51 | Page CHAPTER - III GROWTH AND CONTRIBUTION IN ECONOMY: READYMADE GARMENT INDUSTRY Indian garment industry has played a unique role in Indian economy. The garment sector is the largest employer after agriculture and its importance in India’s economy is recognized for its contribution to industrial production and export earnings. Indian textile industry is a self-reliant industry, from the production of raw materials to the delivery of finished products, with substantial value-addition at each stage of processing; it contributes much to the country's economy. The textile and apparel industry is one of the leading segments of the Indian economy and the largest source of foreign exchange earnings for India. India’s share of global exports of textiles and apparel increased from 2.8 percent in 2008 to 6.3 percent in 2012. Readymade garments industry is the harbinger of overall development of the economy as it plays a pivotal role due to its contribution in the industrial output, employment generation and foreign exchange earnings. The industry accounts for approximately 4% to the GDP. The industry being highly labor intensive provides direct employment to nearly thirty million people and is the second highest employer in the country. Readymade garments industry is one of the few industries of India which is self-reliant and complete in the highest value added products-garments. Therefore, the growth and development of this industry has a significant bearing on the overall development of the economy. The Indian readymade garment has its roots going back several thousand years. The industry is undergoing a transformation due to the phasing out of quantitative restrictions and dismantling of tariff barriers which aim at complete integration of textile trade. In such a turbulent environment, the readymade garments industry is required not only to fight for their share in the international readymade garments trade on equal footing, without guarantee of access through quota regime, but also to protect their territory in Indian Market where
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CHAPTER - III
GROWTH AND CONTRIBUTION IN ECONOMY:
READYMADE GARMENT INDUSTRY
Indian garment industry has played a unique role in Indian economy. The
garment sector is the largest employer after agriculture and its importance in
India’s economy is recognized for its contribution to industrial production and
export earnings. Indian textile industry is a self-reliant industry, from the
production of raw materials to the delivery of finished products, with substantial
value-addition at each stage of processing; it contributes much to the country's
economy. The textile and apparel industry is one of the leading segments of the
Indian economy and the largest source of foreign exchange earnings for India.
India’s share of global exports of textiles and apparel increased from 2.8 percent
in 2008 to 6.3 percent in 2012.
Readymade garments industry is the harbinger of overall development of
the economy as it plays a pivotal role due to its contribution in the industrial
output, employment generation and foreign exchange earnings. The industry
accounts for approximately 4% to the GDP. The industry being highly labor
intensive provides direct employment to nearly thirty million people and is the
second highest employer in the country. Readymade garments industry is one of
the few industries of India which is self-reliant and complete in the highest value
added products-garments. Therefore, the growth and development of this industry
has a significant bearing on the overall development of the economy. The Indian
readymade garment has its roots going back several thousand years.
The industry is undergoing a transformation due to the phasing out of
quantitative restrictions and dismantling of tariff barriers which aim at complete
integration of textile trade. In such a turbulent environment, the readymade
garments industry is required not only to fight for their share in the international
readymade garments trade on equal footing, without guarantee of access through
quota regime, but also to protect their territory in Indian Market where
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multinational branded garments players have started entering the vast Indian
market. (Aggarwal & Singh, 2009). However, India’s export growth was lower
than that of most Asian countries during that period. The garment industry is the
fastest growing industry in the world. From the last few decades, the fashion
industry in India has been experiencing an explosion due to considerable dynamic
nature which increases fashion consciousness among consumers. Everyone has a
separate and elegant fashion sense which is mainly related to the apparels
throughout the world.
Apparels define the personality, education, behavior and the way of thinking
of the people. It is substantial to note that Indian fashion consumers will set the
global fashion trends in the coming era. Currently, all international brands are found
in India. Indian fashion industry has progressed from emerging stage to successful
blooming industry today. The industry is composed of handlooms, power looms and
mills. From the total of Indian exports 20% are from textile sector and it provides
direct employment opportunities to nearly 35 million Indians primarily the weaker
sections. It contributes about 4% of GDP and14% of industrial output including
substantial segments.
India is in the process of urbanization and industrialization, and is
gradually moving towards being a market-based economy. During this
transitional period, large numbers of people previously living in rural areas have
become urban residents. This gives a unique dual structure to its current
consumer market. On the one hand, demand for branded luxury goods is
increasing quickly, while on the other hand, major suppliers meet the needs of the
medium and low-end markets. Consumers in the medium and low-end market are
more sensitive to prices, and fast fashion with lower prices has become popular in
recent years. The Indian consumer’s lifestyle is undergoing tremendous changes,
and the domestic clothing market is becoming more versatile, fashionable and
segmented. With demand for comfort dressing increasing, more and more
consumers today prefer quality clothing made of pure cotton and other natural.
Rising disposable income, large working population especially women, and
changing preferences of consumers from ‘need based’ to ‘experience based’, has
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further fuelled the growth of the sector. People today have become fashion
conscious and are well aware of the running trends. They are buying branded
cloths from shopping malls and discount outlets, which have changed their way
of dressing. With growth of the organized retail and expected boom in the retail
segment, Indian garment industry is going to take a modernized form and become
a major segment in the years to come. The contribution of rural residents to the
total consumption of textiles and clothing could be twofold. On one hand, their
gradually increasing income could result in growing purchasing power, and larger
expenditure on clothing, especially on goods with higher demand elasticity such
as fashion goods. On the other hand, a considerable proportion of current rural
residents are becoming urban residents; urban living standards and lifestyle will
have an overwhelming impact on their attitudes towards fashion, and this change
could also promote domestic demand.
India is the world’s second largest producer of textiles and garments after
China. It is the world’s third largest producer of cotton- after China and the USA-
and the second largest cotton consumer after China. The textile and garment
industry fulfils a pivotal role in the Indian economy. It is a major foreign
exchange earner and, after agriculture, it is the largest employer with a total
workforce of 35 millions. In 2009 textiles and garments accounted for about 16
per cent of industrial production and 18 per cent of export earnings.
The Indian textile industry is as diverse and complex as country itself and it
combines with equal equanimity this immense diversity into a cohesive whole.
Endowed with largest loom age in the world, the second highest spindle age, next
only to China, a strong multi-fiber raw material base, a vast pool of skilled workers,
flexible production systems, a dynamic entrepreneurship together with vibrant design
creativity, have all contributed to creating a vibrant textile industry that has long been
the mainstay of the Indian economy. The Indian textile garment industry is an
enormous complex entity.
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Export and Import Measures
Textiles Exports (2012-13)
The targets for textiles exports for 2012-13 initially set at USD 38 billion
have been revised upwards to USD 39.60 billion, following the Foreign Trade
Policy Annual Supplement in June, 2012. The details of exports targets fixed and
achieved during the last three years and current year sector and item-wise
including apparel, man-made and cotton textiles are as under:
Figure 3.1: Details of Exports 2010-11 2011-12 2012-13
Council Targets Achievement* Targets Achievement* Targets Achievement*
RMG 12000 11026 14000 13073 18000 12391
Cotton
Textile (excl
Raw
Cotton)
5000 5792 7000 6808 9000 7517
Man-made
Textiles 3700 4705 5500 5631 6100 5043
Handloom 300 346 500 554 400 518
Woolen
Textiles 630 442 700 508 750 418
Silk
Textiles 730 632 800 437 500 406
Handicrafts
# 2200 2301 2700 2706 3300 3305
Jute 275 460 350 457 500 387
Carpet 650 1037 800 846 1050 986
Total 25485 26471 32350 31056 39600 30971
*Based on DGCI&S data (Principal Commodities)
#As reported by the Export Promotion Council for Handicrafts (EPCH)
Imports :-
The total imports of T&C products by India reached US$ 5.22 billion
during the calendar year 2012. Cotton was the biggest import amongst T&C
items, with a share of USD 0.77 billion followed by impregnated textile fabric
(USD 0.74 billion) and Man-made Filaments with a share of USD 0.73 billion.
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The imports have increased by 5.26% during the calendar year 2012 in dollar
terms over the corresponding period in calendar year 2011.
Export Promotion Measures :-
The Government has been continually supporting the textiles exports
sector through various provisions of the Foreign Trade Policy and the other
policy initiatives to enable the sector to increase market share in the global
textiles markets.
Slowdown in Exports of the Textile Sector and Policy Measures Taken :-
As per latest exports figures (Principal Commodities) released by the
DGC&IS, textiles & clothing worth USD 26.82 billion was exported during 2010-
11 and USD 33.31billion during 2011-12. During 2012-13, exports of textiles &
clothing were of the order of USD 31.71 billion as against USD 33.31 billon in
2011-12, recording a negative growth 4.82%. The volatility in the EU market
during the calendar year 2012 affected severely India’s T&C exports to EU. The
EU textiles market witnessed a negative growth of 13% during the calendar year
2012, resulting in a 1.3 billion shortfall of India’s T&C exports to EU during the
Calendar year 2012 over 2011 Policy realignment for apparel sector urgently
required - duty drawback/ incentives under FTP/ duty reduction in fabric/ yarn
imports. MSP sales plan needs to be put in place. CITM has held 2 rounds of
discussions. TUFS committed liabilities crowding out new sanctions. At the
Processing Stage there is a need to provide the technical and financial assistance to
processing units that will enable industry to meet environment sustainability
objectives without making themselves uncompetitive in the international market.
At the Apparel Stage amendment to Labour Laws is urgent, to permit
longer hours of overtime with due compensation, and to allow flexi-hiring of
labour, ie according to variations in orders. There is a need to adopt the model of
development of infrastructure of workers housing and workers dormitories along
with work spaces, to enable expansion of scale. Encourage and also support
innovative start-up models like hiring of built up work space for a-move-in-and-
begin strategy that does not require investment up front.
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The textiles sector in India is keenly looking forward to the finalisation of the
India-EU BTIA, which would considerably open up trade in textiles sector with EU
countries. A very favourable stance has been taken by the Ministry of Textiles with
regard to textiles trade with Europe in terms of the broad based agreement with EU.
Figure 3.2: India Import Statistics
The Government has been continually supporting the textiles exports
sector through various policy initiatives to enable the sector to increase market
share in the global textiles markets. Government has introduced several export
promotion measures in the Union Budget 2012-13 as well as through schemes of
Foreign Trade Policy 2009-14, including incentives under Focus Market Scheme
and Focus Product Scheme; enhancing the coverage of Market Linked Focus
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Product Scheme for textile products and extension of Market Linked Focus
Product Scheme etc to increase India’s share in various countries.
To ease the resultant financial distress, recognizing the Handloom sector
as the most vulnerable segment of the Textile industry, Government has
announced a Handloom Revival, Reform & Restructuring Package under which
Rs.3884 crore was allocated for waiver of loans of handloom cooperatives,
individual weavers, etc. and for interest subsidy, margin money and credit
guarantee for fresh loans. Government also approved a debt restructuring package
to help loss making textile mills, to be administered on a case by case basis by the
banks within the prudential norms of the Reserve Bank of India.
The recent measures taken by the Government to support the textiles
exports sector are as under :
i) 2% Interest Subvention Scheme on rupee export credit is available
to certain specific export sectors. These are (i) Handicrafts, (ii)