of fibers, swelling of fibers fur softness and absorbency. Chemicals

like enzymes for desizing, caustic soda, hydrogen peroxide are added

and the fabric is brought to boil under pressure. This stage also

prepares fabric for dyeing, printing, and finishing.

Conventional Kiers for boiling under pressure, or continuous

bleaching range, Jbox, Jumbo Jiggers, etc. In addition to basic

bleaching the fabric is passed through a solution of caustic liquor to

swell the fibers which imparts greater absorbency and lustre to the

fabric. This process is done on mercerising machines. Chemicals used

are caustic soda, hydrogen peroxide, starches and enzymes

Dyeing

To impart colors to fabric. The colored fabric should have a high

fastness to washing, sometimes to even bleaching, sunlight, and

perspiration. This is done on the various types of dyeing machines,

Jiggers, padding machines, continuous dyeing, jet dyeing machines,

etc.
Printing

Various motifs or images are printed on the fabric. In mass production

this has to be done continuously. However, designs also need to be

changed. Batch sizes vary with type of fabric, end use and the duration

of a fashion cycle. These are done through roller printing machines,

screen-printing machines, transfer printing machines, and auxiliary

machines.

Finishing

This is the final stage of fabric making. Fabrics have to be made

dimensionally uniform and stable and imparted a good desired handle.

Different merchandisers for different fabrics require different handles.

Consumers look for crease resistance, soil release, stain resistance

easy washing and pressing etc. Basic machines are stenter, drying

machines, calendars shrink-proof range etc. Resins, softness,

lubricants and starches are also used.