Economy-Analysis of Textile Industry

7/30/2019 Economy-Analysis of Textile Industry

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Prepared by:

Tanveer Sahab (06BS3690)

KIRANMAYE AYSOLA (06BS1552)


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Introduction

Economy Industry linkage

Conclusion


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Introduction

Presence in Indian Economy

Value Chain of the Industry

Cost Competitiveness & Competitor


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Total market size (2006-07): USD 49 bn

Domestic market ~ USD 30 bn

Exports ~ USD 19 bn

Apparel constitutes 50% of export

Strong contribution to Indian Economy

14% contribution to industrial production

5% contribution to GDP

16% contribution to export earnings

Direct employment to more than 35 million people

Industry functions in the form of clusters (roughly 70 in number)across India, producing 80% of the countrys total textile

95% of the apparel manufacturers are in the micro, small and mediumenterprises sector and operate on slim margins

Sector is diverse, with the hand-spun and hand woven sector at oneend of the spectrum, and the capital intensive, sophisticated millsector at the other end

Source: Ministry of Textiles Annual Reportbharattextile.com

Presence in Indian economy


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Value chain of Textile (apparel) industry in India

Of the 2300 processors in India, only 200 units are integrated withspinning, weaving or knitting units

Bulk of apparel and home textile manufacturing accounted for by77,000 small scale units

The textile industry across the value chain is largely decentralized Units mostly independent and small scale in nature, rather than

composite units undertaking all activities together

Large scope for entry of organised integrated textile manufacturers

Source-www.ibef.org , India resource center


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Cost competitiveness & Competitors

India is cost competitive vis--vis competing countries intextile production, except in case of textured yarn and fabric

Source-www.ibef.org , India resource center


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Economy Industry linkage Indicators

Rupee Appreciation Government policy

Increase in purchasing power

Index of Industrial production

Inflation

Merchandise Trade Technology

Retail in apparel

Fiscal reforms

HR issues


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Rupee appreciation

Reduction in profit margin

Loss of competitive advantage

Loss of Business particularly in U.S.A.

Textile export went down by 14% in Q1 of 2007-08

Source- www.ibef.org, India resource center
http://www.ibef.org/http://www.ibef.org/


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Pro industry Supportive

Offerings of relief packages

Reduction in import duty of manmade fiber

Additional subvention of 2% in pre & post shipment credit

Refund of service tax to exporters

Source- www.ibef.org, India resource center

Government policy
http://www.ibef.org/http://www.ibef.org/


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Rise in income level

Domestic garment sales to grow by 14%

Higher penetration of Organized retail giving boost to theapparel industry

source-Crisil report on sector analysis

Increase in purchasing power


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Weight of Textile products(apparel)-2.5%

Growth rate-11.5% (2006-07)

Growth rate-19.4%( April August 2006-07)

Projected Contribution in IIP- 3.8%

Increase in Incremental non food credit taken by textileindustry (from 16117 crore rupees to 17378 crore rupees in

corresponding period but in % term it has com down from 39%to 28% ( aug 2006 to aug 2007)

Source- Central statistical organization

Index Of Industrial production


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All Commodity WPI-5.4% Oct.7, 2006-07

Cotton Textile Inflation-6.4%

Weighted Contribution-3.8%

All Commodity WPI-3.1% Oct.7, 2007-08

Cotton Textile Inflation- -.5%

Weighted Contribution- -.5%

Price of Cotton textile as a manuf. Product came down


Inflation


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Merchandize Trade

Export of Textile & textile Products came down as a whole

Export of Textile & textile Products -19 Billion $ ( 2006-07)

Reduction in export from $2.8 billion to $ 2.6 Billion from

April-may 06-07 to April-may 07-08



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The Indian textile industry still lags behind when it comes tolatest technology.

CAD is the most popular tool used in the textile and apparelindustry.

The government of India has a Technology Upgradation Fund(TUF) for the textile and jute industry

Technology


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Government has done away with multiple taxes.

Whole value addition chain has been given an option of exciseduty exemption.

Import of certain textile machinery items-spinning, weaving ,processing, readymade garment sectors: concessional duty of5% and 10%.

Announcement in the reduction of interest rate in pre-shipment and post-shipment credit

SIDBI has given these special lending rates:

5% reimbursement on interest actually charged or

15% Credit Linked Capital Subsidy on eligible or investmentmade for modernization

Fiscal Reforms


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There are 12 million retail outlets in India.

Mens apparel market is 46% and women's apparel market is

17%.

Many brands for apparel are present in India eg: Arrow, VanHeusen, Peter England etc.

Growth of retail expected to be at 25%-30%

The branded apparel is now worth USD 1 billion.

Retail in apparel


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HR Issues

Indian textile industry is highly labour intensive

It employs 35 million next to agriculture

The Indian textile industry needs a workforce of 64.5 million

people by 2010.

Indian textile and apparel industry to make it a child labourfree industry.

Launching of HR development scheme (NATIJA)Neighbourhood apparel Training Institutes for Job Assurance


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Conclusion

Negative impact Rupee appreciation

Technology

Fragmented industry

HR issues

Reduction in employment

Positive Impact Favourable govt. policy

Fiscal reforms

Retail penetration

High income level

High weight in IIP Reduction in cotton prices

It is clear that rupee appreciation has hit hard to Indian textile

industry w.r.t. export business , reduction in employment but itseems to recover with the help of favourable government policy &

reforms , retail growth but initiatives need to be taken by the

industry also w.r.t. better technology , consolidation of business

& economy of scale.


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Economy-Analysis of Textile Industry

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