Sachit Jain

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Indian Textile Industry:

A Growth Perspective

Mr. Sachit JainVardhman Group

Singapore, March, 2010


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Indian Textile Industry: Growth Drivers

o Global Opportunities

o Domestic Policy Frame-Work

o Manufacturing competitiveness


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Growing world trade in textile and clothing offerssignificant opportunities for Indian T&C exports

152

158

310

157

198

355

203

277

480

250

362

612

280

440

720

0

200

400

600

800

1000

1200

1400

1600

1995 2000 2005 2008 2012

World Trade in Textiles and Cothing(USD bn)

Total

Clothing

Textile


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World Trade in Textile and Clothing

With removal of quantitative restrictions especially after 2002, Indiastextile and clothing exports grew at a higher rate during 2002-2007in tandem with growth in world trade in T&C.

Indias T&C exports growth was lower than China, which registered

23% growth in T&C exports during 2002-2007. China exported $171bn T&C products against $22 bn from India

It indicates missed opportunities as well as scope for future growth

Textile Clothing T&C

1995-2002

World 0.2% 4% 2%

India 4% 5% 4%

2002 -2007

World 9% 11% 10%

India 11% 11% 11%

*CAGR

Comparative growth rate in World Trade in T&C(%)*


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0Growing importance of cotton in world trade intextile and clothing is visible in USA T&C imports

USA: Textile and Clothing Imports( USD bn)

5552

40

24

13

15

20

3237

38

0

10000

20000

30000

40000

50000

60000

1990 1995 2000 2005 2008

Cotton products

Non cotton

products

48

56 58 59

0

10

20

30

40

50

60

1990 2000 2005 2008

USA T&C imports: Percentage share of cotton products


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0The Industry Structurally has a Significant

Potential to Grow

Growing Internationaldemand ,

Large domestic market

Presence in all parts of valuechain

Large numbers of producers

Availability of Raw Materialsand Workforce

Well developed textile machinery industry

Context forFirm Strategy

and Rivalry

Factor(Input)

Conditions

DemandConditions

Related &Supportingindustries

Attributes of Indias Textile Industry whichprovides structural advantage to grow -


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0India share in world installed capacity of spindlesand shuttle-less looms

39

104

212

0

50

100

150

200

250

India China World

Spindles Installed capacity ( mn nos.)

50

370

970

0

200

400

600

800

1000

India China World

Shuttle-less looms installed capacity(in 000 nos.)


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Breaking from the past legacy

Fragmented Industry Structure

Low Level Of Technology

Sub-scale Of Operations

Because of past policy distortion, the

profitability and investments remained

subdued in the past

Fi l P li F k F f t d d t


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0Fiscal Policy Framework : From fragmented duty

structure to unified approach

Fabric1993-94

(Rs./sqm) Exemption2003 2004/2006

Limit(if any) B.E.D. S.E.D. B.E.D.

1 FABRIC(WOVEN )

Cotton Fabric Optional Duty 2(optional) 10

a) Does not

exceeds Rs.100.20

Man Made/

Blended Fabric Optional Duty 2(optional)10

FABRIC

(KNITTED)

Cotton Optional Duty 2(optional)8

Blended & MMF Optional Duty 2(optional) 10

2 FABRIC PROCESSING

B.E.D.

A.1

Hand

Processing(With

out aid of

Power/steam)

0 0

e.) Exceeds

Rs.10020% A.2

Hand

Processing (with

specified 12

power

processes for

100% cotton

fabric)

0 5 5

2

A.3

Hand

Processing (with

specified 12

power

processes for

Blended and

100% non cotton

fabric)

0 8

a.)Does not

exceeds Rs.40

per sqm. 0.50+5%

A.4

Hand

processing(with

specified 7

powerprocesses for

man made

fabric)

0 8

CProcessed fabric

-woven 12 10

D Processed fabric

knitted-Cotton Optional 2(optional)

8

E

Processed

Fabric Knitted-

MMF Optional 2(optional)10

3

4

4% on a

cotton fabric

and 8% on

blended and

non cotton

fabric for all

categories

Cotton/Blended/Manmade

fabric processed with out aid

of power is exempted from

duty

India: Trends in Effective Rate of Excise Duty on Fabric and Fabric Processing

c.) Exceeds

Rs.100 per

sqm

20%

Grey fabric exempted from

duty

Blended and man made

fabric, whose value per sqm

b.) Exceeds

Rs.40 but does

not exceeds

Rs.100

2.50+ 20% of

the value

exceeding

Rs.40 per

sqm.

d.) Exceeds

Rs.40 but does

not exceeds

Rs.100

2.50+ 20% of

the value

exceeding

Rs.40 per

sqm.

c.) Exceeds

Rs.25 but does

not exceeds

Rs.40 0.50+5%

Particulars2002

1

Cotton fabric

whose value

per sqm.

b.) Exceeds

Rs.10 but does

not exceeds

Rs.25 0.50

B.E.D.


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0Domestic policy frame work-Recent initiatives

Restoration of level playing fieldOrganised vs. unorganized sector

Small vs. large units

Unequal fiscal treatment has been abandoned

Duty rationalization

Technology upgradation fund(TUF)

Reduction in import duty on most of textile machinery

Capital subsidy for fabric processing

Development of SEZ and apparel parks are put on fast track.

Fiscal policy reforms refurbish the investmentoutlook of the industry


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Textile industry committed efforts to harness thefundamental strengths are visible in growing investments

0

2

4

6

8

10

12

14

16

1999-

2000

2000-

2001

2001-

2002

2002-

2003

2003-

2004

2004-

2005

2005-

2006

2006-

2007

2007-

2008

2008-

2009

Investment approved under TUF

( USD 40 bn)

About equal amount of investment is projectedin next 10 years


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Scope for future growth lies in fundamental strengths ofthe Indian Textile Industry

Well integrated production base

Wide range of Cotton / Spun yarn

Strong base for Cotton , PSF and PFY

Wide range of Cotton and Synthetic fabric

Growing domestic market for high quality textiles

Growing demand for Technical Textiles / Performance Fibres


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Indias share in cotton production in the world isgrowing( mn tons)

17

19

26

2 24 5

23 21%

16%

12%12%

0

5

10

15

20

25

30

1993/94 2000/01 2005/06 2008/09

0%

5%

10%

15%

20%

25%World

India

% share of India in


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0The principle cause for higher cottonproduction is growing productivity( kg/ha)

Productivity per hectare( kg/ha)

278

524

610

724761

554

478

286

0

100200

300

400

500

600

700

800

1993/94 2000/01 2005/06 2008/09

World

India

100

52

100

46

100

66

100

69

0

20

40

60

80

100

1993/94 2000/01 2005/06 2008/09

India recorded higher growth rate in productivity

World

India

I i tt d ti it


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0Increasing cotton productivity :

Village adoption programo The cotton yield in Punjab declined to very low level 300 kg/ha in 1999

leading to drop in cotton cultivation

o Best yield award to cotton growers started in 2001

o Village adoption program for increasing cotton productivity by improving

cultivation practices and quality seed started in 2003

o Cotton productivity grew to 700 kg/ha in Punjab

o The model is all set to be replicated in rest of cotton producing States in

India, which will give sustainable increase in productivity and cotton crop

0


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0India: Foreign trade trends in cotton

India: Import and export of cotton fiber( mn tons)

0.0

0.2

0.4

0.6

0.8

1.0

1993/94 2000/01 2005/06 2008/09

Import

Export

The Indian cotton isattractive to foreign

Buyers due to its

peculiar

characteristics

Cotton constitutesa major part of

imported cotton for

manufacturing

Higher counts

0


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2 0 0 82 0 2 0

A rea und er co ttoncu ltivat ion - m n ha m n h ec ta re

1 0 1 0

P ro d u c tiv ity kg /h a

5 6 0 7 5 0

P ro d u c tio n m n to n s5 .6 7 .5

C o n su m p tio n m n to n s4 6 .2

C o tto n su rp lu s m n to n s1 .6 1 .3

C O T T O N E C O N O M Y O F IN D IA O U T L O O K 2 0 20

0Cotton fiber place in Indian textile value chain will


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10Cotton fiber place in Indian textile value chain will

remain important

PRODUCTION OF SPUN YARN (IN '000 TONNES)

1510

1894

2267 2272

2948

4500

395

646 585677

2800

107196 248

366 378

800

207

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

1990 1995 2000 2005 2008 2020

YEAR

COTTON

BLENDED

100% N.C.

0


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67752395TOTAL

3917PPFY

11130NFY

13644VFY

35001336PFY

93PPSF

32091ASF

695223VSF

1965651PSF

20202009

India: MMF consumption projections( mn kg)

10


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INDIA: TEXTILE FIBER CONSUMPTION

OUTLOOK 2020

42.7

6.56.7

0

2

4

6

8

2009 2020

Fiber consumption outlook-2020( mn tons)

Cotton

MMF

60

49

40

51

010

20

30

40

50

60

Cotton MMF

Composition of fiber consumption(% share)

2009

2020

10Size of Indian Textile Industry-Exports


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10Size of Indian Textile Industry-Exports

Textile and Clothing exports(USD bn)

13.50 14.0517.50 19.10

21.50 22.0018.36 19.27

21.6424.30

40.00

60.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-

2011

2011-

2012

2012-

2013

2014-

2015

2019-

2020

-15

-10

-5

0

5

10

15

T&C exports growth rate

10


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10

3.5

1310

30

0

5

10

15

20

25

30

INDIA CHINA WORLD USA

Scope for growth in domestic market:

Per capita fiber consumption(Kg)

10


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10

35

22

60

37

90

60

0

20

40

60

80

100

120

140

160

2008-09 2014-15 2019-2020

PROJECTED SIZE OF INDIAN TEXTILE INDUSTRY( USD BN)

Exports

Domestic

010SWOT analysis of Indian Textile Industry:


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Strengths

Independent & Self-Reliant industry.

Availability of Low Cost and Skilled Manpower

Availability of large varieties of cotton fiber and has a fast

growing synthetic fiber industry.

India has great advantage in Spinning Sector and has a

presence in complete textile value chain.



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1SWOT analysis of Indian Textile Industry:Weaknesses

The fabric and garmenting sector need modernization,which is under process

Infrastructural Bottlenecks and Efficiency such as,Transaction Time at Ports and transportation Time.

Unfavorable labor Laws.

Lack of Trade Membership, which restrict to tap otherpotential market.

Economies of Scale- average spinning mill-14000 spindles

Higher Indirect Taxes, Power and Interest Rates.



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1SWOT analysis of Indian Textile Industry:Opportunities

Growth rate of domestic Textile Industry is 6-8% per annum.

Large potential in International Market.

Product development and diversification to cater global needs.

Elimination of Quota Restrictions leads to greater Market Access.

Market is gradually shifting towards Branded Readymade Garments.

Emerging Retail Industry and Malls provide huge opportunities for

the Apparel, Handicraft and other segments of the industry.

Greater Investment and FDI opportunities are available. Large scope for technical textile linked with growing industrialization,

large infrastructure projects in stream



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1SWOT analysis of Indian Textile Industry:Threats( Concerns)

Competition from other developing countries, especially

China in domestic market also will lead to consolidation

Elimination of Quota system has led to fluctuations in

Export Demand.

Rising prices of inputs-raw material

Formation of trading blocks

010

Vibrant Private Sector


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1 Vibrant Private Sector

Vardhman Group Bombay Rayon Nahar Alok Arvind mills Ahima Shanmugvel JCT Madura Welspun Surya Laxmi Group Trident Ramlinga Group Gokaldas exports

Lakshmi Group Orient Craft LNJ Group Bombay Rayon Fashions Chola Group Raymond Raja Palayam

Super spinning Centaury GTN group

2010


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Thank You

Documents

Sachit Jain