Indian Cotton & Textile Industry (Pratik Dokania)

Introduction

India’s textiles sector is one of the mainstays of the national economy and contributes nearly 14% to India’s industrial output.

It is also one of the largest contributing sectors of India’s exports contributing about 11% to the country’s total exports basket.

India earns about 27% of its foreign exchange through textile exports India is the world’s second largest producer of textiles and garments after

China and accounts for about 14% of the world's production of textile fibres and yarns.

India is the largest producer of jute, second largest producer of silk and cotton; and third largest in cellulosic fibre.

India has the highest loom capacity (including hand looms) with 63 per cent of the world's market share.

India’s domestic textile and apparel industry stands at $67bn and exports at $41.4bn in the year 2014-15, up from $39.3bn in the last year, a marginal rise of 5.4% compared to last year, whereas export of cotton textiles and raw cotton touched $11.3bn in 2014-15 as against $13.3bn in 2013-14, a fall of 14.7%.

The textiles industry is labour intensive and is one of the largest employers. Currently provides direct employment to more than 35 million people and another 55 million in allied activities. It is the second largest employer after agriculture

The textile and apparel industry can be broadly divided into two segments, namely

Yarn & fibre, which includes handloom, handicrafts, sericulture, power looms in the unorganised sector and

Processed fabrics & apparel in the organised sector.

Evolution of Cotton textile Industry (Rahul)

The modern textile industry took birth in India in the early nineteenth century when the first textile mill in the country was established at fort Gloster near Calcutta in 1818.

The cotton textile industry, however, made its real beginning in Bombay, in 1850s. The first cotton textile mill of Bombay was established in 1854 by a Parsi cotton merchant then engaged in overseas and internal trade.

Indeed, the vast majority of the early mills were the handiwork of Parsi merchants engaged in yarn and cloth trade at home and Chinese and African markets.

The first cotton mill in Ahmedabad, which was eventually to emerge as a rival centre to Bombay, was established in 1861. The spread of the textile industry to Ahmedabad was largely due to the Gujarati trading class. The cotton textile industry made rapid progress in the second half of the nineteenth century and by the end of the century there were 178 cotton textile mills; but during the year 1900 the cotton textile industry was in bad state due to the great famine and a number of mills of Bombay and Ahmedabad were to be closed down for long periods.

The two world War and the Swadeshi movement provided great stimulus to the Indian cotton textile industry. However, during the period 1922 to 1937 the industry was in doldrums and during this period a number of the Bombay mills changed hands.

The Second World War, during which textile import from Japan completely stopped, however, brought about an unprecedented growth of this industry. The number of mills increased from 178 with 4.05 lakh looms in 1901 to 249 mills with 13.35 lakh looms in 1921 and further to 396 mills with over 20 lakh looms in 1941.

By 1945 there were 417 mills employing 5.10 lakh workers. The cotton textile industry is rightly described as a Swadeshi industry because it was developed with indigenous entrepreneurship and capital and in the pre-independence era the Swadeshi movement stimulated demand for Indian textile in the country.

The partition of the country at the time of independence affected the cotton textile industry also. The Indian union got 409 out of the 423 textiles mills of the undivided India.

14 mills and 22 per cent of the land under cotton cultivation went to Pakistan.

Some mills were closed down for some time. For a number of years since independence, Indian mills had to import cotton from Pakistan and other countries. After independence, the cotton textile industry made rapid strides under the Plans.

Between 1951 and 1982 the total number of spindles doubled from 11 million to 22million.

It increased further to well over 26 million by 1989-90

Major Trends (Rashi)

Ministry of Textiles is encouraging investments through increasing focus on schemes such as Technology Up-gradation Fund Scheme (TUFS) and cluster development activities

TUFS for the textile sector to continue in the 12th Five Year plan with an investment target of USD24.8 billion

With the expiry of MFA in January 2005, cotton prices in India are now fully integrated with international rates

The Ministry of Textiles commenced an initiative to establish institutes under the Public Private Partnership (PPP) model to encourage private sector participation in the development of the industry Technical textiles, which has been growing at around twice the rate of textiles for clothing applications over the past few years, is now expected to post a CAGR of 20% over FY11-17

Fabric production rose from FY 2007 to 2014 with CAGR of 2.7% Major segment cotton: 74%

Yarn grew from 3.8 million tonnes to 5.3 tonnes in FY 2014 thereby reporting a CAGR of 4.9%

Man-made fibre CAGR of 1.7% FY07 to FY 2014 Strengths include

o Favourable trade policieso Rising per capita incomeo Shift towards branded productso Increase in domestic demando Vast textile production capacityo Large pool of skilled and cheap work forceo Entrepreneurial skillso Efficient multi-fibre raw material manufacturing capacity

Weakness includeo Increased global competition in the post 2005o trade regime under WTOo Imports of cheap textiles from other Asian neighbourso Use of outdated manufacturing technologyo Poor supply chain managemento Huge unorganized and decentralized sector

India’s Exports (Rengarajan)

India has overtaken Germany and Italy to emerge as the world's second largest textile exporter. But it lags China, whose exports are nearly seven times higher.

Data released by the Apparel Export Promotion Council, the industry body for garment exporters, showed that India's textiles exports were estimated at $40 billion in 2013, compared with China's $274 billion.

Textiles includes everything from fibre and yarn to fabric, made-ups and readymade garments made of cotton, silk, wool and synthetic yarn.

Over 55% of the global trade relates to readymade garments, where India ranked sixth in 2013 with exports of $16 billion, which is around 40% of the country's textiles exports.

India beat Turkey to move up a notch. For China the share of garments is estimated at close to 60%, indicating that the government needs to provide a bigger fillip to the readymade industry.

Apart from China, Italy and Germany, smaller countries such as Bangladesh and Vietnam have overtaken India in recent years as major suppliers to retail chains in Europe and the US on the back of cheap labour and lower-duty access

The industry had expected part of the business from Bangladesh to shift to India after accidents in factories raised safety concerns. But it managed to log 18% growth in the garments segment in 2013, compared to global growth of 6%.

Over the past few months the Indian garment industry has staged a recovery of sorts which can be seen in the 23% rise in exports of shirts, trousers, skirts and other readymade garments during 2013. Exporters said a change in focus to markets beyond the US and the EU has helped. As of 2011 India accounted for 5.11% of global textile exports

Exports in billion dollars

Country 2012 2013 growthChina 246 274 11India 33 40 21Italy 34 36 6Germany 35 35 0bangladesh 24 28 17World 738 773 5

Biggest importers from India (cotton) 2014 –

China 3.22 billion Pakistan 381 million Sri Lanka 200 million Turkey 190 million Egypt 160 million

Road Ahead (Pratik Chakraborty)

China’s devaluation of Yuan has made Indian exports to China more uncompetitive and is likely to further widen the bilateral trade gap. 

The Apparel, Made-ups and Home Furnishing Sector Skill Council (AMHSSC) will train 20 lakh people by 2022 under the skill development programme

Road Ahead

The future for the Indian textile industry looks promising, buoyed by both strong domestic consumption as well as export demand.

With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with the entry of several international players like Marks & Spencer, Guess and Next into the Indian market.

The organised apparel segment is expected to grow at a compound annual growth rate (CAGR) of more than 13 per cent over a 10-year period.

The Indian textile industry has the potential to grow five-fold over the next ten years to touch US$ 500 billion mark on the back of growing demand for polyester fabric, according to a study by Wazir Advisors and PCI Xylenes and Polyester.

Government Initiatives

The Indian government has come up with a number of export promotion policies for the textiles sector. It has also allowed 100 per cent FDI in the Indian textiles sector under the automatic route.

Duty free entitlement to garment exporters for import of trimmings, embellishments and other specified items increased from 3 per cent to 5 per cent. This initiative is expected to generate an additional RMG exports estimated at Rs 10,000 crore (US$ 1.61 billion).

The government has also proposed to extend 24/7 customs clearance facility at 13 airports and 14 sea ports resulting in faster clearance of import and export cargo.

The proposal for imposing duty on branded items was dropped providing relief to the entire value chain.

The Ministry of Textiles has approved a 'Scheme for promoting usage of geotechnical textiles in North East Region (NER)' in order to capitalise on the benefits of geotechnical textiles. The scheme has been approved with a financial outlay of Rs 427 crore (US$ 69.12 million) for five years from 2014-15.

The Ministry of Textiles, Government of India plans to enter into an agreement with Flipkart to provide an online platform to handloom weavers to sell their products.

The foundation stone of the Trade Facilitation Centre and Craft Museum was laid by Mr Narendra Modi, Prime Minister of India at Varanasi.

Detailed arrangement for purchase of cotton from the farmers by the Cotton Corporation of India Ltd (CCI) under the Minimum Support Price Operation was monitored. 343 purchase centres were finalised in consultation with the State Governments after meetings with officers of CCI and the cotton producing states, resulting in streamlining of operations.

Value Chain

After this the the textile goes to the Designer Distributor/Wholesaler Retailer