Maharashtra Economic Development Council

Industry Monitor

Indian Textile Industry

Ms. Vidya Dhopatkar Economist, MEDC

he Indian textile industry is one of the key sectors of the Indian economy in terms of

in the world after China. Cotton is one of the principal crops of the country and is the major raw material for domestic textile industry. The Indian textile industry consumes a diverse range of fibres and yarn, but is predominantly cotton based. Cotton farmers in India have been showing increasing inclination in bringing more and more areas under BT cultivation. The share of BT Cultivation in 2009-10 constitutes around 79% of the total acre as against 73% during 2008-09. With increased productivity, the country has achieved cotton production of 5.02 million tons in cotton season 2009-10 as against 4.93 million tons in the previous year. As on September 2010, there were 1896 cotton/man-made fibre textile mills (non-SSI) in the country with an installed capacity of 38.53 million spindles, 5,18,000 rotors and 57,000 looms.

output, investment, and employment. The textile industry contributes 4% to the GDP, about 14% to industrial production, and 17% to the countrys export earnings. Textile industry is the second largest provider of employment after agriculture; it provides direct employment to over 35 million people. A strong raw material base, a vast pool of skilled and unskilled personnel, and cheap labour are some of the salient features of the Indian textile industry. Indias textile industry is predominantly cotton based. The textile industry is highly dependent on agriculture products for raw materials and it is highly capital intensive industry. The prices of raw material also vary from year to year depending on weather and rainfall conditions. The textile industry produces a variety of products suitable to the different market segments, both within and outside the

Table 1: Production of textile item (million kg) Man-Man made CottonBlended

country. The major sub-sectors that comprise the textiles sector include cotton, manmade fibre, filament yarn, the wool and woolen textiles, the sericulture and silk textiles, handlooms, handicrafts, the jute and jute textiles. Demand for textile products is driven by growth in domestic
made bre 2006-07 2007-08 2008-09 2009-10 2010-11 (P) 1139 1244 1066 1268 1281 lament yarn 1370 1509 1418 1522 1550 yarn 2824 2948 2899 3079 3469 and noncotton yarn 989 1055 1015 1114 1214

Total spun yarn 3813 4003 3914 4193 4683

P: provisional ; Source: Ministry of Textiles

population,percapitaincomes, increase in penetration of organised retail market, rising consumption and income levels, increase in number of working women, etc. The foreign direct investment inflows worth US $ 997.12 million have been received by the textile industry during April 2000 to July 2011, which account for 0.69% of total FDI inflows in the country.

Manmade fibre, filament yarn and spun yarn The production of man-made fibre, filament yarn and spun yarn is showing increasing trend from past couple of years. Man-made fibre production and filament yarn production recorded a slight increase of just 1% each in production during 2010-11 whereas; the production of spun yarn grew by 11.7%.

Segment details Cotton India is the second largest cotton producing country
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Wool and Woolen Textile India is the seventh largest producer of wool. Since the domestic production is not adequate, the

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Orissa, Tripura and Chattisgarh. The Jute industry provides direct employment to 0.37 million workers in organized mills. As on January 2010, the total number of looms installed in the jute industry stood at 48,260 consisting of 22,038 Hessian looms, 24,093 sacking looms, 1,068 C.B.C looms and others at 1,061. The installed spindles in jute mills other than 100% export oriented units were 731,408 comprising 622,324 fine spindles and 109,084 coarse spindles. Raw jute is produced mainly in the state of West Bengal, Bihar, Assam, Orissa, Andhra Pradesh, Tripura and Meghalaya.

industry is dependent on imported raw material. The major wool producing states includes Rajasthan, Gujarat, Madhya Pradesh, Uttrakhand, Maharashtra, Haryana, Jammu & Kashmir, Himachal Pradesh, Andhra Pradesh and Karnataka. Sericulture and Silk Textile India continues to be the second largest producer of silk in the World after China. India produces all four varieties of silk namely, Mulberry, Eri, Muga, and Tassar. In 2009-10 the production of mulberry raw silk increased by 4.6% after a decline in production in the previous year. Silk fabrics production also increased by 4% in 2009-10 compared to 200809. Sericulture is labour-intensive and agro-based cottage industry, provides employment to around 6.8 million persons in rural and semi-urban areas. During 2009-10, total production of all varieties of raw silk increased to 19,690 MT registering an increase of 7.2%. However, during 2008-09, total production of all varieties of raw silk was increased by just 0.3% to 18,370 MT. Chart 1: Share in Production of silk varieties during 2009-10

Handloom Handloom is the largest provider of employment within textile industry. It provides employment to 43.31 lakh persons. In 2010-11, the production of handloom fabric has increased to 6903 million sqr mtr from 6806 million sqr mtr in 2009-10.

Handicraft The Handicrafts sector provides employment to a vast segment of craft persons in rural and semi urban areas and generates substantial foreign exchange for the country.

Export Scenario Exports of textiles and clothing products from India have increased steadily over the last few years, particularly after dismantling the quota regime. Despite the global slowdown, share of Indias textile exports in total exports increased to 12.05% in 2009-10 from 10.82% in 2008-09. In the Look East Policy, new markets have been tapped to promote exports, besides relying on the existing markets like EU and the US.
Source: Ministry of Textile, Annual Report 2010-11

Jute and Jute Textile Globally, India is the major producer of both raw jute and jute products. There are 79 composite jute mills in India. Out of the total 79 jute mills, 62 jute mills are located in West Bengal, 7 in Andhra Pradesh, and rest are located in Bihar, Uttar Pradesh, Assam,

Indias textiles and clothing export registered robust growth of 25% in 2005-06 to reach at US$ 17.52 billion over 2004-05. The growth continued in 2006-07 with exports reached at US$ 22.15 billion in 2007-08. However, due to global economic slowdown the exports declined by 4.2% in 2008-09

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all commodities has gone up during 2009- 10, and reached 1.17% as against 1.14% during 2008-09. The total imports of textile and clothing products by India reached US$ 3.36 billion in 2009-10. Manmade Filaments was the biggest import amongst textile items, with a share of 16.56% followed by impregnated textile fabric and cotton with a share of 15.62%.

at US$ 21.23 billion. During 2009-10, the exports of textiles increased by 5.6% and reached the level of US$ 22.42 billion. During 2009-10, Indias exports of apparel declined to US$ 10046.89 million as against US$ 10383.26 million over the previous year. The decline can be attributed to the economic slowdown in EU and the US markets leading to lower demand for apparel and other textiles products. The Government has set an export target of US $ 25.48 billion during 2010-11.

Recent Government Initiatives Table 2: Textile Exports Scenario (US $ mn)

Segments/Year Readymade garments Cotton Textiles Man made textiles Wool and Woolen textiles Silk Textiles (excluding handicraft, jute, and coir) Handicrafts Jute Total textile exports 2007-08 9070 6859 3177 443 658 20206 1452 328 22147 2008-09 10383 4804 3326 485 685 19682 1091 303 21226 2009-10 10065 5711 3971 470 596 21078 962 218 22419

The Ministry of Textiles took several new initiatives since 2010 to achieve faster and inclusive growth and participatory development. The Government have taken a number of steps for expansion of textile sector including technology upgradation and modernization of textile mills under the Technology Upgradation Fund Scheme, support for industry infrastructure through Scheme for Integrated Textile Parks (SITP); Integrated Scheme for Development of Powerloom Sector along with Group Workshed Scheme for the sector; Scheme for skill upgradation of textiles workers under the Integrated Skill Development Scheme and other capacity building programmes for the industry like Knitwear Technology Mission. In addition, fiscal incentives are provided for exports of textile and clothing items under various provisions of the Foreign Trade Policy 2009-2014.

Source: Ministry of Textile, Annual Report 2010-11

Readymade Garments account for almost 45% of the total textiles exports. The exports basket consists of a wide range of items comprising readymade garments, cotton textiles, handloom textiles, manmade fibre textiles, wool and woolen goods, silk, jute and handicrafts including carpets. Indias textiles products, including handlooms and handicrafts, are exported to more than hundred countries. However, the USA and the EU, account for about two-third of Indias textiles exports. The other major

export destinations are Canada, UAE, Japan, Saudi Arabia, Republic of Korea, Bangladesh, Turkey, etc. The Vision Statement for the textiles industry for the 11th Five Year Plan (2007-12) envisages India is expected to secure 7% share in the global textiles trade by 2012 from current share of 4%.

The Technology Upgradation Fund Scheme (TUFS) was commissioned in 1999 with a view to provide support for modernization and upgradation of textiles industry by providing credit at the lower rates to entrepreneur both in organized an unorganized sector. The Government has restructured the TUFS scheme for textile industry during May 2011 to boost investment in technology. The objective of the restructured scheme is to leverage investments in technology upgradation in the textiles and jute industry, with a special emphasis on balanced development across the value chain.

Import Scenario The import dependency of the domestic textile industry has been rising. The share of import of textile products by India as percentage of total imports of

The major objectives of the restructured TUFS scheme are as follows:- (a) Address the issues of fragmentation and promote forward integration by providing 5% interest rates for spinning units with matching capacity in weaving/knitting/processing/

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Vision Statement for Textile Industry (2007-12) To build world class, state-of-the-art, and achieve a

garmenting; (b) promoting investments in sectors with low investment like processing; (c) reducing the repayment period to 7 years with 2 years moratorium to promote financial efficiency; (d) Technology upgradation in weaving by providing higher capital subsidy for establishment of new shuttle less looms, that would help to reduce and eventually phase out secondhand looms (e)Ensuring greater participation of SSI units by increasing the limits under this category; (f)The eligibility of restructured/ rescheduled cases to be restricted to initial loan repayment schedule and ballooning of subsidy in rescheduled cases to be avoided (f) revamped scheme to be structured in such a way that the subsidy out go is not open ended and has a definite cap of Rs 1972 crore (g) Greater administrative and monitoring controls to be introduced with preauthorization of all eligible claims by the Textiles Commissioner Mumbai, before approvals and

manufacturing

capacities

predominant global standing in manufacture and export of textiles and clothing. To ensure the growth of the Indian textile industry at 16 percent per annum in value terms, to US$ 115 billion, by the end of the Eleventh Five Year Plan. To secure a 7% share in global textile trade by the end of the Eleventh Five Year Plan. To equip the textile industry to withstand the pressures of import penetration, and maintain dominance of the growing domestic market. To enable Small & Medium Enterprises (SMEs) to achieve competitiveness to face the global scenario with condence. To provide a conducive policy environment which will encourage innovation, augment R&D efforts, and enhance productivity through the upgradation of technology, manufacturing processes and the development of human resources. To establish the Indian textiles industry as a producer of internationally competitive value added products.
Source: 11th Five Year Plan Document for Textile Industry

intensive monitoring by the Inter Ministerial Steering Committee chaired by Secretary Textiles. Government has been promoting the use of Agro Textile products from past few years. Under the National Horticulture Mission (NHM), protected cultivation is one of the components under which the agro textiles/plastics are being promoted for Green House, Shade Net House, Plastic Tunnels and Plastic Mulching. The budgetary allocation made during 2011-12 for protected cultivation under NHM

is Rs 155.99 crore. The Scheme for Integrated Textile Parks is being implemented to facilitate setting up of textile units with appropriate support infrastructure. At the end of December 2010, 40 Parks have been sanctioned in nine states, with total project cost of about Rs 4141 crore with Government contribution of Rs 1425 crore. When fully functional the Parks would have an investment of Rs 19,500 crore and provide employment to more than 8 lakh persons.

(2007-12)

development and training in the textiles sector. Under this Scheme, the Government has envisaged skill development of 27 lakh persons at the overall costs of Rs 2360 crore over the five years.

The Government has launched the Integrated Skill Development Scheme for the Textiles & Apparel Sector, including Jute and Handicrafts during the current Five Year Plan (2007-2012) with an objective of capacity building of Institutions providing skill

Till February 2011, four mega handloom clusters at Varanasi (Uttar Pradesh), Sivasagar (Assam), Virudhunagar (Tamilnadu) and Murshidabad (West Bengal) have been taken up. Each mega handloom cluster has at least 25,000 handlooms and to be developed in a time period of 5 years. A Mega Cluster for Powerloom in Bhilwara in Rajasthan and a Carpet Cluster at Srinagar sanctioned during 2010-11.

In order to diversify the textiles exports and reduce dependence on EU and the USA, the Government is

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predominantly dependent on cotton so, any change in production or prices of cotton directly affects the industry. The handicraft sector is unorganized in nature, and also sufferes from low capital, poor exposure to new technologies, absence of market intelligence, and a poor institutional framework. The industry is highly dependent on imports; in order to

promoting an export policy regime Look East Policy which covers all the potential markets including the nations of East and South East Asia. The policy envisages not only search for new markets but also attracting direct foreign investment.

Summing Up Indias strong performance in textile sector is the result of various advantages that the country enjoys in terms of diverse raw material base (ranging from cotton, wool, jute to synthetic man-made fibres like polyester, nylon), cheap labour, design expertise, booming economy, strong domestic and export demand, strong forward and backward linkage (from raw material to fabrics), supporting policy initiatives from the Government, etc. On the other hand, the domestic textile industry today faces a host of constraints such as highly fragmented structure; low productivity of labour compared to other countries, technological obsolesce, stiff competition from foreign players, pricing pressure, dominance of small scale sector, etc. The domestic textile industry is

reduce the dependence industry needs to invest more in capacity expansion. The domestic industry lacks economies of scale and therefore unable to compete with other countries. The cost of power is relatively high also interest rates, taxes. One can overcome these constraints through focusing more on increasing productivity by leveraging technology, investing in brand building, marketing, focusing on innovations, training/skill development, upgradation of machinery, etc. Sustaining the growth rate especially in the changing scenario of fluctuating currency, global and domestic uncertainty, erratic monsoon, etc is a great challenge before the domestic textile industry. vidyadhopatkar@gmail.com