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Growth Prospects of Indian Textile Industry – Home Textile focus
J. N. SinghTextile Commissioner
Indian Textile Sector - Overview
Key contributor to GDP 4 percent of GDP 14 percent of National Industrial
production
Significant forex earner 15 percent of exports
Employment generator Provides direct employment to 35
million people
2004-05Textile MillsSpinning Mills Nos. 2,012Composite Mills Nos. 1,566Exclusive weaving mills Nos. 202 Capacity InstalledSpindles Million Nos.
37.47Looms Lakh Nos. 1.03Powerloom Lakh Nos. 19.03Handloom Lakh Nos. 38.91
Textile exports $ billion 17.8Textile imports $ billion 2.2
What is the Indian Market Size (Bn US $)
2005-06
Export Domestic Total % to Total
Apparel 8.64 19.22 27.86 59.28
Textile 9.24 9.99 19.14 40.72
Total 17.88 29.12 47 100
Home Textile Market Globally
Global Home Textile Market is estimated at US $12b in 2005, and is expected to grow at 16% CAGR and reach US $22-25b By 2010.
India ranks 2nd in the global market with a share of approx. 9-10% of market share.
India's home textile exports expected to grow from $1.2 billion now to $5 billion by 2010 Great opportunity to be the market leader.
Our Vision 2010
– Market size of US$95 Bn • Export Target- US $ 50 Billion
(National Textile Policy, 2000)• Domestic market - US$ 45 Billion
(CRISIL Study, 2004)
– India’s market share in World textiles trade to grow from
3% to 6%.
– Growth Projections of 20% in exports, 16% domestic
Reasons for Optimism: Growth in fabric production
4
-0.15
1
7
9
12
-2
0
2
4
6
8
10
12
14
2001-02 2002-03 2003-04 2004-05 2005-06 2009-10(Expected)
Perc
en
tag
e
Reasons for Optimism: Raw Materials India is now the 2nd largest producer of
cotton
2nd largest producer of Silk
Very well placed in Man-made Fibres too.
Reasons for Optimism: Growth in Investments in Textile sector Investments under TUFS have grown
significantly recently.
Project cost sanctioned under TUFS
1320 14383289
7349
15032
30000
0
5000
10000
15000
20000
25000
30000
35000
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07(Estimated)
(Rs.
cro
re)
Reasons for Optimism :Growth in exports
-10
15
9
4
2224
-15
-10
-5
0
5
10
15
20
25
30
2001-02 2002-03 2003-04 2004-05 2005-06(Provisional)
2006-07 (Initial figures)
Perc
en
tag
e
Winners and Losers in EU Market 2005 over 2004
SRILANKA
THAILAND
VIETNAM
INDONESHIA
TUNISIA
MOROCCO
RUMAINA
PAKISTAN
B'DESH
INTRA EU
INDIA
TURKEY
CHINA
-20 -10 0 10 20 30 40 50
Gainers: China, India, Turkey Losers: Thailand, Pakistan, Indonesia
Romania
South Korea
Turkey
China
USA
Pakistan
Taiwan
India
Indonesia
Bangladesh
0 5 10 15 20 25 30 35 40
EU MARKET VARIATION JAN – JUN 2006/05
Hong Kong
Mexico
Canada
Vietnam
Pakistan
Indonesia
Bangladesh
Cambodia
India
China
-20 -10 0 10 20 30 40 50
US IMPORTS OF TEXTILE AND APPAREL PERCENT VARIATION
2005/04
Mexico
Canada
Hong Kong
China
India
Pakistan
Bangladesh
Vietnam
Cambodia
Indonesia
-15 -10 -5 0 5 10 15 20 25 30
US IMPORTS OF TEXTILE AND APPAREL PERCENTAGE VARIATION
JAN – SEPT. 2006/05
DRIVERS OF DOMESTIC GROWTH : Demand Side Factors: Increasing Income Levels
Distribution of households by income category
Classification Income class 2001-02 2005-06* 2009-10* CAGR
Deprived <90 135,378 132,250 114,394 -3.6
Aspirers 90-200 41,262 53,276 75,304 9.0
Seekers 200-500 9,034 13,813 22,268 12.7
Strivers 500-1000 1,712 3,212 6,173 17.7
Near rich 1000-2000 546 1,122 2,373 20.6
Clear rich 2000-5000 201 454 1,037 22.9
Sheer rich 5000-10000 40 103 255 25.4
Super rich >10000 20 53 141 27.7
Total 188,193 204,283 221,945 2.1* - ProjectionsNote : Income is in Rs.’000 per annum at 2001-02 prices and the households are in ‘000s
Source : NCAER
Favorable Demographics for Home Tex
– The population of India is expected to increase from 1029 million to 1400 million during the period 2001-2026.
– The population profile of India is shifting towards a larger composition of people
in the age group 15-59 .India most favourably placed globally. Out of the total population increase of 371 million between 2001 and 2026, the share of the age-group 15-59 years in this total increase is 83 percent.
– The low median age of population means a higher current consumption spending vs savings
– The growth in population is taking place in the urban area. Out of the total population increase of 371 million during 2001-2026 in the country, the share of increase in urban population is expected to be 249 million.
– Favourable Demographics- increasing young population and that too in the urban area- coupled with rising income levels will act as a key growth factor for the Indian textile and Fashion Industry
Increasing Working Female Population
10
15
20
25
30
1961 1971 1981 1991 2001 2005 (E)
Pro
po
rtio
n o
f wo
rkin
g fe
ma
le to
tota
l fe
ma
le p
op
ula
tion
(p
erc
en
t)
Source : CENSUS
Increased usage of credit cards and availability of cheap finance
The use of credit cards (plastic money) has increased significantly
in the last 3-4 years. The number of credit cards issued has grown
at 26 per cent per annum in the past 5 years while debit cards
have grown by a whopping 113 per cent. Increase in the number
of installations of electronic data converter machines will provide
fillip to impulse apparel purchases.
Demand Driver- Domestic Housing Boom Asian Development Bank expects that by 2008, the
housing deficit will be 22 mn units and by 2030 India will be requiring upto 10 mn housing units every year. A very huge requirement for home tex.
The Real estate sector has given phenomenal returns in the last 2-3 years as per the global trend. A property owner is now more inclined to buy/renovate his home furnishings etc.
The domestic housing boom is further enhanced by the reducing age of Indian borrower- from 43 years in 1995-99 to 33 years in 2005-9.
Drivers of Domestic Growth:Supply side factor : Retailing Revolution - Growth so far
196.7 208.1 222.0
3.9
6.2
7.8
2.0
3.0
3.5
180.0
190.0
200.0
210.0
220.0
230.0
240.0
2003E 2004E 2005P
US
D B
illi
on
1.5
2.0
2.5
3.0
3.5
4.0
Perc
en
t
Total retail industry Organised Penetration
Five year outlook
222.0 304.2
7.8
24.3
3.5
8.0
100.0
200.0
300.0
400.0
2005 P 2010 P
US
D B
illi
on
1.5
2.5
3.5
4.5
5.5
6.5
7.5
8.5
Perc
en
t
Total retail industtry Organised Penetration
Growth of Mall Space
From 2 mn sq ft in 2001 , we had 28 mn sq ft of mall space in 2005 – and by end 2008, the eight Indian large cities will have a supply of 66 mn sq ft and the next seven large cities about 13 mn sq. ft.
The entry of Reliance, Aditya Birla group, expansion of Futures and now of Bharati-Walmart is expected to further sizzle Indian market.
Drivers of Export Growth
Dismantling of the MFA regime and the full play to the Indian entrepreneurship.
Progressive dismantling of the textile and mass apparel industry from the Western world. India is a major player to fill this gap. The current quantitative restriction on China is helping India.
Buying of several Western brands by Indian industry, thus facilitating entry in EU and US.
Increasing modernization of Indian textile and apparel manufacturing sector in response to the increased global demand and facilitated by the TUFS scheme.
Global Housing Boom
According to estimates by The Economist, the total value of residential property in developed economies rose by more than $30 trillion over the past five years, to over $70 trillion, an increase equivalent to 100% of those countries' combined GDPs .
The global boom in house prices has been driven by two common factors: historically low interest rates have encouraged home buyers to borrow more money; and households have lost faith in equities after stockmarkets plunged, making property look attractive .
Naturally as people buy more property or as their property becomes costlier , the propensity to spend on home-textile increases significantly.
Other Export Drivers
The IMF forecasted a 4th continuous year of income increase globally at 4.7%- naturally leading to a more than higher purchase of textiles including home-tex.
Also a phenomenon of decline in textile prices over a continuous period esp in developed economies- driving higher the worldwide demand of textiles and clothing.
Real Clothing PricesIndex, 1994=100
70
80
90
100
110
120
1995 1996 1997 1998 1999 2000 2001 2002 2003
United States
South Korea
Germany
Thailand
Japan
China
Strategy of various
Stakeholders
Strategy for the GOVERNMENT 1.Further investments must continue to be encouraged-
TUFS should be continued (may be with some modification)
TUFS help to processing sector – Vital for home tex
Year TUFS all segments (in crores)
Processing (in crores)
P.c %
2002-3 1438 210 14.63
2003-4 3289 260 7.91
2004-5 7349 986 13.42
2005-6 15032 1157 7.7
2006-7 (april-sept) 9335 2081 22.30
2. Continuance of textile infrastructure schemes
SITP ( Scheme for Integrated Textile Parks) has had a huge success : 26 parks approved. GOI contribution to be 866 crores with another 1250 crores to come from private sector. Estimated investment of Rs.13445Cr.
Need to continue such schemes on the PPP model.
3. HRD
Governments in PPP mode with the industries must invest heavily in training in the textile sector because a huge shortfall of over 40 lakh workers is expected in the next 5 years.
4.High Transaction Costs Issues:
– According to EXIM Bank Study (2002), transaction cost is
very high in Textile & Garments Sector ranging from 3-10%
– Ownership of exports – less support from State
Governments
– Non-refundable incidence of State Taxes – VAT, Entry Tax,
Luxury Tax, Mandi Tax, Electricity Duty, Octroi, etc.
Proposal:
– To consider refund of State / Local levies through
appropriate refund mechanism
5.High Power CostIssues:
High power cost:
Cross subsidisation
Frequent power interruption
Competitors’ Edge:
Country Cost
(Cent / KWH)
Country Cost
(Cent / KWH)
India 8.87 Indonesia 3.65
China 6.04 Bangladesh 3.49
High Power Cost
Proposal:
– Export oriented textile units be exempted from cross
subsidy
– Duty free import of furnace oil to units for captive power
generation
– Uninterrupted power supply for export oriented textile
clusters
Industry’s Strategy
Integration- Moving up/down the full value chain. Leading Home-tex players like Welspun, Alok are now fully integrated, with strong competencies in spinning, weaving,and finishing.
Scale- Massive expansion plans of existing as also new players to take advantage of this unprecedented opportunity. Smaller companies, some of whom are in unrelated businesses, are also foraying into home textiles - Gangotri Textiles, KG Denim, S Kumars Nationwide, Bannari Amman Spinning, to name a few.
Brand presence- there has to be greater shift towards branded products.Realization that real value addition comes only after branded sale.
Domestic- Spaces brand of Welspun
Carmichael House of S.Kumars
International- Purchase of Christy by acquiring CHT Holding by Welspun.
Dan Rivers and Roseby’s by GHCL.
Designer labels will also have to be brought in to counter the pull of top international labels like Tommy Hilfiger, Zegna, Mark and Spencer and likely presence of Italian Pozzi Industria Tessile and Ralph Lauren. Alliance with Indian designers important over here.
Future ?
The home-textile sector in India is in for BOOMING TIMES.
Save for major implementation problems, India poised to become a leader in this sector.
THANK
YOU
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