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Economy-Analysis of Textile Industry
Economy-Analysis of Textile Industry
Introduction
Economy
Industry linkage
Conclusion
Introduction
14% contribution to industrial production 5% contribution to GDP 16% contribution to export earnings Direct employment to more than 35 million people
Industry functions in the form of clusters (roughly 70 in number) across India, producing 80% of the countrys total textile 95% of the apparel manufacturers are in the micro, small and medium enterprises sector and operate on slim margins Sector is diverse, with the hand-spun and hand woven sector at one end of the spectrum, and the capital intensive, sophisticated mill sector at the other end Source: Ministry of Textiles Annual Report bharattextile.com
Of the 2300 processors in India, only 200 units are integrated with spinning, weaving or knitting units Bulk of apparel and home textile manufacturing accounted for by 77,000 small scale units The textile industry across the value chain is largely decentralized Units mostly independent and small scale in nature, rather than composite units undertaking all activities together Large scope for entry of organised integrated textile manufacturers
Source-www.ibef.org , India resource center
India is cost competitive vis--vis competing countries in textile production, except in case of textured yarn and fabric
Source-www.ibef.org , India resource center
Rupee appreciation
Reduction in profit margin Loss of competitive advantage Loss of Business particularly in U.S.A. Textile export went down by 14% in Q1 of 2007-08
Government policy
Pro industry Supportive Offerings of relief packages Reduction in import duty of manmade fiber Additional subvention of 2% in pre & post shipment credit Refund of service tax to exporters
Inflation
All Commodity WPI-5.4% Oct.7, 2006-07 Cotton Textile Inflation-6.4% Weighted Contribution-3.8% All Commodity WPI-3.1% Oct.7, 2007-08 Cotton Textile Inflation- -.5% Weighted Contribution- -.5% Price of Cotton textile as a manuf. Product came down
Merchandize Trade
Export of Textile & textile Products came down as a whole Export of Textile & textile Products -19 Billion $ ( 2006-07) Reduction in export from $2.8 billion to $ 2.6 Billion from April-may 06-07 to April-may 07-08
Technology
The Indian textile industry still lags behind when it comes to latest technology.
CAD is the most popular tool used in the textile and apparel industry. The government of India has a Technology Upgradation Fund (TUF) for the textile and jute industry
Fiscal Reforms
Import of certain textile machinery items-spinning, weaving , processing, readymade garment sectors: concessional duty of 5% and 10%.
Announcement in the reduction of interest rate in preshipment and post-shipment credit SIDBI has given these special lending rates: 5% reimbursement on interest actually charged or 15% Credit Linked Capital Subsidy on eligible or investment made for modernization
Retail in apparel
There are 12 million retail outlets in India. Mens apparel market is 46% and women's apparel market is 17%. Many brands for apparel are present in India eg: Arrow, Van Heusen, Peter England etc. Growth of retail expected to be at 25%-30% The branded apparel is now worth USD 1 billion.
HR Issues
Conclusion
Negative impact
Positive Impact
Favourable govt. policy Fiscal reforms Retail penetration High income level High weight in IIP Reduction in cotton prices
It is clear that rupee appreciation has hit hard to Indian textile industry w.r.t. export business , reduction in employment but it seems to recover with the help of favourable government policy & reforms , retail growth but initiatives need to be taken by the industry also w.r.t. better technology , consolidation of business & economy of scale.