growth prospects of indian textile industry 1223881557761512 8
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8/3/2019 Growth Prospects of Indian Textile Industry 1223881557761512 8
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Growth Prospects of Indian
Textile Industry ± HomeTextile focus
J. N. SinghTextile Commissioner
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Indian Textile Sector - Overview
Key contributor to GDP
4 percent of GDP
14 percent of National Industrial
productionSignificant forex earner
15 percent of exports
Employment generator
Provides direct employment to 35million people
2004-05
Textile Mills
Spinning Mills Nos. 2,012
Composite Mills Nos. 1,566
Exclusive weaving mills Nos. 202
Capacity Installed
Spindles Million Nos. 37.47
Looms Lakh Nos.1.03
Powerloom Lakh Nos. 19.03
Handloom Lakh Nos.38.91
Textile exports $ billion 17.8
Textile imports $ billion 2.2
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What is the Indian Market Size (Bn US $)
2005-06
Export Domestic Total % to Total
Apparel 8.64 19.22 27.86 59.28
Textile 9.24 9.99 19.14 40.72
Total 17.88 29.12 47 100
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Home Textile Market Globally
Global Home Textile Market is estimated at
US $12b in 2005, and is expected to grow at
16% C AGR and reach US $22-25b By 2010. India ranks 2nd in the global market with a
share of approx. 9-10% of market share.
India's home textile exports expected to growfrom $1.2 billion now to $5 billion by 2010
Great opportunity to be the market leader.
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Our Vision 2010
± Market size of US$95 Bn
Export Target- US $ 50 Billion
(National Textile Policy, 2000) Domestic market - US$ 45 Billion
(CRISIL Study, 2004)
± India¶s market share in Wor ld textiles trade to grow from
3% to 6%.
± Growth Projections of 20% in exports, 16% domestic
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R easons for Optimism: Growth
in fabric production
4
-0.15
1
7
9
12
-2
0
2
4
6
8
10
12
14
2001-02 2002-03 2003-04 2004-05 2005-06 2009-10
(Expected)
P e r c e n t a g e
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R easons for Optimism: Growth in
Investments in Textile sector Investments under TUFS have grown
significantly recently.
Project cost sanctioned under TUFS
1320 14383289
7349
15032
30000
0
5000
10000
15000
20000
25000
30000
35000
20 01-02 2002-03 20 03 -04 2004-05 2005-06 20 06 -07
(Es timated)
( R
s .
c r o
r e
)
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R easons for Optimism :Growth in
exports
-10
15
9
4
2224
-15
-10
-50
5
10
15
20
25
30
2001-02 2002-03 2003-04 2004-05 2005-06
(Provisional)
2006-07
(Initial figures)
P e r c e n t a g e
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Winners and Losers in EU Market
2005 over 2004
SRILANKA
THAILAND
VIETNAM
INDONESHIA
TUNISIA
MOROCCO
RUMAINA
PAKISTAN
B'DESH
INTRA EU
INDIA
TURKEY
CHINA
-20 -10 0 10 20 30 40 50
Gainers: China, India, Turkey
Losers: Thailand, Pakistan, Indonesia
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Romania
South Korea
Turkey
China
USA
Pakistan
T
aiwan
India
Indonesia
Bangladesh
0 5 10 15 20 25 30 35 40
EU MARKET VARIATION JAN ± JUN
2006/05
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Hong Kong
Mexico
Canada
Vietnam
Pakistan
Indonesia
Bangladesh
Cambodia
India
China
-20 -10 0 10 20 30 40 50
US IMPORTS OF TEXTILE AND
APPAREL PERCENT VARIATION
2005/04
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Mexico
Canada
Hong Kong
China
India
Pakistan
Banglade
sh
Vietnam
Cambodia
Indonesia
-15 -10 -5 0 5 10 15 20 25 30
US IMPORTS OF TEXTILE AND
APPAREL PERCENTAGE VARIATION
JAN ± SEPT.2006/05
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DRIVERS OF DOMESTIC GROWTH :
Demand Side Factors: Increasing Income Levels
Distribution of households by income category
Classification Income class 2001-02 2005-06* 2009-10* CAGR
Deprived <90 135,378 132,250 114,394 -3.6
Aspirer s 90-200 41,262 53,276 75,304 9.0
Seekers 200-500 9,034 13,813 22,268 12.7
Strivers 500-1000 1,712 3,212 6,173 17.7
Near rich 1000-2000 546 1,122 2,373 20.6
Clear rich 2000-5000 201 454 1,037 22.9
Sheer rich 5000-10000 40 103 255 25.4
Super rich >10000 20 53 141 27.7
Total 188,193 204,283 221,945 2.1* - Projections
Note : Income is in Rs.¶000 per annum at 2001-02 prices and the households are in µ000sSource : NC AER
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Favorable Demographics for
Home Tex ± The population of India is expected to increase from 1029 million to 1400 millionduring the period 2001-2026.
± The population profile of India is shifting towards a larger composition of peoplein the age group 15-59 .India most favourably placed globally. Out of the total population increase of 371 million between 2001 and 2026, the share of the age-group 15-59 year s in this total increase is 83 percent.
± The low median age of population means a higher current consumptionspending vs savings
± The growth in population is taking place in the urban area. Out of the total population increase of 371 million during 2001-2026 in the country, the share of increase in urban population is expected to be 249 million.
± Favourable Demographics- increasing young population and that too in theurban area- coupled with rising income levels will act as a key growth factor for the Indian textile and Fashion Industry
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Increasing Working Female
Population
10
15
20
25
30
1961 1971 1981 1991 2001 2005 (E) P r o p o r t i o n o f w o
r k i n g f e m a l e t o t o t a l f e m
a l e p o p u l a t i o
( p e r c e n t )
Source : CENSUS
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Increased usage of credit cards and availability
of cheap finance
The use of credit cards (plastic money) has increased
significantly in the last 3-4 years. The number of credit
cards issued has grown at 26 per cent per annum in the past
5 years while debit cards have grown by a whopping 113 per
cent. Increase in the number of installations of electronic
data converter machines will provide fillip to impulse apparel
purchases.
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Demand Driver- Domestic
Housing Boom Asian Development Bank expects that by 2008, the
housing deficit will be 22 mn units and by 2030 Indiawill be requiring upto 10 mn housing units every year.
A very huge requirement for home tex. The Real estate sector has given phenomenal
returns in the last 2-3 years as per the global trend. A property owner is now more inclined to buy/renovatehis home furnishings etc.
The domestic housing boom is further enhanced bythe reducing age of Indian borrower- from 43 years in1995-99 to 33 years in 2005-9.
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Drivers of Domestic
Growth:Supply side factor :R etailing R evolution - Growth so far
196.7 208.1 222.0
3.9
6.2
7.8
2.0
3.0
3.5
180.0
190.0
200.0
210.0
220.0
230.0
240.0
2003E 2004E 2005P
U S D B
i l l i o n
1.5
2.0
2.5
3.0
3.5
4.0
P e r c e n t
Total retail industry Organised Penetration
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Five year outlook
222.0 304.2
7.8
24.3
3.5
8.0
100.0
200.0
300.0
400.0
2005 P 2010 P
U S D B
i l l i o n
1.5
2.5
3.5
4.5
5.5
6.5
7.5
8.5
P e r c e n t
Total retail industtry Organised Penetration
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Growth of Mall Space
From 2 mn sq ft in 2001 , we had 28 mn sq ftof mall space in 2005 ± and by end 2008, the
eight Indian large cities will have a supply of 66 mn sq ft and the next seven large citiesabout 13 mn sq. ft.
The entry of R eliance, Aditya Birla group,
expansion of Futures and now of Bharati-Walmart is expected to further sizzle Indianmarket.
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Drivers of Export Growth
Dismantling of the MF A regime and the full play tothe Indian entrepreneurship.
Progressive dismantling of the textile and massapparel industry from the Western world. India is amajor player to fill this gap. The current quantitativerestriction on China is helping India.
Buying of several Western brands by Indian industry,thus facilitating entry in EU and US.
Increasing modernization of Indian textile and apparelmanufacturing sector in response to the increasedglobal demand and facilitated by the TUFS scheme.
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Global Housing Boom
According to estimates by The Economist , the totalvalue of residential property in developed economiesrose by more than $30 trillion over the past five years,to over $70 trillion, an increase equivalent to 100% of
those countries' combined GDPs . The global boom in house prices has been driven by two
common factors: historically low interest rates haveencouraged home buyers to borrow more money; andhouseholds have lost faith in equities after stockmarkets
plunged, making property look attractive . Naturally as people buy more property or as their
property becomes costlier , the propensity tospend on home-textile increases significantly.
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Real Clothing Prices
Index, 1994=100
70
80
90
100
110
120
1995 1996 1997 1998 1999 2000 2001 2002 2003
United States
South Korea
Germany
Thailand
Japan
China
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Strategy of various
Stakeholders
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Strategy for the GOVERNME NT
1.Further investments must continue to beencouraged- TUFS should be continued (maybe with some modification)
TUFS help to processing sector ± Vital for
home tex Year TUFS all segments (in
crores)
Processing (in
crores)
P.c %
2002-3 1438 210 14.63
2003-4 3289 260 7.91
2004-5 7349 986 13.42
2005-6 15032 1157 7.7
2006-7 (april-sept) 9335 2081 22.30
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3. HR D
Governments in PPP mode with theindustries must invest heavily in training
in the textile sector because a hugeshortfall of over 40 lakh workers isexpected in the next 5 years.
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4.High Transaction Costs Issues:
± According to EXIM Bank Study (2002), transaction cost is
very high in Textile & Gar ments Sector ranging from 3-10%
± Owner ship of exports ± less support from State
Governments
± Non-refundable incidence of State Taxes ± VAT, Entry Tax,
Luxury Tax, Mandi Tax, Electricity Duty, Octroi, etc.
Proposal:
± To consider refund of State / Local levies through
appropriate refund mechanism
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5.High Power Cost
I ssues:
High power cost:
Cross subsidisation
Frequent power interruption
Competitors¶ Edge:
Country Cost(Cent /
KWH)
Country Cost(Cent /
KWH)
India 8.87 Indonesia 3.65
China 6.04 Bangladesh 3.49
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High Power Cost
Proposal:
± Export oriented textile units be exempted from cross
subsidy
± Duty free import of furnace oil to units for captive power
generation
± Uninterrupted power supply for export oriented textile
cluster s
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Industry¶s Strategy
Integration- Moving up/down the full value chain.Leading Home-tex players like Welspun, Alok arenow fully integrated, with strong competencies in
spinning, weaving,and finishing.
Scale- Massive expansion plans of existing as alsonew players to take advantage of this unprecedentedopportunity. Smaller companies, some of whom arein unrelated businesses, are also foraying into hometextiles - Gangotri Textiles, KG Denim, S KumarsNationwide, Bannari Amman Spinning, to name afew.
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Brand presence- there has to be greater shift towards branded products.Realization
that real value addition comes only after branded sale.
Domestic- S paces brand of Welspun
Carmichael House of S.Kumars
International- Purchase of Christy by acquiringCHT Holding by Welspun.
Dan R ivers and R oseby¶s by GHCL.
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Designer labels will also have to bebrought in to counter the pull of top
international labels like Tommy Hilfiger,Zegna, Mark and Spencer and likelypresence of Italian Pozzi Industria
Tessile and Ralph Lauren. Alliance withIndian designers important over here.
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Future ?
The home-textile sector in India is in for BOOMING TIMES.
Save for major implementationproblems, India poised to become aleader in this sector.