CHAPTER III FOREIGN TRADE OF INDIAN COTTON TEXTILE INDUSTRY The chapter covers the following sections. (i) Textiles in the Indian Economy: (a) Indian Cotton Industry - This section deals with cotton production and concentration of cotton crop in a few states, and yield, and comparing the Indian scenario with that of a few other countries. (b) Indian Textile Industry – structure and performance of the entire textile industry value chain. The analysis reveals SWOT analysis of the Indian Textiles Industry. Highlights of the draft National Fibre policy announced by the Ministry of Textiles, Government of India in July 2010 are also covered. (ii) Competitiveness of Indian Textiles and Clothing Industry. This section deals with various factors influencing competitiveness of Indian products in international markets where competition with products from other countries is involved. (iii) India’s position in Textiles and Clothing Exports – Composition. This deals with analysis of the composition of textiles exports, with break up for cotton and non-cotton; and in both the sub-sectors, further break up into five segments – fibre, yarn, fabric, readymade garments, and made-ups. Direction of Indian Textiles and Clothing exports is covered in the second half of chapter IV. Time series data for 11 years, 1998-99 to 2008-09 are considered for intensive analysis. In some of the tables, data from 1994-95 to 2009-10 are used to analyse the impact of the quantitative restrictions during the period of operation of the Agreement on Textiles and Clothing (T&C) (January 1995 – December 2004) on Indian textile exports, and in the quota free regime from January 2005 till date. Compound annual growth rate (CAGR), and annual per cent change and per cent share are worked out for specific periods for analysing variations. (iv) Indian Textiles and Clothing Imports Scenario for the period 1998- 99 to 2009-10. For imports, composition and direction are covered in this chapter. Five hypotheses indicated in chapter II have been examined with data presented in
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CHAPTER III
FOREIGN TRADE OF INDIAN COTTON TEXTILE
INDUSTRY
The chapter covers the following sections. (i) Textiles in the Indian
Economy: (a) Indian Cotton Industry - This section deals with cotton
production and concentration of cotton crop in a few states, and yield, and
comparing the Indian scenario with that of a few other countries. (b) Indian
Textile Industry – structure and performance of the entire textile industry value
chain. The analysis reveals SWOT analysis of the Indian Textiles Industry.
Highlights of the draft National Fibre policy announced by the Ministry of
Textiles, Government of India in July 2010 are also covered. (ii) Competitiveness
of Indian Textiles and Clothing Industry. This section deals with various factors
influencing competitiveness of Indian products in international markets where
competition with products from other countries is involved. (iii) India’s position
in Textiles and Clothing Exports – Composition. This deals with analysis of the
composition of textiles exports, with break up for cotton and non-cotton; and in
both the sub-sectors, further break up into five segments – fibre, yarn, fabric,
readymade garments, and made-ups. Direction of Indian Textiles and Clothing
exports is covered in the second half of chapter IV. Time series data for 11 years,
1998-99 to 2008-09 are considered for intensive analysis. In some of the tables,
data from 1994-95 to 2009-10 are used to analyse the impact of the quantitative
restrictions during the period of operation of the Agreement on Textiles and
Clothing (T&C) (January 1995 – December 2004) on Indian textile exports, and in
the quota free regime from January 2005 till date. Compound annual growth rate
(CAGR), and annual per cent change and per cent share are worked out for
specific periods for analysing variations.
(iv) Indian Textiles and Clothing Imports Scenario for the period 1998-
99 to 2009-10. For imports, composition and direction are covered in this chapter.
Five hypotheses indicated in chapter II have been examined with data presented in
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this chapter both for textile exports and imports; and results brought out. Trend
lines have been drawn for the time series data for exports and imports, using the
method of least squares. Chow Test has been used to analyse the position of
exports and imports in five segments and the total, in the ATC period and post-
ATC period.
I. Textiles in the Indian Economy
3.1 India’s Cotton Industry
Cotton is one of the principal commercial crops cultivated in India. It plays
a major role in sustaining the livelihood of an estimated 5.8 million cotton farmers,
and 40-50 million people engaged in related industry and trade activities. The
Indian textile industry consumes a diverse range of fibres and yarn. The industry
is multi-fibre based, using cotton, jute, wool, silk, man-made, and synthetic fibres.
Cotton is the major raw material used in India. The fibre-mix of textile industry in
India is skewed towards cotton, with 60 per cent of yarn as cotton-based, and the
remaining 40 per cent being non-cotton based, using other fibres. Internationally
the fibre-mix is skewed towards man-made fibres with 60 per cent input of this
category, and the remaining 40 per cent as cotton-based. India is the second largest
producer of cotton in the world, next to China, and has the largest cultivated area
with China as the second, and USA as the third; and accounts for 20 per cent of
global production of cotton. However, in yield, India lags far behind a number of
other countries. The acreage under cotton cultivation during cotton season
(October-September) has increased considerably in recent years from 8.8 million
hectares in 2004-05 to 10.33 million hectares in 2009-10 (9.8% growth over the
previous year) (Table 3.1). It was 9.41 million hectares in 2008-09, and 7.63
million hectares in 2003-04. Compound annual growth rate (CAGR) of acreage
under cotton during 1999-2009 works out to 1.7 per cent, and for production 6.6
per cent. The acreage has been fluctuating though it has been steadily increasing
from 2004-05. Between 2002-03 and 2009-10, CAGR is 4.4 per cent in respect of
area, and 11.7 per cent in respect of production. About 62% of India’s cotton is
produced in rainfed areas, and 38% on irrigated land. Cotton farmers have been
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showing increasing inclination to take to Bt cultivation which helps them in
increasing their net earnings through higher yields and lower cost of pesticides
consumption. The acreage under Bt cotton in 2009-10 is 78% (8.08 million
hectares) of cotton cultivated area, as against 72% in 2008-09. India produces a
large number of cotton hybrids and varieties with all the four species of cotton
cultivation. The widespread use of Bt cotton seeds has played a catalytic role in
enhancing cotton production in the country.
During 2009-10, the country harvested higher cotton crop for the sixth
consecutive year at 5.02 million tonnes (equivalent to 29.5 million bales of 170
kgs each) as against 4.93 million tonnes (29 million bales) during 2008-09 (Table
3.3). Cotton yield during 2009-10 was 486 kgs lint per hectare as against 524 kgs
in 2008-09, and 567 kgs in 2007-08 (Table 3.4). Yield per hectare in China is 1251
kg, USA 912 kg, and the world average 766 kg. The decline was due to
unfavourable agro-climatic conditions and insufficient rains. Cotton cultivation is
mainly spread over nine states of the country, three each in the Northern, Central
and Southern zones. The states are Punjab, Haryana and Rajasthan in the North,
Gujarat, Maharashtra and Madhya Pradesh in the Centre, and Andhra Pradesh,
Karnataka, and Tamil Nadu in the South. Cultivation in a few other states is
relatively small. Among the states, Gujarat, Maharashtra and Andhra Pradesh
stand prominent in production, above 5 million bales each in 2009-10, while in
respect of yield Tamil Nadu, Andhra Pradesh and Gujarat occupy the first three
ranks in that sequence in 2008-09. With the further possibility of higher use of Bt
seeds / hybrid seeds, and decline in the cost of such seeds, it is projected to
improve the yield to 700 kgs per hectare, and cotton production to 6.6 million
tonnes (39 million bales) by 2011-12 from 31.5 million bales in 2007-08.
Technology Mission on Cotton has played an important role in improving yield of
cotton, and increasing production, apart from modernisation of the industry value
chain.
Correlation Coefficients have been worked out for state-wise cotton
production data for the 9 leading states for the years 1999-00 and 2009-10 to know
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whether the ranking of various states during the 2 periods remains the same or has
changed over years (Table 3.3).
Karl Pearson’s Correlation Coefficient ( r ) : 0. 8429
Charles Spearman’s Rank Order Correlation Coefficient (rho): 0.9259
Both the coefficients show very high degree of positive correlation. This
shows that ranks have remained nearly the same. Changes noticed in the ranks of
the states between the two periods are as follows; Maharashtra and Gujarat have
exchanged their ranks 1 & 2, with Gujarat becoming 1 in 2009-10, and
Maharashtra 2; Haryana, Punjab and Rajasthan have been ranked as 5, 6 and 7 in
2009-10. The ranking of other states remains the same. Andhra Pradesh and
Madhya Pradesh are 3 & 4, respectively; Karnataka and Tamil Nadu are 8 & 9,
respectively. In comparison with the first 3 states, all others are at a much lower
level in annual production.
3.2 Indian Textile Industry
The Indian textile industry is pegged at US $55 billion in 2010, 64 per cent
of which services domestic demand, and the rest is for the export-market. The
Textile industry, also known as textiles and clothing (T&C), textiles and garments
(T&G), and textiles and apparel (T&A) accounts for 14 per cent of industrial
production, 4 per cent of Gross Domestic Product (GDP), and 12.5 per cent of the
country’s exports earnings in 2009-10. Exports was US $22.15 billion in 2007-08,
US $20.98 billion in 2008-09, and US $22.38 billion in 2009-10. Out of total
textile exports, export of readymade garments / clothing is around 51 per cent.
Compound annual growth rate (CAGR) of textile exports in US $ terms was 10.5%
during 2004-09, as against 6.4% during 1994-2005. During 1994-2000, it was
6.9%, and during 1999-2005, 6.0%. The corresponding percentages of CAGR for
overall exports of the country are 22.0 for 2004-09, 12.2 for 1994-2005, 6.9 for
1994-2000, and 17.8 for 1999-2005. The Agreement on Textiles and Clothing
(ATC) of the World Trade Organisation (WTO) has been in operation for phasing
out quantitative restrictions on movement of textiles from developing countries to
developed countries during January 1995 and December 2004. With the
elimination of quota restrictions on completion of tenure of the ATC, quota free
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regime has come into vogue for international trade in textiles, apart from other
commodities. CAGR of the post-ATC period for exports from 2005 for Indian
textiles, as well as for overall exports has performed better compared to the ATC
period. From 1990-91 up to 2003-04, percentage of textile exports to the country’s
overall exports ranged from 21 to 28. In view of the faster growth of overall
exports in US $ terms of 20 to 30% in recent years, the proportion of textile
industry’s contribution to overall exports has come down. The sector directly
employs over 35 million people, which includes sizeable percentage of
marginalised sections of the society and women. The sector is the largest employer
after agriculture in the economy.
Textile imports in 2009-10 constitute US $3.4 billion, 1.2% of the country’s
overall imports. CAGR for textile imports in US $ terms for 2004-09 has been
higher (12.1%) compared to 9.6% for 1994-2005. Corresponding figures for
overall imports of the country were 28.5% and 14.6%. Growth rate in the second
phase of ATC period (1999-2005) has been higher for textile imports as well as for
overall imports compared to the first phase (1994-2000).
The National Manufacturing Competitiveness Council (NMCC) has
identified T&G as one of the priority sectors having high growth potential, and
higher multiplier effects for employment generation, and inclusive growth. The
NMCC envisaged the market potential for the industry at US $115 billion by 2012.
This would create 12 million job opportunities – 5 million direct and 7 million in
the allied sectors. Indian apparel market has grown by more than 20 per cent
annually in recent years, and is estimated to be valued at US $26 billion. A recent
research study of Technopak Advisors, a leading management consultancy firm,
presented the perspectives of the industry on the following lines. The industry is
expected to grow from US $70 billion in 2009 to US $220 billion by 2020;
domestic market size from US $46 billion in 2009 to US $140 billion by 2020; the
apparel retail market worth US $33 billion in 2009 is expected to touch US $100
billion by 2020. India has the potential to increase its textile export share in world
textile exports from the current 4.5% to 8% to reach US $80 billion by 2020 from
the level of US $22.4 billion in 2009-10. Growth within the industry will be driven
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by innovation across product, design, brand, channel, and also business processes.
European Union and USA are the major destinations for India’s textile and
garment exports. Other major destinations include: United Arab Emirates (UAE),
China, Bangladesh, Saudi Arabia, and Japan. As per data collated by WTO, for the
year 2006, India accounted for 4.3% of total world exports of textile products, and
in the clothing segment India’s share was 3.3%.
Having a highly fragmented structure, the Indian textile and apparel value
chain consists of four stages.
� Ginning and Spinning – Spinning is the process by which cotton or manmade fibre is converted into yarn. In case of cotton, before spinning, ginning is done where the impurities are removed.
� Weaving and knitting – Conversion of cotton or manmade yarns into woven or knitted fabrics
� Processing – includes bleaching, dyeing, mercerising, and printing, which results in finished fabric to be used for manufacture of clothing.
� Clothing manufacturing – this is the final stage where the designing, pattern making, cutting, embellishing, stitching, finishing and packaging is done for distribution.
Many players in India have been focusing on further expansion, and have
been moving up the value chain by adopting a range of strategies. India’s position
in the world textile economy is given in Table 3.7(B). As can be seen from the
table, India is ranked first in the weaving sector with a large number of shuttle
looms and handlooms. However, India ranks only fourth position in the world in
terms of capacity of shuttleless looms; as a result, India lags behind China in terms
of production. India is also ranked first in the production of Jute. However, in case
of raw wool and synthetic fibre, it was positioned 7th and 5th rank, respectively.
The major sub-sectors that comprise the textiles sector include the
Erode and Madurai in Tamil Nadu, NOIDA (Uttar Pradesh), and Gurgaon
(Haryana). Clusters are specialised in terms of (a) types of garments manufactured
(either woven or knitted), and (b) variety of products produced (i.e. men’s,
women’s or children’s). Seven major export clusters with exports in 2007-08 in
Rs. billion given in brackets are : Tirupur (995), Gurgaon (425), Bangalore (400),
NOIDA (350), Chennai (200), Ludhiana (140), and Kolkata (100).
Fragmented Industry
The textile and clothing industry in India is a fragmented one with a large
number of players, which hampers its ability to emerge as a world class supplier.
Also very few players have integrated their operations. With the exception of the
organised mill sector, either as spinning or composite mills including weaving and
processing facilities, all other stages of manufacture are in the small and medium
enterprise sector. One of the reasons for China’s supreme position in global textile
and clothing industry is its integrated production and consolidated supply chain
facilities. The global buyers prefer to place orders with a few large vendors at
competitive cost. The disintegrated nature of the industry hampers the chances of
securing large orders as also achieving economies of scale. Associated challenges
are low productivity, inadequacy of resources to invest in high technology, etc.
Cost Competitiveness
With regard to cost of production, India fares well in labour cost advantage
in the textile sector. However, the cost of power and capital (depreciation and
interest) is greater than many other countries. The labour cost of Bangladesh,
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Pakistan and Vietnam is far below that of India, posing competitive threat to the
Indian readymade garments industry. Compared to year 2000, in the recent years,
the cost of labour in India has gone up substantially as contrasted with the position
in the Asian competitor countries. SWOT analysis of the Indian textile industry in
the context of the global competitive environment is presented here in terms of
strengths, weaknesses, opportunities, and threats.
Text Table 3.1: Indian Textile Industry – A SWOT Analysis
Strengths Weaknesses
� Multi-fibre raw material base � Lack of technology upgradation � Cheap labour � Low investment levels � Supervisory skills � Poor yield and quality of raw material � Traditional skills � Product quality - lower end � Large domestic market � Traditional management
Opportunities Threats � High labour costs in developed countries � Absence of protection under WTO from
2005 � Absence of quotas from 2005 � Emerging competition � Regional trading blocs � Non-tariff barriers
Source: Textiles Committee, Mumbai.
3.3 National Fibre Policy (2010)
1. A working group on National Fibre Policy was constituted by the Ministry
of Textiles in July 2009, comprising representatives of government organisations,
export promotion councils, industry associations, and experts drawn from
prominent organisations. Eight sub-groups on various fibres were formed to
critically examine the relevant aspects, and make recommendations to facilitate
formulation of a comprehensive fibre policy. The National Fibre Policy 2010-11
was released by the Ministry of Textiles on its website on July 7, 2010 inviting
comments and suggestions. The Policy will be formalised in the near future. A few
of the Key aspects covered in the draft Policy Paper are presented in this section.
(Source: www.texmin.gov.in)
3.3.1 Overview
2. The National Fibre Policy has been designed with a decadal perspective of
2010-20, and seeks to place India firmly on the World Fibre map by strengthening
the existing policy framework, and providing institutional and technological
support for rapid Fibre growth in the country in the coming decade. The projected
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growth trajectories envisaged under the National Fibre Policy are ambitious, and
would benefit all stake holders in the Textile Industry value chain.
3. The National Fibre Policy seeks to build a strong and vibrant textile
industry competent of producing quality cloth at acceptable price, increasingly
contributing to enhanced employment provision and competing for an increased
share of global market. The Fibre neutral policy seeks to balance the existing
disparities within the complete range of fibres by providing additional fiscal and
non-fiscal incentives for sustainable growth of all fibres, and be competitive in the
international market.
4. The policy framework has been built keeping in mind the potential growth
of technical textiles both for domestic and international demands. Special attention
has been drawn to promote the lesser known specialty man made fibres and other
natural fibres. The domestic fibre consumption ratio in India at present is 41:59
(FY09) between man-made fibres and cotton, while it is almost 60:40 globally.
The global fibre consumption trend in future is likely to further tilt in favour of
man-made fibres as there is a limitation to growth of cotton world wide on account
of limited availability of land for cotton cultivation. Given that the future demand
is expected to be largely in favour of man-made fibre based textiles; special
attention is required to boost the consumption and production of man-made fibres
in India.
5. Investments needed for modernization and technology upgradation have
been envisaged through continuation of the TUFS scheme while promoting greater
downstream integration. The policy also envisages extension of the TUFS scheme
to Man Made Fibres production and Technical Textiles. The Handloom Sector
plays a vital role in the economy. In terms of employment, the Sector is next only
to agriculture and provides employment to the weaker sections of the society, with
86% handloom weavers/workers living in rural and semi-urban areas. The
National Fibre Policy addresses increasing the demand for raw materials for
handloom weavers keeping in view of the projected growth rates of the handloom
sector.
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6. The key elements of the National Fibre Policy thus include the following:
a) Cotton production is envisaged to rise at a growth rate of 4.7 per cent from 31.9 million bales in 2010-11 to 48.3 million bales in 2019-20; Cotton Consumption is envisaged to increase to 41.3 million bales by 2019-20 with 7 million bales being surplus;
b) Man Made Fibres and Speciality Fibres domestic demand will rise at a growth rate of 8 per cent per annum from 3.9 billion kgs in 2015 to 6 billion kgs in 2020;
c) Jute production will rise at a growth rate of 3.6 per cent from 9.4 million bales in 2010-11 to 13.0 million bales in 2019-20;
d) Wool consumption is projected to nearly double from 114.2 million kgs in 2009-10 to 260.8 million kgs in 2020.
8. The National Fibre Policy also envisages significant institutional strengthening mechanisms in the form of the following:
a) An Inter-Ministerial Committee of Secretaries headed by Textiles
Secretary to calibrate cotton exports to ensure improved supply chain management for domestic consumption, Electronic data exchange between Customs Department and Textiles Commissioner for monitoring cotton and yarn export shipments;
b) Establishment of a Yarn Advisory Board for formulation of a Yarn Balance sheet to ensure adequate yarn availability for handlooms and garments sector;
c) Launching of a Technology Mission on Technical Textiles and creation of centres of excellence in the identified sub groups of technical textiles;
d) Creation of a Jute Development Fund for R&D efforts in modern machinery development of Jute sector;
e) Setting up of an MMF advisory council with all stakeholders to monitor excise duty and other concessions and take an integrated approach to solving the problems of MMF producers;
f) Adopting a Mission Mode approach and establishing an Inter Ministerial Board for promotion of Organic, Suvin and ELS cotton sector;
g) Restructuring the Central Wool Board on the lines of the Central Silk Board to effectively implement the various schemes and policies and achieve desired objectives;
h) A Focus Fibre Focus State approach would be adopted for the development of Other Natural Fibres in the Country.
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3.3.2 Aims and Objectives
9. The National Fibre Policy has the following aims and objectives:
i. Augmenting investment, and providing support on both fiscal and non-fiscal front to increase fibre availability in the country, and facilitate high growth and competitiveness of the textile sector.
ii. Focusing on improving quality of the fibre produced in India;
iii. Devising means to augmenting remuneration of all the stakeholders within the fibre eco-system;
iv. Correcting fiscal anomalies, and policy limitations that are currently present in the fibre eco-system in order to ensure balanced growth of the textile industry;
v. Providing assistance for building capacity in both industry segment and human capital required for processing the expected surge in the fibre production;
vi. Supporting modernisation and technological up-gradation of various segments of the industry, to increase its competitiveness;
vii. Addressing the problem of infrastructure bottlenecks.
3.3.3 Future Outlook of India’s Cotton Production and Consumption
10. Cotton production largely depends on the area under cotton production and
productivity. Considering the issues pertaining to food security and land pressures,
the area under cotton production is assumed to be largely constant at the current
level. Thus, the future production is expected to be driven by improvement in
cotton yield. Yield is assumed to grow at 4.7%. The final scenario for 2020 is
encapsulated in the table below.
Future Outlook for Cotton Production and Consumption (figures in lakh bales)
Year Production Consumption Surplus 2010-11 319 267 52 2014-15 384 323 61 2019-20 483 413 70
11. In the years to come, the robust increase in domestic consumption is likely
to drive down the surplus in cotton. Therefore, it is essential that there is greater
focus on enhancing domestic production of cotton significantly to cater to the
expected increase in domestic demand.
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3.3.4 Man Made Fibres
12. Analysis of the world Textile and Garment production vividly brings out
that India’s failure to harness the potential of Man Made Fibres has proved to be a
limiting factor in attaining a dominant position it deserves in the international
Textiles and Clothing sector.
13. India is the second largest producer of man-made fibres in the world (World
Fibre Report 2008) with presence of large plants having state-of-the art
technology. MMF textiles constitute almost two-third of the domestic textile
market. However, India’s share in global exports of value-added textiles of
manmade fibres is miniscule at around 2.25% in 2008 (India’s MMF exports were
US $ 3.3 billion as against global exports of US$ 146.7 billion). Hence, the
domestic MMF: cotton fibre consumption ratio in India is 41:59 (FY09) while it is
the reverse globally. The share of man-made fibres in total fibre consumption has
risen from 25% in early nineties to 41% at present. However, since quota abolition,
the share of MMF in India’s fibre consumption has almost stagnated at around
40% on account of rising cotton production and international demand for cotton by
textile manufacturers to cater to export demand from global markets.
14. India’s capacities for man-made fibres currently stand at 3.4 billion kg,
which is around 6.6% of global MMF capacities. India’s total production of
manmade fibres stood at 2.5 billion kg in FY09, of which exports constituted
10.1% at 0.25 billion kg., and imports constituted 0.12 billion kg. Indian man-
made fibre industry is largely polyester dominated, which constitutes over 83% of
total manmade fibre production.
15. While man-made fibre production is highly concentrated, with limited
players engaged in manufacturing of MMF, the value added MMF textiles
manufacture is primarily in the decentralised sector, with presence of a large
number of small and medium enterprises. Production of MMF fabrics has grown
from 21 billion square meters in FY05 to 23.9 billion square meters in FY09.
While in the domestic market, MMF textiles and garments are dominant (65-70%),
cotton textiles are predominant in the export markets (over 80%).
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16. Given the changing consumption pattern in favour of man-made fibre based
textiles, there is a need to assess the medium term and long term demand for
manmade fibres in India. The demand for man-made fibre depends upon the
demand for yarn and fabrics, which in turn depends upon the consumption of
finished textiles, namely, apparel and made-ups.
17. Considering future GDP growth of 8%, the domestic demand for man-made
fibres/ filament yarns is estimated at 3.9 billion kg in FY15 and about 6 billion kg
in FY20. Adjusting to this the likely exports and imports of MMF, the overall
MMF requirement is estimated at 4.2 billion kg for FY15 and 6.48 billion kg for
FY20. This implies capacity additions of about 1.8 billion kg (FY15) and 4.6
billion kg (FY20), which would require an investment of over Rs. 90 billion by
FY15 and Rs. 230 billion by FY20.The PFY (Polyester Filament Yarn) has a
majority share in the MMF fibre demand and the country’s share in PSF
(Polyphenylene Sulfide Fibres) is weak.
3.3.5 Speciality Fibres and Technical Textiles
18. Technical Textiles are “textile materials and products used primarily for
their technical performance and functional properties rather than their aesthetic or
decorative characteristics”. Some of the terms used for Technical Textiles include
textiles”, “invisible textiles” and “hi-tech textiles”. Technical Textiles are used
individually to satisfy a specific function (fire retardant fabric used in the uniforms
of firemen) or as a component of another product for enhancing its strength,
performance or other functional properties (tyre cord fabrics used in automobile
tyres). They are also sometimes used as accessories in processes to manufacture
other products (paper maker felt in paper mills). Some examples of Technical
Textiles in our day-to-day life include- tea bags, interlinings in clothes, carpets,
wall coverings, sanitary napkins, baby diapers, mattresses, and blankets amongst
others. Technical Textiles have a very important role in nation’s security and
infrastructure development and nation building in general. Some examples are-
geo-textiles for long lasting roads, environment/ soil protection fabrics used in
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disaster management, protective clothing (such as bullet proof vests) for security
personnel, fire-retardant fabrics for public places, etc.
19. With globalisation of Indian economy and the rise in the expectations &
capacity of the middle class, the market size for technical textiles has shown a
healthy growth of 18% during 2001-02 to 2007-08, and is expected to grow at 11%
per annum till 2012-13, and thereafter at 6-8% per annum till 2020 naturally.
However, if government interventions take place in the form of a stimulus, the
growth of technical textiles industry can be estimated at 12-15% per annum till
2020.
20. Speciality fibres are special man-made fibres used for manufacture in
Technical Textiles. The requirement / consumption of speciality fibres, therefore,
have direct correlation with the manufacturing base of technical textiles in the
country and its growth.
21. The proposed policy interventions in speciality fibre sector would enable
the technical textiles sector to attract an investment of Rs.50 billion by 2012; to
create additional employment opportunities for 12 lakhs persons by 2012, and to
grow at 12-15% CAGR.
22. A comprehensive Technology Mission of Technical Textiles is also
proposed to be launched.
3.3.6 Major Policy Initiatives Required to meet the Gap
3.3.6.A: Cotton
23. India will be a cotton surplus Nation in the next decade. For the Textiles
Ministry, therefore, supply side management issues are of vital importance which
need to be addressed in the National Fibre Policy to ensure adequate availability
and quality of spinnable cotton in the country.
24. The key issues involved in policy formulation include: (a) cotton
contamination, (b) improving quality, (c) improving infrastructure, (d) problem of
admixtures, (e) need for establishing uniform standards, (f) creation of testing
facilities, and (g) need for an Indian arbitration for imported cotton. The
responsibility for enhancing production rests with the Ministry of Agriculture. The
policy measures include creating an institutional framework for development of
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cotton fibre, improving irrigation facilities and water harvesting, and increasing
awareness amongst farmers for suitable agronomic practices.
Improving Supply Chain Management and Ensuring Cotton Security
25. After independence, most productive cotton lands became part of Pakistan
and Indian Union was left with short cotton production for large cotton based
Industry. This lead to serious shortage of cotton, and India turned from an
exporting country to a net Importer of long staple cotton. Cotton security for
domestic industry became a paramount need.
26. However, with various Governmental measures and agriculture extension
schemes to grow more cotton in the Country through Intensive Cotton
Development Program in 1971-72, and setting up of Technology Mission on
Cotton in 2000 coupled with release of Bt seeds for Commercial cultivation in
2002-03; the cotton production of the Country reached a record level of 30.7
million bales in 2007-08. With these developments, India became the 2nd largest
producer, consumer and exporter of cotton in the world. Minimum Support Price
(MSP) Mechanism safeguards the interest of cotton growers in the wake of fall in
kapas prices.
3.3.6.B: Cotton Export: Self Sufficiency in Cotton
27. Initially, cotton exports from India during the nineties were governed by
long-term cotton export Policy of the Government of India. As per this policy,
quota of 5 lakhs cotton bales including short staple non-spinnable Bengal Deshi
used to be released in the beginning of the season depending upon the availability
of surplus cotton. Thereafter the additional export quota used to be released in a
phased manner depending upon the availability of surplus cotton after meeting the
domestic consumption needs. A major portion of the quota was given to CCI.
Some portion of this quota was also allocated to Co-operative Institutions like
NAFED, HAFED, MarkFed, Maharashtra Federation etc. Since some of these
institutes did not possess sufficient basic infrastructure & marketing expertise;
therefore, CCI was facilitating in liquidating their quota. In late 1990s, residual
quota was also given to private traders in small quantities. During this quota
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system, Textile Commissioner’s Office was tasked with undertaking registration of
export contract. CCI, NAFED and other State Federations were under obligation to
give a Legal Undertaking (LUD) while private traders had to give Bank Guarantee
to ensure performance of Export Contracts. Now Maharashtra Federation,
GUJFED, RAJFED and most of the other State Federations have become defunct,
and are not involved in cotton marketing any more.
28. The Government of India with effect from July 2, 2001 had liberalised
cotton exports from the country, and placed the same under Open General License
(OGL). Thus, the system of allocation of cotton export quotas in favour of
different Agencies including CCI was dispensed with.
29. Cotton exports from India which used to be around 5 to 6 lakhs bales up to
1985-86, reached the level of 13 lakhs bales in 1986-87. Thereafter, there were
only meager exports from the country except for the year 1992-93 and 1996-97. In
2005-06, exports were 47 lakhs bales, and touched the highest level of 88.50 lakhs
bales in 2007-08.
30. In 2009-10, the actual export shipment from the Country is reported to the
extent of 73.28 lakhs bales. An additional 3.12 lakh bales are being shipped to
Bangladesh and Pakistan. Considering the cotton consumption of the Country as
260 lakhs bales, the carry over stocks shall be around 34 lakh bales, which is
equivalent to 45 days consumption only. Thus, carry over stock for next Cotton
Season shall be around 14.3 % of cotton production of 292 lakhs bales estimated
for Cotton Season 2009-10, resulting in very tight supply position of cotton for
Indian Textile Mills.
31. In the medium and long term, the stock to use ratio would be a determinant
of the exportable surplus. The National Fibre Policy, thus, seeks to improve supply
chain management with calibration of cotton exports, and putting in place credible
and transparent institutional mechanisms for ensuring India’s cotton security
commensurate with the growth envisaged in the sector.
32. In order to avoid repetition of such a situation (09-10) of over exports
resulting in shortages & disruption of supply of cotton to domestic textile industry,
tangible steps have been considered under the National Fibre Policy for future to
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ensure regular supply of quality cotton to Industry till the end of every cotton
season.
33. The National Fibre Policy envisages the following policy measures: Though
CCI is a major player for MSP operations, the National Fibre Policy envisages CCI
to undertake commercial operations so as to ensure secured supply of cotton to
textile mills at competitive prices. This shall obviate the possibility of cartelisation
for individual gains;
• After projecting cotton consumption of domestic mills vis-à-vis expected cotton production, availability of surplus cotton would be ascertained by Cotton Advisory Board. An Inter-Ministerial Committee of Secretaries under the Chairmanship of Textiles Secretary would, based on recommendations of Cotton Advisory Board and other factors; consider exportable surplus of cotton from the country, and also ensuring the prescribed carry over stock at the end of season;
• Textiles Ministry in consultation with ISRO/ Department of Space would put in place improved crop mapping of cotton so as clearly identify production and acreage;
• In consultation with Department of Revenue, Textiles Ministry would put in place an electronic data exchange system, that would ensure that every Shipping/ Dry port provides a platform for data exchange on cotton shipments on a weekly basis to the Textiles Commissioner.
34. The National Fibre Policy to the extent possible will seek to eliminate
export shipments to bonded warehouses in non-consumption countries, and shall
be instrumental in getting better per unit export realisation, which shall ultimately
benefit cotton growers of the country. Government would also seek to introduce a
separate price index for Indian cotton.
3.3.6.C: Cotton Yarn
35. Textiles Ministry would also initiate necessary policy interventions for
greater monitoring and streamlining of yarn exports to ensure adequate availability
to the handloom and garment sector. 2009-10 has witnessed significant price
surges in the yarn industry that has resulted in significant distortions in the supply
chain to the handlooms and garments sector. The policy interventions envisaged by
the Ministry of Textiles to stabilise prices of cotton yarn for improved supply
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chain management for textile yardage, handloom weavers and garment sector are
the following:
• Yarn export registration which has commenced from April 2010 would be firmly established as an institutional strengthening mechanism.
• A Yarn Advisory Board would be established to formulate a Yarn Balance Sheet for the Country. The Yarn Advisory Board comprising of representatives of stakeholders, ministries of Government of India and the Industry would function on the lines of the Cotton Advisory Board and would be an enabling mechanism for considered policy making to ensure adequate supplies to downstream industry;
• Ministry of Textiles would intensify the Test Check of Hank Yarn Obligations through the Textiles Commissioner to ensure that the industry fully adopts the prescribed norms for ensuring adequate availability of hank yarn to the handloom sector. The Ministry of Textiles would advise the Textiles Commissioner to explore necessary legal and regulatory options available under the Essential Commodities Act to ensure that the mandatory obligations of the Spinning Industry to the Handlooms Sector are duly fulfilled.
• In addition to the above, Textiles Ministry has constituted a committee under chairmanship of Development Commissioner (Handlooms) to examine all issues of Hank Yarn Obligations to ensure adequate availability of hank yarn to weavers. The Committee’s recommendations would be considered for future policy interventions.
• Appropriate fiscal measures on yarn would be considered in consultation with Finance Ministry to improve domestic availability of yarn if the trigger point prescribed for yarn exports by the Yarn Advisory Board is breached.
3.3.6.D: Improving marketing and branding of Cotton
36. Grading of Kapas is imperative for improving the marketing and branding
of Kapas and lint. The grading system by an independent agency, regulated ware
housing system, better contracting system with risk management instruments, will
raise the dynamics of Indian cotton to a greater level of acceptance, fine image and
remarkable branding. The National Fibre Policy envisages the following policy
measures:
• A structured mechanism for promotion of cotton use would be developed, in order to sustain domestic consumption on a long term basis, so as to maintain the strength of cotton economy.
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• Pilot projects for marketing of lint by the farmers, instead of kapas would be considered. This would result in higher income to the farmers and accelerate cotton production.
• The role and functions of Government agencies involved in marketing of cotton fibre will be looked into for any reorientation of their role towards inclusion of price stability.
II. Competitiveness of Indian Textiles and Clothing Industry
3.4 Supply Chain Management
The Indian textile and clothing industries have one of the longest and most
complex supply chains in the world, with existence of many intermediaries
between the farmer and the final consumer. Each intermediary not only leads to
lengthening of lead times, but also adds to costs. By the time the product reaches
the final consumer, price of it increases manifold. This has to be reduced if India
has to become competitive. The industries would need to develop supply chain
management (SCM) perspective, and rationalise costs at each stage in the entire
supply chain, and not only within their own units. Hong Kong apparel industry did
take this initiative, and has managed to shrink the supply chain in terms of lead
times, as well as costs.
In recent years modern garment units are increasingly emphasising on
supply chain management (SCM) which refers to “delivery of enhanced customer
and economic value through synchronised management of the flow of physical
goods and associated information from sources to points of consumption.” In a
dynamic environment where demand is uncertain and significantly seasonal, where
the product life cycles are short and where the competitive intensity is high -
companies that are able to perform functional integration tend to outperform others
(Verma, 2002).
The supply chain in India is extremely fragmented mainly due to the
government policies and lack of coordination between industry and relevant trade
bodies. It is noteworthy that the countries that are globally competitive are the ones
which have a significantly consolidated supply chain. Some of the countries with
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much less fragmented supply chains are Korea, China, Bangladesh, Turkey,
Pakistan and Mexico, and these are close competitors of India in the global market
for exports.
3.5 Lack of Dyeing Facilities
The major problem facing the structure of textile and clothing sector is lack
of good infrastructure to develop dyeing/processing units. The small fabrics
producing units belonging to the powerloom sector are not in a position to come
out with better dyeing units, which is economical at large size, and require huge
investment. But the large dyeing units find its survival very uneconomical for
catering to the needs of small powerloom units producing in small lots. One dyeing
unit catering to the processing requirement of a large number of powerloom units
is not working well due to spread of units, and increase in transport and
management costs which make co-ordination difficult. A few powerloom units
have experimented the installation of modern dyeing units in a co-operative
arrangement, but this has yet to become a widespread phenomenon. This lack of
dyeing facilities is badly affecting the quality of fabrics available for garment
units.
This explains the poor quality fabric available to Indian garment producers
compared to international standards. This affects our competitiveness in the
apparel sector. A large number of garment units producing high value and
designer garments products resort to import for good quality fabrics. Thus there
exists a major gap in the garment value chain. This mismatch needs to be corrected
and Government incentives are required for targeting incentives in a proper
direction to allow good dyeing infrastructure to develop.
3.6 Low Labour Cost in Production of Indian Apparel
Despite some glaring problems of the Indian apparels industry, there is
immense potential for growth for Indian apparel exports. Garment sector is highly
labour intensive in India, and thus labour cost assumes much significance in per
piece cost of garment production. India compares very favourably across the
developing countries in terms of low labour costs for the same skill of labour.
Bangladesh, Pakistan and Vietnam are, however, countries having lower labour
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costs compared to India. However, empirical evidence suggests that low wages are
not always a factor of competitiveness particularly in case of good quality designer
garments. Quite often high wages are paid to skilled labourers as remuneration for
the high levels of skill and productivity which, in turn are important factors of
export competitiveness. It is observed that export oriented garment units pay
higher wages to their labourers than the domestic market oriented units. This
difference in wage rates is attributed to the unique and indispensable skills of
designers, pattern makers and craftsmen, as well as to better-trained cutters and
tailors employed by exporting firms. However, the size of units is also crucial, and
quality is not always the deciding factor for wage rate. Currently India has a 3.4
per cent share in the global market for textiles and clothing. Proliferation of retailer
driven global supply chains in recent times means that the highest value activities
are in designing, distribution, branding and marketing. For this, it is important that
both backward and forward linkages be established domestically. India already
produces good quality yarn, but integration in the industry is weak as is the
capacity to deliver quality products on a timely and flexible schedule. Policy-
makers must now identify a strategic direction for the industry to ensure that
sectoral initiatives impel rather than impede growth (G. Badri Narayanan,
Economic and Political Weekly, February 26, 2005, pp. 905-907).
3.7 Competitiveness of Indian Textiles and Clothing
Competitiveness is a function of factors related to cost of production, as
well as those related to non-price factors such as delivery schedules, reliability of
producers, and such intangible factors like image of the country/company and
brand equity. Together, they define the competitive sinews of a product to compete
under free market conditions. Findings presented in this section of inter-country
comparison of competitiveness of Indian Textiles are based on the Study carried
out by National Council of Applied Economic Research (NCAER), New Delhi
(2009), titled, Assessing the Prospects for Indian Textile and Clothing Sector,
hereafter referred to as NCAER study (2009).
In the sphere of cotton yarn, India is one of the lowest cost producers.
International Textiles Manufacturers Federation (ITMF) statistics, 2006 shows
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comparative cost of production of yarn and fabric of some major textiles producing
countries - India, Brazil, China, Italy, Korea, Turkey, and USA. Indian cost of
Ring Yarn at US$2.13 per kg is much lower than USA (US$2.81 per kg.), Italy
(US$3.20 per kg.) and China (US$2.89 per kg.) during 2006 (Text Table 3.2).
Cheap availability of raw material and low labour cost are the major causes of low
cost of production of ring yarn in India. In O-E yarn production, India is much
competitive as compared to other countries. The analysis based on ITMF data
includes Pakistan in their cost comparative analysis. This is one major limitation of
ITMF data as Pakistan is one of India’s key competitors. Gherzi Eastern Limited
data helps in making comparison in this regard. Gherzi study shows that India’s
labour cost is very close to China’s, but higher than that of Pakistan, which gave
Pakistan a major advantage. Power cost in India is also quite high compared to
Pakistan and China. The cheap cotton availability is the major advantage India
enjoyed compared to even Pakistan and China.
The cost comparison of other items using ITMF data show that India is
much competitive in the international export market in case of woven ring yarn
fabric shown by ITMF data. In 2006, total fabric cost for India was US $ 0.627 per
metre. India’s closest competitor was Brazil with per metre fabric cost being US$
0.715. Chinese, US and Italian fabric incurred per metre fabric cost of US $0.740,
US $0.837, and US $1.004 respectively (Text Table 3.2). Here also raw material
and labour cost components were the major determining factors for
competitiveness of Indian woven fabric. Similarly, in case of knitted ring yarn
fabric, India is much competitive as compared to its competitors. In 2006, per
metre cost of knitted fabric was US $0.511 which was much less than its
competitors. In 2006 its closest competitor was Korea with per metre knitted
fabric cost of US $0.621 (Text Table 3.2). Here also raw material and labour cost
components were the most important factors for its competitiveness. It is notable
here that in case of both woven and knitted fabric, Chinese fabric had a somewhat
lower labour cost but it is more than compensated by cheap raw material
availability in India.
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The above analysis reflects that India’s competitiveness is confined to grey/
unprocessed products such as grey yarn and grey fabric. Dyeing and processing
segment of the Indian textiles industry is not so technologically well advanced due
to restrictive policy regime in the past. This is reflected in the relatively inferior
quality of domestically dyed & processed yarn and fabric. This has resulted in a
comparatively much larger share of grey yarn and fabric as compared to that of
dyed and finished yarn and fabric in Indian textiles exports. During 2007-08, the
exports of cotton woven fabric amounted to US $1035 million out of which dyed
and printed cotton woven fabric accounted for US $400 million, i.e., 38.6% of the
former. Similarly, exports of man made woven fabric during 2007-08 was of the
order of US $804 million out of which dyed and printed woven fabric was of US
$296 million, i.e., 36.7% of the former. In case of knitted and crocheted fabric, the
condition is worse. In this segment, total export is to the tune of US $90.34 million
during 2007-08, out of which 25.3% is in the form of dyed and/or printed products.
This shows the urgent need for the modernisation of the dyeing and processing
segment of the industry along with other value added processing stages.
The low realisation per unit value of export is another indicator of low
value addition. The unit value realisation for woven cotton and blended fabrics is
US$1.57 per sq. mt. In case of man made fabric exports, it is US $1.64 and for
knitted and crocheted fabric (of both cotton and manmade fibres), it is US $4.03.
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Text Table 3.2: International Cost Comparisons for Yarn and Fabric in Seven Countries - 2006
Cost Index: Italy = 100 Type of Cost Brazil China India Italy Korea Turkey USA Brazil China India Italy Korea Turkey USA
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Total Costs of Ring Yarn (US$/kg. yarn) 2.65 2.89 2.13 3.20 2.54 2.61 2.81 83 90 67 100 79 82 88 Total Cost of O-E yarn (US $/kg. yarn) 1.85 2.28 1.52 1.96 1.80 1.89 1.75 95 116 78 100 92 96 89 Manufacturing Costs of Ring Yarn Weaving (US $/metre of fabric) 0.21 0.19 0.22 0.40 0.25 0.23 0.30 53 48 55 100 63 58 75 Manufacturing Costs of O-E Yarn Weaving (US $/metre of fabric) 0.20 0.18 0.22 0.43 0.26 0.24 0.31 47 42 51 100 60 56 72 Total Cost of Woven Ring – Yarn Fabric (US $/metre of fabric) 0.715 0.740 0.627 1.004 0.733 0.728 0.837 71 74 62 100 73 73 83 Total Cost of Woven O-E Yarn Fabric (US $/metre of fabric) 0.662 0.748 0.595 0.911 0.704 0.707 0.741 73 82 65 100 77 78 81 Manufacturing Costs of Ring Yarn Knitting (US $/metre of fabric) 0.033 0.027 0.020 0.070 0.029 0.024 0.045 47 39 29 100 41 34 64 Total Cost of Knitted Ring –Yarn Fabric (US $/metre of fabric) 0.643 0.692 0.511 0.806 0.612 0.624 0.691 80 86 63 100 76 77 86 Manufacturing Costs of O-E Yarn Knitting (US $/metre of fabric) 0.04 0.031 0.025 0.090 0.035 0.029 0.058 46 34 28 100 39 32 64 Total Cost of Knitted O-E Yarn Fabric (US $/metre of fabric) 0.70 0.846 0.568 0.791 0.679 0.705 0.685 89 107 72 100 86 89 87 Source: ITMF (International Production Cost Comparison 2006), as given in the NCAER Study, 2009. (p.161)
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The mill sector is copetitive only in a few products, which are mainly
produced on a large scale. Modern looms run fast, and size of production in a
given lot is important for achieving scale economies. Mill sector loses its
competitive advantage in case the product demand is in smaller lots to meet the
requirement of small garment units spread all over the country. Apart from that,
mill sector is finding it hard to compete in other products.
The cause for this state of affairs is that powerloom segment is cost
competitive. Handlooms sector is losing its competitiveness, and its share in
production is declining fast. In the field survey conducted by NCAER, New Delhi
during 2008-09, it was found that cotton bed sheet made in powerloom costs
Rs.14.32 per sq. mt. On the other hand, similar bed sheet costs Rs.29.30 per sq. mt.
if made in handloom. The sarees made of blend of cotton and manmade fibres per
sq. mt. costs Rs.15.51 and Rs.40.76 in powerloom and handloom, respectively.
Handloom sector is efficient and competitive for a few varieties only.
The analysis of average realisation of price of fabrics produced in
powerloom and mill sectors shows a wide gap in the rates of the two sectors. The
comparison of market prices of cloth produced in the two sectors during March
2008 indicates that the price of grey cotton cloth produced in powerloom was Rs.
15.24 per metre as compared to ex-mill price of cotton cloth at Rs.34.37. Market
price of grey synthetic cloth produced in powerloom was Rs.8.90 per meter as
compared to ex-mill price of the same cloth as Rs.54.30 per metre. In case of
blended cloth produced in the two segments, the prices were Rs.17.15 and Rs.
46.89 per metre, respectively. Even if one adds the cost of dyeing and any other
value addition, assuming better processing facilities in case of mill sector, the gap
would still be too high. The gap is wide even to discount for any quality of
fabrics.
The analysis of cost using NCAER 2008-09 survey data brings out the fact
that despite significant economic reforms since 2000, the mill sector is not able to
withstand the competition from powerloom sector. The future scenario is also
unlikely to change in a significant manner, and powerloom sector is likely to
remain competitive vis-a-vis other sectors. In fact, the handloom sector is finding it
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extremely difficult to survive, and is cornpetitive only in a few artisanal products.
The share of mill sector is unlikely to grow rapidly in future as well.
III. India’s Position in Textiles and Clothing Exports -
Composition (1994-2009)
3.8 Analysis Pattern of T&C Exports and Imports
Exports of textiles and clothing of India has been analysed for a 15-year
period (1994-95 to 2008-09). Aggregate picture of exports of the sector has been
divided into contribution of cotton textiles and non-cotton textiles. In each of these
categories, the contribution of low value added segments (fibre, yarn, and fabrics),
and high value added segments (readymade garments, and made-ups) has been
examined for time series data, and for four years in particular, 1994-95, 1999-
2000, 2004-05, and 2008-09. Along with absolute values of exports of these
components in Rs. billion, percentage change over the previous year, and
percentage share have been calculated. These are supplemented by compound
annual growth rate (CAGR) in percentage for four periods: 1994-2000, 1999-2005,
1994-2005, and 2004-09. January 1995 – December 2004 is the period of
operation ATC. Period from January 2005 refers to post-ATC regime. Similar
analysis has also been carried out for T&C imports of India for 1998-2009.
Using the method of least squares to find a regression line, trend lines of
various parameters have been drawn based on the time series data for 11 years
(1998-1999 to 2008-09). These are presented in Figures 3.1 to 3.12. Figures 3.1 to
3.3 refer to T&C exports and imports. Figures 3.4 to 3.8 refer to exports of
combined segments of fibre, yarn, fabrics, readymade garments, made-ups, and
total textiles for 1998-2009, and exports of cotton components and total cotton
textiles for 1998-2009. Figures 3.9 to 3.12 refer to imports of combined segments
of fibre, yarn, fabrics, readymade garments, made-ups, and total textiles for 1998-
2009, and imports of non-cotton components and total non-cotton textiles for
1998-2009. The trend lines are drawn based on derived trend values of exports,
and imports. They present annual average increase of each parameter during the
specified period. India’s position in the imports of textiles and clothing into the
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major textile markets of USA and European Union (EU) has also been analysed
using the data of recent years to highlight the competitive environment in textiles
among developing and developed countries. Utilising the data available from the
Compendium of International Textile Statistics 2009 of the Union Ministry of
Textiles, region-wise and country-wise analysis of the globe along with global
trends for T&C exports and imports, and the role of developing countries, with
focus on Asian region has also been attempted for 2000 to 2009, to highlight the
contrast between cost efficient developing countries and high cost developed
economies. These details are given in chapter IV.
3.9 Indian Textiles and Clothing Exports – Overall Picture
The exports of Indian textiles including fibre, yarn, fabric, RMG, made-
ups, and some other items excluding handicrafts reached a level of Rs.1058.64
billion and US $22.38 billion during 2009-10 as against the exports of Rs.986.52
billion and US $20.98 billion in 2008-09, marking a growth of 7.3 and 6.7 per
cent, respectively (Table 3.8).
Indian textile exports shows better performance during the post-quota
period than the ATC period. CAGR for the total textile exports during the period
2004-2009 in Rs. terms recorded 11.3 per cent as CAGR of 10.5 per cent during
1994-2005; and in US $ terms 10.5 per cent against 6.4 per cent, during 1994-2005
respectively. It indicates that exports of textiles from India during 2004-09, have
increased steadily over the last few years particularly after 2004-05 when textiles
export quota restrictions ceased to operate.
The volume of Indian textile exports, could not register faster growth as
compared to certain other countries due to various reasons like constraints of
infrastructure, high power and transaction cost, incidence of state level cess and
duties, lack of state-of-the-art technology, etc.
In the year 2007-08 the textile exports of India suffered badly due to sharp
appreciation in Rupee vis-a-vis the US $. Although the rupee has depreciated
sharply vis-a-vis the US dollar since April 2008, the exports prospects of the
Indian textile sector continues to be adversely affected. Some of the reasons
attributed to this decline are the financial sector melt down and economic
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slowdown in international markets, increased cost of production because of
increasing raw material costs, power and other input costs which have affected the
profitability of textiles and garment units in India and their exports. The liquidity
crunch is another factor that is affecting the industry. In such a situation the
positive impact of rupee depreciation had been washed away.
In 2009-10, Indian T&C exports reached a level of Rs.1058.64 billion, and
in 2008-09 Rs.986.52 billion, with growth rates of 7.3% and 9.3%, respectively;
compared to Rs.902.33 billion level in 2007-08 with growth rate of 2.5%. This
indicates that Indian textile exports has gradually recovered after sudden decline of
growth rate in the years 2006-07 and 2007-08 (Table 3.8-A).
In case of country-wise analysis, USA occupied the first position having
21.01 per cent market share of Indian textile exports followed by UK, German F
Rep, UAE, China PRP, France, Italy, Bangladesh, Turkey and Spain, etc. during
2007-08.
USA continued its declining trend in post-quota period, and reached a level
of 20.44 per cent market share, and stood in the first position in 2008-09 followed
by UK, United Arab Emirates, German FRP, France, Italy, Spain, Bangladesh,
China PRP and Turkey, etc (Table 24-B).
China and Bangladesh emerged as new markets for Indian exports. India
gradually recovered its share in UAE which showed sudden decline in 2005-06
due to heavy competition.
T&C export data presented here does not include textile machinery exports
from the country. The Indian Textile Accessories and Machinery Manufacturers’
Association in their press release (The Hindu, December 18, 2010) states as
follows : exports of textile machinery in 2009-10 was Rs.45.0 billion as against
Rs.40.8 billion in 2008-09. The Association is confident of 20% growth in 2010-
11. Exports is mainly to Asian countries, especially, Bangladesh, Thailand,
Vietnam, and Pakistan. Spinning machinery is main item of export. The annual
installed capacity of the textile engineering industry is over Rs.80 billion. The
capacity utilisation was 76% in 2007-08. However, with recession, the utilisation
dropped to 53% in 2008-09. It is hoped that with the surge in demand for textile
147
machinery and accessories, the textile engineering industry will be able gear up its
capacity further to meet the needs of the industry.
Projected market size of textile industry by the terminal year of the
Eleventh Plan (2011-12) is as follows. In 2005-06 total textile market of India was
US $47 billion, shared by Exports US $17 billion and domestic US $30 billion.
(Report of the Working Group on Textiles & Jute Industry for the Eleventh Five
Year Plan, 2007-12).
Assumed growth rates during the Eleventh plan are 16% for total textile
market, 22% for exports and 12.25% for domestic market.
By 2011-12, the market size is expected to increase to US $115 billion, with
US $55 billion for exports, and US $60 billion for the domestic market. The
present picture in 2009-10 is US $55 billion total market size, with US $22.4
billion as exports, and US $32.6 billion towards domestic market size.
According to the report of the working Group on Textile & Jute Industry for
the Eleventh Five Year Plan (2007-2012), segment-wise incremental machinery
and Investment requirement during the Eleventh Plan is Rs.1,50,600 crore.
For spinning industry, Rs.50,200 crore for 29.25 million spindles (8.25 for
replacement of machinery).
For weaving segment, Rs.20,200 crore for 1,08,850 shuttleless looms,
98,500 auto looms, 59,100 plain looms, and 39,400 semi-auto looms.
For knitting segment, Rs.2,400 crore for 9,400 M/cs.
For processing segment, Rs.56,000 crore for 38 billion square meters.
For garment segment, Rs.21,800 crore for 14.5 lakh M/cs.
Indian textile industry is taking support from Government of India through
TUF scheme, Technology Mission on Cotton (TMC), FDI and other segment-wise
institutions established by Government of India to meet the requirement of finance
for modernisation.
3.10 Shift towards Value Addition
Indian textile exports trade has been shifting towards finished goods from
intermediate products and raw material as can be seen from the fact that higher
growth rate recorded by the high value added RMG with a CAGR 14.3 per cent
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followed by the fabric and yarn with a CAGR 7.7 and 6.0 per cent, respectively
during the post-quota period (2004-09). In case of ATC period (1994-05), RMG
showed CAGR 7.6 per cent lower than the growth rate of fabric and yarn. This
trend indicates Indian textile exports shifting towards value added goods during
the post-ATC period (Table 3.35-B). Indian textile made-ups is another high value
added product segment which also showed higher growth during the second half of
the ATC period (1999-2005) with a CAGR 17.7 per cent, followed by the fabric
8.6 per cent, and RMG 7.4 per cent. This indicates that Indian made-ups market
integrated with the world market earlier than the integration of RMG. During the
earlier ATC period 1994-2000 yarn exports recorded higher growth with a CAGR
18 per cent followed by the fabric 9.5 per cent, RMG 7.8 per cent, and made-ups
3.4 per cent. This situation clearly indicates that Indian textile exports market
followed the global trend of shifting trade towards value addition.
Fibre exports recorded overall high with a CAGR 43.1 per cent during the
post quota period as against 21.8 per cent growth during the ATC period. This
indicates that the demand for fibre increases in response to the faster progress of
world textile trade during the post-quota regime and also reveals that India has
greater untapped potential for moving in the direction of higher value addition in
the textile industry in view of the excess cotton fibre raw material availability than
consumption with in the country.
Among all the segments of total textile exports, RMG exports recorded
highest percentage share in total textile exports with 51 per cent followed by
fabrics 15.7 per cent, yarn 11.6 per cent, made-ups 11 per cent, and fibre 4.5 per
cent during 2008-09. In this period, fibre exports showed lower percentage share in
total textile exports with higher growth rate, among all the segments. In case of
value added products, RMG exports segment was the greatest beneficiary in the
post-ATC period with high growth and high share.
3.11 Cotton Textile Exports Segment
During the post-ATC period cotton fibre exports segment recorded the
highest growth with a CAGR 61.5 per cent as against a CAGR 37.7 per cent in
ATC period. In case of value added products, cotton RMG showed better
149
performance than the cotton yarn and cotton fabric. CAGR of the cotton RMG
exports increased from 8.7 per cent in the ATC period to 13.7 per cent in post-
ATC period. In contrast CAGR of yarn and fabrics decreased from 8 and 2.5 per
cent in ATC period to 5.2 and 2 per cent in post-ATC period, respectively. Cotton
made-ups exports segment has not shown better performance after integration of
the Indian textile market with the world market. However during the second half of
the ATC period (1999-05), it recorded higher growth rate with a CAGR 15.7 per
cent. This situation indicates cotton textile exports segment also shifting towards
value addition with the closure ATC. It also indicates that India has strong cotton
raw material base. Exports of cotton fibre surplus indicates the potential of the
country to move towards value addition.
Among all the segments of cotton textiles export. cotton RMG showed the
highest percentage share in the total with 64 followed by yarn 11.8, made-ups
11.7, fabrics 7.6, and fibre 4.9 during 2008-09. In this period, cotton fibre exports
showed the lowest percentage share among all the segments. However, in contrast,
cotton fibre exports recorded the highest exports growth during the post ATC
period with 61.5 per cent. In case of value added , cotton RMG dominates all other
segments with its lion’s share of 64 per cent in 2008-09 and the highest CAGR
13.7 per cent during the post-ATC period. Percentage share of the cotton fabric
and cotton yarn in total cotton textile exports decreased from 14.4 and 10.4 per
cent in ATC period to 11.8 and 7.6 per cent in post-ATC period, respectively. This
also indicates that cotton textile trade is shifting towards value addition.
3.12 Non-cotton Textile Exports Segment
During the post-ATC period, non-cotton fibre growth decreased with a
CAGR 25.1 per cent from 25.7 per cent of ATC period. In case of value added
products, non-cotton RMG and non cotton made-ups showed better performance
than the non-cotton yarn and non cotton fabric. CAGR of the non-cotton RMG
exports increased from 4.8 per cent in the ATC period to 16 per cent in post-ATC
period. In contrast, CAGR of yarn and fabrics decreased from 22.3 and 16.3 per
cent in the ATC period to 7.3 and 10.4 per cent in the post-quota period,
respectively. During 1999-2005 non-cotton made-up exports showed higher
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growth with a CAGR 24.8 per cent than non-cotton yarn, fabric and RMG exports.
This indicates that non-cotton made-up exports segment has been integrated with
global market earlier to that of RMG. This situation reveals that non-cotton textile
exports is also shifting towards value addition with the closure of ATC, and also
indicates India has the potential towards value addition in non-cotton textile
industry, in view of the significant growth in non-cotton fibre exports.
Among all the segments of non-cotton textiles exports, non-cotton RMG
showed the highest percentage share in total non-cotton textile exports with 37.8
per cent followed by non-cotton fabric 32.5, non-cotton yarn 13.4, non-cotton
made-ups 11.7, and non-cotton fibre 4.6 during 2008-09. In this period, non-cotton
fibre exports showed lower percentage share in total non-cotton textile exports
among all the segments. But in contrast non-cotton fibre exports recorded higher
export growth during the post-ATC period than other segments. In case of value
added products, non-cotton RMG, showed higher percentage share in total non-
cotton textile exports followed by the non-cotton fabric exports, yarn exports and
made-up exports. The percentage share increased for the non-cotton RMG, fabric
and made-ups from 28.1, 29.6 and 9.1 in 2004-05 to 37.8, 32.5 and 11.7 in 2008-
09, respectively as against the exports of non-cotton yarn decreasing from 13.6 per
cent in 2004-05 to 13.4 per cent in 2008-09. This indicates that non-cotton textile
exports segment is also shifting towards value addition.
3.13 Interpretation of Textile and Clothing Exports on the Basis of Growth
Rates in Trend Equations and Hypothesis Tables
The trend equations for textile exports reveal as follows:
Text Table 3.3: Annual Average Increase in T&C exports during 1998-2009
Category of Textiles Exports Overall Growth
(Value in Rs. crore) Fibre 796 Yarn 584
Fabric 675 RMG 2,804
Made-ups 810 Total Textiles 6,040
Total textile exports (US $ million) 1,327 Total textile imports (US $ million) 277
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As noticed from the above data, weightage for textile exports is, thus, in
favour of higher value added items of RMGs and made-ups. Raw cotton exports is
an indication of the surplus available in the country after meeting domestic
consumption. It also indicates potential for further value addition.
According to the above table, during the period 1998-2009, the overall
growth rate of T&C exports and growth rate for high value added exports growth
rate (RMG and Made-ups) are higher than the growth rate for low value added
later in this chapter deal with textile exports. Hypothesis I, “removal of
quantitative restrictions on exports of textiles and clothing to developed countries
from 2005 has made positive impact on the exports of the sector. This is due to
increase in both cotton and non-cotton products,” has been proved right.
Hypothesis II, “percentage share of exports of high value added products, mainly
readymade garments (RMGs) and made-ups to total textiles exports has been
steadily increasing, and that of low value added products decreasing,” has been
proved right. Hypothesis III, “regardless of growth rate of exports of combined
T&C sector (cotton, non-cotton and others), cotton textiles and clothing exports
has been consistently growing at a faster pace,” has been disproved. The details are
given later in the hypotheses testing section of this chapter.
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Fig. 3.1: ## Textile Exports and Overall Exports
Source: Table 3.8(A)
The Trend equations for Textile Exports and Overall Exports in US $
million for the period 1998-99 to 2008-09 are given below:
Fig. 3.1 : ## Trend lines fitted based on the derived Trend Values of Textile
Exports and overall Exports
1. The annual average increase in Textile Exports of India is US $ 1,327 million.
2. The annual average increase in Overall Exports of India is US $ 15,096 million.
Trend Equation R2 Sig Remarks
Textile Exports = 6938 + 1327 t 91.6 0.000 Good Fit
Overall Exports = - 5442 + 15096 t 89.4 0.000 Good Fit
153
Fig.3.3: ## Textile Exports and Textile Imports
Source: Tables 3.8(A) and 3.9(A)
The trend equations for Textile Exports and Textiles Imports in US $
million for the period 1998-99 to 2008-09 are given below:
Trend Equation R2 Sig Remarks
Textile Exports = 7151 + 1274 t 91.2 0.000 Good Fit
Textile Imports = 437 + 277 t 98.5 0.000 Good Fit
Fig.3.3: ## Trend lines fitted based on the derived Trend Values of Textile
Exports and Textile Imports
1. The annual average increase in Textile Exports is US$ 1,327 million.
2. The annual average increase in Textile Imports is US$ 277 million.
154
Fig. 3.4: ## Exports and Imports of Raw Cotton
Source: Tables 12(A) and 12(B)
The trend equations for Exports and Imports of Raw cotton (quantity in 000
tonnes) for the period 1998-99 to 2008-09 are presented below:
Trend Equation R2 Sig Remarks
Quantity Exports = -327 + 118t 53.7 0.01 Not Fit
Quantity Imports = 226 - 5.81 t 4.2 0.545 Not Fit
Fig. 3.4: ## Trend lines fitted based on the derived Trend Values of Exports and
Imports of Raw cotton.
1. The annual average increase in Raw Cotton in EXPORTS is 118 (‘000) tonnes.
2. The annual average increase in Raw Cotton in IMPORTS is -5.18 (‘000) tonnes.
155
Fig. 3.5 : ## EXPORTS: FIBRE, YARN, FABRICS, AND TOTAL
Textiles
Source: Tables 3.14(A) ,3.15, and 3.16
The trend equations for Exports of Fibre, Yarn, Fabrics, and Total Textiles
in Rs. crore for the period 1998-99 to 2008-09 are given below:
Trend Equation R2 Sig. Remarks
FIBRE = - 2064 + 796 t 61.2 0.004 Good Fit
YARN = 5793 + 584 t 86.5 0.000 Good Fit
FABRICS = 6706 + 675 t 88.5 0.000 Good Fit
TOTAL Textile = 29469 + 6040 t 96.3 0.000 Good Fit
Fig. 3.5: ## Trend lines fitted based on the derived Trend Values of Exports of
Fibre, Yarn, Fabrics, and Total Textiles
1. The annual average increase in FIBRE in EXPORTS is Rs. 796 crore. 2. The annual average increase in YARN in EXPORTS is Rs. 584 crore. 3. The annual average increase in FABRICS in EXPORTS is Rs. 675 crore. 4. The annual average increase in TOTAL Textiles in EXPORTS is Rs. 6,040 crore.
156
Fig. 3.6: ## EXPORTS: RMG, MADE-UPs, AND TOTAL Textiles
Source: Tables 3.14 ,3.17, and 3.18
The Trend equations for Exports of RMG, Made-ups, and Total Textiles in
Rs crore for the period 1998-99 to 2008-09 are given below:
Trend Equation R2 Sig. Remarks
RMG = 14293 + 2804 t 91.6 0.000 Good Fit
MADE-UPS = 2554 + 810 t 93.2 0.000 Good Fit
TOTAL Textile = 29469 + 6040 t 96.3 0.000 Good Fit
Fig.3.6: ## Trend lines fitted based on the derived values of Exports of RMG,
Made-ups, and Total Textiles.
1. The annual average increase in RMG in EXPORTS is Rs. 2,804 crore. 2. The annual average increase in MADE-UPs in EXPORTS is Rs. 810 crore. 3. The annual average increase in TOTAL Textiles in EXPORTS is Rs. 6,040 crore.
157
Fig. 3.7: ## COTTON EXPORTS: FIBRE, YARN, FABRICS, AND
TOTAL Cotton Textiles
Source: Tables 3.14(A) ,3.15, and 3.16
The Trend equations for cotton Exports of Fibre, Yarn, Fabrics, and Total
Textiles in Rs. crore for the period 1998-99 to 2008-09 are given below:
Trend Equation R2 Sig. Remarks
FIBRE = - 1875 + 657 t 54.6 0.009 Good Fit
YARN = 4698 + 246 t 71.3 0.000 Good Fit
FABRICS = 4086 + 14.4 t 2.6 0.638 Not Fit
TOTAL = 19192 + 3646 t 95.3 0.000 Good Fit
Fig. 3.7: ## Trend lines fitted based on the derived values of cotton Exports of
Fibre, Yarn, Fabrics, and Total cotton Textiles
1. The annual average increase in FIBRE in COTTON EXPORTS is Rs. 657 crore.
2. The annual average increase in YARN in COTTON EXPORTS is Rs. 246 crore.
3. The annual average increase in TOTAL Cotton Textiles EXPORTS is Rs. 3,646 crore.
4. The Component FABRICS is not significant,; hence, we eliminate the result.
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Fig. 3.8: ## COTTON EXPORTS: RMG, MADE-UPs, AND TOTAL
Cotton Textiles
Source: Tables 3.14 ,3.17, and 3.18
The trend equations for cotton Exports of RMG, Made-ups, and Total
cotton Textiles in Rs. crore for the period 1998-99 to 2008-09 are given below:
Trend Equation R2 Sig. Remarks
RMG = 9717 + 2247 t 94.4 0.000 Good Fit
MADE-UPS = 2567 + 482 t 84.8 0.000 Good Fit
TOTAL = 19192 + 3646 t 95.3 0.000 Good Fit
Fig. 3.8: ## Trend lines fitted based on the derived Trend Values of cotton
Exports of RMG, Made-ups and Total cotton Textiles
1. The annual average increase in RMG in COTTON EXPORTS is Rs. 2,247 crore.
2. The annual average increase in MADE-UPs in COTTON EXPORTS is Rs. 482 crore.
3. The annual average increase in TOTAL Textiles in COTTON EXPORTS is Rs. 3,646 crore.
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3.14 Indian Cotton Textiles in Global Context (Yarn, Fabrics, and Made-
ups) Text Table 3.4: World Trade in Total Textiles and Cotton Textiles (Yarn, Fabrics, and Made-ups), and India’s Share, Category-wise - Value of Exports (2002 - 08), Percentage
Change (2007 and 2008), and CAGR (2002-08) (Value in US $ billion)
Text Table 3.4 (Continued)
Source: Comtrade, published in Texprocil, India, Annual Reports 2007-08 and 2008-09.
Text Table 3.4 presents the picture of exports of the world and India during
2002-08, for total textiles and cotton textiles, as covered by TEXPROCIL-namely,
yarn, fabrics and made-ups, and total of the three categories.
Global textile trade of the three categories covered in the table recorded
growth with a CAGR of 8.3 per cent during the period 2002-08, increasing from
2008 2007 2006 2005 2002 Category
Total Cotton Total Cotton Total Cotton Total Cotton Total Cotton
In 2008-09, out of total textile exports of Rs.986.52 billion, with growth
rate of 9.3%, the share of RMG is Rs.503.90 billion (51.1%), with growth rate of
29.1%. Textiles other than RMG accounted for Rs.482.62 billion (48.9%), with
percentage change as (-)5.7. The share of the RMG exports in total textile exports
in the last 15 years from 1994-95 ranged from 43% to 55%. It has come down in
recent years, and moved up to 51% in 2009-10. Growth rate of RMG has not
shown a consistent pattern. Over 20% change was noticed in 4 out of 15 years, the
latest being 29.1%. Negative growth rate was noticed in three years. RMG
segment is quite substantial, and promising in terms of potential for exports. The
share of textiles other than RMG varied from 45% to 57%. In most of the years, it
was in the range of 50 to 57%. This segment consists of four categories – fibre,
yarn, fabrics, and made-ups. Percentage change of this segment used to be 27 to
30 during 1994-97; but declined later. It even showed negative growth in two
years. It was in the range of 12 to 15% in 6 years. CAGR for RMG in the post-
quota regime (2004-09) was 14.3%, higher than in earlier periods; for textiles other
than RMG, CAGR was 8.5% in the post-quota period, lower compared to the
quota-period level of 11.8%. It used to be high at 15.4% during 1994-2000. For
overall textile exports, CAGR during 2004-09 is higher (11.3%) compared to
earlier periods of 9.7%. This is attributable to high growth rate of RMG. In the
entire textile value chain, RMG exports stands prominent. To improve the share
and growth rate of RMG exports, the constraints faced by the sector need to be
removed; and technological advances need to be paid greater attention, apart from
vertical integration of processes.
The trend of exports of textiles other than RMG and RMG has given rise to
an interesting direction in the post-ATC scenario. Export growth of low value
added textiles like yarn and fabric has experienced steep decline. RMGs, on the
other hand, showed higher growth rate in most of the years (Tables 3.35-B, 3.17
and 3.14-A). The trend itself explains the different parameters of the sector in
terms of the manufacturers’ preference for higher value addition. The indication of
a declining share of textile exports gives rise to a widespread feeling of maturity of
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Indian manufacturers to climb up the value chain, and refrain from exporting low
value added products. The conversion of low value added products to high value
added products is beneficial to generate higher revenue, through supplies to
domestic as well as export markets. This also implies higher investment on
advanced technologies, and adoption of technology-intensive processes and
machinery, though the entire value chain can be considered labour-intensive in
comparison to other industries.
CAGR of yarn and fabrics in the post-ATC era has come down to 6% and
7.7% from the quota-period level of 11.4% and 9.1%, respectively. Similarly
made-ups exports recorded 5.1% growth rate during 2004-09, lower compared to
10.3% in the quota period (Table 3.35-B). These indicate greater domestic demand
for low value added items, and structural changes taking place in production and
supply. Increased export share of RMG is evidence of the structural changes in the
industry in manufacturing and marketing, including export promotion, along with
technological advances in industrial clusters in a number of locations in the
country.
RMG exports reached a level of Rs.503.90 billion during 2008-09 with
51.08 per cent share in total textile exports as against the exports of Rs.390.28
billion in 2007-08 with 43.25 per cent share in total textile exports, marking a
growth of 29.1 per cent (Table 3.17).
Cotton RMG exports reached a level of Rs.375.99 billion during 2008-09
with 38.11 per cent share in total textile exports as against the exports of Rs.298.09
billion in 2007-08 with 33.04 per cent share in total textile exports, marking a
growth of 26.1 per cent.
Non-cotton RMG exports reached a level of Rs.127.91 billion during 2008-
09 with 12.97 per cent share in total textile exports as against Rs.92.19 billion in
2007-08 with 10.22 per cent share in total textile exports, marking a growth of
38.8 per cent.
CAGR of exports of total RMG, cotton RMG, and non-cotton RMG
increased from 7.6, 8.7 and 4.8 per cent in ATC period to 14.3, 13.7, and 16.0 per
cent in post-ATC period, respectively (3.35-B).
164
The increasing growth rate of cotton and non-cotton RMG exports from
ATC period to post-ATC period was significant. But the percentage share of
cotton RMG exports in total cotton textile exports increased from 52.6 per cent in
the period 1994-95 to 64 per cent in 2008-09 as against the percentage share of
non-cotton exports in total non-cotton textile exports decreasing from 63.2 per cent
in 1994-95 to 37.8 per cent in 2008-09.
We can conclude that growth rate increased from ATC period to post-ATC
period for cotton and non-cotton RMG exports. But the percentage share of cotton
RMG exports in total cotton textile exports increased from 1994-95 to 2008-09
whereas the percentage share of non-cotton RMG exports in total non-cotton
textile exports decreased during the same period. It indicates that there was more
demand for Indian cotton RMG than the non-cotton RMG.
3.16 Made-ups Exports
The exports of made-ups reached a level of Rs.108.22 billion during 2008-
09 with 10.97 per cent share in total textile exports as against Rs.95.74 billion in
2007-08 with 10.61 per cent share in total textile exports, marking a growth of 13
per cent (Table 3.18).
Cotton made-ups exports reached a level of Rs.68.71 billion during 2008-09
with 6.96 per cent share into total textile exports as against Rs.65.32 billion in
2007-08 with 7.24 per cent share in total textile exports marking a growth of 5.2
per cent. The non-cotton made-ups exports reached a level of Rs.39.51 billion
during 2008-09 with 4 per cent share in total textile exports as against Rs.30.42
billion in 2007-08 with 3.37 per cent share into total textile exports, marking a
growth 29.9 per cent.
CAGR of total made-up exports, cotton made-up exports and non-cotton
made-up exports decreased from 10.3, 8.5 and 18.6 per cent in ATC period to 5.1,
1.1, and 14.7 per cent in post-ATC period respectively (Table 3.35-B).
Made-up exports showed higher performance during the period 1999-05
(second half of the ATC period) than all other value added products exports like
yarn, fabrics, and RMG. This indicates that made-up exports segment benefited
165
from global integration earlier than the other textile exports (before the completion
of ATC period).
Cotton and non-cotton made-up exports also show highest growth than the
cotton & non-cotton yarn, fabric and RMG exports segments during the period
1999-05. But the growth rate of non-cotton made-ups was higher than the growth
rate of cotton made-ups.
The percentage share of exports of non-cotton made-up total non-cotton
textiles increased to 11.7 per cent in 2008-09 from 5.9 per cent in 1994-95 whereas
in cotton made-up exports, the share decreaed from 15.7 to 11.7 per cent during
the same period.
We can conclude that both cotton and non-cotton made-ups benefited from
the ATC. But non-cotton made-ups benefited to a greater degree than the cotton
made-ups in terms of growth and share (Table 3.35-B).
In the overall basket of textile exports, cotton textile exports shows better
performance than non-cotton textile exports during the post-quota period. CAGR
of cotton textile exports increased from 7.76% in ATC period (1994-2005) to 10.6
per cent in post-ATC period (2004-09) as against CAGR of non-cotton textile
exports decreasing from 13.62 per cent to 12.32 per cent. Share of cotton textiles
export in the total textiles exports decreased from 72.7 per cent in 1994-95 to 59.5
per cent in 2008-09 whereas the percentage share of non-cotton exports increased
from 27.3 per cent to 40.5 per cent during the same period (Table 3.13-A).
3.17 Fibre Exports
The exports of textile fibre reached a level of Rs.44.17 billion with 4.5 per
cent share in total textile exports during 2008-09 as against the exports of
Rs.103.13 billion in 2007-08 with 11.43 per cent share in total textile exports,
marking a negative growth of (-)57.2 per cent (Table 3.14-A). Fibre exports
growth increased from ATC period with a CAGR 21.8 to 43.1 per cent during
post-ATC period. The percentage share of fibre exports in total textile exports
increased nine times for the period 1994-95 to 2008-09 (Table 3.35-B). The
exports of cotton textile fibre reached a level of Rs.28.76 billion during 2008-09
with 2.9 per cent share in total textile exports as against the exports of Rs.88.65
166
billion in 2007-08 with 9.83 per cent share in the total textile exports, marking a
negative growth of (-)67.7 per cent . The growth of cotton textile fibre exports
increased from a CAGR 37.7 per cent in ATC period to a CAGR 61.5 per cent in
post-ATC period. The percentage share of cotton fibre exports in total cotton
textile exports increased more than 12 times during the period 1994-95 to 2008-09.
The exports of non-cotton fibre reached a level of Rs.15.51 billion during 2008-09
with 1.6 per cent share in total textile exports as against the exports of Rs.14.48
billion in 2007-08 with 1.6 per cent share in total textile exports, marking a growth
of 7.1 per cent. The growth of non-cotton fibre textile exports decreased from a
CAGR 25.7 per cent in ATC period to CAGR 25.1 per cent in post-ATC period.
The percentage share of non-cotton fibre exports in total non-cotton exports
increased more than 5 times for the period 1994-95 to 2008-09.
We can conclude that cotton textile fibre exports showed higher growth
than non-cotton textile fibre exports during the ATC and post-ATC periods. The
cotton textile exports growth increased from ATC period to post-ATC period as
against non-cotton textile fibre exports decreasing from ATC period to post-ATC
period. The percentage share of cotton and non-cotton fibre exports in total cotton
textiles exports and non-cotton textiles exports increased from 1.1 and 2.5 per cent
in 2004-05 to 4.9 and 4.6 per cent in 2008-09, respectively. The share of cotton
fibre exports in total cotton exports was higher than the share of non-cotton fibre
exports in the total non-cotton exports during 2008-09. However, during the 2004-
05, the share of non-cotton textile fibre exports was higher than the share of cotton
fibre exports.
3.18 Yarn Exports
The exports of yarn reached a level of Rs.114.38 billion during 2008-09
with 11.6 per cent share in total textile exports as against Rs.126.77 billion in
2007-08 with 14.05 per cent share in total textile exports, marking a negative
growth of (-)9.8 per cent (Table 3.15).
Exports of cotton yarn reached a level of Rs.69.12 billion during 2008-09
with 7% share in total textiles exports as against Rs.72.82 billion in 2007-08 with
8.51 per cent share in total textile exports, marking a negative growth of (-)10 per
167
cent. The exports of non-cotton yarn reached a level of Rs.45.26 billion during
2008-09 with 4.6 per cent share in total textile exports as against Rs.49.95 billion
in 2007-08 with 5.98 per cent share in total textile exports, marking a negative
growth of (-)9.4 per cent. CAGR of exports of total yarn, cotton and non-cotton
yarn declined from 11.4, 8.0, and 22.3 per cent in ATC period to 6.0, 5.2 and 7.3
per cent in post-ATC period, respectively (Table 3.35-B).
Growth declined in non-cotton yarn exports from ATC period to post-ATC
period, but the decline has more steap in case of non-cotton yarn compared to
cotton yarn. The percentage share of cotton yarn exports in total cotton textile
exports declined from 14 in 1994-95 to 11.8 in 2008-09 whereas non-cotton yarn
exports increased from 5 to 13.4 during the same period in relation to the
corresponding total exports.
We can conclude that the growth rate has declined in cotton & non-cotton
yarn exports from ATC period to post-ATC period. But the decline in growth rate
in non-cotton yarn exports was more steep compared to cotton yarn exports during
the same period. It is also a positive signal to the value addition of the Indian
Textile Industry
3.19 Fabrics exports
The exports of fabric reached a level of Rs.154.96 billion during 2008-09
with 15.71 per cent share in total textile exports as against Rs.126.38 billion in
2007-08 with 14.01 per cent share in total textile exports marking a growth of 22.6
per cent (Table 3.16).
The exports of cotton fabric reached a level of Rs.44.46 billion during
2008-09 with 4.51 per cent share in total textile exports as against the exports of
Rs.41.67 billion in 2007-08 with 4.62 per cent share in total textile exports
marking a growth of 6.7 per cent.
The exports of non-cotton fabric reached a level of Rs.110.50 billion during
2008-09 with 11.2 per cent share in total textile exports as against Rs.84.71 billion
in 2007-08 with 9.39 per cent share in total textile exports, marking a growth of
30.4 per cent.
168
CAGR of exports of total fabric, cotton fabric and non-cotton fabric
declined from 9.1, 2.5 and 16.3 per cent in ATC period to 7.7, 2.0 and 10.4 per
cent in post-ATC period, respectively (Table 3.35-B).
Growth rate decline in non-cotton fabric exports from ATC period to post-
ATC period was higher than the declining growth rate in cotton fabric exports
during the same period.
The percentage share of cotton fabrics exports in total cotton textile exports
decreased from 17.3 per cent in 1994-95 to 7.6 per cent in 2008-09. But the
percentage share of non-cotton fabrics export in total non-cotton textile exports
increased from 23.4 per cent in 1994-95 to 32.5 per cent in 2008-09.
We can conclude that the growth rate was declined in cotton & non cotton
fabrics exports from ATC period to post-ATC period. But the growth rate decline
in non-cotton fabric exports was higher than the declining growth rate in cotton
fabric exports during the same period.
3.20 Comparative Analysis of Indian Cotton and Non-Cotton T&C Exports
This section analyses the impact of phasing out of quotas (completion of
ATC period - Agreement on Textiles and Clothing) on Indian textile exports
during 2005-09 segment-wise with break up for cotton and non-cotton categories.
Table 3.35(A) presents segment-wise exports, with percentage change over the
previous year in respect of cotton and non-cotton categories for four periods: 1994-
95, 1999-2000, 2004-05, and 2008-09. Value of exports is given in Rs. billion.
Table 3.35(B) presents segment-wise for cotton and non-cotton categories of
textile exports CAGR in four periods, and share in four years. Total textile exports
(cotton plus non-cotton) increased from Rs. 256 billion in 1994-95 to Rs. 987
billion in 2008-09 (a period of 15 years). Year 1994-95 represents the
commencement period of ATC; 2004-05, end of ATC period, and 1999-2000 falls
mid-way of the ten-year quota period of ATC. 2008-09 is the post-quota period to
analyse the impact of the elimination of the quota system. CAGR for total textile
exports (cotton & non-cotton…C+NC) for 2004-09 is 11.3%. Compared to this,
for the earlier ten-year period (1994-2005), growth is 9.7%. In the first half of the
ten-year period, growth is 10.9%, and in the second half 8.4%. Elimination of the
169
quota system from January 2005 has thus made an impact on improving the CAGR
during 2004-09 for Indian total textile exports. Analysis between cotton and non-
cotton exports reveals that cotton exports has recorded CAGR of 10.6% as
distinguished from non-cotton exports which has achieved higher growth of 12.3%
during 2004-09. For C exports in all the years of quota period, growth rate was
about the same (7.8%). For NC exports, growth rate was higher (18.2%) in the first
phase, and lower (9.2%) in the second phase, resulting in the growth rate for the
ten-year period as 13.6%.
Share of RMG in total textile exports was 51% in the post-quota period of
2008-09, 46% in the quota period (2004-05), 56% in 1994-95, and 48% in 1999-
2000. Made-ups accounted for 11% in 2008-09, compared to 13.8% in 2004-05.
The picture in 1994-95 was 13% and for 1999-00, 9.2%. These two together
represent higher value added products compared to other segments. This indicates
that the trade has been shifting towards higher value added products from the stage
of largely exporting raw material and intermediate products. In 2008-09, share of
fibre was 4.5%, yarn 11.6%, and fabrics 15.7%. In the post-quota period, share for
these segments has come down. Another interesting finding is cotton RMG’s share
is 64% in 2008-09, compared to 57.3% in 2004-05, and around 53% in the earlier
two years. As a contrast, non-cotton RMG’s share has declined in 2008-09 to
32.0% from 63%, 40%, and 28% in the earlier three years. In higher value added
products, cotton products are gaining in importance. CAGR of total RMG exports
is 14.3% in 2004-09. In the earlier two periods of quota regime growth was 7.8%
and 7.4%. This is corroborated by higher growth rate of cotton and non-cotton
RMG (13.7% and 16% in 2004-09, respectively), which are higher compared to
growth rates recorded in earlier periods for both the categories. In respect of yarn
and fabrics, CAGR in 2004-09, is less compared to the earlier two periods. Cotton
fibre exports has recorded higher CAGR (61.5%) compared to non-cotton fibre
exports (25.1%) resulting in growth rate for total fibre exports of 43.1% in 2004-
09. Growth rate in 2004-09 is higher in all categories of fibre compared to earlier
periods.
170
High Fibre export growth in post-quota period indicates the increasing
demand for fibre in response to increase of world textile trade for the last few
years. This also reveals that there is potential for export of fibre from the available
surplus in the country after meeting domestic consumption for all categories of
consumers. Fluctuations in fibre exports in different years are because of the
changing policies of the Government, which has even banned export of fibre in
certain periods.
IV. Indian Textiles and Clothing Imports Scenario(1998-2009)
3.21 Overview of T&C Imports
Indian Textile and Clothing (T&C) imports stands at US $3.44 billion in
2009-10, US $3.58 billion in 2008-09, US $3.33 billion in 2007-08, US $2.27
billion in 2004-05, US $1.17 in 2000-01, and US $0.84 billion in 1998-99 (Table
3.9A). Decline in 2009-10 is of (-)3.9%. In earlier years, maximum growth rates
reached are 31.8% in 2001-02, 23.6% in 2003-04, 20.6% in 2005-06, and 17.2% in
2007-08. In relation to overall imports of the country, textile imports accounted for
1.2% in 2009-10. The percentage was 3.0 in 2001-02, declined thereafter to 2.0 in
2004-05, and came down further year after year. It remained at 1.3% or 1.2% in
the recent three years. In the ATC period (1994-2005), in US $ terms imports
increased by CAGR of 9.6%, and in the post-ATC period (2004-09), CAGR is
12.1%. CAGR during 1999-2005 was 14.8%. Values in Rs. terms indicate that the
percentage change of cotton and non- cotton imports (Tables 3.13 B-1 and B-2)
has been varying year after year without a set pattern. Cotton textile imports
increased by 32.7% in 2008-09, compared to 18.4% for non-cotton textile imports,
resulting in overall textile imports percentage change as 21.1 for 2008-09.
Percentage change for overall textile imports was low in a number of years. It was
above 17 in five years in the last 11 years. Non-cotton textiles imports in total
textiles imports accounted for 75% to 83% in the recent years, and cotton textiles
imports was in the range of 17 to 20%. Non-cotton imports is, thus, dominant. In
2008-09, 44% of textiles imports was of yarn and fabrics, and 46% was of raw
material and semi-raw material. Trend lines have been drawn based on trend
equations for textiles imports in relation to overall imports of the country during
171
1998-2009, and also for five segments for total textiles imports, and for non-cotton
textiles imports (Figures 3.2,3.3, and 3.9 to 3.12). Raw material imports mainly
consist of extra long staple (ELS) cotton, where domestic production is less than
consumption. Raw cotton imports has been declining in recent years though it
increased in certain years. As a contrast, raw cotton exports has been moving in
the upward direction in a number of years (Tables 3.12-A and B).
The trend equations for textiles imports reveal as follows:
Text Table 3.6: Annual Average Increase in Textiles Imports during 1998-2009
As noticed from the above data, weightage for textiles imports is, thus, in
favour of low value added raw materials and semi-raw materials (yarn and
fabrics). Growth rate is higher for low value added products compared to high
value added products of RMG and Made-ups. Among low value added products,
growth rate for fabric is higher than for yarn. Similarly, among high value added
products, growth rate is higher for made-ups compared to RMG . We can conclude
that for imports, low value added products occupy greater weightage.
Analysis of textiles imports of 2008-09 reveals as follows: Cotton textiles
20.2%, non-cotton textiles (59.4%), and others (20.4%). Cotton and non-cotton
textiles imports include the following: fibre 27.9%, yarn 16.5%, fabric 24.4%,
RMG 3.9%, and Made-ups 6.9%.
Hypothesis Tables 3.4 and 3.5 (a), (b) & (c), presented later in this chapter,
deal with textile imports. Hypothesis V, “Percentage share of imports of non-
cotton textiles and clothing in relation to combined T&C imports has been steadily
increasing”, has been proved right. Hypothesis IV, “Percentage share of imports of
low value added products - fibre, yarn, and fabrics - to total T&C imports has been
steadily increasing”, has been disproved. The details are given later in the
Category of Textiles Imports
Overall Growth
(Value in Rs. crore)
Yarn 213
Fabric 414
RMG 49.3
Made-ups 62.3
Total Textiles 1196
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hypotheses testing section of this chapter. In the post-ATC period, the share of
cotton textiles imports in total textile imports increased from 17.1% in 2005-06 to
18.4% in 2007-08, and 20.2% in 2008-09. In 2004-09, CAGR of non-cotton textile
imports was 12.43%, compared to 11.9% for cotton textile imports, and 12.33%
for the combined imports. During the period 2005-06 to 2008-09, percentage of
high value added products in total textile imports shows increasing trend – cotton
RMG and made-ups increased from 0.75 and 0.29 to 1.70 and 0.58, respectively;
non-cotton RMG and made-ups increased from 1.33 and 3.62 to 2.23 and 6.29,
respectively. Low value added products imports percentage in total textile imports
showed decreasing trend, in respect of both cotton and non-cotton products.
Textile imports data mentioned above does not include import of machinery
and accessories for the textile industry in the context of technology upgradation
and modernisation availing of the facility available under Technology Upgradation
Fund Scheme (TUFS) and Export Promotion of Capital Goods (EPCG) Scheme, in
particular. Import of machinery for T&C units includes shuttleless powerlooms,
and machinery for garment units, not to speak of modernisation needs of spinning
and composite mills. The survey of garment units revealed that garment
manufacturing units engaged in different processes have the propensity to replace
old machines with new imported machines from China, Japan and South Korea,
despite very low off take of TUF loans obtained by garment manufacturers. Those
who are setting up new units or making expansion are installing imported
machines from the beginning for higher productivity and better quality products.
However, there is a greater tendency to buy Chinese origin machines due to its low
cost. Embroidery machines, which require comparatively higher capital
investments, are also imported from Japan. In Tirupur (Tamil Nadu) garments
cluster, machines used at various stages of production are largely imported to
match international standards of production. Therefore, technology used is the
latest. Different types of machines are imported from Europe, USA and Far East
Asia like Japan/Taiwan/ Korea. Of late, Tirupur exporters have started using
machines of Chinese origin due to cost considerations. In the context of
infrastructural development of textile / clothing units through Integrated Textile
173
Parks and Apparel Parks, the demand for imported machinery and foreign direct
investment is bound to increase for new units being set up in these locations.
3.22 Fibre Imports
The imports of fibre reached a level of Rs.4,515 crore during 2008-09 with
27.85 per cent share in total textile imports as against Rs.3,493 crore in 2007-08
with 26.09 per cent share, marking a growth of 29.3 per cent (Tables 3.19-A & B).
The imports of cotton fibre reached a level of Rs.1,691 crore during 2008-09 with
10.43 per cent share in total textile imports as against Rs.912 crore in 2007-08 with
6.81 per cent share, marking a growth of 85.4 per cent.
The imports of non-cotton fibre reached a level of Rs.2,824 crore during
2008-09 with 17.42 per cent share in total textile imports as against Rs.2,581 crore
in 2007-08 with 19.27 per cent share, marking a growth of 9.4 per cent.
3.23 Yarn Imports
The imports of yarn reached a level of Rs.2,672 crore during 2008-09 with
16.48 per cent share in total textile imports as against Rs.2,270 crore in 2007-08
with 16.95 per cent share, marking a growth of 17.7 per cent (Table 3.20).
The imports of cotton yarn reached a level of Rs.74 crore during 2008-09
with 0.46 per cent share in total textile imports as against Rs.91 crore in 2007-08
with 0.68 per cent share, marking a negative growth of (-)18.7 per cent.
The imports of non-cotton yarn reached a level of Rs.2,598 crore during
2008-09 with 16.03 per cent share in total textile imports as against Rs.2,179 crore
in 2007-08 with 16.27 per cent share, marking a growth of 19.2 per cent.
3.24 Fabric Imports
The imports of fabric reached a level of Rs.3,956 crore during 2008-09 with
24.40 per cent share in total textile imports as against Rs.3,826 crore in 2007-08
with 28.57 per cent share, marking a growth of 3.4 per cent (Table 3.21).
The imports of cotton fabric reached a level of Rs.1,136 crore during 2008-
09 with 7 per cent share in total textile imports as against Rs.1,193 crore in 2007-
08 with 8.91 per cent share, marking a negative growth of (-)4.8 per cent.
174
The imports of non-cotton fabric reached a level of Rs.2,820 crore during
2008-09 with 17.4 per cent share in total textile imports as against Rs.2,633 crore
in 2007-08 with 19.66 per cent share, marking a growth of 7.1 per cent.
3.25 RMG Imports
The imports of RMG reached a level of Rs.638 crore during 2008-09 with
3.93 per cent share in total textile imports as against Rs.454 crore in 2007-08 with
3.39 per cent share, marking a growth of 40.5 per cent (Table 3.22).
The imports of cotton RMG reached a level of Rs.276 crore during 2008-09
with 1.70 per cent share in total textile imports as against Rs.199 crore in 2007-08
with 1.49 per cent share, marking a growth of 38.7 per cent.
The imports of non-cotton RMG reached a level of Rs.362 crore during
2008-09 with 2.23 per cent share in total textile imports as against Rs.255 crore in
2007-08 with 1.90 per cent share, marking a growth of 42 per cent.
3.26 Made-ups Imports
The imports of made-ups reached a level of Rs.1,114 crore during 2008-09
with 6.87 per cent share in total textile imports as against Rs.493 crore in 2007-08
with 3.68 per cent share, marking a growth of 126 per cent (Table 3.23).
The imports of cotton made-ups reached a level of Rs.94 crore during 2008-
09 with 0.58 per cent share in total textile imports as against Rs.70 crore in 2007-
08 with 0.52 per cent share, marking a growth of 34.3 per cent.
The imports of non-cotton made-ups reached a level of Rs.1,020 crore
during 2008-09 with 6.29 per cent share in total textile imports as against Rs.423
crore in 2007-08 with 3.16 per cent share, marking a growth of 141.1 per cent.
3.27 Direction of Textile Imports
• In case of all textile imports in 2008-09, China continues to be the leading source country with a share of 39.4 per cent followed by USA and Australia with 6 and 4 per cent share, respectively (Table 3.30). The share of China has increased from 12.3% in 1998-99, to 24.4% in 2003-04, and 42.1% in 2007-08, and declined to 39.4% in 2008-09. The share of developed countries has come down, and that of developing countries has increased, over years. In case of USA and Australia, the shares were 16.1% and 9.0% in 2000-01, and 6.1% and 4.1% in 2008-09, respectively. The shares of other Asian developing countries has remained at about the same level.
175
• In case of cotton Raw (including waste cotton) imports, USA continues to be the leading source country with a share of 24 per cent followed by Egypt and Burkina Faso with 15.92 and 9.73 per cent, respectively (Table 3.31-B). Table 3.31-A in US $ terms indicates that after USA and Egypt, Tanzania and Uzbekistan stand next with 12.24% and 10.44%, respectively in 2008-09.
• In case of cotton yarn imports, Pakistan was a leading market with a share of 59 per cent followed by China PRP and Vietnam Soc Rep with 14.09 and 3.28 per cent, respectively (Table 3.33-C).
• In case of cotton Fabric imports, China PRP was a leading market with a share of 47 per cent followed by Pakistan and Hong Kong with 10.5 and 7.4 per cent, respectively (Table 3.33-D).
• In case of RMG imports, China PRP was a leading market with a share of 29 per cent followed by Italy and Nepal with 11.5 and 5.3 per cent, respectively (Table 3.34-B). In US $ terms, UK stands third with 9.4 per cent share (Table 3.34-A).
• In case of made-up articles imports, Bangladesh was a leading market with a share of 23 per cent followed by China and USA with 20 per cent each (Table 3.33-B).
176
Fig. 3.2 : ## Textile Imports and Overall Imports
Source: Table 3.9(A)
The trend equations for Textile Imports and overall Imports in US $ million
for the period 1998-99 to 2008-09 are given below:
Trend Equation R2 Sig Remarks
Textile Imports = 437 + 277 t 98.5 0.000 Good Fit
Overall Imports = - 29461 + 25143 t 84.8 0.000 Good Fit
Fig. 3.2 : ## Trend lines fitted based on the derived Trend Values of Textile
Imports and overall Imports
1. The annual average increase in Textile Imports is US $ 277 million.
2. The annual average increase in Overall imports is US $ 25,143 million.
177
Fig. 3.9: ## IMPORTS: FIBRE, YARN, FABRICS, AND TOTAL Textiles
Source: Tables 3.9(A) ,3.19(A), 3.20, and 3.21
The Trend equations for imports of Fibre, Yarn, Fabrics, and Total Textiles
in Rs. crore for the period 1998-99 to 2008-09 are given below:
Trend Equation R2
Sig. Remarks
FIBRE = 2147 + 167 t 53.3 0.011 Not Fit
YARN = 291 + 213 t 98.2 0.000 Good Fit
FABRICS = - 115 + 413 t 92.2 0.000 Good Fit
TOTAL Textile = 2203 + 1196 t 98.7 0.000 Good Fit
Fig. 3.9: ## Trend lines fitted based on the derived Trend Values of Imports of
Fibre, Yarn, Fabrics, and Total Textiles
1. The annual average increase in YARN in IMPORTS is Rs. 213 crore. 2. The annual average increase in FABRICS in IMPORTS is Rs. 414 crore. 3. The annual average increase in TOTAL Textiles in IMPORTS is Rs. 1,196 crore.
4. The Component FIBRE is not significant; hence, we eliminate the result.
178
Fig.3.10: ## IMPORTS: RMG, MADE-UPs, AND TOTAL Textiles
Source: Tables 3.9(A) , 3.22, and 3.23
The Trend equations for Imports of RMG, Made-ups, and Total Textiles in
Rs. crore for the period 1998-99 to 2008-09 are given below:
Trend Equation R2
Sig. Remarks
RMG = - 68.5 + 49.3 t 80.6 0.000 Good Fit
MADE-UPs = 54 + 62.3 t 63.9 0.003 Good Fit
TOTAL Textile = 2203 + 1196 t 98.7 0.000 Good Fit
Fig.3.10: ## Trend lines fitted based on the derived Trend values of Imports of
RMG, Made-ups, and Total Textiles
1. The annual average increase in RMG in IMPORTS is Rs. 49.3 crore. 2. The annual average increase in MADE-UPS in IMPORTS is Rs. 62.3 crore. 3. The annual average increase in TOTAL Textiles in IMPORTS is Rs. 1,196 crore.
179
Fig.3.11:## NON-COTTON IMPORTS: FIBRE, YARN, FABRICS, AND
TOTAL Non-Cotton Textiles
Source: Tables 3.13(B-1) ,3.19(A), 3.20, and 3.21
The Trend equations for Non-cotton Imports of Fibre, Yarn, Fabrics, and
Total non-cotton Textiles in Rs. crore for the period 1998-99 to 2008-09 are given
below:
Trend Equation R2 Sig. Remarks
FIBRE = 1029 + 159 t 96.4 0.000 Good Fit
YARN = 285 + 205 t 98.1 0.000 Good Fit
FABRICS = 44 + 276 t 93.4 0.000 Good Fit
TOTAL = 1017 + 763 t 95.2 0.000 Good Fit
Fig.3.11: ## Trend lines fitted based on the derived Trend Values of Non-cotton
Imports of Fibre, Yarn, Fabrics, and Total non-cotton Textiles
1. The annual average increase in FIBRE in NON-COTTON IMPORTS is Rs. 159 crore.
2. The annual average increase in YARN in NON-COTTON IMPORTS is Rs. 205 crore
3. The annual average increase in FABRICS in NON-COTTON IMPORTS is Rs. 276 crore.
4. The annual average increase in TOTAL Textiles in NON-COTTON IMPORTS is Rs. 763 crore.
180
Fig.3.12:## NON-COTTON IMPORTS: RMG, MADE-UPs AND TOTAL
Non-Cotton Textiles
Source: Tables 3.13(B-1) , 3.22, and 3.23
The Trend equations for Non-Cotton Imports of RMG, Made-ups, and Total
Non-cotton Textiles in Rs. crore for the period 1998-99 to 2008-09 are given
below:
Trend Equation R2 Sig. Remarks
RMG = - 22.6 + 27.2 t 80.3 0.000 Good Fit
MADE-UPs = 29 + 58.5 t 62.3 0.004 Good Fit
TOTAL = 1017 + 763 t 95.2 0.000 Good Fit
Fig.3.12: ## Trend lines fitted based on the derived trend values of Non-cotton
Imports of RMG, Made-ups, and Total Non-cotton Textiles
1. The annual average increase in RMG in NON-COTTON IMPORTS is Rs. 27.2 crore.
2. The annual average increase in MADE-UPs in NON-COTTON IMPORTS is Rs. 58.5 crore.
3. The annual average increase in TOTAL Textiles in NON-COTTON IMPORTS is Rs.763 crore.
181
3.28 Comparison of Time Series Data Between Two Periods of ATC and
Post-ATC
Time series data on exports and imports of textiles of cotton and non-cotton
categories for different product groups - for each category, fibre, yarn, fabric,
RMG, made-ups, and the combined total of segments - have been processed for
two periods. The periods considered are ATC (1998-2005) and post-ATC (2005-
2009).
For this purpose, we have adopted Dummy Variable Regression Method, and
the results of analysis are presented in Annexure I. From the results of four
categories, two for cotton and non-cotton exports, and two for cotton and non-
cotton imports, it is noticed that only in case of two categories, significant
difference has been noticed in the overall growth rates between two sub-periods of
ATC and post-ATC. These are:
1. Exports of combined cotton textiles 2. Exports of combined non-cotton textiles
In case of exports of combined cotton textiles, the common growth rate
between two sub-periods is Rs.448 crore, and the additional growth rate in post-
ATC period is Rs.306.7 crore. Similarly, in case of exports of combined non-
cotton textiles, the common growth rate between two sub-periods is Rs.4371.8
crore, and the additional growth rate in post-ATC is Rs.1322.3 crore.
In all other cases, it may be concluded that there is no significant difference in
the overall growth rates between ATC and post-ATC periods.
3.29 Testing of Hypotheses
Analysis attempted in this Chapter leads to the following conclusions on the
five hypotheses mentioned in Chapter 2. For each hypothesis, result is indicated
here along with reference to the tables presenting data in detail. For purposes of
convenience, relevant data for each hypothesis have been consolidated, and
presented in hypotheses tables in the subsequent pages.
Hypothesis 1: Removal of quantitative restrictions on exports of textiles
and clothing to developed countries from 2005 has made a positive impact on the
182
exports of the sector. This is due to increase in both cotton and non-cotton
products.
Result: The hypothesis has been proved right with increase in CAGR
during 2004-09 of 11.28% for total textiles and clothing exports, 10.6% for cotton
and 12.32% for non-cotton categories. All the three items have shown better
performance with higher growth rates compared to earlier periods - Table 3.13 (A-
2). The same pattern holds good for cotton and non-cotton categories, when we
analyse percentage change in individual years - Table 3.13 (A-1). For value in US
$ billion, CAGR for total textiles and clothing exports for 2004-09 works out to
10.53%, higher compared to earlier periods. CAGR for overall exports for this
period is 22.04%, much higher compared to earlier periods. The post-quota regime
has, thus, been beneficial to the export sector.
Hypothesis 2: Percentage share of exports of high value added products,
namely, readymade garments (RMGs) and made-ups to total textiles exports has
been steadily increasing, and that of low value added products decreasing.
Result: The hypothesis has been proved right, as the share of two value
added product categories in total textiles and clothing exports increased to 62% in
2008-09 from 57% in 1999-00, though the figure was less in certain years.
Increase is particularly marked in respect of cotton RMGs and made-ups. In 2008-
09 in respect of cotton RMG, the share was 64.0% and for made-ups 11.7%, thus
totalling nearly 76% of total cotton textiles and clothing exports (Table 3.35-B).
Hypothesis 3: Regardless of the growth rate of exports of combined
textiles and clothing sector (cotton, non-cotton, and others), cotton textiles and
clothing exports has been consistently growing at a faster pace.
Result: The hypothesis has been disproved. As observed from the data
given in Table 3.13(A-1) for individual years, exports of cotton textiles and
clothing has been broadly following the trend of total textiles and clothing exports,
with decline in per cent change in certain years.
Hypothesis 4: Percentage share of imports of low value added products,
namely, fibre, yarn, and fabrics to total textiles and clothing imports has been
steadily increasing.
183
Result: The hypothesis has been disproved (Tables 3.19, 3.20 and 3.21).
Combined share of the three categories of low value added products in relation to
total textiles imports, including others has, on the contrary, come down from 81%
in 1999-2000 to 78% in 2004-05, and 69% in 2008-09. In fact, the share of imports
of high value added products has been on the increase over years, rising from 5.8%
in 1999-2000 to 7.4% in 2003-04, and 10.8% in 2008-09. The figure declined in
certain years.
Hypothesis 5: Percentage share of imports of non-cotton textiles and
clothing in relation to combined textiles and clothing imports has been steadily
increasing.
Result: The hypothesis has been proved right (Tables 3.13 B-1 and B-2).
The share of imports of non-cotton textiles in combined textiles and clothing,
including others has been moving on the same lines as the total textiles and
clothing imports. It is around 77% to 83% in most of the recent years. Per cent
change is over 20 in a number of years, though it was low in a few years.
184
Database for Testing Hypotheses
Hypothesis I
Removal of quantitative restrictions on exports of textiles and clothing to developed countries from 2005 has had a positive impact on the exports of the sector. This is due to increase in both cotton and non-cotton products – Source: Tables 3.13 (A-1 & A-2) --------- The hypothesis has been proved right.
Hypothesis Table 3.1(a): Exports - All Textiles, with break-up for Cotton and Non-cotton
(1993-2009) – Per cent share and change
(value in Rs. billion)
% Share of total
% Change
Year Cotton Non-cotton
Total Textiles
Cotton Non-cotton
Cotton Non- cotton
Total Textiles
% share of textiles exports to overall exports
1 2 3 4 5 6 7 8 9 10
1993-94 152.64 51.17 203.81 74.9 25.1 Na na Na 29.2
Hypothesis Table 3.1(b): CAGR of Textiles Exports with break-up for Cotton and Non-
cotton (1994-2009)
% based on value in Rs. billion % based on value in US $
billion
Textiles Exports
Period
Cotton Non-Cotton
Total Textiles
Overall Exports
Textile Exports
Overall Exports
1 2 3 4 5 6 7
1994-2000 7.64 18.19 10.94 14.05 6.87 6.94
1999-2005 7.88 9.24 8.39 18.66 6.00 17.80
1994-2005 7.76 13.62 9.66 16.33 6.41 12.24
2004-2009 10.60 12.32 11.28 22.34 10.53 22.04
185
Hypothesis II
Percentage share of exports of high value added products, namely, readymade garments (RMGs) and made-ups to total textiles exports has been steadily increasing. --------- The hypothesis has been proved right.
Hypothesis Table 3.2(a): Per cent Share of Exports of High Value Added Products – Cotton
and Non-cotton to the Total Textiles of the Respective Categories (1994-2009) – Source:
Table 3.35B (value in Rs. billion)
Cotton Non-Cotton Total (C+NC) Year
RMG Made-ups Total RMG Made-ups Total RMG Made-ups Total 1 2 3 4 5 6 7 8 9 10
Regardless of the growth rate of exports of combined textiles and clothing sector (cotton, non-cotton, and others), cotton textiles and clothing exports has been consistently growing at a faster pace. – Source: Tables 3.13(A-1) & A-2 ---------The hypothesis has been disproved.
186
Hypothesis Table 3.3(a): CAGR of Total Textiles Exports with
Break-up for Cotton and Non-cotton (%) - (1994-2009)
Percentage share of imports of low value added products, namely, fibre, yarn, and fabrics to total textiles imports has been steadily increasing. -----------
The hypothesis has been disproved.
Hypothesis Table 3.4: Per cent Share of Imports of Textiles – Low Value Added and High
Value Added Products to Total Textile Imports, including others (1999-2009)
Percentage share of non-cotton textiles and clothing imports in relation to combined textiles and clothing imports has been steadily increasing. – Source: Tables 3.13(B-1 & B-2) --------- The hypothesis has been proved right.
Hypothesis Table 3.5(a): Per cent Share of Total Textiles Imports with Cotton and Non-
cotton Break-up (1998-2009)
(value in Rs. billion)
Period Non-cotton Cotton
1998-99 81.3 18.7
1999-00 71.1 28.9
2000-01 73.9 26.1
2001-02 67.7 32.3
2002-03 77.4 22.6
2003-04 75..3 24.7
2004-05 79.5 20.5
2005-06 82.9 17.1
2006-07 82.2 17.8
2007-08 81.6 18.4
2008-09 79.8 20.2
Hypothesis Table 3.5(b): Per cent Change of Cotton and Non-cotton Textiles Imports
The regression equation is FABRICS = - 43 + 101 t + 28.4 Dt Predictor Coef StDev T P
Constant -42.9 151.0 -0.28 0.783
t 101.30 33.89 2.99 0.017
Dt 28.38 23.20 1.22 0.256 > 0.05
R-Sq = 88.8% R-Sq(adj) = 86.0%
The regression equation is Components Total Imports = 727 + 245 t - 53.1 Dt Predictor Coef StDev T P
Constant 727.0 298.9 2.43 0.041
t 244.64 67.10 3.65 0.007
Dt -53.14 45.94 -1.16 0.281 > 0.05
R-Sq = 77.9% R-Sq(adj) = 72.3%
The regression equation is Combined Textiles = 2417 + 1130 t + 52.4 Dt Predictor Coef StDev T P
Constant 2416.6 407.4 5.93 0.000
t 1130.45 91.45 12.36 0.000
Dt 52.40 62.60 0.84 0.427 > 0.05
R-Sq = 98.8% R-Sq(adj) = 98.5%
V. Conclusions based on Empirical Analysis on the Impact of Quota
Free Regime on Indian Exports and Imports of T&C
1. Quota free regime from January 2005 has made a positive impact on the Indian textiles and clothing exports, as well as on the overall exports of the country.
2. Share of cotton textiles and clothing (T&C) exports in total T&C exports has increased to around 63% in recent years, and has been steadily increasing, while that of non-cotton T&C exports has come down to around 37%.
3. Exports of non-cotton T&C recorded higher growth rate of 12.3%, compared to that of cotton T&C of 10.6% during 2004-09.
4. Trade has been shifting towards higher value added products, namely, readymade garments and made-ups, from the earlier stage of exporting raw materials and intermediate products. Manufacturers have also expressed this preference, in view the demand pattern and competitive environment observed in developed countries in particular.
5. Share of yarn and fabrics exports over years, and also growth rate of both categories during 2004-09 have declined. Declining trend of the share of cotton yarn in total T&C exports has been arrested from 2006-07 after 6 years, whereas the declining trend of the share of cotton fabrics in total T&C exports has been arrested from 2007-08 after 8 years.
6. Share of RMG in total T&C exports has increased to 51% in 2008-09 from a low figure of 46% in 2004-05. In 2008-09, share of RMG in cotton T&C exports is 64%, and has steadily increased, whereas RMG’s share in non-cotton T&C exports has come down to 32%. CAGRs of RMG of cotton, non-cotton, and total T&C exports have been the highest of all categories, with the
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exception of fibres during 2004-09. Cotton and non-cotton made-ups exports have similar share in 2008-09. CAGR for 2004-09 for non-cotton made-ups exports is high, and of cotton made-ups low. As a result, CAGR of made-ups in total T&C exports is also low.
7. Non-cotton textile imports accounted for 75 to 83 per cent in recent years. And cotton textile imports remained around 17 to 20 per cent. Non-cotton imports is, thus, dominant. The imports largely consist of raw materials and semi-raw material. Raw material imports mainly consist of extra long staple cotton.
8. In case of all textile imports, China continues to be the leading source country, followed distantly by USA and Australia. The share of China and other developing countries has increased, and of developed countries declined over years. The leading countries for import of various segments are USA for raw materials (raw cotton), Pakistan for cotton yarn, China for cotton fabrics and RMGs, and Bangladesh for made-ups.
VI. Summing Up
The Indian Textile industry consumes a diverse range of fibres and yarn.
The industry is multi-fibre based. Cotton is the major raw material used in India.
Indian textile industry is skewed towards cotton, with 60 per cent of yarn as
cotton-based, and the remaining 40 per cent being non-cotton-based, using other
fibres. India is the second largest producer of cotton in the world, next to China,
and has the largest cultivated area under cotton, with China as the second, and
USA as the third; and accounts for 20 per cent of global production of cotton.
However, in yield of cotton, India lags far behind a number of other countries.
Having a highly fragmented structure, the Indian Textile and Apparel value
chain consists of four stages: ginning and spinning, weaving and knitting,
processing, and clothing manufacturing. India produces good quality yarn, but
integration of the industry is weak as is the capacity to deliver quality products on
a timely and flexible schedule. India’s competitiveness in global markets is
confined to grey / unprocessed products such as grey yarn and grey fabric. Dyeing
and processing segment of the Indian textile industry is not so technologically well
advanced due to restrictive policy regime in the past. This is reflected in the
relatively inferior quality of domestic dyed and processed yarn and fabric. The mill
sector is not able to withstand competition from the powerloom sector. The
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powerloom sector is likely to remain competitive vis-à-vis other sectors. In fact,
the handloom sector is finding it extremely difficult to survive, and is competitive
only in a few artisanal products. The share of the mill sector is unlikely to grow
rapidly in future as well.
Quota free regime of international trade from January 2005 has made a
positive impact on the Indian textile and clothing (T&C) exports, as well as on the
overall exports of the country. Share of cotton T&C exports in total T&C exports
has increased to around 63% in recent years, and has been steadily increasing,
while that of non-cotton T&C exports has come down to around 37%. The trade
has been shifting towards higher value added products, namely, readymade
garments and made ups from the earlier stage of exporting raw materials and
intermediate products. Non-cotton textile imports accounted for 75 to 83 per cent
in the recent years, and cotton textile imports remained around 17 to 20 per cent.
Non-cotton imports is, thus, dominant. The imports largely consist of extra long
staple cotton. In case of all textile imports, China continues to be the leading
source country. This is followed distantly by USA and Australia. The share of
China and other developing countries has increased, and of developed countries
declined over years. In case of raw cotton, USA continues to be the leading source
Note: Figures given in the tables 3.13(A & B) are extracted from the respective component tables for fibre, yarn, fabrics, RMG, and made-ups. Cotton, non-cotton, and total of the two categories are presented here. Non-cotton and total textiles figures include a few others beyond five categories for which details are given in the subsequent tables. Total textiles exports and Imports values as given here differ from those given elsewhere in earlier tables. This is due to the difference in coverage of items in the respective tables. Percentage change indicated is over the previous year.
Sources: Textile Commissioner, Ministry of Textiles, Government of India, Compendium of Textile Statistics, 2002, 2004, 2008, and 2009, Mumbai. Website : www.txcindia.com
% share of
textile
exports to
overall
exports
(value in Rs. billion)
Table 3.13(A-1): Exports - All Textiles, with break-up for Cotton and Non-cotton
(1993-2009)
Year CottonNon-
cotton
Total
Textiles
% Share of
total% Change
Table 3.13(A-2): CAGR of Textile Exports with break-up for Cotton and Non-cotton
1994-2000 na na na 19.06 4.54 11.631999-2005 7.95 18.30 15.67 18.41 14.83 17.561994-2005 na na na 18.74 9.56 14.562004-2009 11.90 12.43 12.33 28.69 12.13 28.46
Note: Figures given in the tables 3.13(A & B) are extracted from the respective component tables for fibre, yarn, fabrics, RMG, and made-ups. Cotton, non-cotton, and total of the two categories are presented here. Non-cotton and total textiles figures include a few others beyond five categories for which details are given in the subsequent tables. Total textiles exports and Imports values as given here differ from those given elsewhere in earlier tables. This is due to the difference in coverage of items in the respective tables. Percentage change indicated is over the previous year.
Sources: ibid
Table 3.13(B-1): Imports - All Textiles, with break-up for Cotton and Non-cotton (1998-
2009)
Table 3.13(B-2): CAGR of Textile Imports with break-up for Cotton and Non-cotton
Total consumption 173.36 168.83 217.00 241.00 230.00
Export 0.65 0.84 47.00 85.00 50.00
Total disappearance 174.01 169.67 264.00 326.00 280.00
Carry forward 40.50 24.00 56.00 43.00 60.00
Note: P = Provisional
Source: ibid.
Table 3.5: Balance Sheet of Cotton (1999 - 2009)
(Quantity in lakh bales of 170 kgs)
SUPPLY
DEMAND
197
198
Qty % Share Qty % Share Qty % Share
1 2 3 4 5 6 7 8
1999-2000 18989 49 5913 15 13724 36 38626
2000-01 19627 49 6348 16 14358 36 40333
2001-02 19769 48 6288 15 15334 37 41390
2002-03 19296 47 5877 14 16289 39 41462
2003-04 18849 44 6078 14 18007 42 42933
2004-05 20578 46 6025 13 18388 41 44991
2005-06 23873 49 6299 13 18655 38 48826
2006-07 26225 50 6882 13 19582 37 52689
2007-08 27205 49 6888 12 21183 38 55276
2007-08 (Apr-Dec) 20354 50 5119 13 15439 38 40912
2008-09 (Apr-Dec) 20214 50 5246 13 15018 37 40478
CAGR(%) (1999-2008) 4.6 1.9 5.6 4.6
Note : Percentage Share of each category in relation to total quantity is worked out annually. CAGR has been worked out for the two extreme periods (1999-2008).
Website: www.txcindia.comSource : Official Indian Textile Statistics 2008, Ministry of Textiles, Government of India
Table 3.6: Variety-wise Production of Cloth (1999 - 2009)
2. Shuttleless Looms Mn. No. 0.88 0.05 5.68 4 China
3. Handlooms Mn. No. 4.6 3.9 84.78 1 India
9.82 5.93 60.39 1 India
1. Raw Cotton 2005-06) (Oct.-Sept.) Mn. Kg. 24756 4148 16.76 3 China
2. Cellulosic fibre/yarn (2005) Mn. Kg. 2529 295 11.66 2 China
3. Synthetic fibre/yarn (2005) Mn. Kg. 31762 1850 5.82 5 China
4. Raw Wool (Greasy) (2005) Mn. Kg. 2164 45 2.08 7 Australia
5. Raw Silk (2004) Mn. Kg. 126 17 13.49 2 China
6. Jute (2005-06) Mn. Kg. 2826 1575 55.73 1 India
64163 7930 12.36
Yarn - (2005)
Cotton Yarn (Est.) Mn. Kg. 24994 2460 9.84 2 China
Fabrics - (2005)
Cotton fabrics(Est.) Mn. Kg. 14011 2071 14.78 3 China
Total fibre - 2005 (including jute ) (P) Kg. 9.28 6.42 ---- ---- ----
Total textiles & colthing exports Bn. US $ 479.54 17.08 3.56 6 EU (25)
A. Spinning
1. Spindles Mn. No. 53.26 9.77 18.34 2 China
2. Rootors Mn. No. 2.79 0.13 4.66 5 China
B. Draw texturing '000 No. 1952.71 185.6 9.50 2 China
C. Weaving
1. Shuttleless Looms '000 No. 519.17 12.00 2.31 7 China
2. Shuttle Looms '000 No. 102.72 3.60 3.50 2 China
D. Knitting '000 No. 137.04 6.98 5.09 4 China
Note: P = Provisional. Est. = Estimated.
Source : WTO, ITMF, ICAC, JMDC, ASFI, Fiber Organon, as published in Compendium of International Textile Statistics (2009), Textile Commissioner, Ministry of Textiles, GOI, Mumbai.
Table 3.7(B): India's Position in World Textile Economy (2005)