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THE TEXTILE INDUSTRY IN INDIA Looking For reforms

Article · April 2014

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 Market Survey

By: SWETHA THIRUCHANURU

DR K. VENUGOPAL RAO

THE TEXTILE INDUSTRY IN INDIA

Looking FOR REFORMs
The Indian textile industry is considered amongst one of the leading textile industries in the
world. It is divided into three segments, namely, cotton, synthetic and other textiles such as
jute, wool and silk. Apart from providing the basic necessities in the life of Indian people, it
plays a significant role in the country’s economic growth.

E
ither directly or in-
directly, it has been
estimated that one of
every six households
in the country depends
on the Indian textile industry for its
livelihood. The strong roots of pro-
duction of cotton yarns and ample
skilled and unskilled workers and
good export potential are the major
characteristics of the Indian textile
industry. This is a traditional, rich
and well-established industry, enjoy-
ing considerable demand in the do-
mestic as well as global markets.

Role of the
textile industry
in Indian economy
Indian textile industry contributes
about 14 per cent to industrial produc-
tion, 4 per cent to the country’s gross
domestic product (GDP) and 17 per
cent to its export earnings. Further,
it is a source of direct employment for
over 35 million people, which makes it
the second largest provider of employ-
ment after agriculture.
India has the advantage of abun-
dant resources of raw materials.
The Indian textile industry has the
strength of a strong cotton produc-
tion. It is one of the largest produc-
ers of cotton yarn in the world and
there are good resources of fibres.
The country has a wide range of cot-
ton fibre and has a rapidly develop-
ing synthetic fibre industry.
The increase in the production of
cotton yarn from past two decades is
as follows:
Cotton production in India.
The production of cotton yarn in-
creased from 3.43 million bales in
1950-51 to 11.614 million bales in
2012-13. The growth rate increased
by about 10 per cent per annum.
Over the years, country has achieved
significant quantitative increase in
cotton production. Till 1970s, coun-
try used to import massive quanti-
ties of cotton in the range of 0.8 to
0.9 million bales per annum.
However, after government
launched special schemes such as
intensive cotton production pro-
grammes through successive five-
year plans, cotton production re-
ceived the necessary growth through
increase in area and sowing of hy-
brid varieties around mid 70s.
Since then, the country has be-
come self-sufficient in cotton pro-
duction, barring a few years in the
late 90s and early 2000s when large
quantities of cotton had to be im-
ported due to lower crop production

www.ffymag.com April 2014 • FACTS FOR YOU 23

 Market Survey
Table I cotton production per global rates.
hectare in the near Allocation for TUF was raised
Production and Yield of Cotton future. from ` 5.35 billion in 2006-07 to `
as per Area
Apart from meet- 9.11 billion in 2007-08. Handlooms
Year Area Production Yield ing the increased cot- are now covered under the TUF
(million (million bales (kilograms ton consumption by scheme. This scheme continues with
hectares) of 170 kg) per hectare)
domestic textile in- an investment target of ` 1510 bil-
1950-51 5.882 3.43 99 dustry, country may lion in the 12th plan (2012-17).
1960-61 7.61 6.012 134 have sufficient sur- Excise Duty Scheme. The ex-
1970-71 7.605 5.664 127 plus cotton to meet cise duty of yarn has increased from
1980-81 7.823 7.8 169 the requirements of four per cent to five per cent. The
1990-91 7.439 11.7 267 importing countries. mandatory excise duty of ten per
cent imposed on branded readymade
2000-01 8.576 14 278
Export garments would not only have seri-
2001-02 8.73 15.8 308
ous adverse impact to these highly
2002-03 7.667 13.6 302 scenario
labour-intensive segments but
2003-04 7.63 17.9 399 There was a sig- would also have significant opera-
2004-05 8.786 24.3 470 nificant growth in the tional problems for implementation.
2005-06 8.677 24.1 472 industry from 2010-11 Since most inputs for these seg-
2006-07 9.144 28 521 to 2011-12. Exports in ments would be coming through op-
2007-08 9.414 30.7 554 readymade garments tional excise duty regime, there will
2008-09 9.406 29 524 stand first and succeed- be very little duty credit to be uti-
2009-10 10.31 30.5 503 ing industries are cot- lised for payment of excise duty.
ton textiles, manmade Foreign Direct Investment
2010-11 11.142 339 517
and woollen fabrics. (FDI) Policy. One hundred per cent
2011-12 12.178 35.3 493
There are quit a FDI is allowed in the textile sector
2012-13 11.614 33.4 489 few companies play- under the automatic route. FDI in
Source: Ministry of Textiles and Cotton Advisory Board ing a key role in the sectors to the extent permitted under
industry and the ma- automatic route does not require any
and increasing cotton requirements jor companies are as mentioned in prior approval either by the govern-
of the domestic textile industry. Table III. ment of India or Reserve Bank of India
The Technology Mission on Cot- (RBI). The investors are only required
ton had been launched by the gov- Government initiatives to notify the regional office concerned
ernment of India in February 2000 of RBI within 30 days of receipt of in-
and support
for development of high yielding ward remittance. Ministry of Textiles
varieties, appropriate transfer of Government of India has initi- has set up an FDI cell to attract FDI in
technology, better farm manage- ated many schemes for textile indus- the textile sector in the country. The
ment practices and increased area try, such as: FDI cell has objectives such as: provide
under cultivation of BT cotton hy- The Technology Upgradation assistance and advisory support, assist
brids. These developments have re- Fund Scheme. Technology is the foreign companies in finding out joint
sulted into a really good turnaround key aspect to being competitive in the venture partners, sort out operational
in cotton production in the country global scenario. Owing to this reason, problems, maintenance and monitor-
from 2006-07. The yield per hectare, the government of India established ing of data pertaining to domestic and
which was stagnant at about 300kg the Technology Upgradation Fund international trade.
per hectare for more than 10 years, Scheme (TUFS) on April 1, 1999 to India’s share in global exports is
increased substantially and reached enable firms to access low-interest about four per cent. The export shares
a level of 554kg per hectare in the loans for technology upgradation. of the countries such as Korea, Tai-
cotton season of 2007-08. Under this scheme, the govern- wan, Mexico and Turkey are ahead
The fundamental changes that ment reimburses five per cent of and far better than India. Lack of
are taking place in the realm of cotton the interest rates charged by the upgradation of technology and manu-
cultivation in the country have the banks and financial institutions, facturing quality of products are the
potential to take the current produc- thereby ensuring credit availability main reasons for India lagging behind
tivity level near to the world average for upgradation of the technology at as compared to other countries.

24 FACTS FOR YOU • April 2014 www.ffymag.com

 Market Survey
SWOT analysis Table II
Strengths. Production and Yield of Cotton in Various States of India
1. Abundant raw material avail- State 2010-11 2011-12
ability Area Production Yield Area Production Yield
2. Availability of low-cost man-
Punjab 0.53 1.6 513 0.56 1.7 516
power
Haryana 0.492 1.4 484 0.605 1.6 450
3. Growing economy and poten-
tial in domestic as well as interna- Rajasthan 0.335 0.9 457 0.53 1.5 481
tional market North total 1.357 3.9 489 1.695 4.8 481
Weaknesses. Gujarat 2.633 10.3 665 3.023 11.5 647
1. Lack of technological develop- Maharashtra 3.932 8.2 355 4.095 8.5 353
ment. India is one of the largest pro- Madhya Pradesh 0.6.5 1.7 445 0.706 1.8 433
ducers of cotton in the world. It is Central total 7.215 20.2 476 7.824 5.5 504
extremely important for the industry Andhra Pradesh 1.784 5.3 505 1.854 5.5 504
to adopt a technologically advanced
Karnataka 0.545 1 312 0.549 1.4 434
manufacturing process. But Indian
Tamil Nadu 0.122 0.5 697 0.121 0.5 702
textile industry is technologically
weak. For instance, Surat, Bhiwandi South total 2.451 6.8 472 2.524 7.4 498
and Sholapur are the renowned places Orissa 0.075 0.2 459 0.102 0.2 333
for fabric industries. Instead of replac- Others 0.045 0.2 756 0.046 0.2 739
ing new machinery, the outdated ones Total — 31.3 — — 34.4 —
are being used. China does not enter- Loose lint — 1.2 — — 1.2 —
tain the outdated ones and upgrades Grand total 11.142 32.5 496 12.191 35.6 496
and grabs the latest technology. While
**Area in million hectares; Production in million bales of 170 kg; Yield kg per hectare
the share of shuttleless looms in Chi- Source: Ministry of Textiles and Cotton Advisory Board
na is 23 per cent, in India traditional
handweave methods have been fol-
lowed usually and the shuttleless Opportunities. The following line between handloom and cotton
looms are only two per cent. are the opportunities: industry. Additionally, it is a wrong
2. Rigid government policies. 1. Large domestic and interna- perception of the government that
There are no proper reforms, which tional market potential these fabrics are only for traditional
is the major cause of industrial cri- 2. Retail industry and malls. The wear.
sis. Nineteen states in India culti- increase in the number of retail in- 2. Competition from other coun-
vate cotton but only a few states dustries and shopping malls can pro- tries—staggering performance of
such as Tamil Nadu, Maharashtra, vide huge opportunities. Further, the China. This sector has 18 per cent of
West Bengal, Odisha, Assam and An- market is gradually shifting towards share in China’s GDP. It depicts the
dra Pradesh undertake manufactur- branded readymade garments which magnificent status of China in the
ing of fabric. Even though there is can increase the opportunities further. sector. Cottage industries manufac-
a huge production of cotton but the Threats. ture fabrics in ample in this country.
yarn is unavailable. Yarn mills focus 1. Unstable price. There is a high It is appreciable that China has used
more on export than on the nation’s uncertainty and also unstable prices the local cotton for the purpose of
requirements. in the market. Owing to this, the us- country’s necessities. The exports
Further, there is no stability in age of cotton is not very high. Farm- take place only after meeting the
the prices of cotton that is used for ers resort to strike for getting mini- country’s requirement.
fabric manufacture. National Hand- mum support price in the market, Further, China’s motto is to gain
loom Development Corporation fails and yarn mills suffer if the price of high productivity by having less
to supply the yarn to looms at subsidy cotton increases. pressure on labour. Hence, they have
and it is the same in case of silk too. Government fails to meet the upgraded their technology, machines
Owing to the unstable prices in India, targets and is unable to resolve the and equipment.
traders import silk from China. India issues. India has huge cotton stocks 3. Threat for traditional market.
is rich in wool cultivation and is ex- but still industries are confined to a India is the second largest country
porting wool to other countries. few cities. In India, there is a divide in cultivating cotton and silk and

www.ffymag.com April 2014 • FACTS FOR YOU 25

 Market Survey
this industry is pitiable. Though the
Table III
number of weaving machines were
Different Companies in the Indian Textile Industry increased but the industry failed to
Company Business areas sell its produce, and so the very less
Welspun India Ltd Home textiles, bathrobes and terry towels growth in exports has pushed the
sector into crisis.
Vardhman Group Yarn, fabric, sewing threads and acrylic fibre Approximately 30 schemes are
Alok Industries Ltd Home textiles, woven and knitted apparel, fabric garments and being implemented in the sector.
polyester yarn But there is no parity in fund dis-
Raymond Limited Worsted suiting, tailored clothing, denim, shirting, woollen outerwear tribution. Tirupur is one of the best
instances amongst many. It has
Arvind Mills Ltd Spinning, weaving, processing and garment production (denims,
been a role model and benchmark
shirting and khakis)
for India in terms of employer-la-
Bombay Dyeing & Bed linen, towels, furnishings, fabric for suits, shirts, dresses and bour team work and skilled work.
Manufacturing Company Ltd saris in cotton Similar spirit can be observed in
Garden Silk Mills Ltd Dyed and printed fabric Panipat fabric industry too at Har-
Aditya Birla Nuvo Ltd Madura Garments Lifestyle Retail Company Ltd yana. Unfortunately, the Andhra
(diversified conglomerate) Jaya Shree Textiles-Domestic linen and worsted yarn Pradesh units are unable to follow
Indian rayon- viscose filament yarn their examples.
Necessary actions. Excellent
ITC Lifestyle Lifestyle market
schemes and policies are already in
Reliance Industries Ltd Fabric and formal menswear existence but have failed in imple-
mentation. These is a dire need for
seventh largest country in the pro- Table IV vision, skill development, employ-
duction of wool all over the world. ment targets, welfare and market-
Global Textile Industry ing.
On the contrary, cotton industry has
and its Market Share of
only four per cent share in nation’s Subsidies. The present subsi-
Major Countries
GDP. This depicts the status of the dies and amenities provided by the
sector in India. Country Market share government have failed to catch the
4. Absence of reforms. Most of (per cent) industrialists’ attention. Indeed,
the cotton produced in India is be- Korea 22 textile industries can generate more
ing exported. Merely 19 per cent of Taiwan 21 employment than IT and pharma.
the cotton is meeting the nation’s China 18 But the government has failed in
requirements. Turkey 9 setting the standards.
Delays in disbursement of funds
Mexico 9
Status in Andhra Pradesh are causing slackness in the indus-
Pakistan 6
try. The government should also
India 4
In Tamil Nadu, technology focus on avoiding delay in disburse-
upgradation is comparatively better Others 11 ment of funds under Technology
than in Andhra Pradesh. Hence, the Source: GDP share of respective country websites Upgradation Fund Scheme.
productivity level is high. Further, Promotional activities. The
inspired by China’s technology, In- try. For instance, fabric industry sector requires promotional pro-
dia introduced technology upgrada- started three decades ago in Tiru- grammes, finance support, employ-
tion fund by spending ` 170 billion. pur at Tamil Nadu. It faced many ment generation programmes, mod-
Still it fails to meet the expectations. impediments, difficulties and crises ernisation of technology, subsidies,
Textile industry generates em- but it overcame all the barriers. At raw material supply, design and
ployment next only to agriculture. It present, it is exporting ` 150 billion technology assistance, and training
is such a crucial sector for employ- worth of fabrics to various places. and skill upgradation. 
ment, but the laxity in the policy im- On the contrary, Andhra
plementation is adding to the woes Pradesh pioneered this industry at Swetha Thiruchanuru is a UGC-senior
of the sector. Sirisilla earlier than Tamil Nadu. research fellow while Dr K. Venugopal
Rao is a professor at Sri Krishnadevar-
The regional disparities have a But Andhra Pradesh has been fac- aya Institute of Management (SKIM),
bad affect on India’s cotton indus- ing crisis and the current status of Anantapur, Andhra Pradesh

26 FACTS FOR YOU • April 2014 www.ffymag.com

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