[ad_1]
An Outlook on Indian Textile Sector

Indian textiles industry is a well-established with showing strong features and a bright future. In fact, the country is the second biggest textiles manufacturer worldwide, right after China. Similar force is demonstrated in the cotton production and consumption trend where India ranks just after China and USA. The textiles manufacturing business is a pioneer activity in the Indian manufacturing sector and it has a primordial importance in the economic life of the country, which is still predominantly based on the agro-alimentary sector. Employing around 35 million people, textiles industry stands as a major foreign currency revenue generator and further proves it in its 14% share of industrial production and the 16% of export revenues it generated.

Textiles industry is not limited to manufacture and export of garments. The success of Indian textiles lies in effective vertical integrations policies which have helped operators in taming the processes which while lying beyond simple manufacturing exercise do have a serious impact on it, for example, raw material treatment. Thus, cotton, jute, silk or wool and even synthetic material are also produced by this industry to complement and strengthen the garments manufacturing industry. Almost one quarter of the world’s spindle activities is hosted in India, again positioning itself just after China. Looming is another important element that accounts for significant activity in this industry; in fact, it takes an impressive 61% share including handlooms. The country is also significant textiles fiber and yarn manufacturer on the world scene, taking on its own a 12% share of the world’s production volume. India ranks on the second place as regards in production of silk and cellulose fiber and yarn whilst standing on the fifth position when it comes to synthetic fiber and yarn.

Indians have well understood the importance of staying one step ahead of developments in the world economic environment. The industry is now preparing itself to take share of opportunities expected to arise out of the market freed from quota restrictions and other trade barriers. Industry operators are increasingly moving towards modernization and expansion as encouraged by the so-designated Textile Upgradation Fund Scheme implemented by Government.

The local textile sector is now at a critical stage where it should prepare itself to rise and grab the opportunities that are available through liberalization of the international market. Manufacturers however, were caught in inadvertence as new players started to creep on the market at a time when most operators had attention on imminent opportunities coming from a quota-free market. Strategies and policies were mainly targeted towards expansion and modernization leaving more space to domestic players. Now it obviously appear that the latter have had ample freedom to strengthen them and they are now more prepared than export-oriented companies.

Lack of competition is eroding enthusiasm, impacting on activity on the European and USA markets. With the removal of quotas and similar trade barriers, observers expect the market to provide new opportunities with evaluations reaching S$1.4bn for towels and US$1.8 in bed linen. China’s impressive production capacity and its growing strength compelled Europe and USA markets to some serious reflections. To bring a halt to massive invasion of their products, EU and USA have imposed trade restrictions, which also encourage retailers to review their sourcing strategy through diversification out of China. Now, undoubtedly India has good cards to play. With traders realizing the threat of relying on a single manufacturing source such as China, India could do well in proposing a valuable alternative to buyers on the international scene, but this is only possible through an adequate and appropriate development strategy and macro-economic policy.

In that view, many manufacturing companies in India are rushing towards expansion and modernization options. Manufacturers are having recourse to fund raising programmes pushing EPS to higher growth, dissolving equity on its way. Business collaborations with foreign players, creation of buying offices and Government’s effort to enhance quality production and export are many visible signs of Indians coming into force on the global market.

Geared with expanded capacities

The new opportunities have carried along Indian home-textiles manufacturers in the expansion strategy direction. The Textile upgradation fund has helped many such operators to increase capacity during the last three fiscal years. Such expansion strategies have not only had an impact on production volume, also assisted companies in better providing customized products.

Value addition – route to higher price realizations

Terry towels coming from the Indian factories accounted for almost 21% of the world market. With another 19% share in the bed linen market, India stands as a quality supplier to the USA. Indian products are more focused towards innovation and quality. Visible efforts in quality improvement, innovations through R&D programmes, and other value-added features bring a whole new dimension to the Indian products. In turn this resulted in higher profit as compared to other regional producers.

Customized and high-value added products are generally not affected by change in market parameters. As such, there were no exceptional price fluctuations on Indian markets during quota removal period. But such was not the case with other regional competitors’ products, such as China, where prices were cut down significantly favoring buyers.

Higher competition with neighboring country

China reacted to quota removals by invading the US market with its textiles production. The US had no other choice than to re-introduce trade barriers to calm down the situation encouraging traders to diversify purchasing options and thus giving India an unexpected push on the global market.

The situation is not completely in the pocket for India, however. It should remain on its guards as its neighbors start to embark on similar global adventure with an enthusiasm and motivation packed attitude. Pakistan and Bangladesh are growing at fast pace, shortening the gap with India in an impressive manner. In the last 3 years Pakistan exported 4 times more pillowcases to USA than India! Pakistan, to note, is among the most important cotton producers worldwide and has been blessed by preference agreements with EU and US even during the quota-imposed periods. Pakistani Government has understood the game and is encouraging development through implementation of a 6% R&D aid programs. Others, like Turkey are also in the race.

Budget Measures

Technology Upgradation Fund (TUF) increased toRs5.4bn from its previous Rs4.4 bn

Interest subsidy provision on term loans available for those in the handloom field has been increased from Rs2.0bn to Rs2.4bn

Excise duty has been reduced by half on all artificial fiber yarn and is now at 8%

Import duty reduced from 15% to 10% on all artificial fiber yarn

Impact of Budget

Decrease in excise duty on artificial fibre has been implemented to favor cheaper production costs and ensure competitiveness on export market.

SSIs are expected to grow further with interest subsidy on handloom sector loans.

The TUF, with its interest subsidy, provides textiles operators with interesting funding plan for their expansion and development strategies.

Textiles parks creations will undeniably help in boosting the overall industry. 10 dedicated areas have already been identified and 7 of them already sanctioned. A special Scheme for Integrated Textiles Parks is meant to help in realization of such objectives.

Sector Outlook

The future of the textiles industry seems to be bright in all aspects. As such Government places all its trust and relies sector for its strong ’employment creation’ capability, more precisely in the garments manufacturing side. Lowering tax burdens on companies will play an important part in cutting down production costs and boosting competitiveness, increasing ability to tap high-volume orders from the global market. Modernization would enable companies provide quality and volume solutions which is in constant demand by international buyers.

Industry Wish List

A reduction of 5% in the customs duty on manufacturing inputs for textiles machines. The rate is currently between 10% and 15%.

Textiles products would continue to carry the specific duty imposition, which may be extended to other SAFTA member countries.

Reduction from 15% to 10% on customs duty imposed on synthetic fiber.

Apparel Export Promotion Council (AEPC) is targeting elimination at 100% of all taxes on apparel exports.

Positives Aspects

The Technology Upgradation Fund Scheme (TUFS) pushed an additional 10% capital subsidy in acquisition of processing machines; with a view to help in expansion plans. Processing sectors are expected to reap the benefits of such a measure in the long term.

Union textiles has exposed a White paper, named Vision 2010 where it gives clear indications as regards its objectives and targets concerning the US bn export market.

Operators are increasingly considering consolidation methods to strengthen production capacity, which would put them in better position on the global and free market. As such, mergers and takeovers are currently very frequent with companies tying up with smaller one to tackle global challenges.

However, continuing TUFS have been stopped after March 31, 2007 by the Textiles Ministry. The ministry has asked the TUFS nodal agencies and banks not to process further new loans with instant effect.

As per the sources, the estimated budget provision set for reimbursing the interest subsidy for the TUFS loans for the fiscal 2006-07 was only Rs 535 crore, but the required funds for the subsidy is about Rs 1,515 crore, which comes to three times higher than the set provision.

Negative Aspects

India is somewhat lagging behind technology in the garments manufacturing sector and this seriously hinders increase in exportable production. Shuttleless looms in India accounted for 9.3% of total looms in 2003. USA shows 94.8% in the same category whilst Austria reveals 95.2%. Clearly India is well behind with only Pakistan showing up at 7.6%.

Labor regulations are a major concern in India causing great harms to the industry at various levels. With no clear legislations, strikes and similar issues often bring business to complete halts.

Obviously, finding solutions in such conditions is a time and effort wasting enterprise, much to the dismay of the industry or even the whole economy of the country.

The geographical location of India as compared to its competitors is a rather uncomfortable but natural disadvantage. Producers like Mexico, Brazil or even China have a good proximity with Europe and US markets and this pays on the global trade market. Impacts are mainly felt on transportation cost, delivery times, etc.

Handloom Reservation Order and the Hank Yarn Obligation order are examples of obsolete and unnecessary regulations that indulge operators in a time-wasting and complicated maze of procedures. This mainly affects local operators, giving impression that the domestic markets is going opposite way to international market whereby liberalization is a key element.

Conclusion

The home textile sector is in a good position to activate and encourage developments in the overall domestic textile industry. With more emphasis on product having longer cycles than those average apparels, the home textiles manufacturing is more protected than its apparel counterparts. Those wishing to reap the benefits of opportunities have to show good preparatory dispositions as well as willingness to stay on the forefront of the global competition game – without these; we could see regional competition grabbing most of the market share.

[ad_2]

Source by Gaurav Doshi