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Indian Textile Industry:A Growth Perspective
Mr. Sachit JainVardhman Group
Singapore, March, 2010
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Indian Textile Industry: Growth Drivers
o Global Opportunities
o Domestic Policy Frame-Work
o Manufacturing competitiveness
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The consolidation of textile manufacturing in Asia gives impetus to Indian Textile Industry growth
70 % of world fiber processing takes place in Asia.
China, India and Pakistan account for 60% of world fiber consumption.
Though Bangladesh and Vietnam have been emerging as competing textile economies. They depend on the imported textile inputs.
Global retailers are preferring single point service helping integrating suppliers of textile and clothing.
World Textile Fiber Processing
Rest of world30%
Asia70%
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Growing world trade in textile and clothing offers significant opportunities for Indian T&C exports
152158
310
157
198
355
203
277
480
250
362
612
280
440
720
0
200
400
600
800
1000
1200
1400
1600
1995 2000 2005 2008 2012
World Trade in Textiles and Cothing(USD bn)
TotalClothingTextile
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World Trade in Textile and Clothing
With removal of quantitative restrictions especially after 2002, Indias textile and clothing exports grew at a higher rate during 2002-2007 in tandem with growth in world trade in T&C.
Indias T&C exports growth was lower than China, which registered 23% growth in T&C exports during 2002-2007. China exported $171 bn T&C products against $22 bn from India
It indicates missed opportunities as well as scope for future growth
Textile Clothing T&C
1995-2002
World 0.2% 4% 2%
India 4% 5% 4%2002 -2007
World 9% 11% 10%
India 11% 11% 11%
*CAGR
Comparative growth rate in World Trade in T&C(%)*
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Growing importance of cotton in world trade in textile and clothing is visible in USA T&C imports
USA: Textile and Clothing Imports( USD bn)
5552
40
24
13
15
20
3237
38
0
10000
20000
30000
40000
50000
60000
1990 1995 2000 2005 2008
Cotton products
Non cottonproducts
4856 58 59
0
10
20
30
40
50
60
1990 2000 2005 2008
USA T&C imports: Percentage share of cotton products
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The Industry Structurally has a Significant Potential to Grow
Growing International demand ,
Large domestic market
Presence in all parts of value chain
Large numbers of producers
Availability of Raw Materials and Workforce
Well developed textile machinery industry
Context for Firm Strategy
and Rivalry
Factor (Input)
Conditions
Demand Conditions
Related & Supporting industries
Attributes of Indias Textile Industry which provides structural advantage to grow -
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India share in world installed capacity of spindles and shuttle-less looms
39
104
212
0
50
100
150
200
250
India China World
Spindles Installed capacity ( mn nos.)
50
370
970
0
200
400
600
800
1000
India China World
Shuttle-less looms installed capacity(in 000 nos.)
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Breaking from the past legacy
Fragmented Industry Structure
Low Level Of Technology
Sub-scale Of Operations
Because of past policy distortion, the
profitability and investments remained
subdued in the past
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Fiscal Policy Framework : From fragmented duty structure to unified approach
Fabric 1993-94 (Rs./sqm) Exemption 2003 2004/2006
Limit(if any) B.E.D. S.E.D. B.E.D.1 FABRIC(WOVEN )
Cotton Fabric Optional Duty12(optional) 10
a) Does not exceeds Rs.10 0.20
Man Made/ Blended Fabric Optional Duty12(optional)
10
FABRIC (KNITTED)
Cotton Optional Duty12(optional)8
Blended & MMF Optional Duty12(optional) 10
2 FABRIC PROCESSINGB.E.D.
A.1
Hand Processing(Without aid of Power/steam)
0 0
e.) Exceeds Rs.100 20% A.2
Hand Processing (with specified 12 power processes for 100% cotton fabric)
0 5 5
2
A.3
Hand Processing (with specified 12 power processes for Blended and 100% non cotton fabric)
0 8
a.)Does not exceeds Rs.40 per sqm. 0.50+5%
A.4
Hand processing(with specified 7 power processes for man made fabric)
0 8
CProcessed fabric -woven 12 10
D Processed fabric knitted-Cotton Optional 12(optional)
8
EProcessed Fabric Knitted-MMF Optional 12(optional)
10
3
4
4% on a cotton fabric
and 8% on blended and non cotton
fabric for all categories
Cotton/Blended/Manmade fabric processed with out aid of power is exempted from duty
India: Trends in Effective Rate of Excise Duty on Fabric and Fabric Processing
c.) Exceeds Rs.100 per
sqm20%
Grey fabric exempted from duty
Blended and man made fabric, whose value per sqm
b.) Exceeds Rs.40 but does not exceeds Rs.100
2.50+ 20% of the value exceeding Rs.40 per
sqm.
d.) Exceeds Rs.40 but does
not exceeds Rs.100
2.50+ 20% of the value exceeding Rs.40 per
sqm.
c.) Exceeds Rs.25 but does
not exceeds Rs.40 0.50+5%
Particulars 2002
1Cotton fabric whose value per sqm.
b.) Exceeds Rs.10 but does
not exceeds Rs.25 0.50
B.E.D.
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Domestic policy frame work-Recent initiatives
Restoration of level playing fieldOrganised vs. unorganized sectorSmall vs. large unitsUnequal fiscal treatment has been abandoned
Duty rationalization
Technology upgradation fund(TUF)
Reduction in import duty on most of textile machinery
Capital subsidy for fabric processing
Development of SEZ and apparel parks are put on fast track.
Fiscal policy reforms refurbish the investment outlook of the industry
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Textile industry committed efforts to harness the fundamental strengths are visible in growing investments
0
2
4
6
8
10
12
14
16
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
Investment approved under TUF( USD 40 bn)
About equal amount of investment is projectedin next 10 years
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Scope for future growth lies in fundamental strengths of the Indian Textile Industry
Well integrated production base
Wide range of Cotton / Spun yarn
Strong base for Cotton , PSF and PFY
Wide range of Cotton and Synthetic fabric
Growing domestic market for high quality textiles
Growing demand for Technical Textiles / Performance Fibres
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Indias share in cotton production in the world is growing( mn tons)
1719
26
2 24 5
23 21%
16%
12%12%
0
5
10
15
20
25
30
1993/94 2000/01 2005/06 2008/090%
5%
10%
15%
20%
25%World
India
% share of India in
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The principle cause for higher cotton production is growing productivity( kg/ha)
Productivity per hectare( kg/ha)
278
524
610
724761
554
478
286
0100200300400500600700800
1993/94 2000/01 2005/06 2008/09
World
India
100
52
100
46
100
66
100
69
0
20
40
60
80
100
1993/94 2000/01 2005/06 2008/09
India recorded higher growth rate in productivity
World
India
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Increasing cotton productivity : Village adoption program
o The cotton yield in Punjab declined to very low level 300 kg/ha in 1999
leading to drop in cotton cultivation
o Best yield award to cotton growers started in 2001
o Village adoption program for increasing cotton productivity by improving
cultivation practices and quality seed started in 2003
o Cotton productivity grew to 700 kg/ha