1. INTRODUCTION

1.1 Introduction of Textile Industry:

The Textile industry in India traditionally, after agriculture, the only industry that has generated

huge employment for both skilled and unskilled labor in textiles. The textile industry continues

to be the second largest employment generating sector in India. It offers direct employment to

over 35 million in the country. India is the second producer but India will lead in all. According

to the Ministry of Textiles, the sector contributes about 14% to industrial production, 4% to the

country's gross domestic product (GDP) and 17% to the country's export earnings. The share of

textiles in total exports was 11.04% during April–July 2010, as per the Ministry of Textiles. It is

estimated that India would increase its textile and apparel share in the world trade to 8% from the

current level of 4.5% and reach US$80 billion by 2020. During 2009-2010, Indian textiles

industry was pegged at US$55 billion, 64% of which services domestic demand.

No one knows when exactly the spinning and weaving of textile began. It has been said that

people knew how to weave even 27000 years ago. This was even before humans were able to

domesticate animals. The oldest actual fragment of cloth found was in southern Turkey.

People used fibers found in nature and hand processes to make fibers into cloth. Even though

high technology was not available, skilled weavers created a wide variety of fabrics. Dyeing of

fabrics was done to satisfy the universal human need for beauty. Within time, more complex

social and political organization of people evolved. With the growth of cities and nations,

improvements in technology came into place and there was a substantial development in the

international trade, both of which involved textiles.

Chinese textile was considered to be the most significant in international trade. Historians have

claimed that silk from China has reached ancient Greece and Rome along a trade route called the

Silk Road in the latter part of the second century B.C. and Egypt in 1000 B.C. The Romans also

imported cotton from nearby Egypt and from India. Archaeologists have found facilities for

dyeing and finishing cotton fabrics in settlements throughout the Roman world. During the

middle ages, the production and trading of the plant called ‘woad’, an important source of dye,

was a highly developed industry. During the fifteenth century, Trade Fairs in southern France

provided a place for the active exchange of wools from England and silks from the Middle East.

The economic activities surrounding these events gave rise to the first international banking

arrangements. Even the discovery of America was a result of the desire of Europeans to find a

faster route not only to the spices but also to the textiles of the Orient. Textile trade quickly took

root in America, as colonists sold native dyes such as indigo and cochineal to Europe and bought

cottons from India. Although advances were being made in the technology of textile production,

the manufacture of cloth in Western Europe in 1700 was still essentially a hand process. Yarns

were spun on a spinning wheel and fabrics were woven by hand-operated looms.

A major reorganization of manufacturing of a variety of goods occurred during the latter half of

the 1700s in Western Europe. These changes, known as the ‘Industrial Revolution’, altered not

only technology, but also social, economic, and cultural life. The production of textiles was the

first area to undergo industrialization during the seventeenth and eighteenth centuries as the

result of an economic crisis. Good quality textile products, produced inexpensively in India and

the Far East, were gradually replacing European goods in the international market. In Britain, it

became imperative that some means be found to increase domestic production, to lower costs,

and to improve the quality of textiles. The solution was found in the substitution of machine or

nonhuman power for hand processes and human power.

Many important inventions, most importantly spinning machines, automatic looms, and the

cotton gin, improved the output and quality of fabrics. These inventions provided the

technological base for the industrialization of the textile industry. Each invention improved one

step of the process. For example, an improvement that increased the speed of spinning meant that

looms were needed that consumed yarn more rapidly. More rapid yarn production required

greater quantities of fiber. The growth of the textile industry was further hastened by the use of

machines that were driven first by waterpower, then by steam, and finally by electricity. The

textile industry was fully mechanized by the early part of the nineteenth century. The next major

developments in the field were to take place in the chemist’s laboratory. Experimentation with

the synthesis of dyestuffs in the laboratory rather than from natural plant materials led to the

development and use of synthetic dyes in the latter half of the nineteenth century. Other

experiments proved that certain natural materials could be dissolved in chemical solvents and re-

formed into fibrous form. By 1910, the first plant for manufacturing rayon had been established

in the United States.

The manufacture of rayon marked the beginning of the manufactured textile fibers industry.

Since that time, enormous advances have been made in the technology for every field in the

textile industry. Today, the textile industry utilizes a complex technology based on scientific

processes and vast economic organizations. With the application of advanced technology to the

textile field, textile use has expanded from the traditional areas of clothing and home furnishings

into the fields of construction, medicine, aerospace, sporting goods, and industry. These

applications have been made possible by the ability of textile scientists to utilize textile fibers,

yarns, and fabrics for specific uses. At the same time that textile technology is making strides in

new directions, the fabrics that consumers buy for clothing and household use also benefit from

the development of new fibers, new methods of yarn and fabric construction, and new finishes

for existing fibers and fabrics.

Today, a huge international industrial complex encompasses the production of fiber, spinning of

yarns, fabrication of cloth, dyeing, finishing, printing, and manufacture of goods for purchase.

Consumers purchase many different products made of textiles. The story of the journey that

these products make as they progress from fiber to yarn to fabric to finished product is not just

the story of spinning yarns, weaving or knitting fabric, or constructing the end product. It is also

the story of a complex network of interrelated industries.

The textile industry occupies a unique place in our country. One of the earliest to come into

existence in India, it accounts for 14% of the total Industrial production, contributes to nearly

20% of the total exports. Being the largest foreign exchange earner, accounting for more than 5

per cent of GDP and providing direct employment to 38 million people, primarily the weaker

sections, it is the second most important sector only after agriculture.

The No.1 exporter of textiles, China, has a share of more than 10 per cent followed by Korea

with 8.1 per cent; India's hovers at 3.5-4 per cent. In clothing exports, China holds a share of

18.5 per cent followed by Italy (6.7 per cent) and India (3 per cent). India's share may look small

but in monetary terms it is large.

It has a unique position as a self-reliant industry, from the production of raw materials to the

delivery of finished products, with substantial value-addition at each stage of processing; it is a

major contribution to the country's economy. The industry is composed of handlooms, power

looms and mills. While the mill sector is well-organized and modern, the same cannot be said of

the power loom and handloom segments. The mill sector has managed to grab a reasonable share

of the world export market.

Although the development of textile sector was earlier taking place in terms of general policies,

in recognition of the importance of this sector, for the first time a separate Policy Statement was

made in 1985 in regard to development of textile sector. The textile policy of 2000 aims at

achieving the target of textile and apparel exports of US $ 50 billion by 2010 of which the share

of garments will be US $ 25 billion. The main markets for Indian textiles and apparels are USA,

UAE, UK, Germany, France, Italy, Russia, Canada, Bangladesh and Japan.

The main objective of the textile policy 2000 is to provide cloth of acceptable quality at

reasonable prices for the vast majority of the population of the country, to increasingly contribute

to the provision of sustainable employment and the economic growth of the nation; and to

compete with confidence for an increasing share of the global market.

1.2 Introduction of India Textile Industry:

The Indian textile industry has a great legacy, which is perhaps unmatched in the history of

India’s industrial development. India’s textile industry evolved and developed at a very early

stage and its manufacturing technology was amongst the best. Prior to colonization, India’s

manually operated textile machines were among the best in the world, and served as a model for

production of the first textile machines in newly industrialized Britain and Germany.

Indian textiles were sought after for their finesse, quality and design. According to Chouta-Kuan,

the Chinese observer preference was given to the Indian weaving for its and delicacy’ Prestige

trade textiles such as Patola from Patan and Ahmedabad, coast were sought after by the

Malaysian royalty and wealthy traders of the Philippines.

Textiles have historically formed an important component of India’s exports. Marco Polo’s

records show that Indian textiles used to be exported to China and South-East Asia. Textiles have

also comprised a significant portion of the Portuguese trade with India. These included

embroidered bedspreads, wall hangings and quits of embroidered wild silk on a cotton or jute

ground.

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

The attractiveness of the fast dyed, multi-colored Indian prints on cotton (chintz) in Europe led to

the formation of the London East India Company in 1600, followed by Dutch and French

counterparts. By the late 1600s there was overwhelming demand for their governments to ban

the import of these cottons from India.

The legacy of the Indian textile industry stemmed from its wealth in natural resources silk, cotton

and jute. The textile industry stemmed from its wealth in natural resources silk, cotton and jute,

the technology used was superior and the skills of the weavers gave the finished product a most

beautiful and ethnic look. The Indian textile industry with such a great pedigree could have gone

only on way from here. But same did not happen.

The textile industry is the largest industry of modern India. It accounts for over 20 percent of

industrial production and is closely linked with the agricultural and rural economy. It is the

single largest employer in the industrial sector employing about 38 million people. If the

employments in allied sectors like ginning, agriculture, pressing, cotton trade, jute, etc. are added

then the total employment is estimated at 93 million. The net foreign exchange earnings in this

sector are one of the highest and, together with carpet and handicrafts, account for over 37

percent of total export earnings at over US $ 10 billion. Textiles, alone, account for about 25

percent of India’s total Forex earnings.

India’s textile industry since its beginning continues to be predominantly cotton based with about

65 percent of fabric consumption in the country being accounted for by cotton. The industry is

highly localized in Ahmedabad and Bombay in the western part of the country though other

centers exist including Kanpur, Calcutta, Indore, Coimbatore, and Sholapur.

The structure of the textile industry is extremely complex with the modern, sophisticated and

highly mechanized mill sector on the one hand and the hand spinning and hand weaving

(handloom) sector on the other. Between the two falls the small-scale power loom sector. The

latter two are together known as the decentralized sector. Over the years, the government has

granted a whole range of concessions to the non-mill sector as a result of which the share of the

decentralized sector has increased considerably in the total production. Of the two sub-sectors of

the decentralized sector, the power loom sector has shown the faster rate of growth. In the

production of fabrics the decentralized sector accounts for roughly 94 percent while the mill

sector has a share of only 6 percent.

Being an agro-based industry the production of raw material varies from year to year depending

on weather and rainfall conditions. Accordingly the price fluctuates too. The Ministry of

Textiles under the Government of India has taken some significant steps to arrest these problems.

It has framed "The National Textile Policy 2000" to address the aforesaid issues. This policy

aims at negating these problems and increasing the foreign exchange earnings to the tune of US$

50 billion by the year 2010. It includes rational road-maps for the development and promotion of

all the sectors involved directly or indirectly with the textile industry of India. Further, the policy

also envisages bringing the unorganized decentralized textile sector (which accounts for 76% of

textile production) at par with the organized mill sector. Furthermore, the policy also aims at

introducing modern and efficient manufacturing machineries and techniques in the Indian textile

sector.

India being the second biggest textile manufacturer worldwide, possesses all the strong features

of being addressed as a well established textile industry. Textile manufacturing is not only a

pioneer activity in the manufacturing sector but it is also a main source of revenue. Indian

textiles have a huge demand globally because they are being exported to various countries.

Extensive range of Indian products are extremely elegant and are a reflection of Indian culture.

This industry is the major employment generator by employing almost 35 million people in

textile industry. In today's world,the Indian textile industry is one of the most booming sectors in

the industrial world. One can experience it by viewing the increase in demand of apparel and

clothing among the consumers. The Government of India has guidelines in the form of Indian

textile acts, Indian textile policies, etc for the Indian textile industry. Browse to know more about

Indian textile and its relevant acts.

Tags:- Indian Textile, Indian Textile Industry, Textile Manufacturer

Indian Textile

Indian Textile Acts Central Silk Board Act, 1948 The Handlooms (Reservation

of Articles for Production) Act,

1985

Yarn, Fabrics and Made-ups

Export Entitlement (Quota)

Policy 2000-2004

Pee System Annexure-v Pee System Annexure - IV

Indian textile industry holds the prestigious status in India. Textile industry caters to one of the

most essential needs of the people, that is clothing. Moreover, textile industry of India is an

independent industry, from the basic requirement of raw materials to the final products, with

huge value-addition at every stage of processing. Today textile sector accounts for nearly 14% of

the total industrial output. Indian fabric is in demand for its ethnicity, earthy colors, loads of

variety and textures available in each type of fabric.

India is now a fast emerging market inching to reach half a billion middle income population by

2030. All these factors are good for the Indian textile industry in a long run. Even though the

global economic crisis seams to be worsening day-by-day, as long as economies are emerging

and growing as those in South and South East Asia, textile industry is here to grow provided it

takes competition and innovation seriously. Read below to have an insight of the stand of the

Indian Textile Industry in the economy.

Where Does the Indian Textile Industry Stand Now?

A general impression I get talking to the Indian textile industry leaders in the past few days make

me understand that the industry is in a pinch. Why so? These are the reasons:

1. Global recession

2. Less export orders due to reductions in inventories by global retail giants like Wal-Mart

3. Price of raw materials like cottons and

4. Infrastructure bottlenecks such as power, particularly in Tamil Nadu.

It has been recently reported that textile exports in 2009-10 period will be equal or could be even

lower than the one achieved in 2008-09. In this global financial meltdown situation, what should

the Indian textile industry do? In the times of adversity, it is an immediate task for all stake

holders to pause for a moment and take stock of the difficulties and chart plans for sustainability

and growth of the Indian textile industry.

Road Ahead for the Indian Textile Industry

As the saying goes in the financial sector, it is not advisable to put all eggs in one basket. This is

what happened somewhat in the case of the Indian textile industry. With the opening of world

markets and the abolition of textile quotas since 2005, there came a negative situation as well.

But, hindsight is always 20-20. Indian textile industry should have focused on all major sectors

right from fibre to fashion and planned for an organized growth across the supply chain so as to

compete with China and even countries such as Pakistan, Vietnam and Thailand. Instead, the

industry had put majority of its stock in the spinning sector. This is clearly evident in the

utilization of Technology Upgradation Fund Scheme effectively by the spinning sector. Although

it is a positive outcome, in my opinion, the industry turned a blind eye on value-adding sectors

such as weaving and finishing. Indian powerloom sector, which enables value-addition is a

highly unorganized industry and needs major upgradation. Not only India does not have world

quality indigenous shuttleless looms, but also investments are not adequate to cope with the

quality and quantity to cater to the export market. Technical textiles sector is still in its infancy

and a tangible growth will be highly visible by 2035 when the growth in this sector will be

exponential. Is there a panacea to the complexities surrounding the India Textile Industry?

Some Solutions for the Growth of Indian Textile Industry:

A couple of points given below will give food for thought for all the stake holders in the Indian

textile industry:

1. The weak links in the Indian conventional industry such as weaving and finishing have to

be strengthened. A major thrust here is to have consolidated efforts by Indian Textile

Machinery Manufacturers Association, end-users and the Government to undertake a

moonshot and come-up with alternatives to European Machinery, which the weaving

sector can afford. This should be doable within the next five years, if dedicated efforts are

undertaken with the financial support for R & D by the Government through its various

schemes.

2. Inch forward in the non-commodity textile sector, i.e., technical textiles sector from a non

crawling phase to at least a crawling industry in the next three years. General awareness

on nonwoven and technical sectors has been created with the recent marathon training

workshops and conferences such as, "Advances in Textiles, Nonwoven and Technical

Textiles", organized for the past five years in Coimbatore by Texas Tech University,

USA and those such as the Texcellance and IIT's Technical Textiles conferences. These

have put India on the international map in technical textiles. These conferences are of less

use if they do not translate into investments and new projects. This aspect has been slow.

Why is it so? Although the awareness on the broad-based technology know-how and end

products has been created, less to no awareness has been created among industrialists on

the marketability of non-commodity textile products.

 

1.3 History of India Textile Industry:

Map of handlooms in India, 1985

The archaeological surveys and studies have found that the people Harappan civilization knew

the weaving and the spinning of cotton four thousand years ago. Reference to weaving and

spinning materials is found in the Vedic Literature also.

There was textile trade in India during the early centuries. A block printed and resist-dyed

fabrics, whose origin is from Gujarat is found in tombs of Fostat, Egypt. This proves that Indian

export of cotton textiles to the Egypt or the Nile Civilization in medieval times were to a large

extent. Large quantities of north Indian silk were traded through the silk route in China to the

western countries. The Indian silks were often exchanged with the western countries for their

spices in the barter system. During the late 17th and 18th century there were large export of the

Indian cotton to the western countries to meet the need of the European industries during

industrial revolution. Consequently there was development of nationalist movement like the

famous Swadeshi movement which was headed by the Aurobindo Ghosh.

There was also export of Indian silk, Muslin cloth of Bengal, Bihar and Orissa to other countries

by the East Indian Company.

The history of textiles in India dates back to nearly five thousand years to the days of the

Harappan civilization. Evidences that India has been trading silk in return for spices from the 2nd

century have been found. This shows that textiles are an industry which has existed for centuries

in our country. Recently there has been a sizeable increase in the demand for Indian textiles in

the market. India is fast emerging as a competitor to China in textile exports. The Government of

India has also realized this fact and lowered the customs duty and reduced the restrictions on the

imported textile machinery. The intention of the government’s move is to enable the Indian

producers to compete in the world market with high quality products. The results of the

government’s move can be visible as Indian companies like Arvind Mills, Mafatlal, Grasim;

Reliance Industries have become prominent players in the world. The Indian textile industry is

the second largest in the world-second only to China. The other competing countries are Korea

and Taiwan. Indian Textile constitutes 35% of the total exports of our country.

The history of apparel and textiles in India dates back to the use of mordant dyes and printing

blocks around 3000 BC. The foundations of the India's textile trade with other countries started

as early as the second century BC. A hoard of block printed and resist-dyed fabrics, primarily of

Gujarati origin, discovered in the tombs of Fostat, Egypt, are the proof of large scale Indian

export of cotton textiles to the Egypt in medieval periods.

During the 13th century, Indian silk was used as barter for spices from the western countries.

Towards the end of the 17th century, the British East India Company had begun exports of

Indian silks and several other cotton fabrics to other economies. These included the famous fine

Muslin cloth of Bengal, Orissa and Bihar. Painted and printed cottons or chintz was widely

practiced between India, Java, China and the Philippines, long before the arrival of the

Europeans.

India Textile Industry is one of the largest textile industries in the world. Today, Indian economy

is largely dependent on textile manufacturing and exports. India earns around 27% of the foreign

exchange from exports of textiles. Further, India Textile Industry contributes about 14% of the

total industrial production of India. Furthermore, its contribution to the gross domestic product of

India is around 3% and the numbers are steadily increasing. India Textile Industry involves

around 35 million workers directly and it accounts for 21% of the total employment generated in

the economy.

Structure of Indian Textile Industry

Production: India is the second largest producer of fibre in the world and the major fibre

produced is cotton. Other fibres produced in India include silk, jute, wool, and man-made

fibers.60% of the Indian textile Industry is cotton based.

The strong domestic demand and the revival of the Economic markets by 2009 have led to huge

growth of the Indian textile industry. In December 2010, the domestic cotton price was up by

50% as compared to the December 2009 prices. The causes behind high cotton price are due to

the floods in Pakistan and China. India projected a high production of textile (325 lakhs bales for

2010 -11). There has been increase in India's share of global textile trading to seven percent in

five years. The rising prices are the major concern of the domestic producers of the country.

Man Made Fibers: These include manufacturing of clothes using fiber or filament

synthetic yarns. It is produced in the large power loom factories. They account for the

largest sector of the textile production in India. This sector has a share of 62% of the

India's total production and provides employment to about 4.8 million people.

The Cotton Sector: It is the second most developed sector in the Indian Textile

industries. It provides employment to huge amount of people but its productions and

employment is seasonal depending upon the seasonal nature of the production.

The Handloom Sector: It is well developed and is mainly dependent on the SHGs for

their funds. It market share is 13% of the total cloth produced in India.

The Woolen Sector: India is the 7th largest producer of the wool in the world. India also

produces 1.8% of the world's total wool.

The Jute Sector: The jute or the golden fiber in India is mainly produced in the Eastern

states of our country like Assam, West Bengal. Indian is 3rd largest producer of jute in

the world.

The Sericulture and Silk Sector: India is the 2nd largest producer of silk in the world.

India produces world's 18% total silk. Mulberry, Eri, Tasar, and Mugas are the 3 main

types of the silk produced in the country. It is a labor-intensive sector.

Indian Textile Policy: Government of India passed the National Textile Policy in 2000

Textile Organization: The Indian Textile industries are mainly dominated by some government,

semi government and private institutions.

The major functions of the ministry of Textile are:

Textile Policy & Coordination

Man-made Fiber Industry

Cotton Textile Industry

Jute Industry

Silk and sericulture Industry

Wool Industry

Decentralized Power loom Sector

Export Promotion

Planning & Economic Analysis

Finance Matters

Information Technology(IT)

The advisory boards include:

All India Handlooms Board

All India Handicrafts Board

All India Power looms Board

Advisory Committee under Handlooms Reservation of Articles for Production

Co-ordination Council of Textiles Research Association

Jute Advisory Board

The major export promoting councils include:

Apparel Export Promotion Council, New Delhi

Carpet Export Promotion Council, New Delhi

Cotton Textiles Export Promotion Council, Mumbai

The major PSU or Public Sector Undertaking are:

National Textile Corporation Ltd. (NTC)

British India Corporation Ltd. (BIC)

Cotton Corporation of India Ltd. (CCI)

Jute Corporation of India Ltd. (JCI)

National Jute Manufacturers Corporation (NJMC)

Handicrafts and Handlooms Export Corporation (HHEC)

National Handloom Development Corporation (NHDC)

Export Promotion Council for Handicrafts, New Delhi

Handloom Export Promotion Council, Chennai

Indian Silk Export Promotion Council, Mumbai

Power loom Development & Export Promotion Council, Mumbai

Synthetic & Rayon Textiles Export Promotion Council, Mumbai

Wool & Woolen Export Promotion Council, New Delhi

Other autonomous bodies in this industry are:

Central Wool Development Board, Jodhpur

National Institute of Fashion Technology, New Delhi

National Centre for Jute Diversification

The textile Research Associations are:

Ahmadabad Textiles Industry’s Research Association

Bombay Textiles Research Association, Mumbai

Indian Jute Industries Research association, Kolkata

Man-made Textiles Research Association, Surat

Synthetic and art silk –Mills Research Association, Mumbai

Wool Research Association, Thane

Northern India Textiles Research Association, Ghaziabad

South India Textiles Research Association, Coimbatore

Organized sector: According to Kearney’s ‘Retail Apparel Index’ India ranked as the fourth

most promising market for apparel retailers in 2009.

There is large scope of improvement in the textile industry of India as there is a huge increase in

personal disposable income among the Indians after the 1991 liberalization. There is also a large

growth of the organised sector in the Indian textile industries. The foreign brands along with the

collaboration of the Indian companies established business in India. Some of these are Puma,

Armani, Benetton, Esprit, Levi Strauss, Hugo Boss, Liz Claiborne, Crocs etc.

The major Indian Industries include Bombay Dyeing, Fabindia, Grasim Industries, JCT Limited,

Lakshmi Machine Works, Lakshmi Mills and Mysore Silk Factory.

1.4 Global Scenario:

The textile and clothing trade is governed by the Multi-Fiber Agreement (MFA) which came into

force on January 1, 1974 replacing short-term and long-term arrangements of the 1960’s which

protected US textile producers from booming Japanese textiles exports. Later, it was extended to

other developing countries like India, Korea, Hong Kong, etc. which had acquired a comparative

advantage in textiles. Currently, India has bilateral arrangements under MFA with USA,

Canada, Australia, countries of the European Commission, etc. Under MFA, foreign trade is

subject to relatively high tariffs and export quotas restricting India’s penetration into these

markets. India was interested in the early phasing out of these quotas in the Uruguay Round of

Negotiations but this did not happen due to the reluctance of the developed countries like the US

and EC to open up their textile markets to Third World imports because of high labor costs.

With the removal of quotas, exports of textiles have now to cope with new challenges in the form

of growing non-tariff / non-trade barriers such as growing regionalization of trade between

blocks of nations, child labour, anti-dumping duties, etc.

Nevertheless, it must be realized that the picture is not all rosy. It is now being admitted

universally and even officially that the year 2005 AD is likely to present more of a challenge

than opportunity. If the industry does not pay attention to the very vital needs of modernization,

quality control, technology up gradation, etc. it is likely to be left behind. Already, its

comparative advantage of cheap labour is being nullified by the use of outmoded machinery.

With the dismantling of the MFA, it becomes imperative for the textile industry to take on

competitors like China, Pakistan, etc., which enjoy lower labour costs. In fact the seriousness of

the situation becomes even more apparent when it is realized that the non-quota exports have not

really risen dramatically over the past few years. The continued dominance of yarn in exports of

cotton, synthetics, and blends, is another cause for worry while exports of fabrics are not

growing. The lack of value added products in textile exports do not augur well for India in a

non-MFA world.

Textile exports alone earn almost 25 percent of foreign exchange for India yet its share in global

trade is dismal, having declined from 10.9 percent in 1955 to 3.23 percent in 1996. More

significantly, the share of China in world trade in textiles, in 1994, was 13.24 percent, up from

4.36 percent in 1980. Hong Kong, too, improved its share from 7.06 percent to 12.65 percent

over the same period. Growth rate, in US$ terms, of exports of textiles, including apparel, was

over 17 percent from 1993-94 to 1995-96. It declined to 10.5 percent in 1996-97 and to 5

percent in 1997-98. Another disconcerting aspect that reflects the declining international

competitiveness of Indian textile industry is the surge in imports in the last two years. Imports

grew by 12 percent in dollar terms in 1997-98, against an average of 5.8 percent for all imports

into India. Imports from China went up by 50 percent while those from Hong Kong jumped by

23 percent.

CHINA:-

China's investment spending in the textile industry slumped 20 percent in the first two months of

this year from the same period in 2008, the National Bureau of Statistics said. Textile industry

spending accounted for 0.9 percent of the nation's overall investment of 1.03 trillion yuan, down

0.5 percentage point from a year earlier, the statistics bureau said. China's garment and textile

exports tumbled 15 percent to $21.9 billion in the two months from a year earlier, customs data

show. Exports of yarn, fabrics and textile products totaled $7.29 billion, down 21 percent, while

apparel exports fell 11 percent to $14.6 billion, the Beijing-based Customs Bureau said on March

11.

Textile firms, once an export engine of China, are fighting for their survival this year with rising

costs and dismal overseas market hit by the subprime crisis. Those firms wooing foreign buyers

at the 103rd China Import and Export Fair, the largest trade fair in the country also called the

Canton Fair, felt the pinch. Few buyers visited their exhibition stall, and fewer still signed

contracts. Chinese product competitiveness was not much as it was. The reduction in tax rebates

and the devaluation of the dollar have made Chinese products 20 percent higher than what it was.

The Chinese currency has ventured below the seven Yuan mark since the government loosened

the unit’s peg to the dollar in 2005. The Yuan has gained about 18 percent since then. This has

made Chinese textile products more expensive and its price advantage has almost vanished

compared with products from Vietnam and India. The Yuan appreciation, together with the

rising material and labor costs, has driven some textile firms to the brink of bankruptcy.

The global textile and clothing industry is estimated to be worth about US$ 4,395 bn and

currently global trade in textiles and clothing stands at around US$ 360 bn. The US market is the

largest, estimated to be growing at 5% per year, and in combination with the EU nations,

accounts for 64% of clothing consumption. The Indian textile industry is valued at US$ 36 bn

with exports totalling US$ 17 bn in 2005‐2006. At the global level, India’s textile exports

account for just 4.72% of global textile and clothing exports. The export basket includes a wide

range of items including cotton yarn and fabrics, man‐made yarn and fabrics, wool and silk

fabrics, made‐ups and a variety of garments. Quota constraints and shortcomings in producing

value‐added fabrics and garments and the absence of contemporary design facilities are some of

the challenge that have impacted textile exports from India.

India’s presence in the international market is significant in the areas of fabrics and yarn.

India is the largest exporter of yarn in the international market and has a share of

25% in world cotton yarn exports

India accounts for 12% of the world’s production of textile fibres and yarn

In terms of spindle age, the Indian textile industry is ranked second, after China, and

Account for 23% of the world’s spindle capacity

Around 6% of global rotor capacity is in India

The country has the highest loom capacity, including handlooms, with a share of

61% in world loom age.

US market

US imports of textiles and clothing fell for the first time in seven years in 2008 by 5.2% to 50.4

billion square meters after growing by an average of 8.4% per annum between 2001 and 2007.

Within the 2008 total, imports of apparel fell by 2.7%, imports of made-up textiles by 5.4%,

fabric imports by 9.3% and yarn imports by 11.1%. Of these four categories, apparel continued

to account for the highest share of total imports. Furthermore, at 45.1%, this share was up from

43.9% a year earlier. By contrast, the share of made-up textiles fell for the first time in 11 years

although, at 33.6%, it was still double the share held by these items in 1997. Meanwhile, the

share of fabric imports fell for the sixth consecutive year and that of yarn imports for the fourth

consecutive year. US import prices rise for a third successive year in 2008, following several

years of decline. The rise in 2008 was led by China. By contrast, there were falls in the average

prices of imports from Vietnam and India -- the USA's second and third largest suppliers of

textiles and apparel respectively. China strengthened its lead as the USA's biggest supplier in

2008, in both value and volume terms. However, growth in imports from China slowed to just

1.1% in value terms -- and in volume terms imports from China actually fell by 3.6%.

Despite these developments, China's share of the US import market grew slightly in 2008 from

33.5% to 35.1% in value terms and from 40.3% to 40.9% in volume. The fastest growing

supplier, however, was Vietnam, and the country became the USA's second largest supplier in

terms of value. In South Asia, US imports from India and Pakistan fell in value terms, although

imports from Bangladesh increased by 11.1%.

Bangladesh

Swedish Firms have Expanded Outsourcing in Bangladesh. Swedish firm engaged in outsourcing

home textiles and home furnishing items is planning to expand its operations in Bangladesh.

RMG Exports is expected to Surge despite global recession. The readymade garment sector, one

of the pillars of the Bangladesh economy, is definitely in a positive mode despite global financial

meltdown. The three-day Bangladesh Apparel and Textile Exposition (BATEXPO) wooed

foreign buyers to buy apparel products.

Bangladesh announced a 1.14 trillion taka ($ 16.5 billion) budget for the 2009/10 fiscal year

aimed at shielding the economy from the global economic crisis. Gross Domestic Product was

expected to grow about 6 per cent in the year to June 2010, after 5.9 per cent growth in the year

to June 2009. Inflation was fore cast to ease to around 6% to 7% in the year 2008 - 09. Global

recession impacted in Bangladesh economy on three fronts: Exports, Imports and Remittances.

Finance minister of Bangladesh said Except for readymade garment and the domestic textile

sector, exports for all other commodities have declined compared to previous year. The budget,

which assumes revenues of 795 billion taka, allocates 21 billion taka to finance public private

partnerships, and 36 billion taka in subsides to agriculture, which contributes 21% of GDP.

Pakistan

Pakistan government plans to spend Rs 40 billion in fiscal year 2009 - 10 for value added textile

sector. The export refinance has been increased from last year Rs 140 billion to Rs 250 billion in

the budget 2009 - 10. The SMEs would have access to credit through Rs 10 billion credit

guarantee fund while the new entrepreneurs would get venture capital without collateral from a

separate Rs 10 billion funds established for this purpose. Government has allocated a substantial

amount of Rs 60 billion in the federal budget to assist the industries involved in value addition,

SMEs and revival of industrial activity in the country.

CAMBODIA:-

Cambodia's garment industry is the country's biggest industrial employer, and is now struggling

against stiffer global competition and slowing demand. Many Chinese and Korean companies

have established a presence in Cambodia for years.  Now, more than 10 Chinese-owned factories

have moved to cheaper markets, leaving hundreds of thousands of garment workers from the

provinces facing destitution, reported Phnom Penh Times in early 2008.The garment industry

earns 80 percent of Cambodia's foreign exchange earnings and employs an estimated 350,000

people in more than 300 factories. The industry began to grow after a the country passed a new

labor laws encouraging labour unions and allowed the International Labour Organization (ILO)

to inspect factories and publish its findings. In turn, the United States agreed to cut tariffs on

Cambodian garment exports, buying 70 percent of all of the country's textiles in the 1990s. 

Cambodia maintained its higher working conditions after the deal expired in 2005, and garment-

making has made the national economy one of the fastest growing in the region.

The World Bank reported that the industry grew only 8.0 percent in 2007 compared to the

growth of up to 20 percent previously. The Cambodia Ministry of Commerce said that the

apparel exports had declined since October 2007, mainly due to the US economic slowdown.

Exports to the United States slipped 1.44 percent in the first quarter of 2008, compared with the

same period in 2007. Predicted Trend .The Cambodia's Free Trade Union (FTU) said that the

factory owners are looking abroad for greater productivity and lower costs. Kaing Monika,

Manager at the Garment Manufacturers Association of Cambodia, commented that many

manufacturers could move to Vietnam, Bangladesh or India if they could get lower costs.

Production costs, oil and power, are high in Cambodia, and the demand for higher wages also put

the country's garment industry in danger, he said. Factory owners are also facing a proliferation

of labor unions and illegal strikes. Experts predict that in 2009 Cambodia would even see more

competition when US restrictions on Chinese textile exports are scheduled to end.  China and

Vietnam are still Cambodia's direct competitors. Cambodia's labor ministry said that to counter

this competition, Cambodia must increase productivity, quality and extend their reputation as

having high labor standards.

1.4.1 Major Manufacturing countries and their Market Share:

In 2008, the largest apparel manufacturers and exporters were countries from the Asia-Pacific

region which included countries like China, Hong Kong, Philippines, Malaysia, Indonesia,

Bangladesh, Sri-lanka, Pakistan, Thailand and India. The other major apparel manufacturing

nations were USA, Italy, Germany and Mexico.

Graph No: 1.1 Country wise Market Share

“The end of the quota regime, which marks the phasing out of the MFA from January 1, 2005,

has ushered a new phase of l\global opportunity for the Textile & Clothing Sector. The removal

of quotas could witness the World Trade in Textile, which is at present US $ 395 billion to surge

to over US $ 650 billion by 2010. The expected future CAGR is expected to be 8% with Textiles

Accounting for 5.8% and Clothing being the real driver of growth with an expected CAGR of a

Study of Productivity and Financial Efficiency of Textile Industry of India 9.6%. Hence, there

lies a distinct opportunities for countries possessing competitive advantages resulting from

labour, technology, and raw materials, rather than for those arising from favourable trade

agreements.

1.4.2 Global Trade Volume and Trends

As the apparel manufacturing industry has become more labor intensive and requires less capital

investment, its concentration is shifting more towards the developing countries and even

constituting large amount of their exports. They are concentrating more on developing countries

as the labour cost is very less in such countries. This can be analyzed by the fact that the apparel

production in industrialized countries decreased between 1980 and 1996, where as the

production increased in developing countries during the same period. Similar trend was seen in

exports, the apparel exports of developing countries increased six times between 1980 and 1997,

and that of developed economies rose by 150%.

The global apparel industry’s total revenue in 2011-12 was US$1,252.8 billion, which was

approximately 68% of the overall industry value. Asia Pacific constitutes the largest amount of

production and trade in the apparel industry worldwide.

Region wise Share of Total Trade Revenue (2011-2012)

Region % Share

Asia Pacific 35.40%

Europe 29.40%

USA 22.30%

Rest of the world 12.90%

China had captured 65% of the global market share towards the end of 2011-12 in total apparel

exports. The other major apparel exporting nations include USA, Germany, Hong Kong, Italy,

Malaysia, Pakistan, Thailand and India. Some of the apparel trade statistics are presented below.

Exports of Apparels in 2011-2012

Country US $ Billion

China 8,260.921

Hong Kong 1,723.210

Italy 1,353.586

Malaysia 1,255.069

Germany 669.130

Pakistan 618.830

Thailand 597.758

USA 595.171

India 522.463

According to the provisional DGCI&S data, textile exports during fiscal 2005‐ 06 stood at

around US$17 billion, recording a 22% growth year‐on‐year. Except for man‐made textiles, all

segments in the textile industry, including handicraft carpets, wool and silk, have recorded a

growth in exports during 2005‐06 ‐‐ the first year since the phasing out of the quota system in the

global market.

A readymade garment (RMG) is the largest export segment, accounting for a considerable 45%

of total textile exports. This segment has benefited significantly with the termination of the

Multi‐Fibre Arrangement (MFA) in Jan 05. In 2005‐06, total RMG exports grew by 29%,

touching US$ 7.75 bn. In 2003‐04 and 2004‐05, the growth in RMG exports was 8.5% and 4.1%

respectively. The jump in 2005‐06 exports has been largely due to the elimination of quotas.

Exports of cotton textiles ‐‐ which include yarn, fabric and made‐ups ‐‐ constitute over 2/3rd of

total textiles exports (excluding readymade garments). Overall, this segment accounts for 26% of

total textile exports. According to the Ministry of Textiles, in 2005‐06, total cotton textile

exports Source: Ministry of Textiles, GoI Source: Ministry of Textiles, GoI XVI were worth US$

4.5 bn, implying a growth of 27% over the exports in 2004‐05, which were worth US$ 3.5 bn.

Man‐made textiles exports have witnessed a decline of 2.5% in 2005‐06. Between 1999‐2000

and 2002‐03, man‐made textiles exports were growing at around 30% per annum.

The slowdowns began since 2003-04 and have been on the decline since. Major export

destinations for India’s textile and apparel products are the US and EU, which together

accounted for over 75% of demand. Exports to the US have further increased since 2005, post

the termination of the MFA. Analysis of trade figures by the US Census bureau shows that post‐

MFA, imports from India into the US have been nearly 27% higher than in the corresponding

period in 2004‐05.

1.4.3 Global Factors Influencing Textile Industry

The history of the textile and clothing industry has been replete with the use of various bilateral

quotas, protectionist policies, discriminatory tariffs, etc. by the developed world against the

developing countries. The result was a highly distorted structure, which imposed hidden costs on

the export sectors of the Third World. Despite the fact that GATT was established way back in

1947, the textile industry, till 1994, remained largely out of its liberalization agreements. In fact,

trade in this sector, until the Uruguay Round, evolved in the opposite direction. Consequently,

since 1974 global trade in the textiles and clothing sector had been governed by the Multi-fibre

agreement, which was the sequel to an increasingly pervasive quota regime that began with the

Short-term arrangement on cotton products in 1962 and followed by the Long-Term

arrangement. After the successful conclusion of the Uruguay Round in 1994, the MFA was

replaced by the Agreement on Textiles and Clothing (ATC), which had the same MFA

framework in the context of an agreed, ten year phasing out of all quotas by the year 2005. The

section that follows takes a brief look at the history of these protectionist regimes as also a more

detailed look at the MFA and the ATC.

1.5 Market Segmentation Criteria

Fashion and non-Fashion:-

Fashion Apparel with low price sensitivity

Non-Fashion Apparel with price sensitivity

Age group:- (infants, children, teenagers, adult, …)

Product Type:-

Female suit, coat, tailored jacket and skirt

Female lingerie, loungewear and nightwear

Female blouse and Shirt

Female dress

Male Suit, Coat and Overcoat

Male Shirt

Male underwear and nightwear

Socks and hosiery

Trouser, Slack and Jean

Accessories

Occasion and Formality:-

Sports outfit

Casual wear

Business clothing

Formal clothing

Material:- (wool, cotton, linen, synthetic fiber, leather, …)

Production Type:-(Cut and Sew, Knitting, …)

1.6 Segment Analysis

India’s textile industry comprises mostly small-scale, non-integrated spinning, weaving,

finishing, and apparel-making enterprises. The figure below depicts the overall value chain and

the number and type of units within the industry.

Readymade garments

Jute industry

Cotton textiles

Silk textiles

Man made textiles

Woolen textiles

Coir and jute

 Moreover the cottage industry of India produces average dress material, with the cheapest of

threads which costs only about 200 INR featuring fine floral and other patterns.

Indian Textile Industry is one of the leading textile industries in the world. Though was

predominantly unorganized industry even a few years back, but the scenario started changing

after the economic liberalization of Indian economy in 1991. The opening up of economy gave

the much-needed thrust to the Indian textile industry, which has now successfully become one of

the largest in the world.

Indian textile industry largely depends upon the textile manufacturing and export. It also plays a

major role in the economy of the country. India earns about 27% of its total foreign exchange

through textile exports. Further, the textile industry of India also contributes nearly 14% of the

total industrial production of the country. It also contributes around 3% to the GDP of the

country. Indian textile industry is also the largest in the country in terms of employment

generation. It not only generates jobs in its own industry, but also opens up scopes for the other

ancillary sectors. India textile industry currently generates employment to more than 35 million

people. It is also estimated that, the industry will generate 12 million new jobs by the year 2010.

Indian textile industry can be divided into several segments, some of which can be listedasbelow:

Cotton Textiles

Silk Textiles

Woolen Textiles

Readymade Garments

Hand-crafted Textiles

Jute and Coir

1.7 Current Scenario:

Textile exports are targeted to reach $50 billion by 2010; $25 billion of the amount will go to the

US. Other markets include Japan, Russia, UAE, Germany, France and Italy. The name of these

countries with their background can give thousands of insights to a thinking mind. The slant cut

that will be producing a readymade garment, will sold the garment at Rs 600, making the value

addition to be profitable by 300 %.

The Indian Textile Industry is a vertically integrated industry which covers a large gamut of

activities ranging from production of its own raw material namely, cotton, jute, silk and wool to

providing to the consumers high value added products such as fabrics and garments. India also

produces large varieties of synthetic and manmade fibers such as a Study of Productivity and

Financial Efficiency of Textile Industry of India.

“The textile sector plays a significant role in Indian economy by contributing to the Gross

Domestic product, generating employment and earning foreign exchange. An estimated 35

million people are directly employed in the Indian Textile Industry, which contributes to 4% of

GDP and 21% of total export earnings.”

India is globally a significant player in the textile sector and is globally the

Third largest producer of cotton and cellulose fiber/yarn.

Second largest producer of cotton yarn.

Largest producer of jute, second largest producer of silk.

Fifth largest producer of synthetic fiber/yarn.

“Cotton is one of the major corps cultivated in India. India has the largest cotton acreage in the

world and cotton is the dominant fiber in Indian Textile Industry. About 75% of the total yarn

and about 56% of the total fabric produced in India was cotton in 2004-05. Almost all cotton

used in India is grown locally and a tiny amount is imported.

Cotton textiles account for 2/3rd of India’s textile exports.”

“During the last five decades, the production of cotton in India increased from 30 lakhs bales of

170 kgs each in 1950-51 to an estimated a Study of Productivity and Financial Efficiency of

Textile Industry of India 213 lakhs bales (170 kg each) in 2004-05. There has also been a rise in

area under cultivation from 58.9 lakhs hectares in 1950-51 to an estimated 89.7 lakhs hectares in

2004-2004.”

1.8 Production and Exports:

India has been experiencing strong performance in the textile industry, across different segments

of the value chain, from raw materials to garments. Domestic production has been growing, as

well as exports.

Textile Exports:-

The Indian textile industry contributes substantially to India’s export earnings. The export basket

consists of wide range of items containing cotton yarn and fabrics, man-made yarn and fabrics,

wool and silk fabrics, made-ups and variety of garments. India’s textile products, including

handlooms and handicrafts, are exported to more than hundred countries. However, USA, EU

Member States, Canada, U.A.E., Japan, Saudi Arabia, Republic of Korea, Bangladesh, Turkey,

etc are the major importers of our textile goods.

During the year 2007-08, the share of textiles exports including handicrafts, jute, and coir in

India’s total exports was 16.63%. India’s textiles exports have registered strong growth in the

post quota period. Textiles exports grew from US$ 14.03 billion in 2006-07 to US$ 17.08 billion

in 2007-08, recording a growth of 21.8 per cent.

1.9 The Agreement on Textiles and Clothing:

Since 1 January 1995, international textiles and clothing trade has been going through

fundamental change under the 10-year transitional programmed of the WTO's Agreement on

Textiles and Clothing (ATC). Before the Agreement took effect, a large portion of textiles and

clothing exports from developing countries to the industrial countries was subject to quotas

under a special regime outside normal GATT rules. Under the Agreement, WTO Members have

committed themselves to remove the quotas by 1 January 2005 by integrating the sector fully

into GATT rules.  While the WTO is still young, the multilateral trading system that was

originally set up under GATT is well over 50 years old.

The past 50 years have seen an exceptional growth in world trade. Merchandise exports grew on

average by 6% annually. Total trade in 2000 was 22-times the level of 1950. GATT and the

WTO have helped to create a strong and prosperous trading system contributing to

unprecedented growth. The system was developed through a series of trade negotiations, or

rounds, held under GATT. The first rounds dealt mainly with tariff reductions but later

negotiations included other areas such as anti-dumping and non-tariff measures.

Multi-fiber Arrangements (MFA) 1974-1994

Agreement on Textile and Clothing (ATC) 1995-2004

Under the Agreement, WTO Members have committed themselves to remove the quotas

by 1 January 2005 by integrating the sector fully into GATT rules.

MFA: -

The Multi-fiber Arrangement was a major departure from the basic GATT rules and

particularly the principle of non-discrimination.

This provided for the application of selective quantitative restrictions when surges in

imports of particular products caused, or threatened to cause, serious damage to the

industry of the importing country.

ATC: - The ATC is a transitional instrument, built on the following key elements:

The product coverage, basically encompassing yarns, fabrics, made-up textile products

and clothing

A programmed for the progressive integration of these textile and clothing products into

GATT 1994 rules

A liberalization process to progressively enlarge existing quotas (until they are removed)

by increasing annual growth rates at each stage

A special safeguard mechanism to deal with new cases of serious damage or threat

thereof to domestic producers during the transition period

Establishment of a Textiles Monitoring Body (“TMB”) to supervise the implementation

of the Agreement and ensure that the rules are faithfully followed

Other provisions, including rules on circumvention of the quotas, their administration,

treatment of non-MFA restrictions, and commitments undertaken elsewhere under the

WTO's agreements and procedures affecting this sector.

1.10 General Implications of WTO on Textile Industry Worldwide:

Exports of textile products will be quota free and will only be based on market

considerations, namely product attributes, pricing, promotion such as advertising, brand

building and other sales promotion means and physical distribution its cost an logistics

decisions, the market will be purely competitive.

It may be unlikely that the developed countries will open their doors after MFA phase out.

The restrictions on imports into these countries may come in many forms such as

Non-tariff barriers based on environmental health, labour standard related issues and so

on.

Formation of regional trade arrangement, which implies higher degree of labialisation

among the regions as compared to rest of the world, for E.g., EU, NAFTA.

Initiating anti dumping and countervailing measures.

In the wake of WTO regime, one needs specialization and the globalization is impending to

take place as to produce where it is cheap and will sell where it is profitable. FDIs and

technology transfer may take place in the developing countries.

Removal of quotas will increase market access and thereby stimulate exports from the

developing countries like India, but it will also increase competition amongst exports, with

the prospects that there could be both winners and losers among the exporters.

There is a likely emergence of “outward processing” concept by manufacturers in advance

countries on their attempts to counteract the textile suppliers from countries like India which

could be termed as dislocation of production.

It would be observed that there is increasing role of NGOs in influencing trade related issues

across countries.

There would be increasing clout of developed countries as evident from reports on

ministerial levels meetings of WTO, in pursuing their interests.

1.10.1 Implication of WTO on Indian Textile Industry:-

Due to the removal of quota restriction as per WTO agreements on market access, import of

woven fabrics, mainly synthetics are on the increasing trend. Imported textiles already have a

large presence in the retail network across the country. Power loom sector with largest

synthetic predominance will have to face these imports. Further due to reduction in import

tariffs added textiles from developed countries and low-end fabrics from low cost production

countries into India may affect domestic production.

In the apparel sector, Ludhiana, Tirupur, Delhi, Bangalore, Mumbai and Chennai are all

remarkably unique and dynamic centers of production and developing as a textile hub

centers, this gross generalization is only indicative of the relative strengths of the various

locations, as individual companies with comparable or greater strengths do also exist outside

this organization.

1.11 Interesting Facts about Indian Textiles:

About 6% contribution to GDP

Second largest employment providing sector after agriculture and providing employment to

about 35million people.

Constitute only 3% of the total world textile exports.

Currently Indian textile export is 13 $ bn and target of 50 $ bn by2010

Constitute 27% of India's total exports and 35% of the gross export earnings.

A ready-made garment contributes to 41% of the total textile exports and about 15% of the

country's total exports.

Indian textile exports are increasing at the rate of 20% annually.

Contributes to almost 14% of the industrial production

Organized mills constitutes just about 3.1% of total production of textile

Highest area under irrigation for cotton in the world about 9million hectares (26% of the

world total growing area) and productivity is 300kg/hectare as compare to 550 kg/hectare

average of the world, third largest producer of the cotton.

First largest producer of cotton yarn and jute in the world

Second largest producer of the raw silk after the china

Fifth largest producer of polyester yarn.

Out of 1227 cotton/man-made fiber mills, 188 mills are in public sector, 124 mills in

cooperative sector and 915 are in the private sector.

37 Mn spindles accounted 23.6% of the world, largest spindle capacity in the world

1.78 Mn power looms accounted 43.63% of the world's and highest in any country

3.9 Mn handlooms accounted 84.78% of the world and highest in the world

India has the second largest spinning capacities in the world. Also, this is continuing to grow and

modernize - the current strength is at around 38 million spindles and 400,000 rotors.

1.12 Government Regulations and Support:

1.12.1 Government Initiatives:-

The textile industry, being one of the most significant sectors in the Indian economy, has been a

key focus area for the Government of India. A number of policies have been put in place to make

the industry more competitive.

1 The Technology Up gradation Fund Scheme (TUFS):-

Recognizing that technology is the key to being competitive in the global market, the

Government of India established the Technology Up gradation Fund Scheme (TUFS) to enable

firms to access low-interest loans for technology up gradation. Under this scheme, the

Government reimburses 5 per cent of the interest rates charged by the banks and financial

institutions, thereby ensuring credit availability for up gradation of the technology at global rates.

Under the TUF Scheme, launched on April 1, 1999, loans amounting to Rs. 149 billion have

been disbursed to 6,739 applicants.

In consonance with the industry, the TUF Scheme has been continued during the Eleventh Plan

(2007-2012). Allocation for TUF has been raised from Rs.5.35 billion in 2006-07, to Rs.9.11

billion in 2007-08. Handlooms will now be covered under the TUF scheme.

2 Integrated Textile Parks Scheme:-

Manufacturing is a thrust area for the government, as Indian industry and the government see

foreign companies more as partners in building domestic manufacturing capabilities rather than a

threat to Indian businesses. Following this through, the Central Government as well as various

States has executed Schemes such as, Schemes for Integrated Textile and Apparel Parks. Under

the Scheme for Integrated Textiles Parks (SITP), 26 parks have been approved so far out of 30

sanctioned. The Budget provision for these parks has been increased from Rs.1.89 billion in

2006-07 to Rs.4.25 billion in 2007-08.

3 Schemes for Handlooms:-

For Handlooms a cluster approach for the development of the handloom sector was introduced in

2005-06 and 120 clusters were selected. 273 new yarn depots are opened up till now and the

Handloom Mark was launched. The Government proposes to take up additional 100-150 clusters

in 2007-08.

4 Health Insurance Scheme:-

The Health Insurance Scheme has so far covered 3,00,000 weavers and will be extended to more

weavers. The scheme will also be enlarged to include ancillary workers. The Government

proposed to enhance the allocation for the sector from Rs.2.41 billion in 2006-07 to Rs.3.21

billion next year.

1.12.2 Quality Improvement:-

The Textile Commission, under the Ministry of Textiles, facilitates firms in the industry to

improve their quality levels and also get recognized quality certifications. Out of 250 textile

companies that have been taken up by the Commission, 136 are certified ISO 9001. The other

two certifications that have been targeted by the Textile Commission are ISO 14000

Environmental Management Standards and SA 8000 Code of Conduct Management Standards.

1.12.3 Foreign Direct Investment (FDI) Policy:-

100% FDI is allowed in the textile sector under the automatic route. FDI in sectors to the extent

permitted under automatic route does not require any prior approval either by the Government of

India or Reserve Bank of India (RBI). The investors are only required to notify the Regional

Office concerned of RBI within 30 days of receipt of in word remittance. Ministry of Textiles

has set up FDI Cell to attract FDI in the textile sector in the country.

The FDI cell will operate with the following objectives:

To provide assistance and advisory support (including liaison with other organizations

and State Governments)

Assist foreign companies in finding out joint venture partners

To sort out operational problems

Maintenance and monitoring of data pertaining to domestic textile production and foreign

investment.

1.12.4 Foreign Investment Scenario:-

Foreign investment and market presence was not very high in India’s textile and apparel sector.

With liberalization in investment and the subsequent the removal of quantitative restrictions on

several textile products, the Indian market now has the presence of several international brands.

However, the presence is more in the nature of brand licensing with Indian players rather than

direct investment. U.S. brands have a larger presence in the market than others. According to

official data from the Secretariat of Industrial Assistance (SIA), the total foreign investment

approved in the sector since 1991 is in the region of US $80 million, of which E.U. investment is

estimated to be US$ 16.5 million a little over 20 percent of total approvals, from 46 applications.

The largest number of approvals was of investments from UK (16) and Italy (14), together

representing more than 75 per cent of the cases and 86 per cent of the value approved.

A few companies have also set up export-oriented manufacturing facilities in India. Notable

names include La Perla, and Brinton, a leading carpet manufacturer from the U.K. Besides

investment, brand licensing and marketing joint ventures have been on the rise in the 1990s, with

some of the world’s most popular apparel brands entering the Indian market. Some of the highly

visible names include: Levi’s, Lee, Wrangler, Benetton, Pepe, Reid and Taylor, Zegna, Arrow,

Louis Philippe, Van Heusen, Lacoste, and Ralph Lauren.

A new trend in recent years has been the arrival in India of expatriate and western designers

(from France, Italy, UK) who are beginning to form joint ventures with Indian designers to cater

to the domestic and export markets. Italian companies are investing in capacity expansion and

striking manufacturing, distribution and franchising deals with India Inc. Carrera is to invest US$

252.7 million in textile projects in India.

Although direct investment in retail remains closed to FDI as of now, companies have found

alternative structures through which they can approach Indian consumers (examples include Levi

Strauss, Marks & Spencer, Royal Sporting House, Adidas, Nike and Reebok in fashion

products). There is certainly a broader opportunity to “grow the market from inside” as

companies can freely set up fully-owned sourcing (liaison) offices, as well as marketing

operations. The number of FDI approved between 1991 and 2004 was 641 which amount to over

US$ 1.02 billion.

1.12.5 Other legislations regarding the Textile sector:-

Ministry of finance has added 165 new textile products under duty drawback schedule. The new

products included wool tops, cotton yarn, acrylic yarn, viscose yarn, various blended

yarn/fabrics, fishing nets etc. Further, the existing entries in the drawback schedule relating to

garments have been expanded to create separate entries of garments made up of (1) cotton; (2)

manmade fiber blend and (3) MMF. Separate rates have been prescribed for these categories of

garments on the basis of composition of textiles.

After the phasing out of quota regime under the MFA, India can envisage its textile sector

becoming $100 billion industry by 2010. This will include exports of $50 billion. The proposed

targets would be achieved provided reforms are initiated in textile sector and local manufacturers

adopt measures to improve their competitiveness. A 5-pronged strategy aiming to attract FDI by

making reforms in local market, replacement of existing indirect taxes with a single nationwide

VAT, liberalization of contract norms for textile and garments units, elimination of restrictions

that cause poor operational and organizational performance of manufacturers, was suggested.

The Union Minister said that the Board for Industrial and Financial Reconstruction (BIFR) had

approved rehabilitation schemes for sick NTC mills at a cost of Rs 39 billion. Of the 66 mills, 65

unviable mills have been closed after implementing Voluntary Retirement Scheme (VRS) to all

employees. According to him, the government has already constituted assets sale committees

comprising representatives of Central and state governments, operative agency, BIFR, NTC and

the concerned NTC subsidiary to effect sale of assets through open tender system.

Proposals for modernization of NTC mills have been made to the consultative committee

members, including formation of a committee of experts to improve management of these mills.

Even the present status of jute industry was under the scanner of the consultative committee.

The Government had announced change from the value-based drawback rate hitherto followed to

a weight-based structure for textile exports that will discourage raw material exports and also

curtail the scope for misusing the drawback claims by boosting invoice value of exports.

NCDEX has launched its silk contract (raw silk and cocoon). With this launch, the total number

of products offered by NCDEX goes up to 27. The launch of the silk contract will offer the entire

suite of fibers to the entire value chain ranging from farmers to textile mills.

With the objective of protecting the interests of those affected by the WTO agreements and

globalization process, Government of India jointly with NCDEX has adopted a policy of

encouraging future contracts of silk.

The Government will run during the Eleventh Plan period a Scheme for the Development and

Growth of Technical Textiles (SDGT) at an outlay of Rs 960 million to promote indigenous

manufacture of technical textiles. The scheme would also provide infrastructure support by

setting up centers of excellence for manufacture of technical textiles.

1.13 Role of government in the past and in present:

1. Regulatory disadvantages:-

One of the most insidious is the historical reservation of manufacturing for very small

companies. While the original political intention might have been to spread self-reliant

industry across a large political base, this reservation has created the fragmentation that

shackled the competitiveness of Indian textile industry.

Most of the sectors have not been de reserved and entrepreneurs and co-operates are

investing significantly sums of money in setting up new, large factories or expanding

their existing manufacturing plants

2. Foreign Investment:-

The government has in the past kept foreign investment out of textile an apparel

manufacturing. It has gradually removed these restrictions and has also brought down

import duties on capital equipment creating grounds for foreign investor to set up

manufacturing plants competitively in India

3. Excise and Tax:-

Some of the other problem remains such as excise and other tax imbalances. The political

diversity of India’s 35 states and union territories and the coalition of ruling party have

led to slow progress in rationalizing these imbalances due to debate and discussions.

However a framework of VAT in beginning to be put in place through in fits and start5s,

which sill clear those imbalances once it is implemented fully and create truly unified

economic space.

4. Labor Laws:-

Labor laws are still seen to be relatively unfriendly to business with companies having

less than ideal flexibility to follow a hire and fire policy. To avoid any potential trouble

with unionization of labor companies have often broken their business down into small

units, which have in turn, lost the efficiencies of economic of scale. In recent years, these

are been movement towards labor reform and one hope that this will make the business

environment even more conductive.

1.14 Step proposed to safeguard the domestic textile industry:-

1. Tariff and non- tariff barriers:-

In the wake of WTO quota regime doesn’t mean abolition of tariff completely, but the

purpose to reduce the quota so that free trade across the country is possible. India can

protect the domestic industry in the form to non-tariff barriers such as health, safety and

labour standards, environmental friendliness, and rules of origin and so on.

2. Anti dumping:-

If a company exports a product at a price lower than the price it normally charges on its

own market it is said to be dumping the product. India as a major threat from neighbour

country like china, which would dump the product to destroy domestic market so,

antidumping law, should have to be strengthened.

3. Unregulated trade:-

Import of cotton is not possible for small-scale organization in large quantity. So, Indian

government should have to play a role of intermediary to help the small-scale industry

and reduce regulated trade.

4. Open data source:-

Indian government should have to create the facility to access the proper data from global

like price, demand of the product and disseminate to the domestic industry.

1.15 CONTRIBUTION OF TEXTILE INDUSTRY IN GDP

The contribution of textile industry to the total GDP was 2.28% during the year 2007-08, 2.25%

during the year 2008-09 and 2.22% during the year 2009-10.

Textiles and Clothing Industry contributed 11.46% of country’s total exports in 2008-09, 12.54%

in 2009-10 and 10.63% in 2010-11. Exports of Textiles & Clothing is USD 21.22 billion, USD

22.42 billion and USD 26.82 billion during 2008-09, 2009-10 and 2010-11

The Indian textile industry is one of the major sectors of Indian economy largely contributing

towards the growth of the country’s industrial sector. The textile sector contributes 14 per cent to

industrial production, 4 per cent to National GDP, and 10.63 per cent to country’s export

earnings. Textile sector in India provides direct employment to over 35 million people and holds

the second position after the agriculture sector in providing employment.

2. MAJOR PLAYERS OF AN INDIAN TEXTILE INDUSTRY

2.1 Arvind Mills:

HISTORY

Arvind Mills Limited was incorporated on 1930 under the Companies Act,1956 The year

1930 was when the world suffered the great depression. Companies across the globe began

closing down. In UK and in India, the textile industry in particular was in trouble. At about this

time, Mahatma Gandhi championed the Swadeshi Movement and at his call, people from all

across India began boycotting fine and superfine fabrics, which had so far been imported from

England. In the midst of this depression one family saw opportunity. The Lalbhais reasoned that

the demand for fine and superfine fabrics still existed. And any Indian company that met this

demand would surely prosper. The three brothers, Kasturbhai, Narottambhai and Chimanbhai,

decided to set up a mill to produce superfine fabric. Next they looked around for state-of-the-art

machinery that could produce such high quality fabric. Their search ended in England. The best

technology of that time was acquired at a most attractive price. And a company called Arvind

Limited was born.

Arvind Limited started with a share capital of Rs 2,525,000 ($55,000) in the year 1931.

With the aim of manufacturing the high-end superfine fabrics Arvind invested in very

sophisticated technology. With 52,560 ring spindles, 2552 doubling spindles and 1122 looms it

was one of the few companies in those days to start along with spinning and weaving facilities in

addition to full-fledged facilities for dyeing, bleaching, finishing and mercerizing. The sales in

the year 1934, three years after establishment were Rs 45.76 lakh and profits were Rs 2.82 lakh.

Steadily producing high quality fabrics, year after year, Arvind took its place amongst the

foremost textile units in the country.

In the mid 1980’s the textile industry faced another major crisis. With the power loom

churning out vast quantities of inexpensive fabric, many large composite mills lost their markets,

and were on the verge of closure. Yet that period saw Arvind at its highest level of profitability.

There could be no better time, concluded the Management, for a rethink on strategy. The Arvind

management coined a new word for it new strategy – Reno vision. It simply meant a new way of

looking at issues, of seeing more than the obvious and that became the corporate philosophy.

The national focus paved way for international focus and Arvind’s markets shifted from

domestic to global, a market that expected and accepted only quality goods. An in-depth analysis

of the world textile market proved an eye opener. People the world over were shifting from

synthetic to natural fabrics. Cottons were the largest growing segments. But where conventional

wisdom pointed to popular priced segments, Reno vision pointed to high quality premium

niches. Thus in 1987-88 Arvind entered the export market for two sections -Denim for leisure &

fashion wear and high quality fabric for cotton shirting and trousers. By 1991 Arvind reached

1600 million meters of Denim per year and it was the third largest producer of Denim in the

world.

In 1997 Arvind set up a state-of-the-art shirting, gabardine and knits facility, the largest

of its kind in India, at Santej. With Arvind’s concern for environment a most modern effluent

treatment facility with zero effluent discharge capability was also established.

Year 2005 was a watershed year for textiles. With the muliti-fiber agreement getting

phased out and the disbanding of quotas, international textile trade was poised for a quantum

leap. In the domestic market too, the rationalizing of the cenvat chain and the growth of the

organized retail industry was likely to make textiles and apparel see an explosive growth.

Arvind has carved out an aggressive strategy to verticalize its current operations by

setting up worldscale garmenting facilities and offering a one-stop shop service, by offering

garment packages to its international and domestic customers. With Lee, Wrangler, Arrow and

Tommy Hilfiger and its own domestic brands of Flying Machine, Newport, Excalibur and Ruf &

Tuf, Arvind set its vision of becoming the largest apparel brands company in India.

2.2 Arrow Textile:

Arrow Webtex Limited was incorporated on November, 5 1990 under the Companies

Act, 1956 under the name Creole Holdings Company Private Limited. Pursuant to it becoming a

deemed Public Limited Company, the name was changed to Creole Holdings Company Limited

on June 2, 1992. Subsequently, on becoming a Private Limited Company, the name was again

changed to Creole Holdings Company Private Limited vide Second Certificate of Incorporation

dated October 22, 2003 issued by the Registrar of Companies, Pune. The name was then changed

to Creole Holdings Compan Limited vide fresh Certificate on change of name dated December

14, 2006. Thereafter, the name was changed to Arrow Webtex Limited vide fresh Certificate of

incorporation upon change of name dated May 18, 2007. Prior to de-merger, Delta Corp Limited

(formerly Arrow Webtex Limited) was engaged in various businesses, inter-alia of manufacture

of narrow woven fabrics (Textiles Business), Real Estate Consultancy etc. In accordance with

the Scheme of Arrangement between Arrow Webtex Limited (now Delta Corp Limited) and

Arrow Textiles Limited and their respective Shareholders and Creditors as sanctioned by

Hon’ble Bombay High Court dated 22nd August, 2008. Textiles Division of Arrow Webtex

Limited was transferred to Arrow Textiles Limited.

2.3 BOMBAY DYEING:

HISTORY:

Bombay Dyeing & Manufacturing Company Limited (BDMCL) was incorporated in 23rd

August of the year 1879 at Mumbai under the house of Wadias. It manufactures cotton textile

goods, non-woven fabrics and Dimethyl Terephthalate (DMT). Unrivalled in its reputation for

quality, the Bombay Dyeing range of fabrics and ready-mades has been growing and evolving

with changing trends and also has a wide range of industrial fabrics that include microdot

interlining; fabrics for shoe uppers, adhesives, abrasives, leather cloth and filters. A modest

beginning for a company, that was to grow in the following years into one of India's largest

producer of textiles. Along the path of growth and diversification, Bombay Dyeing has spawned

dozens of other companies. Textile is a dominant activity for which the company has advanced

facilities. Each of Bombay Dyeing's five manufacturing facilities is of International standards.

Weaving facilities include technology from world leaders such as Sulzer. Bombay Dyeing has

519 Sulzer Projectile Machines in widths of 130', 142', 153' and 169'. The Spinning and

Winding facilities are equipped with Schlafhorst Autocore Rotors, Auto Corner Winding

Spindles and Schweiter CA - 11 Spindles with an installed capacity of 135,336 Ring Spindles

 

 Archway Investment Company (P) Limited became a wholly owned subsidiary of the company

during the incorporation year itself. The company had entered into an agreement with Tootal

Broadhurst Lee Company Limited of Manchester during the year 1961 for the technical know-

how and use of their patented crease resistant and minimum ironing processes under which the

company was permitted to brand its goods with marks Tebilized and Tebilized Double.

Subsequently, in the year 1962, the negotiations were concluded with Heberilein & Company of

Wattil, Switzerland, for the right to use their Hecowa finish on processed goods. Nowrosjee

Wadia Ginning & Processing Company Limited was amalgamated with the company with

effect from 1st October of the year 1967. BDMCL made an agreement with Hercofina of USA

during the year 1978 for the purchase of equipment and machinery and for technology and

technical service.  

 

 During the year 1988, the company installed 2 open-end spinning machines, 3 auto coners, 7

high-speed combers, 1 hot air stenter and some jiggers in the processing house in Mumbai also

in the same year a caustic recovery plant was installed. A year after, in 1989, 2 new Blow Room

lines with cards, 7 auto coners and 48 new Air-jet Weaving machines were installed. At the

processing house, in Mumbai, some Polywool processing machinery and new fusible interlining

machines were also installed. During the same year 1989, BDMCL had entered into a contract

with 20th Century Foods Pvt Ltd of Singapore to render technical services to Thulhiriya Textile

Mills (Sri Lanka) a Government owned textile mill of Sri Lanka, having 1,30,000 spindles and

560 looms. In 1990, The Company installed a blow room line with high production cards, 6

open-end spinning machines, 16 sulzer weaving machines and 2 auto coners at its

manufacturing mills.

 

 The Capital Equipment installed included 72 air jet weaving machines, 8 trutschler cards, 9

draw frames, 5 open end spinning machines, 6 auto coners, 1 warping machine and 2 sizing

machines during the year 1992. In 2nd December of the year 1993, the company had launched

the Euro Issue in the international markets. During the period of 1995, BDMCL had increased

its capacity from 1,12,000 TPA to 1,45,000 TPA. The Company introduced three new brands

for Home collection in the year 1997 and also in the same year, BDMCL had introduced

various projects in its mills to improve the quality of yarn and fabric and reduce rejects. The

Company had signed up with fieldstone Cannon of the US to setup a 50:50 joint venture to

make terry towels.  

 

 In 1998, the company introduced two new brands viz Princeton and Forest Hills in Apparel and

Tulip and Harmony in the home collection segment almost seven years after the launch of its

Vivaldi brand. The Company had won the SRTEPC and TEXPROCIL Gold Trophies for its

outstanding export performance for poly cotton blended fabrics and made-ups for the year

1998-99. BDMCL made a terry towel joint venture project with the US-based Fieldcrest

Cannon in 1999. The Jamnagar Spinning unit of the company, which was situated in Gujarat,

closed down with effect from July 29th of the year 2000. The Company had acquired the 51%

of stake in Proline India for a sum of Rs.4 cr during the year 2002 and changed its Readymade

Garment Business to the same Proline India Limited. Bombay Dyeing unveiled 150 new

designs in bed and bath linen and home towel category in the same year of 2002.  

 

 BDMCL made tie up with Nickleodeon for a merchandising arrangement in the year 2005. The

real estate division of the company had commenced the development of the two properties

Spring Mills, Dadar and Textile Mills, Worli during the year 2005-06. The DMT Plant

operations had been suspended from 6th March of the year 2006 to enable implementation of

the Polyester Stable Fibre (PSF) in the same site of the company. In January 2007,

commissioning of PSF plant in sections commenced and by 31st, 2007, part of the plant was

under operational testing. The Company committed a major part of the total capital expenditure

of Rs.206 crores in 31st March of the year 2007 for a new state-of-the-art processing unit along

with in-house stitching facilities at Ranjangaon.

 

 

2.4 GRASIM LIMITED:

Grasim Industries Limited was incorporated in 1948; Grasim is the largest exporter of

Viscose Rayon Fiber in the country, with exports to over 50 countries. This, along with Aditya

Birla Nuvo can be considered as companies of the AV Birla Group. Grasim is headquartered in

Nagda,Madhya Pradesh and also has a huge plant at Kharach ([[Kosamba, Gujarat, India

Company Ltd was incorporated in 1969 in Thailand, started operations in 1970, this was Aditya

Birla Group’s first foray into international venture. Aditya Birla Group incorporated P.T. Elegant

Textiles in 1973 in Indonesia. Thai Rayon incorporated in 1974, this was the second company in

Thailand, operating in Viscose Rayon Staple Fiber. Century Textiles Co. Ltd. is taken over by

Aditya Birla Group in 1974; this company is a weaving and dyeing plant manufacturing and

exporting variety of synthetic fabrics. PT Sunrise Bumi Textiles incorporated in 1979, it

produces yarn exported over 30 countries in 6 continents. P.T Indo Bharat Rayon incorporated in

1980 produces Viscose Staple Fiber in Indonesia to become a dominant player in the domestic

market as well as export markets. Thai Polyphosphates and Chemicals was started in 1984 in

Thailand to produce Sodium Phosphates, presently merged with Thai Epoxy and Allied Products

Company Limited (1992), Thai Sulphites and Chemicals Company Limited (1995) to form

Aditya Birla Chemicals Ltd. This company supplies to sectors such as food, textiles, electrical

and electronics, composites, leather, plastics and automobiles. PT Indo Liberty Textiles was

incorporated in 1995 to manufacture synthetic spun yarn.

In 2004, the Staple Fibre Division of Grasim Industries Ltd was presented with the

Stockholm Industry Water Award for the company's efforts to reduce water usage and improve

their overall environmental impact.

Focus of Growth Post MFA

In late 1990s and later, the focus was the textile business because of the end of Multi-Fiber

Arrangement (MFA) which opened a host of opportunities to Indian exporters. In this period,

Aditya Birla Group took a three route strategy for growth.

Rapidly enhance existing capacities

Acquire and Build Garment brands for local and international markets

Jayashree textiles was acquired by Aditya Birla Nuvo (formerly Indian Rayon), is a leading

producer and exporter of yarns and fabrics to 50 countries with a turnover of $413 million. It

acquired Madura Garments in 2000 to enter the branded garments business. Have brands such as

Louis Philippe, Van Heusen, Peter England, Allen Solly, and SF Jeans among others and also a

global supplier to global buyers such as Marks & Spencer’s, Polo etc.

Vertical integration to get cost advantage

AV Cell Inc., a joint venture between Aditya Birla Group and Tembec, Canada, established

operations in 1998 to produce softwood and hardwood pulp for the purpose of internal

consumption among different units of the Group.

Together, Aditya Birla Group and Tembec, Canada have acquired AV Nackawic Inc., which

produces dissolving pulp, as a further step to integrate. Grasim industries Ltd. is a leading player

in the Viscose Staple Fiber (VSP). The Aditya Birla Group's VSF manufacturing plants straddle

Thailand, Indonesia, India and China. At each of these locations, further capacity expansions are

under way — in Thailand by 31 ktpa; in Indonesia by 37 ktpa; in India by 64 ktpa and in China

by 30 ktpa. These brown field expansions, slated to be completed by the second quarter of 2008,

will further notch up the Group's VSF production from 566 ktpa to 727 ktpa and entail an

investment close to US$ 260 million.

Grasim wants to follow a strategy of backward integration, right from plantation stage to the

final VSF stage. The Group's VSF business operates through its three companies — Grasim

Industries in India, Thai Rayon Corporation in Thailand and Indo Bharat Rayon in Indonesia,

which also oversees its Chinese operations at Birla Jingwei Fibres, China.

Joint ventures

Thai Rayon

Promoted in 1974 by the Aditya Birla Group, Thai Rayon is the sole manufacturer of Viscose

Rayon Staple Fibre (VSF) in Thailand. More than 50 per cent of Thai Rayon's VSF throughput is

directly exported to more than 20 countries worldwide. The VSF meets the stringent quality

expectations of customers in USA, Mexico, Europe, Turkey, Canada, Israel, Australia, South

Korea, Philippines, Indonesia, Pakistan, Bangladesh and Sri Lanka.

PT Indo Bharat Rayon

Marketed under the brand name of 'Birla Cellulose', the company produces a wide range of VSF

in engineered specifications for textiles and non-woven applications. The company's strong focus

on environmental protection is reflected through its investments in a sophisticated state-of-the-art

waste-water treatment plant and scientific waste disposal systems.

2.5 FABINDIA LIMITED:

History

The company was incorporated in the year 1976. The company opened their first retail

store in New Delhi. The company started as a wholesale export and successfully established

itself as a major retail player in the Indian market. During the year 2004, the company received

the award 'Best Retail Brand' by The Economic Times of India.  

 

 During the year 2006-2007, the company opened retail outlets at Leh, Anna Nagar (Chennai),

Amritsar, Lucknow, Bhubhaneshwar, Shimla, Ahmedabad, Dwarka, Kamla Nagar, Raja Garden

(New Delhi), Mangalore, Jayanagar (Bangalore), Bay Pride-Cochin, Fort Cochin, Coimbatore,

Secunderabad, Goa, Vadodara, Shipra Mall, Ghaziabad, and Calicut. During the same year, the

company opened the Central Ware House (CWH), which is fully operational.  

 

 In April 2007, the company successfully completed Vision Plan 11. During the year 2007-2008,

the company opened 27 retail outlets in the country. The company further opened retail outlets at

Siliguri, Pune and Raipur. During the year, the company set up a wholly owned subsidiary

company namely, Artisans Micro Finance Artisans Private Limited.  

 

 During the year 2008-2009, the company introduced a new line of business by launching

Handcrafted jewelers range at select stores in major cities in India. During the year, the company

opened 18 new retail outlets across the country. During the year, the company acquired 25.1%

stake in EAST Ltd.

The year 1976, saw major equity restructuring within the company, as adhering to

Reserve Bank of India's rules instructing foreign companies to limit their foreign equity to 40

percent, Fabindia offered its shares to close family members, associates, and suppliers like

Madhukar Khera, an early supplier to the company. This was also the height of the Indian

Emergency period(1975-1976), and the rule which barred commercial establishments to run from

residential properties was implemented, the company were forced out of its second premises, a

house on the Mathura Road. This prompted it to open the first Fabindia retail store in Greater

Kailash, N-Block market in New Delhi, in 1976, which remains its register office.

Now catering to the urban India as well, in the coming decade Fabindia differentiated

itself from other government-owned and often subsidized players, in handloom fabrics and

apparel sector, like KVIC and various state emporiums by adapting its fabrics and designs to

urban taste. For this designers were accessed to modernize its line of home linens and most

importantly introduced a range of ready-to-wear garments, including churidar-kurta suits for

women, men's shirts etc. Even today, its team of designers provides most of the designs and

colors, executed by village-based artisans. At the other end, these artisans learnt the basics of

quality, consistency and finish, for instance avoiding frayed edges on handwoven shawls. The

result was that traditional apparel and products became mainstream and fashionable, fast adapted

by a growing middle-class and became identified as the brand for the elite and intellectual as

well as affordable ethnic chic.

Fabindia lost its biggest customer Habitat in 1992, when the latter was bought by Ikea,

which then decided to appoint its own buying agent in India; in the following year John Bissell

suffered a stroke, and his son William, gradually stepped into the helm of affairs, taking over

completely after the death of father in 1998, at age 66. Till then William, an undergrad from

Wesleyan University, who had majored in philosophy, political science and government, had

spent several years in Jodhpur, since completing his education in 1988. William, working with

rural artisans and crafts co-operatives across Rajasthan, was instrumental in the setting up of

various weavers' cooperatives. One of first tasks taken up by William was shifting Fabindia's

focus to the domestic market, en route to becoming a retail chain, for till then it only had two

stores in Delhi. In time Fabindia’s retail business overtook its exports.

Fabindia added its non-textile range in 2000, organic foods in 2004, followed by personal

care products in 2006; finally it launched its range of Handcrafted jewellery in 2008. Fabindia

sells a variety of products ranging from textiles, garments, stationery, furniture, home

accessories, ceramics, organic foods, and body care products, besides exporting home

furnishings. Fabindia's retail expansion plans started taking shape 2004 onwards, it opened

multiple and larger stores in metros like Mumbai, Chennai and Delhi, while at the same time

spreading out beyond metros. It opened stores in cities like Vadodara, Dehradun, Coimbatore

and Bhubaneswar, Durgapur soon as revenues also grew from Rs 89 crore in 2004-05 to Rs 129

crore in 2005-06, reaching Rs 200 crore in 2007, in the year when it sourced its products from

22,000 artisans in 21 states.

Usually, the village-based artisan gets barely 5% of the tag price of their products as the

rest is taken away by the middlemen. To counter this, Fabindia introduced an artisan-shareholder

system through "supply-region companies" incorporated as subsidiaries. Here the craftspeople

collectively own 26% of the equity in each company, based in nationwide centres, with Artisans

Micro Finance, a Fabindia arm holding 49%, and employees and other private investors holding

the balance. Also as part its expansion plans, 6% in Fabindia was sold in 2007, at an estimated

$11 million, to Wolfensohn Capital Partners, a private equity firm founded by former World

Bank president James Wolfensohn. In 2009, it acquired a 25% stake in UK based £ 30 million

ethnic women wear retailer, EAST. Today the company has retail outlets in all major cities of

India - 137 at last count - in addition to international stores in Dubai, UAE; 3 stores in Bahrain;

Doha, State of Qatar; Rome, Italy and one in Guangzhou, China.

Philanthropy

William and John Bissell established "The Fabindia School" in 1992 in Bali, in Pali

district of Rajasthan; today it is co-educational, senior secondary school with 600 students

including 40% girls. The school subsidized tuition fees of the girl students and offers them

scholarships, in partnership with "The John Bissell Scholars Fund", established in 2000.

Awards and recognition

Fabindia was awarded “Best Retail Brand” in 2004 by The Economic Times. In 2004,

Fabindia was featured as part of a CNBC special TV report on India. Fabindia brand does not

advertise, and largely works through word of mouth publicity, and then in 2007 the craft-

conscious enterprise concept of Fabindia became a Harvard Business School (HBS) case study.

2010 marked 50 years of the foundation of Fabindia, and release of the book, The Fabric of Our

Lives: the Story of Fabindia, by Radhika Singh.

3. STRATEGIC ANALYSIS

3.1 PESTL ANALYSIS:-

It is very important that an organization considers its environment before beginning the

marketing process. In fact, environmental analysis should be continuous and feed all aspects of

planning. The organization's marketing environment is made up from:

The internal environment

The micro-environment

The macro-environment e.g. Political (and legal) forces, Economic forces, Socio-cultural

forces, and Technological forces. These are known as PESTL factors.

A PEST analysis is one of them that are merely a framework that categorizes environmental

influences as political, economic, social and technological forces. Sometimes two additional

factors, environmental and legal, will be added to make a PESTL analysis, but these themes can

easily be subsumed in the others. The analysis examines the impact of each of these factors (and

their interplay with each other) on the business.

PEST is useful when a company decides to enter its business operations into new markets and

new countries. The use of PEST, in this case, helps to break free of unconscious assumptions,

and help to effectively adapt to the realities of the new environment.

3.1.1 POLITICAL & LEGAL FACTORS:-

Political factors are how and to what degree a government intervenes in the economy.

Specifically, political factors include areas such as tax policy, labour law, environmental law,

trade restrictions, tariffs, and political stability. Political factors may also include goods and

services which the government wants to provide or be provided and those that the government

does not want to be provided. Furthermore, governments have great influence on the health,

education, and infrastructure of a nation. The political area has a huge influence upon the

regulation of businesses, and the spending power of consumers and other businesses.

Environmental regulation and protection:-

Since 1 January 1995, international textiles and clothing trade has been going through

fundamental change under the 10-year transitional programme of the WTO's Agreement on

Textiles and Clothing (ATC).

Government Initiatives:-

Government of India established the Technology Up gradation Fund Scheme (TUFS) to

enable firms to access low-interest loans for technology up gradation.

The Central Government as well as various States has executed Schemes such as,

Schemes for Integrated Textile and Apparel Parks.

The scheme will also be enlarged to include ancillary workers.

Quality Improvement:-

The Textile Commission, under the Ministry of Textiles, facilitates firms in the industry to

improve their quality levels and also get recognized quality certifications.

Foreign Direct Investment (FDI) Policy:-

100% FDI is allowed in the textile sector under the automatic route.

The investors are only required to notify the Regional Office concerned of RBI within 30 days of

receipt of in word remittance. Ministry of Textiles has set up FDI Cell to attract FDI in the

textile sector in the country.

The Government will run during the Eleventh Plan period a Scheme for the Development and

Growth of Technical Textiles (SDGT) at an outlay of Rs 960 million to promote indigenous

manufacture of technical textiles.

Labour Laws:-

Labour laws are still seen to be relatively unfriendly to business with companies having less than

ideal flexibility to follow a hire and fire policy.

3.1.2 ECONOMIC FACTORS:-

Marketers need to consider the state of a trading economy in the short and long-terms. This is

especially true when planning for international marketing.

Economic factors include economic growth, interest rates, exchange rates and the inflation rate.

These factors have major impacts on how businesses operate and make decisions. For example,

interest rates affect a firm's cost of capital and therefore to what extent a business grows and

expands. Exchange rates affect the costs of exporting goods and the supply and price of imported

goods in an economy.

With liberalization in investment and the subsequent the removal of quantitative

restrictions on several textile products, the Indian market now has the presence of several

international brands.

About 6% contribution to GDP

Constitute 27% of India's total exports and 35% of the gross export earnings

A ready-made garment contributes to 41% of the total textile exports and about 15% of

the country's total exports.

Highest area under irrigation for cotton in the world about 9million hectares (26% of the

world total growing area) and productivity is 300kg/hectare as compare to 550 kg/hectare

average of the world, third largest producer of the cotton.

First largest producer of cotton yarn and jute in the world. Second largest producer of the

raw silk after the china. Fifth largest producer of polyester yarn.

3.9 Mn handlooms accounted 84.78% of the world and highest in the world.

3.1.3 SOCIAL FACTORS:-

The social and cultural influences on business vary from country to country. It is very important

that such factors are considered.

Social factors include the cultural aspects and include health consciousness, population growth

rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the

demand for a company's products and how that company operates. For example, an ageing

population may imply a smaller and less-willing workforce (thus increasing the cost of labor).

Furthermore, companies may change various management strategies to adapt to these social

trends (such as recruiting older workers).

Income distribution:-

India is contributes to almost 14% of the industrial production. So, India is second largest players

in Textile industry all over the world. So, the contribution of textile income is higher for national

income.

Demographics, Population growth rates, Age distribution:-

India has a largest population all over world. 3.9 Mn handlooms accounted 84.78% of the world

and highest in the world. So, it is raise employment opportunities for people. The government

has declared special Park for textile industry.

Lifestyle changes:-

The life style of people has changed every time so, they demand different varieties of product.

The trend of fashion is affecting the textile industry. The companies of Indian textile industry

have to launch wide range of product for people.

3.1.4 TECHNOLOGICAL FACTORS:-

Technology is vital for competitive advantage, and is a major driver of globalization.

Technological factors include ecological and environmental aspects, such as R&D activity,

automation, technology incentives and the rate of technological change. They can determine

barriers to entry, minimum efficient production level and influence outsourcing decisions.

Furthermore, technological shifts can affect costs, quality, and lead to innovation.

Research and development Activities:-

Research and development activities are affected the Indian textile industry. The China, Sri-

lanka, Bangladesh, Pakistan and U.K. are major players in textile industry. They all have benefit

of low cost raw material and low labour cost.

Technology incentives:-

Technological changes are not major affected to Indian textile industry. India has built adequate

infrastructure throughout the various stages in textile development, that is, design, sourcing,

merchandising and production.

Institution for textile technology development:-

Apart from institutes such as NIFT (National Institute of Fashion Technology) and Apparel

Training Institutes, there are several colleges, including the Indian Institutes of Technology and

National Institutes of Technology that offer courses in Textile Engineering.

Thus, India has the infrastructure in place to produce qualified and skilled manpower in areas of

textile design and engineering Indian firms have leveraged this strength to develop a competitive

advantage – the ability to contribute to the design, not only in preparing samples and prototypes,

but also in translating concepts into varieties of finished designs, as well as introducing designs

of their own.

Several Indian firms have their own design departments and in the last five years have begun to

work closely with overseas designers and/or agents.

High value, up-market specialty buyers such as Gap, banana republic and J. Crew value such

expertise and have been leveraging this while buying from India.

3.2 OT ANALYSIS:-

OPPORTUNITIES:-

The global textile trade has been rather muted for a few years now is set to triple to $856

Billion over the next decade. This growth would be driven by dismantling of quotas in

January 2005, as mandated by WTO. The biggest beneficiaries of this growth would be cost

competitive manufacturers in china, Mexico, Turkey and India (whose share of global trade

is a minuscule 3%). Market share of other countries such as Italy, Germany, Korea and

France on the other hand would fall form the current level of 25%

With the phasing out of restrictive trade policies- MFA and other QRs, substantial increase in

size of the markets is expected. Besides the developed countries, new markets would be

opened up in developing countries. Post GATT, the trade of Textiles and clothing is expected

to rise by US$ 24 Billion per year

One of the biggest opportunities in the export trade in home textiles. The market which is

estimated to grow from US $9 billion in 2004 to US $23 billion in 2012

The Federated Group, Wal-Mart, Target, Russell Corp, Sears Roebuck and The Limited

figure are among American retail majors that are looking for additional orders from India

With overseas companies increasingly realizing the need to diversify their sourcing basket

and not focus on one or two countries like China, the Indian textile industry is all set to reap

major dividends.

Growth rate of Domestic Textile Industry is 6-8% per annum.

Large, Potential Domestic and International Market.

Product development and Diversification to cater global needs.

Elimination of Quota Restriction leads to greater Market Development.

Market is gradually shifting towards Branded Readymade Garment.

Increased Disposable Income and Purchasing Power of Indian Customer open new

Market Development.

Emerging Retail Industry and Malls provide huge opportunities for the Apparel,

handicraft and other segments of the industry.

Greater Investment and FDI opportunities are available.

India’s strong performance and growth in the textiles sector is aided by several key

advantages that the country enjoys

Easy availability of labour and material

Presence of supporting industries and supporting policy initiatives from the government.

Elimination of Quota Restriction leads to greater Market Development.

Market is gradually shifting towards Branded Readymade Garment.

Emerging Retail Industry and Malls provide huge opportunities for the Apparel,

handicraft and other segments of the industry.

THREATS:-

‘Non-Tariff Barriers’ (e.g. in the name of anti-dumping, consumer safety, eco-labelling etc.)

are fast replacing ‘quotas’. Phasing out of Quotas also mean countries to export on their

comparative advantage only; Competition in international market to increase manifold.

The domestic turf too would be threatened by increased imports as custom tariffs fall.

The big markets of the world are increasingly becoming inaccessible to India due to the

proliferation of regional/bilateral arrangements that exclude India from the preferential

benefits accorded to other ‘member’ countries.

Threat from countries like China, Pakistan and Bangladesh are major competitor for the

supply of textiles.

Competition from other developing countries, especially China.

Continuous Quality Improvement is need of the hour as there are different demand

patterns all over the world.

Elimination of Quota system will lead to fluctuations in Export Demand.

Threat for Traditional Market for Power loom and Handloom Products and forcing them

for product diversification.

Geographical Disadvantages.

International labour and Environmental Laws.

To balance the demand and supply.

To make balance between price and quality.

3.3 PORTER’S FIVE FORCE MODEL:-

"Porter's five forces" is a framework for the industry analysis and business strategy development

developed by Michael E. Porter of Harvard Business School in 1979.

It uses concepts developing Industrial Organization (IO) economics to derive five forces which

determine the competitive intensity and therefore attractiveness of a market. Attractiveness in

this context refers to the overall industry profitability.

An "unattractive" industry is one where the combination of forces acts to drive down overall

profitability. A very unattractive industry would be one approaching "pure competition".

Porter referred to these forces as the micro environment, to contrast it with the more general term

macro environment. They consist of those forces close to a company that affect its ability to

serve its customers and make a profit.

A change in any of the forces normally requires a company to re-assess the marketplace. The

overall industry attractiveness does not imply that every firm in the industry will return the same

profitability. Firms are able to apply their core competences, business model or network to

achieve a profit above the industry average.

A clear example of this is the airline industry. As an industry, profitability is low and yet

individual companies, by applying unique business models have been able to make a return in

excess of the industry average.

Strategy consultants occasionally use Porter's five forces framework when making a qualitative

evaluation of a firm's strategic position. However, for most consultants, the framework is only a

starting point or 'check-list' they might use. Like all general frameworks, an analysis that uses it

to the exclusion of specifics about a particular situation is considered naive.

Porter's five force include three forces from 'horizontal' competition: threat of substitute

products, the threat of established rivals, and the threat of new entrants; and two forces from

'vertical' competition: the bargaining power of suppliers, bargaining power of customers.

According to Porter, the five forces model should be used at the industry level; it is not designed

to be used at the industry group or industry sector level. An industry is defined at a lower, more

basic level: a market in which similar or closely related products and/or services are sold to

buyers.

Firms that compete in a single industry should develop, at a minimum, one five forces analysis

for its industry.

Porter makes clear that for diversified companies, the first fundamental issue in corporate

strategy is the selection of industries (lines of business) in which the company should compete;

and each line of business should develop its own, industry-specific, five forces analysis. The

average Global 1,000 Company competes in approximately 52 industries (lines of business).

Figure No: 3.1 Porter’s five force model

One of the worst hit sectors during the skyrocketing interest rate scenario in the late 90, the debt-

laden Indian textile industry has spun many turn-around stories since then. Aided by lower

interest rates, restructuring packages from financial institutions and the recent dismantle of

quotas; the sector is today well poised to capture growth opportunities. In 2012, the sector

contributed 20% to industrial production, 9% to excise collections, 18% of employment in

industrial sector, nearly 20% to the country's total export earnings and 4% to the GDP. The

textile sector employs nearly 35 m people and is the second highest employer in the country. In

fact, it is estimated that one out of every six households in the country directly or indirectly

depends on this sector. Here we analyse the sector's dynamics through Porter's five-factor model.

Figure No: 3.2 Porter’s five force model for Indian Textile Industry

Bargaining power of Buyer (demand scenario) (Strong):-

Global textile & clothing industry is currently pegged at around US$ 440 bn. US and European

markets dominate the global textile trade accounting for 64% of clothing and 39% of textile

market. With the dismantling of quotas, global textile trade is expected to grow (as per Mc

Kinsey estimates) to US$ 650 bn by 2015 (5 year CAGR of 10%). Although China is likely to

become the 'supplier of choice', other low cost producers like India would also benefit as the

overseas importers would try to mitigate their risk of sourcing from only one country. The two-

fold increase in global textile trade is also likely to drive India's exports growth. India's textile

export is expected to grow to US$ 40 bn, capturing a market share of close to 8% by 2015. India,

in particular, is likely to benefit from the rising demand in the home textiles and apparels

segment, wherein it has competitive edge against its neighbour. Nonetheless, a rapid slowdown

in the denim cycle poses risks to fabric players.

Buyer purchase trend

The purchase trend of buyers is always changing; the buyers are demanding more

products varieties so it is on fastest growing market.

Buyer switching costs relative to firm switching costs

Buyer’s switching cost is low so, the bargaining power of buyer is strong. In market

many competing brands are available and buyers are moving from one brand to another

brand at low cost.

Availability of existing substitute products

There are many substitute products are available and products available at different

varieties.

Buyer price sensitivity

The wide range of products is available into market at different price and different

quality. So, buyers are more sensitive for price of textile products.

Differential advantage (uniqueness) of industry products

Bargaining power of suppliers (supply scenario) (Weak):-

India is the third largest producer of cotton in the world after China and US and has the largest

area under cultivation. Cotton, a key raw material in the textile and garment industry, accounts

for about 30% of the fabric cost and 13% of the garment cost. India has an abundant supply of

locally grown long staple cotton, which lends it a cost advantage in the home textile and apparels

segments. Other countries, like China and Pakistan, have relatively lower supply of locally

grown long staple cotton. Moreover, low cotton prices due to a bumper cotton crop would enable

India to lower its production cost and sustain pricing pressure. Further, efforts on improving the

yield per hectare would ensure higher productivity and production, thereby providing the much-

needed security of raw-material supply to textile producers.

India also enjoys a significant lead in terms of labour cost per hour (US$ 0.6 in 2012), over

developed countries like US (US$ 15.1) and newly industrialized economies like Hong Kong

(US$ 5.1), Taiwan (US$ 7.1), South Korea (US$ 5.7) and China (US$ 0.9). Also, India is rich in

traditional workers adept at value-adding tasks, which could give Indian companies significant

margin advantage.

Supplier switching costs relative to alternative suppliers

There are many suppliers’ are available for textile industry. The switching cost of one

supplier to another suppliers is very low because of raw material are availability is very

high and at low cost.

Degree of differentiation of inputs

Raw materials are differing from product to product for textile industry so, there are need

different raw material from different suppliers so, it is wide degree of differentiation of

inputs.

Presence of substitute inputs

There are many suppliers are in market for raw material provide. So, the bargaining

power of suppliers is low.

Threat of new entrants (Strong):-

In the quota free regime, capacity expansion is the name of the game in the textile sector.

Resultantly, smaller players who cannot venture into the global markets are flooding the

domestic markets with excess supply, thus weakening the pricing scenario. Be it denim (Arvind

Mills), home textiles or branded apparels (Raymond), new capex and consolidation with

international players is also not likely to safeguard margins for the larger players, unless they can

tap a significant pie of the overseas markets.

The existence of barriers to entry is not existing

The existence of barriers to entry does not exist in textile industry. There is less barriers to

enter in to textile industry.

Switching costs

Capital requirements

There is less capital requirement for entering in to textile industry comparing to other

industry. There is less initial capital needed for starting company in textile industry because

there is required less fixed assets and human resources.

Buyers Demand

Buyers demand is growing rapidly in garment segment and also silk segment so, the

demands of customer are increasing so, it is possible to come new competitors in to market.

Government policies

Government policies are also supporting to textile industry for expanding it. Government is

declared many policies for encouraging textile industry.

Threat of substitutes (Strong):-

Low cost producing countries like Pakistan and Bangladesh (labour cost 50% cheaper) are also

posing a threat to India's exports demand. In fact, players like Arvind Mills have already started

feeling the pinch as overseas buyers have started shifting to 'alternative sources', thus impacting

their incremental volume off-takes.

Relative price performance of substitutes

Low cost producing countries like Pakistan, sri lanka are providing better quality product

at low cost.

Lower buyer switching costs

The consumers have low cost for switching from substitute products, so it can strong

threats of substitute product of textile to enter in to market.

Perceived level of product differentiation

Sri lanka, Bangladesh, china have provide wide range of product of textile in different

segment. So, it is also increasing threats of substitute product from foreign market.

Competitive rivalry (Strong):-

India's logistic disadvantage due to its geographical location can give it a major thumbs-down in

global trade. The country is distant from major markets as compared to its global competitors

like Mexico, Turkey and China, which are located in relatively close vicinity to major global

markets of US, Europe and Japan. As a result, high cost of shipments and longer lead-time

coupled with lack of infrastructure facility may prove to be major hindrances.

The fragmented structure of the industry has also stood in the way of achieving true integration

between the various links in the supply chain. The sector has one of the longest and most

complex supply chains in the world, which the larger players are trying to correct by integrating

their operations and improving efficiency levels.

Number of competitors

There are many number of competitor are available in textile industry and also increasing

rivals of textile. The rivals are also same size and competitive capabilities.

Rate of industry growth

Textile industry is going on growth stage so the rivalries among competitor are becoming

strong because of higher demand of product in to market.

Fixed cost allocation per value added

There is low cost incurred for fixed assets of textile industry. It can require less fixed

assets comparing to other industry so, competitors are tried to reduced cost of production

and competing in to market.

Level of advertising expense

The textile companies are making high advertisement for its product and so they can

make awareness about product in to mind of consumers and attract them for purchasing

the textile product.

Buyers switching cost

The buyers switching cost for textile product is very low and the buyers are also ready to

purchase other brand at low cost.

3.4 CHALLENGES OF TEXTILE INDUSTRY

A major gap in Indian industry is its fragmented industry structure with a dominance of small

scale. The fragmentation of supply base also creates barriers in achieving true integration

between the various links in the supply chain. This creates issues of lack of control and lack

of consistent or reliable performance. The huge geographical spread further complicates this

issue.

Low productivity at all levels, from growing to ginning to spinning to weaving (capacity

utilization as low as 50% in most of the sub-sectors), poor infrastructure-both externally

(basic infrastructure ports, roads, power etc) and internally (90% of units being very small or

in tiny sector), absence of productive economy of scales in most sub-sectors, absence of

VAT, too much regulations and control on dynamics of sub-sectors, restrictive import regime

and trade policy environment, technological obsolescence and lack of term strategy.

Lack of transparency in legal requirements and complicated paperwork" which led to an

increase in producer costs and necessitated the appointment of a broker instead of the much-

preferred direct-dealing with manufacturers

Problems such as excise and other tax imbalances. The political diversity of India's 35 states

and Union Territories, and a coalition of ruling parties have led to slow progress in

rationalizing these imbalances due to debate and discussion.

The Indian RMG sector is still largely dependent on the power loom sector and the

independent process houses, for their input requirements, which do not always meet the

international quality standards. “The RMG sector has to gain control of its production

processes, to have control over quality, and delivery schedules, areas where it is sadly

lacking in the international market. Indian Textile Industry is highly Fragmented Industry.

Industry is highly dependent on Cotton.

Lower Productivity in various segments.

There is Declining in Mill Segment.

Lack of Technological Development that affect the productivity and other activities in

whole value chain.

Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and

transportation Time.

Unfavorable labour Laws.

Lack of Trade Membership, which restrict to tap other potential market.

Lacking to generate Economies of Scale.

Higher Indirect Taxes, Power and Interest Rates.

3.6 Driving Forces

3.7 Strategic Group Mapping

Strategic Groups:

In some industries, groups of competitors are constrained by similar resource positions and

follow similar strategies. The groups or clusters of similar competitors are called strategic

groups. The alliance dynamics among the 35 largest firms in the worldwide textile industry

indicates that the likelihood of an alliance between any two firms depends on the local density of

alliances among the members of their strategic groups, rather than on the global density of

alliances in the industry. These results suggest that firms most closely observe and imitate the

strategic behavior of firms who occupy the same strategic niche rather than the behavior of firms

in their industry defined more broadly. Over time, the resource positions and strategies are

converging, and the sharp differences between strategic groups are eroding.

Strategic Group Mapping

A strategic group is a concept used in strategic management that groups companies within an

industry that have similar business models or similar combinations of strategies. For example,

the restaurant industry can be divided into several strategic groups including fast-food and fine-

dining based on variables such as preparation time, pricing, and presentation. The number of

groups within an industry and their composition depends on the dimensions used to define the

groups. Strategic management professors and consultants often make use of a two dimensional

grid to position firms along an industry's two most important dimensions in order to distinguish

direct rivals (those with similar strategies or business models) from indirect rivals. Strategy is the

direction and scope of an organization over the long term which achieves advantages for the

organization while business model refers to how the firm will generate revenues or make money.

Strategic Group Analysis

Strategic Group Analysis (SGA) aims to identify organizations with similar strategic

characteristics, following similar strategies or competing on similar bases.

Such groups can usually be identified using two or perhaps three sets of characteristics as the

bases of competition.

Examples of Characteristics

Extent of product (or service) diversity

Extent of Geographic coverage

Number of Market segments served

Distribution Channels used

Extent of Branding

Marketing Effort

Product (or service) quality

Pricing policy

Use of Strategic Group Analysis

This analysis is useful in several ways:

Helps identify who the most direct competitors are and on what basis they compete.

Raises the question of how likely or possible it is for another organization to move from

one strategic group to another.

Strategic Group mapping might also be used to identify opportunities.

Can also help identify strategic problems.

There are five steps to make strategy group:

1. Identify two important competitive characteristics that strategically differentiate firms

in an industry from one another:

So here there are two factors identify are reported net profit and net assets of the company they

are taken on X axis and Y axis

2. Plot the firm in two variable

In the chart sawn different companies are plotted in X axis and Y axis in respect to their

performance.

3. Draw circles around the firms that are cluster together.

In this step actually find out the close firms which are nearby similar factor that we have taken in

X, Y axes.

4. Indicate potential movement of firms with arrows.

At the last have to saw the potential movement means the strategy for future movement.

(Year 2012) Reported net profit Net current assetsArvind Mills

151.761644.79

Arrow Textile Ltd50.76 469.07

Bombay Dyeing57.71 1,952.80

Grasim Limited1,056.88 1587.26

FabIndia Limited 21.02 146.54

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.50

200

400

600

800

1000

1200

Arvind Mills

Arrow Limited

Bombay Dyeing

Grasim Limited

FabIndia Lim-ited

NET PROFIT ( in crores)

CURRENTASSET

STRATEGIC GROUP MAP-PING

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.50

200

400

600

800

1000

1200

Arvind Mills

Arrow Lim-ited

Bombay Dyeing

Grasim Limited

FabIndia Limited

3.8 Key Success Factors

It is among the world's largest producers of fabrics and it produces a wide range of apparel

articles and is considered a particularly competitive source for home textiles (bed linens,

towels, etc).

It has impressive design expertise.

One of the largest producers of cotton yarn, jute, silk and manmade fabrics. Presence of

entire chain of manufacturing e.g. in cotton, from growing, ginning, spinning, weaving,

processing to clothing garments/made-ups and also presence of vibrant Textiles machinery

sector and support Institutions as NIFT.

Indian Textile Industry is an Independent & Self-Reliant industry.

Abundant Raw Material availability that helps industry to control costs and reduces the

lead-time across the operation.

Availability of Low Cost and Skilled Manpower provides competitive advantage to

industry.

Availability of large varieties of cotton fiber and has a fast growing synthetic fiber

industry.

India has great advantage in Spinning Sector and has a presence in all process of

operation and value chain. India is one of the largest exporters of Yarn in international

market and contributes around 25% share of the global trade in Cotton Yarn.

The Apparel Industry is one of largest foreign revenue contributor and holds 12% of the

country’s total export.

Industry has large and diversified segments that provide wide variety of products.

Growing Economy and Potential Domestic and International Market.

Industry has Manufacturing Flexibility that helps to increase the productivity.

4. FINANCIAL ANALYSIS

Financial analysis is an assessment of the (1) effectiveness with which funds (investment and

debt) are employed in a firm, (2) efficiency and profitability of its operations, and (3) value and

safety of debtors' claims against the firm's assets. It employs techniques such as 'funds flow

analysis' and financial ratios to understand the problems and opportunities inherent in an

investment or financing decision.

Tools of Financial Analysis

Ratio Analysis

Trend Analysis

4.1 RATIO ANALYSIS:-

Ratio analysis involves establishing a relevant financial relationship between components of

financial statement. Two companies may have earned the same amount of profit in a year, but

unless the profit is related to sales or total assets, it is not possible to conclude which of them is

more profitable. Ratio analysis helps in identifying significant relationship between financial

statement items for further investigation. If used with understanding of industry factor and

general economic conditions, it can be powerful tool for recognizing a company’s strengths as

well as its potential trouble spots.

Industrial Aggregate Ratio Analysis:-

The list of Indian Textile Companies for aggregate ratio analysis is as below;

Arvind Mills Ltd.

Fabindia overseas Pvt. Ltd.

Arrow textiles Ltd.

Grasim industries Ltd.

Bombay Dyeing textile Ltd.

4.2 Profitability Ratio:-

4.2.1 Net profit Margin ratio:-

Table No: 4.2 In (%)

Arvind mills

Fabindia overseas Pvt. Ltd.

Arrow Textiles Ltd.

Grasim Industries Ltd.

Bombay bying

Industry

2007-08 1.29 5.26 5.46 36.79 1.75 10.112008-09 -1.96 6.92 -19.56 23.94 14.91 4.852009-10 2.25 8.76 1.86 25.57 1.13 7.912010-11 5.02 15.09 -6.70 25.45 1.15 8.002011-12 12.36 22.29 3.01 23.69 2.66 12.80

Graph No: 4.2.1

2007-08 2008-09 2009-10 2010-11 2011-120

2

4

6

8

10

12

14

Year

Net

Pro

fit

Rat

io

2007-08 2008-09 2009-10 2010-11 2011-120

2

4

6

8

10

12

14

Net Prifit Ratio (%)

Industry

Interpretation:-

This ratio indicates how well industry is performing. It is the basic criteria for measuring the

performance of the industry. It measures how many percentage of net profit generated by sales.

Net profit is also known as the net margin. It measures the relationship between net profit and

sales of the firm. An industry with high net profit would be in advantageous position to survive

in the face of falling selling prices, rising operating and administrative cost or declining demand.

The net profit margin ratio shows fluctuation in 2007-08 it 10.11%, but, it’s falling to 4.80% in

2008-09. It can recover and increase in 20011-12 to 12%.

The ratio shows Arvind mills and Arrow textiles has negative profit in year 2008-09. So, its

effect on industry net profit margin.

The other three companies have no negative income and hence it represents good profit margin

ratio.

Net profit margin for all companies is fluctuating trend, so net profit margin ratio of industry also

fluctuating but it on somewhat declining trend.

4.2.2 Return on net worth ratio:-

Table No: 4.2.2

In (%)

Arvind mills

Fabindia overseas Pvt. Ltd.

Arrow Textiles Ltd.

Grasim Industries Ltd.

Bombay bying

Industry

2007-08 2.44 13.70 2.90 27.92 -4.41 21.272008-09 -6.06 24.21 -3.86 18.71 -67.50 6.902009-10 3.45 29.73 0.85 21.16 9.71 12.982010-11 7.80 24.77 12.60 15.47 7.64 13.652011-12 9.41 18.14 4.68 12.27 15.54 12.01

Graph No: 4.2.2

2007-08 2008-09 2009-10 2010-11 2011-120

5

10

15

20

25

Year

Ret

urn

on N

et

Wor

th(%

)

2007-08 2008-09 2009-10 2010-11 2011-120

5

10

15

20

25

Return on Net Worth(%)

Return on net worth

Interpretation:-

Rate of return measures profitability from a given level of capital investment. It is excellent

indicator of overall performance of an industry. It shows how efficiently the company has

utilized its assets.

The ratio shows fluctuation trend in every year. It is 21.27% in 2007-08. It is drastically decline

in year 2008-09 to 6.90% because of increase in operating cost and decline of profit. It is also

increase in 2009-10 to 12.98% so; it can show the efficient use of net worth.

The ratio shows that Arrow textiles Ltd. and Bombay dying has negative return on net worth in

year 2008-09 because of high administrative and other cost.

Grasim industries has highest return on net worth ratio for every year in 2007-08 it is 27.92%

and in 2009-10 it is 21.16%. So, it indicates increasing trend for industry.

4.3 Leverage ratios:-

4.3.1 Debt/equity ratio:-

Table No: 4.3.1

Arvind mills

Fabindia overseas Pvt. Ltd.

Arrow Textiles Ltd.

Grasim Industries Ltd.

Bombay bying

Industry

2007-08 1.37 0.36 0.60 0.43 3.07 1.172008-09 1.49 0.45 0.87 0.37 5.42 1.722009-10 1.54 0.66 1.12 0.27 9.19 2.562010-11 1.30 0.31 1.12 0.12 5.39 1.652011-12 1.11 0.13 1.18 0.09 3.33 1.17

Graph No: 4.3.1

2007-08 2008-09 2009-10 2010-11 2011-120

0.5

1

1.5

2

2.5

3

Year

Deb

t -

Equ

ity

Rat

io

Interpretation:-

Debt-Equity ratio indicates the relationship between total long-term debt and net worth.

Debt/equity ratio indicate the how much of debt should able to cover by equity. How much of

debt in comparing to equity capital.

The ratio shows it is increasing continuous from 2007-08 to 2009-10. So, it is considerable and

can be said it is not under control and it is not good for industry to increasing in debt.

But, it is declining in year 20010-11 to 1.65. So, it can say industry has to reduce its debt and it is

favorable for industry.

The ratio indicates fluctuating trend in debt/equity ratio. Bombay dying has highest debt/equity

ratio for every year. Fabindia and Grasim Industries Ltd. has lowest ratio so, it is good for

companies to safeguard on debt.

Overall industry debt equity ratio is fluctuating. It is drastically increase in year 2009-10 because

of companies raise more debt for expansion of company’s growth.

4.3.2 Fixed assets turnover ratio:-

Table No: 4.3.2

Arvind mills

Fabindia overseas Pvt. Ltd.

Arrow Textiles Ltd.

Grasim Industries Ltd.

Bombay bying

Industry

2007-08 0.80 3.38 1.04 1.62 1.15 1.602008-09 0.79 4.01 0.92 1.30 1.34 1.672009-10 0.78 4.10 0.79 1.25 1.57 1.702010-11 0.93 4.36 0.87 1.65 2.46 2.052011-12 1.15 4.33 1.06 1.76 15.05 4.67

Graph No: 4.3.2

2007-08 2008-09 2009-10 2010-11 2011-120

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Year

Fix

ed A

sset

Tur

nove

r R

atio

Interpretation:-

The Fixed asset turnover ratio indicates the relationship between turnover and utilization of fixed

assets like building, plant and machinery, land etc. Higher the ratio, higher the utilization of

fixed assets. Meanwhile industry is able to utilize more and more fixed assets to generate sales.

The ratio shows increasing trend in fixed assets turnover. In 2011-12 it is highest 4.67 times.

And in 2010-11 it is 2.05 times so; it is good for industry to utilize maximum resources for

generating sales.

The ratio shows relationship between sales and fixed assets. Fabindia Oversease Pvt. Ltd. has

highest ratio for every year so, it is good for utilizing maximum fixed assets for company’s

growth, in year 2011-12 it is 4.33 times.

Arvind mills, Bombay Dying and Grasim industries ltd has turnover of fixed assets around 1.5

times since last five years. fabindia ltd is indicates increasing trend so it is shows effective

utilization of fixed assets.

4.4 Liquidity ratios:-

4.4.1 Current ratio:-

Table No: 4.4.1

Arvind mills

Fabindia overseas Pvt. Ltd.

Arrow Textiles Ltd.

Grasim Industries Ltd.

Bombay bying

Industry

2007-08 1.50 1.45 1.41 0.91 0.82 1.222008-09 1.29 1.35 1.46 0.86 0.94 1.182009-10 1.18 1.14 1.54 0.86 1.20 1.182010-11 1.10 1.42 1.34 0.93 1.35 1.232011-12 0.95 1.81 1.00 1.10 1.61 1.29

Graph No: 4.4.1

2007-08 2008-09 2009-10 2010-11 2011-121.12

1.14

1.16

1.18

1.2

1.22

1.24

1.26

1.28

1.3

Year

C

urre

nt R

atio

Interpretation:-

It is generally believed that 2:1 shows a comfortable working capital condition that is current

assets should be twice to the current liabilities. Current ratio means ability of the firm to meet its

obligation. Here the above ratios are said to be ideal level ratio.

The ratio shows minor fluctuating trend. It is considerable for industry to it can maintain current assets more than current liabilities.

So, it can say that all the companies have sufficient current assets to meet current liabilities.

Current ratio indicates the relationship between current assets and current liabilities. The ratio of industry is in fluctuating because of companies ratios are also in fluctuating.

The current ratio of Fabindia and Arrow textiles Ltd. are better than comparing to other

companies, in each year. An Arrow textile has lower ratio in the year 2012 comparing with

industry ratio so, its shows negative effect on industry current ratio.

Arvind mills ltds, Grasim industries and Bombay dying shows fluctuating so, it is good for

industry to major companies’ ratios is not declining so that shows effective utilization of current

assets.

4.4.2 Inventory turnover ratio:-

Table No: 4.4.2

Arvind mills

Fabindia overseas Pvt. Ltd.

Arrow Textiles Ltd.

Grasim Industries Ltd.

Bombay bying

Industry

2007-08 3.76 5.67 4.38 12.90 6.25 6.592008-09 4.07 5.86 4.18 10.30 5.17 5.922009-10 4.58 4.90 4.32 9.86 6.40 6.012010-11 4.75 4.79 4.29 11.95 3.34 5.822011-12 4.92 4.58 4.36 10.17 1.82 5.17

Graph No: 4.4.2

2007-08 2008-09 2009-10 2010-11 2011-120

1

2

3

4

5

6

7

Year

Inve

ntor

y T

urno

ver

Rat

io

Interpretation:-

Inventory turn over ratio indicates the relationship between total sales and invetory. The ideal ratio is more than 1. It can indicates how much time invetories are turn over based on sales. Above ratio are ideally for industry.

In year 2007-08 it is 6.59 times so it is good for industry. And the ratio is maintain continuos to year 2009-10 to 6.01 times. So, the trend for inventory turn over is fluctuating.

The ratio can shows that industry will going on growth rate trend.

The inventory turnover ratio indicates relationship between sales and inventory. The ratio of

industry is somewhat constant trend.

Grasim Industries ltd has highest inventory turnover ratio than comparing to other companies, in

year 2011-12 it is 10.17 times which is higher than industry ratio.

Arvind mills, Fabindia, and Bombay dyeing has fluctuating trend since last five years.

Alok ltd has shows worst ratio and it also in declining trend in year 2009-10 it is 3.05 times so its

shows negative effect on industry’s ratio.

4.5 Payout ratios:-

4.5.1 Dividend payout ratio (net profit):-

Table No: 4.5.1

Arvind mills

Fabindia overseas Pvt. Ltd.

Arrow Textiles Ltd.

Grasim Industries Ltd.

Bombay bying

Industry

2007-08 1.21 19.60 0.00 1.17 2.85 4.972008-09 0.00 19.47 0.00 1.90 2.98 4.872009-10 0.00 16.47 0.00 1.07 2.26 3.962010-11 0.00 17.78 0.00 0.80 4.78 4.672011-12 0.00 15.98 0.00 0.86 4.31 4.23

Graph No: 4.5.1

2007-08 2008-09 2009-10 2010-11 2011-120

1

2

3

4

5

6

Year

Div

iden

t P

ayou

t

Rat

io

Interpretation:-

Dividend payout ratio indicates the how much percentage of profit should pays for dividend from profit. It is relationship between dividend paid and earnings of company.

In year 2007-08 4.97% of profit is declared for dividend. This is very sufficient level for share

holder to getting more dividends. In year 2008-09 it is 4.87% dividend payout ratio and in year

2009-10 it is paid 3.96%. so, it shows that the companies are reducing to paid more dividend to

share holders and industry can invest earnings for further expansion of industry growth.

Dividend payout ratio indicates the relationship between dividend per share and earning per

share. The ratio for industry is shows on declining trend.

Fabindia Oversease Pvt. Ltd shows highest dividend payout ratio comparing with other

companies. Arvind mills can shows ratio in drastically declining after the year of 2005-06

because of declining in profit margin.

Bombay dying, and Grasim Industries show the fluctuating in dividend payout ratio. It is notable

that Arrow textiles was not declaring dividend from 2007-08 to 2011-12.

4.6.TREND ANALYSIS:-

4.6.1 AGGREGATE INDUSTRY SALES TREND:-

Table No: 4.6.1

Year Sales (Rs in million)

2007-08 12350.4

2008-09 11682.09

2009-10 10850.05

2010-11 12446.1

2011-12 14219.24

Graph No: 4.6.1

2007-08 2008-09 2009-10 2010-11 2011-120

2000

4000

6000

8000

10000

12000

14000

16000

Sales

Sales (Rs in million)

Explanation:-

The above graph shows fluctuating trend for sales. It is declining from 2007-08 to 2009-10 but

after that it is increasing trend, so it is good for Indian textile industry to increase in sales of

companies.

The sales of textile industry are shows growing trend.

4.6.2 AGGREGATE INDUSTRY EARNING PER SHARE TREND:-

Table No: 4.6.2

Year EPS (Rs.)

2007-08 11.28

2008-09 12.86

2009-10 10.97

2010-11 10.37

2011-12 13.41

Graph No: 4.6.2

2007-08 2008-09 2009-10 2010-11 2011-120

2

4

6

8

10

12

14

16

EPS (Rs.)

EPS (Rs.)

Explanation:-

Above graph of Earning per share shows textile industry is going on growth trend. In year 2007-

08 it is 11.28 and after year 2008-09 it is declining up to year 2009-10 and it is drastically

increase in year 2011-12 to Rs. 13.41. so it is good for covering earnings per share.

4.6.3 AGGREGATE INDUSTRY EQUITY TREND:-

Table No: 4.6.3

Year Equity ( Rs. In crore)

2007-08 109.04

2008-09 116.76

2009-10 121.45

2010-11 123.08

2011-12 141.75

Graph No: 4.6.3

2007-08 2008-09 2009-10 2010-11 2011-120

20

40

60

80

100

120

140

160

Equity ( Rs. In crore)

Equity ( Rs. In crore)

Explanation:-

Above graph shows the trend of equity is on growing trend. It is indicates constant growth of

equities are available in market of textile industry. In year 2007-08 it is 103.04 crore and in year

2011-12 it is 141.75 crore. So it is says that equity of textile industry is more fluctuated on

market.