The Indian textile industry: International Competitiveness By Gunja Saluja 2008

A Dissertation presented in part consideration for the degree of MA Management

Abstract

This paper identifies the international competitiveness of Indian textile industry. The Indian textile industry is one of the largest in the world, with a huge raw material and textile manufacturing base. Due to its extensive input, it occupies an exceptional place in the Indian market place. Today this sector is highly globalised but, it is further organizing itself to crave a bigger share to become the market leader. This large and ancient industry has carved out a special niche for itself as a facilitator of the countys economic growth and participative development. However, since few years this industry was striving to recover from a stage of stagnation but today it is growing at a very fast pace. This dissertation elucidates the relevant literature on international competitiveness, and further describes various macro economic factors which are affecting the economy of India. The researcher has used qualitative research methods in order to satisfy the objectives of this research. Later, the findings have been discussed with the industrys SWOT analysis. Lastly, the conclusion of this study discusses the limitations and recommendations.

Acknowledgement

First and foremost, I would like to thank god for his blessings which helped me in completing this dissertation. I would also like to express my sincere thanks to my supervisor, Mr. Rajesh Kumar for his support and guidance throughout this research by answering to my queries. I am also very grateful to the interviewees, for their cooperation for filling up the questionnaires and giving interviews. Most importantly, I would like to thank my elder sister Ridhi Saluja, without whose support this dissertation would not have been completed. Lastly, I would like to thank Jaskaran Singh Ghumman for his undying support and strength during my laborious times.

Table of contents
1. 1.1 1.2 1.3 1.4

Page No.

Introduction... 1 Introduction.. 1 Scope and objective of the study............................................................................................. 3 Research motivation 4 Structure of dissertation.. 4

2. 2.1 2.2

Literature review... 6 Introduction.... 6 Competitiveness..... .. 7 2.2.1 Porters five force model......11 2.2.1.1 The bargaining power of buyers........... 13 2.2.1.2 The bargaining power of suppliers... 13

2.2.1.3 The threat of substitutes.....14 2.2.1.4 The treat of new entrants.. 15 2.2.1.5 The rivalry among existing competitors... 15 2.3 2.4 2.5 Productivity/. 16 Increase in global trade........ 18 Family Conglomerates-Strategy for emerging markets....... 20

2.6 Conclusion..... 22

3. 3.1 3.2 3.3 3.4 3.5

Industry Profile 24 Emergence of Indian Textile Industries 24 Role of textile industry in the Indian Economy26 The structure of the Indian textile industry... ... 28 Geographical spread..... 29 A glance at major textile players in India 32

4. 4.1

Macro economic factor affecting Indian textile industry... 35 Introduction.....35

4.2 Government regulation.. 35 4.2.1 Qualitative improvement. 36 4.2.2 4.2.3 Modernization...36 Setting up of SEZs....37

4.2.4

The technology upgradation fund scheme (TUFS) ... 4.2.5 Texsummit 2007

37 38 38

4.3 FDI policies...... 4.4

Dismantling the quotas..... 39

4.5 Agreement of on textile and clothing.. . 42 4.6 Appreciation of rupee. 42

5. 5.1 5.2

Indias position in the world textile market. Overview of the world textile market. International trade and profile of major competitors ..

43 43 44

5.3

International scenario of textile industry 5.3.1 Performance of India in the US market.. 5.3.2 Performance of India in the European market.

44 45 46

6.

Methodology...48 6.1 Research methodology...........48 6.2 Questionnaires.49 6.3 Interviews.....................49 6.4 Locations for the research conducted..50 6.5 Interpretations of the data50 6.6 Limitation of the research50

7. 7.1 7.2

Findings and Analysis.52 Introduction..................52 evaluating the competitive performance of India...52 7.2.1 Infrastructure..53 7.2.2 Labour reforms54 7.2.3 International trade trends....55 7.3 SWOT analysis of Indian textile industry.56 7.3.1 Strength..56 7.3.2 Weaknesses58 7.3.3 Opportunities........59 7.3.4 Threats...59 7.4 Limitations and challenges faced..60 7.4.1 Appreciation of rupee value...60

7.4.2 Labour reforms..62 7.4.3 Fragmented infrastructure..63 7.4.4 Obsolete technology and strategies..................63 7.4.5 Indias brand value..................... 64 8. Conclusion.66

REFERENCES

APPENDIX 1 Indias Cotton Trend in Last Six Decades ...81 APPENDIX 2 Sample of Questionnaires.82

Chapter 1: Introduction
1.1 Introduction: The Indian textile sector plays an exceptionally significant role in shaping the economy of India notably in terms of employment, foreign exchange earnings and share in value added. This sector is the second largest sector after agriculture (Texsummit, 2007). It has come of age and is gaining acknowledgment on the world platform with excellent textiles manufacturing base and availability of massive raw material. India being the second largest producer of cotton in the world, makes it self sufficient, by providing a competitive edge to its competitors worldwide in terms of cost of raw material. Along with abundant cotton production, India has availability of highly skilled labour at very low prices. The Indian economy is fundamentally dependent upon manufacturing of textiles and its trade. There are many reasons for this industry being so important for Indian economy as it contributes (4% of GDP) as well as the countrys export (14% of Indias total exports) and provides employment to the masses (85 million people employed + additional 12 million expected to find jobs by 2010) (Texsummit, 2007). The government says that Indias share in world textile can reach to 8% by 2010 (http://www.fabrics-manufacturers.com). This sector also enjoys a strategic significance due to its foremost contribution to exports and existence of enormous small and medium enterprises (SMEs). With dismantling of the quota system in January 2005, investments in the textile sector have been raising and the export percentage too has increased drastically (Mayer, 2005). Other government initiatives such as setting up of SEZs (Special Economic Zones) for textiles, and allowing 100% foreign direct investment in the textile sector have not only helped in creating opportunities for Indian entrepreneurs, but also for global investors. The structure of

worldwide trade in textiles also marked a significant turnaround after this period, as all the textile and clothing products can be traded globally without quota-restrictions. The elimination of quota restrictions on the export of textiles under the Agreement on textile & clothing did facilitate India in escalating its market share of its major importers, but the growth rate remained much below the expectations. The dismantling of the quota regime symbolizes both an opportunity as well as a threat. It can be an opportunity for the reason that markets will no longer be restricted and, also the domestic market will be exposed to competition. At domestic front, robust economic growth, rising demand, increasing consumerism, expanding organized retail and textile SEZs would provide healthy atmosphere for the growth of industry, whereas it also act as a threat, as markets will no longer be assured by the quotas. However this sector has been doing really well and has reached $ 47 billion market (Home fashion, 2007) but there has been a slowdown in this industry from past few years and the factors like, rigid labour laws, technology obsolescence, lack of training facilities, low capacity, fragmented structure, poor foreign investment and infrastructure constraints continue to trouble the industry . Today, in the international textile market, China is the biggest competitor of India, followed by turkey, Taiwan, Mexico, Bangladesh, South Korea, Indonesia and Pakistan which are the emerging rivals. It is therefore essential to identify the true competitiveness of Indian textile firms in order to make a true evaluation of the scenario. This study will therefore evaluate the international competitiveness of the Indian textile industry. It will reveal the immense potential of the Indian textile industry which will enable this sector to realize its lawful place in the economy globally.

And further, it will examine the Indias export-competitive performance with respect to United States and European Union.

1.2 Scope and objective of the study: India possesses many strengths and opportunities in textile sector. But there is a great need to study this industry as it is structurally flawed and its expansion depends upon curative actions and their effectiveness. It has a lot more potential to do, as compared to what it is performing today. However the industry is inherent with lot of experience, availability of cheap labour, abundant raw material and supporting government initiatives; but, it lacks behind in many other aspects. Therefore the study will reveal various prospects which are yet to be tapped in this sector. The practice of civilizing the structural aspect of Indian textile market initiated first in 1985 Textile Policy. The objective of this study is to assess the competitiveness of Indian textile industry. Since this industry is largely cotton based, the study would focus on the cotton industry as well. With the abovementioned objectives, it will first identify the potential of Indian export market which have shown a remarkable growth in value and have a substantial credence in the Indian export market on the basis of performance of Indias export to Europe and United States. Followed by the various government policies, and lastly the strategies and initiatives that should be taken to upgrade this sector.

1.3 Research Motivation: Authors decision to choose the Indian Textile Industry as her research topic, comes from her own personal, and very strong interest in the area. She has worked in this field for about 2

years and has had a firsthand experience of the textile market in India. While the market size is huge and the potential to grow is immense, India is still struggling on many grounds. The thesis sheds light on the areas that need to be worked upon and also the strategies that can help the Indian firms to strengthen their position in the world market. After having done the study, author presumes to see herself in a better position to assess the scenario of the textile market in India and overseas. Also now for her professional textile career in future, she feels equipped with a better sense of understanding and a broader perspective to make choices and decisions in business. The driving force behind this research was not only the interest in this field, but also her passion to successfully run a textile firm some day. It definitely made the entire research journey more meaningful and worthwhile.

1.4 Structure of dissertation: The dissertation focuses upon the International Competitiveness of Indian textile Industry. Chapter 1 which will provide an overview of textile industry in India, followed by Chapter 2, which will review the relevant literature on it. The industry profile along with geographical diversity is presented in chapter 3. The macro economic situation of Indian Textile Industry with various government policies are defined in chapter 4. Chapter 5 talks about Indias competitive performance internationally. Chapter 6 lays down the methodology that has been used to collect the primary and secondary data. Finally chapter 7 summarizes the analysis and findings, followed by conclusion in chapter 8.

Chapter 2: Literature Review

2.1 Introduction: Every dissertation includes a literature survey and a development of theory which is relevant to its scope. Therefore this chapter will now concentrate on the literature element, which has already paid attention on the issue of Competitiveness, Productivity and Global Expansion in relation to industry. There are many researchers who have explored the idea of competitiveness and its importance. This literature review has been prepared by critically evaluating and exploring the relevant studies that has been carried out by various researchers. It is divided into five sections which will evaluate the work of various researchers on competitiveness, productivity, increase in global trade and Family Conglomerates. In Section 2.2 Porters work is assessed as it is the most significant theory which created debate on competitiveness, along with the arguments of other researchers as well, followed by Section 2.3 and section 2.4 which will accentuate the study on productivity and increasing global trade. Section 2.5 will concentrate on the theory of family conglomerates as it has a great relevance to the industry that is being researched. And it will conclude with the summary of all above sections. However, it is important to observe that there is not substantial literature available on this topic, therefore the research will largely be based on the facts and issues which have been explored earlier on the topics like competitiveness, productivity and expanding global trade.

2.2 Competitiveness: 21st century began with a lot of turbulence, challenges and many opportunities as well. Continued existence and success in such turbulent times depends a lot on competitiveness of the concerned industry. The concept of competitiveness is multidimensional as well as relative. The core stone of debates on competitiveness was first given by (Porter, 1990) which was also published later as a book, Competitive Advantage of Nations (CAN). His central idea in this book was to elucidate the reasons why some social groups, economic institutions and nations advance and prosperous (Porter, 1990). According to him a global strategy is one in which a firm sells its product in many nations and employs an integrated worldwide approach to doing so (Porter, pp 54 1990). He further adds that every business should try to achieve competitiveness through positioning (Bosch, 1997). Competition, according to (Porter, 1985) determines the appropriateness of a firms activities that can contribute to its performance, such as a cohesive culture, innovations, or a good implementation. Since the dissertation is evaluating the international competitiveness of an industry, it will therefore highlight the four broad factors of a nations environment that will describe that, how a firm achieves international success in a particular industry, (Porter, 1990). These four attributes are now commonly known as national diamond. These attributes are as follows: Factor conditions, demand conditions, related and supporting industries, and

firm/strategy/rivalry. It is the most fundamental unit of analysis given by porter, in which the function of a single factor cannot be analyzed individually, since the result of one determinant is dependent on others. The framework has been developed by using the theory of five forces by porter which will be further discussed.

This model will help in analyzing that why some nations are more competitive, while others are not, also, there are some industries in the nation which are more competitive than others. Therefore it will help in understanding a nations comparative position in the global competition. All the determinants are briefly explained ahead in this chapter. Below fig. 1 is the model by Porter on The Competitive Advantage of Nation. Fig. 1 Porters Diamond Model for the Competitive Advantage of Nations

Source: Porter 1998 pp.127 The factor conditions, as (Porter, 1990) suggests, refers to that, what is the nations position in factors of production? In other words we can say that an industry in order to be successful requires an appropriate supply of factors at its home base. Therefore, for an excellent performance from an organization, the simple attributes or factors like human resources, land, labour, capital and infrastructure should be sufficient and must be defined at a disintegrated level. The mere availability of these factors is not enough for advantage but its way of deployment towards effective and efficient utilization is crucial (Porter, 1990, pp. 74). He also

points out that the exceptionally high quality factors can also be one of the most significant advantage. Every country possesses set of particular factor conditions of its own; therefore, it will build up its industries for which the particular set of factor conditions is optimal. Further, the factors can be categorized as general and specialized factors. The general factors which are commonly known as non-key factors, such as unskilled labour, can be easily obtained by any other organization. The specialized factors on the other hand are the key factors of production which are not inherited but created, such as capital, skilled labour, infrastructure which helps in generating sustained competitive advantage because they cannot be easily duplicated by other firms. The second corner of the diamond model is related to various demand factors which have a direct impact on the pace of innovation and product development in the country. The most essential attributes of home demand are composition of home demand, the size and pattern of growth of demand and the anticipatory nature of demand which reflects global trend (Porter, 1990, pp. 86). He argues that it is very important for an economy to have a sophisticated domestic market. If the buyers in the home country are demanding it motivates the company to innovate and to meet high standards in order to improve the firms competitiveness constantly and to achieve national advantage in a country, the home base should provide prior signal of demand trends to its domestic supplier before its foreign competitors.

The third determinant to achieve national advantage is the presence in the nation of supplier or related industries that are internationally competitive (Porter, 1990, pp.100). A firm enjoys more benefits of innovative inputs and cost effectiveness, if the local supporting industries are

more competitive. This effect gets strengthened as soon as the suppliers the various suppliers become strong competitors globally. From above all the arguments this can be concluded that it is not necessarily the size of the base market which matters, but also the degree with which the firms are encouraged to innovate to achieve competitiveness. Hence, a big home market which will enable to meet the above three conditions and can successfully compete globally.

The last corner of the diamond model is concerned with structures and strategies developed by domestic firms. (Porter, 1990, pp. 71) explains it as conditions in the nation governing how companies are created, organized, and managed, and the nature of domestic rivalry. Various cultural aspects like working principles, interaction between the employees, employee - employer relationship, plays a very significant role. Distinctive corporate objectives such as commitment amongst labor force are also of great significance. All these factors are influenced largely by the structure of control and ownership.

(Porter, 1990) also argues that to achieve competitive advantage on a more global scale it is important for firms to understand the trend of domestic rivalry and the strategies played by them.

Lastly, Government and chance are two such factors which influence the above four factors, but they themselves are not the determinants. The governments job in porters model is to act as a catalyst and as a challenger to encourage the firms to inspire them to achieve competitive performance at a much higher level. Together these six factors structure a system, thus explaining that why some companies flourish more than others. This model therefore

identifies the degree to which, firms can hold advantage of their home-base, to develop relations with other countries to become more efficient on a global front.

The above model is further supported by porters five force model which will evaluate the competitiveness of Indian textile industry.

2.2.1 Porters five force model: The textile industry is dynamic to the core. With dismantling of quotas in 2005 the competitive global scenario this industry has changed evidently. This dynamism can be well explained by conducting industry analysis using Porters model. According to (Porter, pp 4, 1985) the collective strength of these five competitive forces [] determine industry profitability because they influence the prices, costs, and required investment of firms in an industry. It is one of the most powerful analytical models for evaluating the form of competition that exists in an industry. (Porter, 1985, pp. 7) also adds that every industry is unique and has its own unique structure [and this] five-forces framework allows a firm to see through the complexity and pinpoint those factors that are critical to competition in its industry, as well as to identify those strategic innovations that would most improve the industrys [] profitability. It will therefore help in outlining the key forces that will asses and determine the level of competitiveness and will illustrate that how these forces are interrelated. The fig. 2 presents the Porter analysis on Indian Textile Industry. Fig. 2 Porter analysis for Indian Textile Industry

Source: Indian Brand Equity Foundation, 2006 According to this model there are five forces which determine the competitiveness of an industry in the long-run. The five competitive forces are: i. ii. iii. iv. v. The bargaining power of buyers The bargaining power of suppliers The threat of substitutes The threat of new entrants The rivalry among existing competitors

2.2.1.1 The bargaining power of buyers: The bargaining power of buyers will evaluate the demand scenario of the industry. Presently the global textile industry is worth US $ 52 billion (Texsummit, 2007). The markets that dominate the trade in textiles globally are US and European markets, and the demand for home textiles and apparel is expected to grow at a much higher rate as it holds competitive edge against its neighboring countries. This industry is expected to grow by US $ 115 Billion by

2012 (Texsummit, 2007). Though China is expected to be the supplier of choice in comparison to India as India lacks in various factors such as fragmented structure, technological obsolesce, rigid labour issues, lack of skill and training, but it is among one of the low cost producing countries therefore maximum importers will aim to alleviate their risk of outsourcing only from one country (www.equitymaster.com). But as (Rao, 2008) put the situation [] is about to change, with the government planning several initiatives to boost production of these textiles, and industry is also waking up to the potential of the segment 2.2.1.2 The bargaining power of suppliers: This force of porter analysis will therefore assess the supply scenario of this industry. Textile is largely cotton based industry, and India is playing a significant role in the worlds cotton market. What lends India cost advantage in apparel and home textiles is abundant supply of locally grown long staple cotton. Further, various efforts are being made to improve the cotton yield to ensure higher productivity. India has now bypassed the United States and has become the second largest producer of cotton in the world in the year 2007. The following fig. 3 shows Indias growing cotton trend. Fig. 3 Indian cotton trends: The new green revolution

Source: The Financial Express 2007

It also enjoys the availability of cheaper labour cost over many developed countries like US, Hong Kong, South Korea, Taiwan. It is one of the biggest advantages because of lower wage rate the overall production cost comes down, giving rise to economies of scale.

2.2.1.3 The threat of substitutes: The threat of substitutes depends upon various factors such as the relative price and performance of substitutes, buyers willingness to substitute and the cost of switching to other substitutes (Porter, 1990). The availability of substitutes in the market lower down the profitability and magnetism of the industry as the price level need to get restricted. There are many low cost producing countries like Pakistan and Bangladesh where the labour cost is almost 50% cheaper (Reference), proving a threat to Indias export market. This has been felt by many exporter according to the research conducted through questionnaires.

2.2.1.4 The threat of new entrants:

The threat of new entrants in the industry increases competition to a great extent. But it also brings new capacity in the market. Threats seriousness largely depends upon the barriers present and it also depends that how the existing competitors of the industry react to it (Porter, 1979; Besanko, 2003). In an economy with quota free regime every one aims at capacity expansion then, but this results into flooded small player in the domestic market since they cannot venture into global markets. This weakens the pricing scenario for all the domestic players. Apparently there are no rigid barriers to enter the domestic market in textiles, which increases the competition even more. For example, even if, the biggest denim exporter (Arvind Mills), home textiles (Welspun and Alok Industries) or branded apparels (Raymond) think of consolidation with international companies, even they will also not be able to protect their margins, unless they are capable of tapping a significant part of the international market (www.equitymaster.com).

2.2.1.5 The rivalry among existing competitors The intensity of rivalry among existing competitors depends upon factors like: the structure of competition, the structure of industry costs, strategic objectives, degree of differentiation, entry and exit barriers, and switching costs (Porter, 1990). The rivalry of Indian textile industry, globally, depends upon various factors like; Indias poor logistics, fragmented infrastructure and unskilled labour. These all factors are a major thumbs-down to Indian economy on the global front. This analysis therefore helps in summarizing the porters work on competitiveness which helped in analyzing the relevant literature on this industry, that in spite of being structurally so

flawed, it has huge potential to compete globally. The following section will now throw light on the theory of productivity. 2.3 Productivity: The productivity of a country depends upon the productivity of the companies operating in that country. As (Dowling, 2008) puts that productivity is the most important determinant in the long run of a nations standard of living, since it is the root of growth of national per capita income. The income growth of few developing countries in percentage is given below in Table 1. Table1. Income growth of few developing countries 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Average China India Pakistan 8.3 5.8 1.8 9.1 3.8 3.1 5.3 10 8.5 4.8 7 10.1 7.5 6.4 6.2 9.9 8.1 8.4 4.5 9.5 7.6 6.5 4.7 8.8 7.8 7.3 5.5 8.8 8 7 5.1 8.9 8 7.2 5.3 8.7 7.7 6.9 5 9.21 7.28 5.94 5.08

Thailand 2.2

Source: Dowling, 2008, pp 50 Also, as given by (porter, 1998) international trade allows a nation to raise its productivity by eliminating the need to produce all goods and services within the nation itself. Therefore a country should specialize in those market sectors in which its companies are relatively more prolific than its international competitors. The literature that is based on productivity can be quantified by three different measures. First is the output per worker, which measures the productivity of individuals separately in active employment (Blake and Sinclair, 2003). The second way to calculate productivity is time basis

production, which will measure the labor productivity by no of hours worked. The third measurement to quantify the productivity is known as the total factor productivity and measures output per unit of inputs (Blake and Sinclair, 2003). The methodology of expansion of accounting explains that growth in productivity results from increase in physical capital, workers ability and total factor productivity (TFP) (Porter and Ketels, 2003). However, TPF (total factor productivity) do not attributes directly towards capital and labour, but it stresses on high level of innovation and upgraded usage of technology. These were some of the competitive measures for an industry to compete with its rivals globally. Increase in the level of productivity will help a firm, in developing a strong base, in domestic as well a in the international market. Now, to understand Indias relative performance, the need for globalization by various researchers is explained to below.

2.4 Increase in global trade: Today each and every sector of the market has been globalised firmly. It has not only transformed the overall economy of developed countries, but it has not only shaken up the, but has also shaken up the forthcoming industrialized centers to give themselves a boost in order to continue competitive position. But why and how do these economies operate elsewhere in the world. Why do they need to get globalised? The following literature will through light on all those relevant issues. According to (Karagozoglu & Lindell, 1998) saturation of domestic market, future prospects in the global market and significant return from foreign firms are the key motives for internationalisation to occur. Another important reason that nations persuade the firms to become international is to earn foreign exchange. Further, Francis and Collins-Dodd, (2000)

adds that the practical approach pooled with less conservatism direct towards export success. They also established a theory on negative relation between export performance and conventional strategies followed by various countries and therefore suggested that if a firm wants to compete globally conservative behavior will hinder its growth tremendously. Thus firms trading globally should open up their thoughts and policies if they crave for growth and expansion in businesses. Globalization has not just changed the face of the developed counties and cities, but it has shaken the upcoming industrial centers to give them a face lift in order to remain competitive. Dowling (2008, p10-11) puts that in the last two years, [the] exports have grown over 25% per year with China and India included and a very healthy 16% even without China and India from the Asia pacific region. Both domestic as well as international trade has been on a remarkable growth. Dowling (2008) further adds that there are many traditional theories that exist on international trade with various competencies to gain competitive edge. But he emphasizes on modern international trade theory which is based on the idea of product differentiation and monopolistic competition to expand internationally. It also highlights the importance of other factors like, economies of scale and upgradation in influencing the pattern of trade worldwide. Globalization has also strengthened the substance of new product development and innovation schemes which are the essential determinants for growth in trade and the capability of countrys economy to vie in the world market. Table 2 below illustrates the growth pattern of merchandise exports in percentage in few of the Asian countries: Table 2: Growth pattern of merchandise exports in few of the Asian countries 2001 China Hong 6.8 -5.8 2002 22.4 4.9 2003 34.6 12.1 2004 35.4 15.9 2005 28.4 11.2 2006 20 11 2007 17 9

Kong Korea Taiwan Malaysia -14 -17.3 -10.6 7.9 6.4 7.2 5.2 4.8 20.3 -2.4 20.7 10.5 11 15 18.2 23.3 9.2 30.6 20.7 20.9 24.3 21.6 23.9 12.7 12.1 8.8 12 15.7 15 15.8 8.9 11 9 17.8 9.5 15.3 17 8 8 7.4 15.1 6 12 17 8

Singapore -10.5 Thailand India Sri Lanka -7.1 -1.6 -12.8

Source: ADB Dowling, 2006

This has also been supported by United Nations, (2006) which shows a direct relation between a countries growth in terms of its GDP and growth in the exports. This report states that, International trade can help in economic growth and play an important role in growth divergence across countries. It can be done by improving export opportunities through economies of diversification or by introducing production activities previously undertaken in industrialized countries (Dowling, 2008, p-21).

2.5 Family conglomerates - Strategy for emerging markets: The concept of family conglomerates is one of the most emerging strategies, especially in the developing economies. A typical FC is explained by (Ben Porath, 1980) [] is owned as well as controlled by a family, and is dominated by a single founder, however other family members can also help as managers in the company. The majority of responsibility and other controlling rights are directed by the family members (Church 1993; Drozdow and Carroll 1997). They generally make use of capital, which is internally generated and also take loans from

government for growth and development (Prasad and Ghauri, 2004). Although FCs are owned
and controlled by a family, there are other factors that shape a business. These include national culture and economic policies (Ward, 2000).

In todays highly globalised world, this strategy has immense growth potential and can be an excellent business partners for Western companies (Cavusgil, 1997; Garten, 1997; Kock and Guillen, 2001). These markets do not only provide cheap labor and raw material, they also have ability to generate good revenues. Also there are many companies in industrialized countries who depend on international markets for both economies of scale as well as profits (Prasad and Ghauri 2004). But, there are many western countries, which prefer strategic alliances, due to lack of experience in such markets (Kock and Guillen 2001). Also FCs comes with certain risks tagged along. Which includes fragmented infrastructure (sales, marketing), due to which many important factors gets affected, like; poor distribution systems, narrow communication control, political instability, improper regulatory discipline and a high level of product diversion (Arnold and Quelch 1998; Garten 1997a; Khanna and Palepu 1997). The concept of FCs from the stage of introduction to its internationalization has been explained in detail by Prahalad and Ghauri. According to them, FCs, most importantly, should realize the needs of their local market consumers, while making an investment for their enterprise. Prasad and Ghauri puts that in many countries, for the expansion of FCs, government plays a very significant role. As supported by (Jones and Rose 1993), this can be in form of tax incentives, subsidies and special loans. Therefore it becomes very important for them to keep positive relations with the government. Foreign coalition: As the FCs grow and reach at the stage of maturity, FCs focus on competition with domestic rivals and seek out new business opportunities in foreign markets to

increase economies of scale (Kock and Guillen 2001). What arises at this stage is the need for expansion, extensive access to resources required and organizational knowledge which will lead them to form joint ventures, international treaties, and agreements on licensing with Western companies (Kock and Guillen 2001). Another reason of partnership is need to upgrade administrative and technological capabilities. As the second or third members of the generation gets involved in the business, who are usually more skilled and educated, they perhaps start hiring special expert managers of different fields from outside the family (Jones and Rose, 1993). They might require a new organizational structure which will meet the challenges of expansion due to international competition (Prasad and Ghauri, 2004). The common pattern of growth as put by (Dent and Randerson 1997) is gradual expansion by initiating ventures with a foreign partner, which involves, importing or exporting inputs, subcontracted components and manufactured goods.

Finally, FCs then have a tendency to penetrate into cooperative agreements which are related to technical know-how, production and marketing (Luostarinen and Hellman 1994). While some, by establishing wholly owned auxiliary and joint ventures overseas, and act like world class corporate (Prasad and Ghauri 2004). As technology becomes vital to retain competitive advantage, they widen up their company by developing their own technology and R&D centers (Kock and Guillen 2001).

2.6 Conclusion: The core objective of this chapter was to identify and then to evaluate the literature on competitive growth and productivity of developing countries. However, it laid emphasis on

competitiveness of Indian textile industry. Porters work on Competitive advantage of nations was the base or this chapter. Four corners i.e. (diamond model) were incorporated with five forces of porter to analyze the industry thoroughly. It is to be noted that there exists many other theories on growth and competition, but there is no precise literature on the Indian textile industry. Therefore the following research on this industry will help to fill this gap.

Chapter 3: Industry Profile

3.1 Emergence of Indian textile industry: In the past, India has been one of the most important players in the global textile market. It is estimated that about three centuries ago it produced close to 25% of the worlds cloth (Rangarajan, 2007). But, the international competitiveness of Indian textile industry went through a sharp decline in the era during Second World War. The British manufacturers penetrated so much into Indian economy that there was influx of foreign goods into the Indian markets. As Ox-ford History of India puts it, 'the machine goods of Lancashire together with the free trade policy had killed the Indian cotton industry (Shah, 1985). This situation is revealed in table 3 which shows flooding of foreign goods in India.

Table 3 Exports of cotton goods from Lancashire to India (In million Yards) Year Cotton piece goods 1835 52 1907 2532 1913-14 3159

Source: Shah (1985) It was long after independence in 1947 when the government of India gave protection to this sector for its economic development. In late 1960s exceptional growth was seen in textile firms of Tamil Nadu. Other centers like Delhi, Mumbai and Kanpur then grew gradually. This liberalization in the economy helped in resurgence of the Indian textile industry. It then started re-establishing itself in the course of 20th century, when Britain started losing its position as most important textile manufacturer.

Like many other countries, the textile sector then became one of the most significant sectors for the economy of India. Soon after abolition of quotas in 2005 India strengthen itself in international textile market. It is today Indias most rooted sector which provides direct employment (formal and informal) to an estimated 38 million people nationwide9 (compared to the estimated 1.2 million employed in the IT sector, and about 650,000 in the booming Business Process Outsourcing industry (Tewari, 2005). An overview of textile export growth from India during last decade has been shown in Figure 4 Figure 4. Indias textile export growth 1991-2003

Source: UN Statistical Data, (2005) As it is evident, from above figure that the Indias textile exports took off in mid 1990s with US topping the charts followed by UK and then other EU countries. The export growth has been very slow in this sector. In past ten years there is no drastic change especially in the European economies, reasons being fragmented infrastructure, unskilled labour, poor port facilities and rigid labour reforms. It also shows that Indian exporters have a lot of dependence

on the US economy, which has recently reduced the profit margins of Indian exporters due to depreciation of US dollar.

3.2 Role of textile industry in the Indian economy: The textile industry in India is one of the major and most important sectors in the economy especially in terms of foreign exchange earnings, employment and production in the country. It is presently growing at 20% and accounts for 4% of Indias GDP. It also contributes 14% to the Industrial Production and employs about 35 million people (indo Italian chamber, pdf). The entire size of the textile sector is worth $ 47 billion in which domestic market is at $ 30 billion and the overseas market at $ 17 billion. This industry attracted Rs. 33000 crore of investment during the fiscal year 2006-07, which was up by 51 percent from Rs. 21850 crore in the former year (Assocham Report, 2008). The percentage contribution of textiles exports in total merchandise exports of India is 15.56% with textiles exports comprising 7.41% and readymade garments 8.15%. Yet, India accounts for mere 3.9% of world textile exports (www.thehindubusinessline.com). The following fig. 5 shows Indias market share in world textile market in the year 2007.

Fig.5 Indias market share in world textile market

Source: Kavitha, (2007) Furthermore, this industry is the countrys biggest foreign export earner, contributing 35 percent of the gross export earnings. It also plays a crucial role by providing employment to millions of craft persons and farmers as it has a very close relationship with the rural economy which is the ultimate source of chief fibre crops such as wool, cotton, silk, jute and handicrafts. According to a recent report, it has been evaluate that out of every six households in India one is either directly or indirectly dependent on this sector (www.texprocil.com). India also has several advantages over its competitors, not only does it produce the worlds second largest amount of cotton, it also offers low cost skilled labour and has an abundant availability of raw material. Since, last seven year this industry was striving to recover from a stage of stagnation. The growth rate of this sector was as low as three to four percent. But it has now recovered and is currently increasing at the rate of nine to ten percent (Landes, et.al, 2005). However, the industry since last few months has been going through tough times due to depreciating value of

US dollars. Now, in order to identify the means by which this sector can channelize its available resources and skills, it is important to understand the structure of Indian textile industry.

3.3 The structure of the Indian Textile Industry: The Indian textile industry is divided into two sub sectors i.e. the organized and the decentralized sector, as illustrated by (Chowdhury, 1995). The organized sector involves various textile mills positioned all over the country i.e. Maharashtra, southern India, and Gujarat, where as various handlooms and power looms in small rural areas forms the decentralized sector. Since independence, the decentralized sector has witnessed a substantial and continuous growth but the government policies in the area of organized sector forced only the restricted growth in the organized sector (Leadbeater, 1993). The legacy of tax, labour, and various other regulatory policies forms the unique structure of the Indian textile industry that has dominated the growth in small-scale, labour-intensive enterprises, but it largely discriminates against larger scale, more capital intensive operations. The structure is the result of historical orientation of the Indian government towards local market and population, rather than focusing on the world market. (Landes, et.al, 2005) The Industry pundits describe the Indian Textile Industry as a composition of composite mills and spinning, weaving, fabric finishing and apparel making enterprises. The spinning industry is the most modern and internationally competitive among all these classified classes whereas the weaving sector has been believed to be highly fragmented and small scale using outdated technology (Landes, et.al, 2005).

The handloom sector, a section of decentralized textile industry is a highly labour intensive section that incorporates as a major source of employment to millions of household weavers along with preserving culture and heritage of the nation. Due to its labour intensive nature, the sector enjoys various tax exemptions and discounted interest rates by the government and is often motivated through various government policies and acts (Landes, et.al, 2005).

3.4 Geographical Spread: The Indian textile industry is highly diverse in size and its geographic concentrations. It is diversely situated throughout the Indian sub-continent. The strong hold of textiles in certain small cities is the most striking feature of this country. There are more than 1,500 structured spinning units of large scale, and over 280 composite mills which are vertically incorporated from spinning to finished fabric http://www.3isite.com/articles/insight1.htm. The most wellknown places in India, known for textile manufacturing and its trade are Tirupur, Ludhiana, Surat, Panipat, Delhi, Bangalore and Chennai

Fig 6. Geographical diversity of Textile Industry

Source: Self Northern India, which includes cities like Panipat, Ludhiana, Delhi are the leading manufacturers and traders of textile goods. Panipat, a district in Haryana and is known by the name of City of Weaver. It is the biggest textile cluster in India which is well-known for manufacturing low priced handloom products (Especially Home Products). There are more than 15000 power looms in the region with the capital investment of Rs. 76.20 crore which provides employment to 28000 people (Assocham Report, 2008). Total exports from this district in the year 2005-06 was Rs. 2200 crore mostly to countries like, Germany, Australia, Canada and Japan. There is also a huge amount of export of carpet from this city which

accounts to Rs. 120 crores, reason being, existence of 65 Carpet woolen spinning units, manufacturing 72 Lacs Kgs/day Carpet yarn with annual turnover of Rs. 175 crores (Assocham Report, 2008). Another small city in Punjab, Ludhiana, is a major supply hub of woolen knits, which is worth $ 200 million to some of the leading fashion houses of EU and US. The capital city, Delhi, is the leading export axis for apparel is known for its excellent designing and merchandising skills. The garment retail sector is growing rapidly in this country. It is also turning out new products such as shoddy and acrylic blankets, tapestry, upholstery, art silk, polyester, polypropylene and shoddy yarns (Home fashion, 2007). The southern part of India is a hub for cotton production. Tripura, a city in the east of Coimbatore city, in Tamil Nadu accounts for 90%of Indias cotton knitwear export, which is worth Rs. 5,000 crore (Home fashion, 2007). There has been a drastic change since 1980, in the belt of this small sized, unorganized sector, which recently became more technologically developed. There are about 7000 units which provide employment opportunities to more than one million people (Bhushi et al,2004). The export import policy of 2002-2007 made a creditable tribute for its contribution to the export of India which now calls it a Town of Export Excellence. Chennai is also one of the largest apparel manufacturing city, especially industries located in the Ambattur-Padi industrial zone. Another metropolitan city is Bangalore, has been famous for its silk production since ages, is now emerging as a technical textile city, including foundation garments and tailored clothing. It presently accounts for 30 percent of countrys total apparel exports which is amounting to Rs. 40,000 crore, carrying 1800-2000 textiles and garmenting units in nearby centers like Salem and Coimbatore (Home fashion, 2007). It has also prompted global brands like Calvin Klein, Next, Gap and many more.

This geographical overview of textile industry is apparently an indicative of relative strengths at various locations, because at the same time there are many individual companies with equivalent strengths which do not exist in these concentrations.

3.5 A glance at major textile players in the Indian market: 1. Vardhman Textiles: Vardhman textiles are the most integrated textile producer of India. This Group was established in the year 1965 and is setup in Ludhiana. Since then, the Group has developed its organization manifolds and aims to be the biggest world class textile group manufacturing varied range of goods for the global textile market. Vardhman Group of companies seeks to attain customer delight through excellence in manufacturing and customer service based on extremely creative combination of state-of-the-art technology. It has the market share of 2.37 percent in cotton and blended yarn industry with the total sales of Rs 2294.67 Crores in the year ending 31st March 2008 (http://vardhman.in/.) 2. Welspun India ltd: Welspun, a US $ 3000 million company, started in 1985, leads the export market in terry towels and currently has a turnover of US $ 1500 million (Datamonitor, 2007). Its operations are spread across the whole globe with an excellent distribution network dealing with products like Bath robes, rugs, towels and saw pipes, exporting in more than 32 countries including U.S.A., U.K, Canada, Australia, Italy, Sweden and France (www.welspuntowels.com). WIL is also planning to acquire firms from Europe and Australia which can comprehend its range of towels, bath robes and bed linens. The constant appreciation of rupee has led the

company to take this decision as it will spread risk by cutting down its dollar billing to half of the revenue (Reuters India, 2008; Welspun eyes home textile firms abroad). 3. Century Textiles: Century textiles & industries limited is a Mumbai based company which was started in the year 1897. Today it is Asias one of the biggest cotton textile mill. In such an extremely

competitive global market, Century's cloth has carved a niche for itself. In the last 20 years Century Textiles has spent more than US $ 58 million for modernizing the plans and upgrading its technology. The total sales of this company in year ending 31st March 2008 were 3850 Crores. (www.centurytext.com) 4. Bombay Dyeing: Bombay dyeing established in 1879, is one of the oldest textile companies of India, is a flagship company of the Wadia Group dealing into manufacturing and marketing of textiles and polyester fabrics. Its total sales in the year ending 31st March 2008 was Rs. 959.01 Crores (www.bombaydyeing.com). It has recently entered into foreign market, a 50:50 Joint venture agreement for a development project in Mumbai with Larsen and Toubro. The company has been exporting in many countries like USA, Europe, Australia and New Zealand. An exceptional strength that this company stands with is its distribution chain all over India, is controlling more than 600 exclusive showrooms all over (www.myiris.com).

5. Aditya Birla Nuvo Limited: Another diversified conglomerate is Aditya Birla Nuvo Ltd. who has launched many new businesses for Indias premier business house, the Aditya Birla Group. It operates a dozen businesses under its fold, varying from textiles to telecom (www.adityabirlanuvo.net). The

razor sharp focus on each business has facilitated its turnover to reach US $ 1.8 billion (Datamonitor, 2007). Its key business segments include viscose filament yarn (VFY), carbon black, branded garments, textiles and insulators with its manufacturing units in India, Thailand, Indonesia, Malaysia, Philippines, Egypt, Canada, Australia and China (www.jayashreeiril.com). 6. Raymond: The Raymond Group, established in 1925 and within few years, transformed from being an Indian textile major to an international conglomerate. With more than 60% of market share in India, Raymond Ltd. is today the largest integrated producer of fabric in the world (www.raymondindia.com). With the turnover of about US $ 475.1 million (Datamonitor, 2007) this group is one of the largest players in Fabrics, denim, cosmetics, air charter and many more. It also manufactures Kamasutra condoms and high end surgical gloves. It is vertically and horizontally incorporated to provide their customers total textile solutions. There are very few companies globally, which offer such a diverse product range of more than 20,000 different range of worsted suiting to cater to customers across occasions, age groups, and styles (www.raymondindia.com).

Chapter 4: Macro economic factors affecting Indian textile industry

4.1 Introduction: In the last two decades, the Indian textile industry has never looked this self-assured with itself as it does today. India today is a intensified economy, gaining global attention from all over the world with government changing its role to facilitate rather than to regulate the industry along with supportive policies for textile industry and most importantly, the western markets increasingly accepting Indias differentiated position as a textile source vis--vis the other Asian industries countries. These all are the factors which have brought in a new perspective to India as a textile nation.

In an attempt to enhance India's share in the world textile souk, several progressive steps are being taken by the Government. The Indian government has been acting as a catalyst to promote this industry; as it is one of the most significant sectors of the economy. To make the industry more competitive several policies have been introduced by the Government.

4.2 Government regulations:

Till 1985, the growth of Indian textile sector used to take place in very general terms. It was in the year 1985; the significance of textile sector in India was realized for the first time. A separate policy was declared to promote this industry. Later, National Textile Policy was announced, in the year 2000 which aimed at availability of adequate quality cloth at reasonable rates, catering to the majority of Indias population (put some ref). It also aimed at providing employment to a large number of population. The same year also became evident because the government took initiatives of setting up apparel parks; 2002 and 2003 showed a

gradual decline in excise duties for most types of fabrics while 2004 offered the CENVAT system on an optional basis (www.dnb.co.in).

4.2.1 Quality improvement: The government is also emphasizing to improve the quality level by getting renowned quality certification. Out of 250 textile companies that have been taken up by the Commission, 136 are certified by ISO 9001. Other certifications targeted by the Textile Commission are ISO 14000 Environmental Management Standards and SA 8000 Code of Conduct Management Standards (Indian Brand Equity Foundation, 2006).

4.2.2 Modernisation: Various other measures have been taken to modernise the textile processing sector in addition to interest imbursement. The government of India in its Union Budget of 2005-06, announced a credit linked capital support of 10 per cent (Indian Brand Equity Foundation, 2006). Scheme for Integrated Textile Park (SITP) has been introduced which is on track to offer world class infrastructure conveniences for setting up their textile units through the Public Private Partnership model. Along with that, for procurement of highly developed machines in powerloom sector; the government endow with 20 per cent of capital subsidy for procurement of modern machinery in the powerloom sector.

Recently, Indias inclination towards western designers and other international brands (from UK, Italy, and France) has been observed to enter into a joint venture to cater the domestic market with more varieties. Carrera invested US$ 252.7 million in textile projects in India

(Indian Brand Equity Foundation, 2006). Many Italian brands like Lotto and Paneria watches, signed brand franchising deals with Indian players.

4.2.3 Setting up of SEZs: This industry has been requiring superior quality infrastructure since centuries besides other structural up- gradation, and this need has led the government to initiate certain policies which will result in higher economies of scale with greater efficiency. Special Economic Zones (SEZ) established by government are such policies only, which are being considered as an engine of economic development supported by quality infrastructure. In 2005 the Maharashtra government proposed to setup two special economic zones in Navi Mumbai and Nagpur (Home Fashion, 2005).

4.2.4 The Technology Upgradation Fund Scheme (TUFS) Other encouraging factor includes, Technology Upgradation Fund Scheme (TUFS) launched by government of India in April 1999, Recognising that technology is the key to being competitive in the global market (Indian Brand Equity Foundation, 2006). This scheme has enabled various organisations to access interest loans at a much lower rate for technology Upgradation. It is a scheme in which, reimbursement of five percent of interest rates charged by the financial institutions and various banks is given back. This ensures availability of credit at global rates for technology upgradation. To an extent, it has also helped in curbing the Chinese export market (fibre2fashion, 2006).

4.2.5 Texsummit, 2007: The Texsummit, 2007 was an initiative taken by ministry of textiles, Government of India, to explore new growth paradigms. Texsummit is expected to bring in a paradigm shift and freshness in approach to its vital industrys healthy development and rapid growth in a manner that India can truly realize the vast opportunity of becoming a global textile power both as a source as well as a consumer. The two-day Texsummit, scheduled for August 31st September 1, 2007 at Vigyan Bhawan in New Delhi, was attended by over 500 industry experts, economists, academicians, from across the textile value chain. All the export promotion councils and industry associations, without an exception were actively involved in the effort. The event aimed at evolving a cohesive action plan and most importantly, unifies the thought process of the organized and unorganized segments and sub-segments of this US$ 52 billion industry, expected to reach to US$ 115 billion by 2010 (Texsummit, 2007).

4.3 FDI policies: As liberalisation in the economy has gathered up, FDI policies in the textile industry has reformed to a great extent. The biggest driving force for the government has been the manufacturing area as for most of the foreign investors it is much safe to invest in building manufacturing potentials. Following this, the government is executing various schemes like integrated textile and apparel sites. However this sector allows 100% FDI, but the firms are not taking enough initiatives to tap this opportunity (Home Fashion, 2007).

4.4 Dismantling of quotas: For many years, the worlds textile market was subjected to a trade regime called Multi fibre Arrangement (MFA). For more than thirty years, many rich nations have sheltered their domestic textile industries from low-priced import goods being created in poorer countries. Dismantling of textile quotas in January 2005 then ushered an era of liberated trading through fair competition. This led to globalization in the textile industry which has offered long-term benefits along with many other improvements in this industry. The Multi Fibre Arrangement (MFA) Appendix1, originally sanctioned in 1947 terminated in December 2004, shot up the exports by 22%. According to two economists of International Monetary Fund (IMF),

Abolition of these quotas correspond to a brilliant prospect for India economy to improve its global export market share in textile trade by suitable policy response and nurturing an environment to overcome specific constraints now plaguing the industry

(www.thehindubusinessline.com). Table 4: Export value of textile industry 2004-2005 Export Value US $14 Bn of textile industry 2005-2006 US $ 17.52 Bn 2006-2007 US $18.73 Bn 2007-2008 US $ 21.46 Bn

(Source: Textile Minister, Shri Shankar Singh Vaghela, India Infoline News Service / Mumbai Aug 13, 2008 10:27) Table 5. The textile export products America, Under MFA MFA categories 218 219 225 Product Description Fabrics of yarn of different colours Duck fabric Blue Denim Fabric

313 317 362 363

Cotton Sheeting Fabric Cotton twill fabric Cotton Bedspreads and Quilts Cotton terry and Other Pile Towels

Table 6. The textile export products to EU, Under MFA MFA categories 1 23 2 3 (incl. 3A) 9 20 39 (Source: Verma, 2002) The world textile production and trade began to re-orientate due to elimination of the MFA quotas. The overall production in this industry tracked major boost in output especially in developing countries, such as India, Pakistan, and China. India being one of the leading producers of cotton offers an advantage over its other competitors. The abolition of MFA quotas has not only enhanced the growth rate of exports in textiles, it has also pushed the country to attain international competitiveness in such a regulated manufacturing sector. D K Nair, Secretary General, Confederation of Indian Textile Industry said Cotton exports from the country rose by more than 20 percent in terms of volume post quota regime (http://www.fibre2fashion.com). Now if we see abolition of quotas as such a boom to the industry, it has also proved to be a major threat (Kathuria and Bhardwaj; 1998) as too many imported textile goods flooded in Product Description Cotton yarn Staple yarn Cotton woven fabric Synthetic woven fabric Cotton Terry towel and Linen Woven Bed Linen Woven table linen

India market making the export scenario much more competitive than ever. However, the India government has initiated various reforms to meet the challenges of post-MFA setup, which intended to encourage huge capital investments and tighten up arduous procedures related to the tax regime. The Textile Vision 2010 was a result of interaction between the Indian textile industry and the government which foresees around 12% annual growth in the textile industry from US$ 36 billion now to US$ 85 billion by 2010. Further, Vision 2010 also intends the conception of an additional 12 million jobs through this initiative (http://www.dnb.co.in). 4.5 Agreement on Textile and Clothing: Another most significant outcome was the ATC (Agreement on Textile and Clothing) agreement by Uruguay Round finally addressing developing countries concerns, as the ATC was designed to facilitate the integration of the textiles and clothing sector into GATT 1994 (Reinert, 2000) Beyond Phase-out of Quota in Textile and Clothing Trading. 4.6 Appreciation of rupee: Also, the appreciation of rupee has bought a sharp focus for exporting industries, particularly the textile sector. The Government is also trying to construct an environment to draw an investment of Rs 1,40,000 crore in the Eleventh Plan period once the textiles and garment exports are probable to rise from the current $14 billion to $40 billion.

(www.thehindubusinessline.com). Thus, the introduction of such policies led to Indias market presence in world textile market and increased foreign investment in this sector. And with elimination of quantitative boundaries on textile goods, liberalisation in huge investment projects and dismantling of quotas has resulted presence of Indian Market amongst several big brands.

Chapter 5: Indias Position in the World Textile Market

5.1 Overview of world textile market: It was long back when the history of growth in World Textile industry started in Britain, because the weaving, knitting and spinning machines were originally invented there. Gradually, cotton, wool, silk, and other such raw materials started being produced in high quantities all over the world. Despite of the fact that the industry was originated in UK, but from 19th Century the manufacturing of textile goods passed on to regions like North America and Europe when the merchandising process at these places came into full operation (www.economywatch.com). Later on countries like China, India and Japan concentrated more on this sector by dynamically industrializing their economies. China, Hong Kong and India then became top producers of textiles due to important factors like abundant availability of cheap labour. According to statistics, the current global textile market possesses worth of more than $400 billion. The industry has been facing both, the opportunities as well as severe competition in such a competitive scenario. It has also been forecasted that the textile production worldwide will increase by 25 percent from the year 2002 to 2010 and in this regard the Asian region will be the most significant contributor (http://www.economywatch.com). There have been several measures taken by World Trade Organization (WTO) to uplift and strengthen this sector. In 1995, WTO rehabilitated its MFA strategy and implemented Agreement on Textiles and Clothing (ATC), specifying that the WTO member nations will get rid of quotas on textiles.

5.2 International trade and profile of major competitors: Today, the global textile and apparel trade is approximately US$500 billion, and is expected to grow by US$800 billion by 2010 (www.findarticles.com). European union and United States together lead the consumption, which is 64 percent in clothing and 39 percent in textiles in 2004 (Indian Brand Equity Foundation, 2006).. There are other significant consumers as well like, Australia, Japan, and New Zealand especially of home textile products (Indian Brand Equity Foundation, 2006). The universal quota regime was in place for decades which finally ended on January 1, 2005, except for few small countries. Elimination of these quotas bought a major transformation in the world economy. It also helped many developing nations like India to lift their economy from poverty and helped them in eradicating complex problems like unemployment.

5.3 International scenario on textile industry: From a very long time, the world apparel and textile industry is growing slowly but steadily. In 2007, this industry generated total revenues of US $1.6 trillion and by 2012; it is expected that this industry will show a compound annual growth rate of 4.3% generating total revenue of US $2 trillion. (Datamonitor, 2007). Fearing to lose their respective domestic markets, many countries like U.S, E.U and Turkey have recently imposed quotas on the Chinese exports. Indian exporters see this as a huge opportunity to expand their businesses across the nations and also comprehend the fact that Indian exports would also be imposed with quotas if the importing nation feels to protect their domestic market. The questions that need to be answers are whether Indian exports could be bear by the existing capacities of the global market? Whether there is a possibility that India in

the future can create a 'niche' for itself? And whether India has the capability to market its own products properly? The author has answered to these questions in the analysis and discussion section. The following paragraphs will describe the performance of the Indian apparel and garment industry in the two major markets of world-US & EU. Indian textile industry is showing phenomenal growth rate recently and is going great guns! The Indian textile industry registered drastic increase in the exports sale after the abolition of the quota regime. Currently, India possesses 4 % of global market share which will grow at least to 8% by 2010 and will have the total value of US $50 billion (Texsummit, 2007).

5.3.1Performance of India in the US market: Indian textile exports after the removal of quota, during the period from January to April 2005 grew by 27% while Chinese industry in the same period grew by 52% (Chandra 2006). In the first nine months of the year 2005, market share of the Indian textile industry increased from 4.4% to 5.2% and this share is expected to grow up to 15% by the 2008. (IBEF, ICRA 2006) According to Mr. Harish Ahuja, MD Shahi Exports states, India has performed extremely well in the home textile business. He explained that there are bright prospects for Indian textile industry in trading home textiles internationally and expects that this market will increase to US $ 10 billion in 2010.

As believed by Verma (2002), growth in this sector is approaching by the value upgradation of rather than from capacity expansion. According to the industry sources, first rank in the home textile is occupied by the terry towels, second by the bath rugs and then follow other made ups.

The increase usage of the wide width looms have resulted in the rise of exports in this segment. After China and Mexico, India is the third largest exporter of textile to U.S. Lately; China's URV has declined by 14% whereas on the other hand India has maintained its URV (Texsummit, 2007 & Confederation of Indian textile industry (CITI).

5.4.2 Performance of India in the European market: In the EU market, after the quota regime India's exports grew by 16% and market share increased from 6.0% to 7.3% in the 1st nine months of CY2005. By the end of 2008 it is expected to be 9.0% (IBEF, ICRA Presentation (2006). Indian textile exports also showed the impressive growth in the EU market and grew by 16% and simultaneously increased its market share from 6.0% to 7.3% in the first nine months of 2005. It is expected that by 2008, market share of the Indian textile industry would increase to 9% (IBEF, ICRA Presentation, 2006). India as in the case of US is placed on the third position in the list of textile exporters in the EU market after China and Turkey. Because of the duties imposed by the EU on the Chinese imports, Indian textile exports posed favorable, due to which China's UVR decreased by 40% and Indian UVR increased by 6% (Texsummit, 2007).

Terry towel is one of the most renowned exports by the Indian textile industry which is very popular in EU market. But the period from 1995 to 2007, exhibits the declining trend in both US and EU markets which is mainly due to the hardening of the prices (FICCI, 2007). Indian textile industry is facing threats from the many other countries other than China, like Pakistan, Bangladesh and Vietnam. It is reported that in the year 2007, India was the fourth largest exporter to US where as Pakistan was above India, it was spotted second (FICCI, 2007).

Indian firms are also performing really well, in the Asia Pacific region. There are many companies operating Singapore, Japan, and Indonesia. Efforts are also being made to develop trade between India and various Middle East countries like Bahrain. Lately, many home textile manufacturers have embarked on introducing collections by using organic materials. It was recently reported that turkey has been surpassed by India, and is the largest cotton producer today (Panthaki, 2008). Organic cotton is the cotton that is grown without using pesticides or chemicals, and is grown in virgin soil. The demand for organic cotton in increasing tremendously all over the world and is more in the European countries. Companies in US (Pottery Barn, West Elm) too are going organic. Another important raw material for textiles, which is gaining demand in the export market, is Jute. Various steps are being taken by the researchers, to ensure that the quality of jute exported from India, should match the global market standards.

Chapter 6: Methodology

6.1 Research methodology:

This chapter will outline the various research methods used by the author to evaluate the competitiveness of Indian textile industry. To analyze a study there are basically two academic research methods, Qualitative research approach and quantitative research approach (Saunders et al. 2003). Both these research methods are used differently for different research purposes. In relation to data collection for this dissertation, qualitative methods have been used which includes questionnaires and semi-structured interviews. The research was conducted to evaluate the International Competitiveness of Indian Textile Industry. It is therefore based on various competitive advantages that India has over other countries and certain limitations because of which it lacks to compete with other strong nations.

The dissertation required both, primary as well as secondary data in order to evaluate the complex global strategies. The secondary data, to analyze the industrys future moves; was gathered from various books, magazines, companys annual reports, and web access. The quotations from the interviewees have been used in the next chapter to evidence and support the analysis. Whereas the primary data collected, was through various interviews and the questionnaires; conducted with seventeen textile exporters of India that how do they compete globally. It enabled the author to unfold many important issues and a realistic global scenario regarding the topic.

6.2 Questionnaires: For a market research, collecting data from questionnaires is the most common method. Questionnaires are very economical to gather data from a potentially vast number of respondents. They are often, one of the most feasible ways to reach a large number of people (Arnold M. Lund, 2001). Questionnaires are used to collect specific data from market, which cannot be gathered elsewhere from, for example: books, newspapers and internet access. It is so because the data collected from this source will be original. The author has used open ended questions as it allows the respondents to better express their answer as they are most suitable for an explanatory research.

6.3 Interviews: Qualitative interviews are often used in an exploratory way which explores the subjective interpretations of collective experiences. It is a valuable research method for exploring data on understandings and different peoples opinions about a subject matter. (Arksey and Knight, 1999, p.2, 2007). It can be broadly classified into three types: structured, semi-structured, and unstructured. The type of interviews used for this dissertation is semi-structured. The quality of the data gathered in an interview depends on both the interview design and on the skill of the interviewer (Author Nick Fox). Gillham (2000) explain that how interviews are one of the best research techniques. Firstly, it is more flexible, suitable when the sample of research is small, secondly, they are appropriate when questions are open ended, requiring detailed response, lastly, when the information is sensitive in character and the interviewee may only reveal it during face-to-face conversation.

6.4 Locations for the research conducted: The Indian textile industry being second largest in the world has a huge potential to perform much more. The industry is poised to meet the ever increasing global competition. This made the author to choose India as her research area. This industry is geographically too diverse because of which the primary data collected, was concentrated among few areas like, Haryana, Punjab, Delhi and Maharashtra. Northern region of India is the most imminent region of textile industry, gaining recognition worldwide. The survey conducted was in regions like, Gurgaon, Delhi and Panipat. Other than this Mumbai, capital of Maharashtra has been the biggest textile hub in India. The questionnaires were being filled in person, where as interviews conducted on telephone. 6.5 Interpretations of the data: Data interpretation has been done by using both primary as well as secondary data. The questionnaires and interviews intended to gain the appropriate information regarding the study. The information gathered primary resource i.e. (from the interviews and questionnaires) were put together to divulge the real situation of the market. The data collected from the secondary resource was also evaluated in similar way. 6.6 Limitations of the research: During the research the biggest constraint faced by the author was her being in United Kingdom and conducting research on Indian firms. This made the task more complex as many research areas couldnt get covered due to restricted access to resources as well as time constraint. During authors visit to India, she managed to conduct only seven interviews personally, whereas the rest of the interviews and questionnaires were through telephone and emails respectively.

Another limitation recognized by the author was, availability of incomplete and broken information by the interviewees, which aroused due to confidential purposes. The interviewees were not comfortable in revealing the figures of their companys revenue. The following chapter will lay down the discussions and authors findings, which will disclose the limitations of Indian textile industry, along with the recommendations to enhance the industry future prospects.

Chapter 7: Findings and Analysis

7.1 Introduction: This chapter will provide a comprehensive analysis of the questionnaires and interviews conducted during the research. In total five descriptive questionnaires and twelve interviews have been analyzed. The research questions are based on the macro economic factors affecting Indian textile industry and the author identified that this industry is facing many challenge, and therefore recommendations have been provided to overcome those limitations. A sample of questionnaires has been provided in the Appendix 2. The questions used for questionnaire are same for the interviews also. The first section of this chapter will therefore interpret the data followed by various challenges faced regarding the fragmented infrastructure, government policies and drawbacks of international trade trends; finally concluding with various recommendations to improve this sector. 7.2 Evaluating the Competitive Performance of India: After reviewing all the questionnaires and the interviews, when questioned about the competitive performance of India globally, out of seventeen, twelve considered China to be the biggest obstacle in its way to be the international leader. Whereas some of them believe that India should follow the efficient strategic model of China. Today India and China are the most rapidly growing economies, with an advantage of holding almost half of the total population. Both these countries are influencing the international issues in all the businesses, global trade and the overall environment. Mr. Sahil Guglani, Managing director of Savoy creations believes

that today India ranks second in the world textile market and now the only main challenge it faces is to beat China. India should therefore focus and work upon its problem areas. The analysis will now elucidate the competitive performance of India with respect to China in terms of Infrastructure, labour reforms, international trade trends and government policies. 7.2.1 Infrastructure: As far as the infrastructure is concerned China is much ahead of India. The Chinese Government has been investing a lot as compared to India for the development of its infrastructure, believing that it attracts the foreign investors to a great extent. Now being specific to the textile industry, the companies operating in China are much more cautious about the production quality, the technology used, health and education of the employees etc. This is where India needs to catch up really fast. Particularly the port services in India have been criticized from all over the world. To be more precise towards different sectors, the port facilities in India are extremely disorganized and have received criticism from all over the world. According to the director of Bertling Logistics, Mr. Josi Morreale, "The lack of Indian port infrastructure is not allowing us to provide service through our own Panamax vessel, which has resulted in an increase in per unit transport cost by as much as 10%" (www.mjunction.in). Dowling (2008) also adds that, due to poor port infrastructure, the exports of textiles of India are at 10% loss with US as compared to other countries like China, Thailand, South Korea and Indonesia (Dowling 2008, p477). Along with this other transportation ways, such as roadways and railways also needs to be a lot more developed. As Mr Ravinder Khanna, The managing director of Sheena exports puts that due to enormous increase in prices of land (expansion of real estate market) in India and the appreciation of rupee, the economys overall size is constantly increasing. This gives India advantage over its

biggest competitor China, as the properties are controlled by the state government only. This restricts foreign investors to setup new industries there. Consequently, it acts as an opportunity for India. 7.2.2 Labour reforms: The labour reforms in India are extremely stringent which hampers the growth of textile manufacturers to a great extent. Mr Manan Saluja, The export manager of Mansarover Overseas comments that China as compared to India has cheap labour, which is why it attracts maximum developed countries for their manufacturing activities. He adds that undoubtedly India also has a vast pool of unskilled labour, but overall production of India goes down due to obsolete technology base and unskilled human labour. China also has a history of extreme employment security which has reformed its labour relations drastically and has created a new labour market, in which workers are highly mobile (http://www.financialexpress.com) Though, there is a change in this scenario taking place, with increase in the rate of labour wage in China. India should take advantage of this situation and should also take serious measures to expertise their labour force. An interviewee Mr. Nimish Arora, The managing director of Dicitex Dcor says that the government should also take some measures to amend its inflexible contractual labour laws. As mentioned before, that China has various facilities for its labour force like heath and medical centers, India too should make efforts to develop these areas for a better labour force.

7.2.3 International trade trends: The author during her research realized that there are two economies, India and China that have gained the maximum after abolition of quotas in 2005. Both the countries have paved towards a very glorious future. However, the strategic competencies used by both the countries have been very different from each other. Mr Avinash Palival, The managing director of Palival Exports who is dealing in cotton rugs and mats said that, the foreign trade strategy which China follows, is that it import semi-finished goods from outside and export the complete and refined product to countries like US, Europe and Japan. This elucidates the situation more clearly, that China soon after abolition of quotas in 2005 attracted huge amount of FDI which offered the country a good value of exchange rate. This helped the Chinas economy to excel at the platform of textile exports. But very soon the US and European markets realized that the China is becoming the biggest foreign exchange reserve holder. Therefore they imposed import barriers from China to safeguard their economy. This again is an advantage for Indian export market to capture. But Mr Ravinder Khanna believes that India too should follow the footsteps of China to an extent, to attract foreign direct investment, which will help the economy to grow and should also enter into joint ventures with international firms. The textile exporters in India are very positive about this industrys potential in near future, both in domestic as well as in global market. It has also been found that the Indias domestic market is emerging drastically giving competition to nations like Pakistan and Sri Lanka.

7.3 SWOT analysis of Indian Textile Industry: Today the world textile industry is worth $400 billion and is likely to grow by 25 percent between 2002 and 2010 and Asian region will largely contribute in this regard. (www.economywatch.com). India being the second largest producer of cotton in the world has great opportunities to make the most of it on a much bigger portion, for this industrys growth. Though China enjoys sustained rapid expansion in exports due to many competitive advantages, India is still giving a cut throat competition to China in production as well as in exports. Therefore the Indian textile industry should boldly respond to this challenge. This section will now elucidate Indias strengths, weakness, threats and opportunities, based on the primary and secondary researched by the author. It will help in focusing on these key factors which are affecting Indian textile industry and will provide a comprehensive platform in examining the performance and future prospects. 7.3.1 Strengths: There are several key strengths which Indian textile industry posses. The first being low cast labour force, which is the most distinct competitive advantages that India has. The country have abundant manpower at very low prices as added by Mr. Sahil Guglani the Managing Director of Savoy Creations. Since, labour wages in this country are very low, the overall manufacturing cost of the finished products cut down. A research by KPMG in fig. 7 shows the same:

Fig. 7 India: One of the lowest labour costs in the world

Source: KPMG, 2003 Another strength, due to which India enjoys advantage over its competitors, is the availability of rich resources of raw material in abundance for textile industry. Since, the industry is largely cotton based it also hold a competitive edge there as it is one the largest cotton producing country in the world. It is also rich in many other resources like, silk, jute, viscose, linen, wool, polyester etc. The third strength is Indias growing domestic and international market. Today this sector is highly self-reliant and holds 17 percent to the countrys export earnings (Texsummit, 2007). The sector also provides employment to more than 35 million people. Therefore, the overall growth and development of this sector has a direct impact on the expansion of the nations economy. Lastly, comparing India to its competitors, it is highly competitive in spinning sector, and therefore has its presence in many value chain processes. It has access to all excellent ports in the world (www.economywatch.com).

7.3.2 Weaknesses: India, despite of being so self sufficient in factors like cheap labour, raw material, still comes across many problems to compete in the international market. This is due to its weaknesses like, fragmented infrastructure which leads to lower ability and hinders the industry to expand. Large section of the industry is even today engaged in the unorganized sector i.e. powerloom and handloom sectors (KPMG Report, 2003). The following Fig. 7 shows the degree of fragmentation in Indian textile industry. Fig. 7 Degree of fragmentation in Indian Textile Industry

Source: KPMG Report, 2003 As commented by Mr Manan Saluja, the export manager of Mansarover Overseas, the industry also lacks because of its cost competitiveness is relatively low due to unskilled labour force and inadequate economies of scale. Mr. Dev Rai, the managing head of Baldev Overseas further adds that, technology obsolesce is one of the biggest reasons why this industry is still labour intensive. The Government of India should aid SMEs of this industry

with

special

loans,

with

which

the

later

can

invest

in

latest

machines.

7.3.3 Opportunities: Though this industry lacks in many areas, but has several opportunities as well, such as focusing towards research and development in this sector to focus onto new product development. It will help the Indian companies to grab the larger market share. As commented by Mr. Ravinder khanna, managing director of Sheena exports that more innovation should be done to develop smarter fabrics, by using various specialized treatments. Abolition of quotas is another opportunity for the nation, as it was a complex system of bilateral restraints which came to an end. The textile trade post 2004, offers many opportunities as various restrictions in the trade system are removed and it has offered the importing countries to have a wider access to the world as a consumption marketplace. Also, the industry is moving towards branded products, which will help India in improving its brand value. 7.3.4 Threats: As discussed earlier, China is one of the major threats to the Indian textile industry. Apart from that the structure of the industry in itself is something that needs to be worked upon. The big Indian players are trying to incorporate the integrated working models of supply chain as the fragmented structure stands in the way of competing efficiently. The location of India and its distance from the western countries that it sells to, is another factor that pulls India back in delivering the best in terms of cost and timeliness. Neighboring countries like Pakistan, Bangladesh and Srilanka are giving India a tough competition owing to their still cheaper labour. Though China so far has been considered the only major competition, but the other neighboring countries mentioned above are also catching

up fast. Lastly, the expiry of the quotas have made the trade free and hence put the firms in an uncertainty as to the amount of market share they would get. 7.4 Limitations and Challenges faced: Now after evaluating the competitive performance of India with China, the challenges that are being faced by Indian firms, can now be identified. The Indian textile industries largely compete on the following factors: i. ii. iii. iv. Quality of products Cost effectiveness Effective supply chain management Designing and innovation

Though, it has been recognized that India is not utilizing its resources to the fullest and is not acting upon the above mentioned areas optimally. Therefore there is a dire need overcome these challenges for India to become the textile leader. 7.4.1 Appreciation of rupee value: At present, the Indian textile industry is highly disturbed due to economic recession in United States. The rupee appreciation has taken a toll on the existing thin margins of textile players. Due to this slowdown in the economy they are bearing huge losses. The hardening of rupee has also affected the overall textile earnings to a great extent. Many SMEs are laying off their workers. The chairman of the Clothing Manufacturers Association of India, Mr . Premal Udani said that around 5, 00,000 jobs are at risk and the export target of $25.06 billion for the year 2008 seems beyond the reach (knowledge.wharton.upenn.edu). Mr. P.D. Patodia, chairman of the Confederation of Indian Textile Industry reveals in a conference that "Our competitiveness for the time being has gone away". It has been estimated

that for every 1% fall in the value of the dollar compared with the rupee, profit falls by 1.2%. (www.knowledge.wharton.upenn.edu). Subir Gokarn, chief economist for Standard & Poor's Asia-Pacific also comments, "Some exporters will be permanently damaged and not all will survive. Authors recommendation: Since, it has been realized that the Indian exporters are a lot dependent on US buyers, which has given rise to this terrible situation. Therefore the Indian textile firms should aim towards expanding their clients portfolio in terms of other countries as well. It will help the firms in diversifying their risk to a great extent. Along with this the Indian government should take measures to protect their exporters, so that they do not bear the whole risk. For e.g.: The government of China has created artificial fixed exchange rates, in which if such situation arises, it is the government who bears the fluctuations in exchange rates. 7.4.2 Labour reforms: As mentioned earlier, poor labour productivity in India has been killing economys cost advantage since very long. One of the biggest factors for deterred FDI is unfavorable labour policies. Because of this the industrys total output has been very low as compared to other countries like China. Government of India is not taking enough initiatives to formulate the labour reforms in India Mr Ravinder Khanna, the managing director of Sheena exports. .Authors recommendation: Establishment of flexible labour market can only help this sector, by protecting the workers from exploitation and catering to their needs. As, the political, social and demographic structure of India prevent fundamental changes to take place in the existing labour laws. Therefore, to organize the workforce of this industry the government should develop five year

plans to accomplish this agenda. Along with technical skills, managerial strategic support should also be provided. For a firm to deliver effective supply chain management, it is very important to hire people with knowledge in all the related fields. Therefore, fashion and textile institutes like NIFT should be opened up by the government to provide detailed textile knowledge to the generation approaching. Government should establish more textile parks, which will not only provide employment to a huge number of people but it will also provide those workers with basic health and education facilities. 7.4.3 Fragmented infrastructure: There are many exporters who outsource their raw material and other inputs from outside suppliers. They often face many problems regarding late deliveries, improper transportation, which disturbs the entire organization (Source: Interviews). However, textile parks and SEZs are in progress, still there exists, huge transportation cost. Authors suggestion: Foreign buyers will always prefer vertically integrated firms instead of firms with dispersed production units. Therefore to develop the infrastructure of this industry, government should invest more in this sector. Special loans should be provided by the government to uplift this sector. The Indian ports should be given special attention along with other transport facilities. 7.4.4 Obsolete technologies and strategies: The Indian textile industry is far from being sophisticated and up to date. The industry is still largely dependent on traditional methods of production and dyeing. The handloom and powerloom sector comprises a huge percentage of the industry. Though these specialized products help India form a niche in the overseas market, these methods are not the best and

optimal methods of production. This prohibits India to match the production capacity of competitors like China. The power and water costs in India too are much higher than China and hence enable China to surpass India in terms of being cost competitive. Authors suggestion: Upbeat about the positive trend in the Indian textile sector, the time is ripe for this sector to attract higher FDI. Once a few overseas players enter the Indian market it would trigger the momentum for more players to draw closer. Collaboration of Indian firms with international companies will attract FDI, which can be used in upgrading the technological status of India. Technology upgradation will therefore help in launching new products of superior quality into the market. Bu doing so, it will help Indian firms to handle custom made orders, thus helpful in catering to a niche market. Other product categories in which it needs to enter effectively is technical textile, which includes, conveyor belts, automobile seat covers. Apart from this, India should also tap the market of medical textiles (bandages and surgical gloves). It will help the country improving its global market share. To reform the existing value chain modern strategies should be adopted. Value added goods should be exported more rather than exporting just the raw materials (Chaterjee, 2005). 7.4.4 Indias Brand Value: At the moment the Indias brand value is not at a very influential position. It badly needs to uplift its image by venturing its products and services in the international market. Not a single Indian brand recognized at the international level (Trivedi, 2007) Authors suggestion: In the present scenario, the trend of industrialization heads towards rising demand structure, in places like India. Therefore the industry in return should take advantage of its domestic market.

It will help in promoting the brand image of India. Many foreign brands like Mango, Gap, Esprit, Reebok, and Tommy Hilfiger have already ventured in India. Therefore big Indian players of textile sector should expand themselves in foreign markets as well. This will help them in establishing niche market for their (Indian) products, which will encourage India as a textile economy. To conclude, this sector needs immense investment for modern technology installation, which will lead to overall capacity expansion. To enhance the attractiveness of this sector, Indian government should endow with suitable fiscal incentives to the interested parties. Government should also encourage, both global manufacturers and small scale manufacturers, to work together into partnership, as it will help in further boost up in this industry.

Chapter 8: Conclusion

The purpose of this dissertation was to highlight the international competitiveness of Indian textile industry, which is one of the oldest sectors and hold great significance for its economy. This has been achieved by assessing the literature that exist on this subject and relating that theory to the practical world. Until the economic liberalization took place in the country, this sector was predominantly unorganized. Post 1990s the opening up of this economy led to a stupendous expansion in this sector. With termination of Multi Fibre Arrangement (MFA) on January 1, 2005 a plethora of opportunities came in front of the industry. The competitiveness of this industry can be studied in both the ways, positively as well as negatively, considering various factors along with it. The industry being so massive in size and geographically so diverse has immense potential for development and expansion in the near future. The author, in this study, has examined the international competitiveness of India in textile sector. She has evaluated the competitiveness of India with other countries in terms of its production and performance. There have been several factors (strengths and weaknesses) influencing the performance of Indian textile firms. Various inherent strengths include availability of cheap unskilled labour, strong raw material base (cotton, jute, silk), growing domestic as well as international market, effective supply chain management and variety of distinct local structure. Whereas the weaknesses which has affected the productivity and have constrained the growth of this industry includes, highly fragmented infrastructure, rigid labour laws, low foreign investment, poor domestic policies and usage of obsolete technology. But with government taking several initiatives to overcome the bottlenecks that hinders the industrys growth, not only the

infrastructure will be improved but with increasing education scenario the productivity will also be increased as more skilled labour will be available. Considering the global scenario, for Indian textile industry its major marketplaces are Europe and US. But, India to be the market leader needs to surpass China, which is its biggest competitor. It also needs to provide an edge to cater niche market. To cater this type of market, there is a requirement of continuous innovation process and product differentiation. Since the Indian industry is dominated by small scale firms, it can optimally cater small orders, whereas, China is predominantly concentrating only on the mass production. Another added advantage that India has, is quota restrictions on China that has been applied by US and other countries in the European market. Earlier, the industrys growth was quite submissive in overall participation in the world textile market. It was in mid 1990s when it started receiving orders actively from other countries, but the experience was at nascent stage. But today, this industry has a very contemporary outlook, with many effective strategic policies to compete the global market. The future prospects of the Indian domestic market are also very promising, with strong increase in GDP, rapid expansion of middle income group accompanied with increasing purchasing power of consumers. There are many Indian companies planting their subsidiary units outside the country i.e. US, EU, and UAE. Many mergers and acquisitions are taking place to draw the attention of foreign investors for better infrastructure and technology. By summing it all, India is now completely geared up and is propelling towards humongous growth of the overall industry. The Indian textile industry is presently worth $ 47 billion and its continual expansion has led the government to lengthen the Technology Up gradation Fund Scheme in its Texsummit,

2007. This will help the industry to achieve world class quality due to upgraded technology. According to Ministry of Textiles, (2008) Indias export target of $ 55 billion [will be] achieved by 2012 keeping following factors [ in consideration]; end of quota regime, growing world economies, with rising per-capita income, spurring consumption, increased trade in apparel, driving the demand for fiber, yarn and fabrics, a surge in demand for technical textiles, a shift from manufacturing/stitching to design-cum-manufacturing and increasing penetration of high format retail stores. There are various opportunities knocking the doors of this industry with which it can be the market leader worldwide. Therefore, to effectively tackle the weaknesses of this sector the country needs to put high investment in R&D to launch new products and by reducing transaction cost per unit. It also needs to move towards middle or high end market from low end market scenario basically to improve their international standards. Another focus area is organizing the human resource. For higher productivity it is imperative that the workforce should be skilled and educated. India should also reduce its dependency on the US market, as it will help it to diversify the possibility of risk. Abovementioned all the factors will help the country to become a highly competitive player in global textile market.

References:
Arksey, H. & Knight, P. (1999), Interviewing for social scientists, London: Sage

Arnold, D. J. & Quelch, J. A. (1998), New strategies in emerging markets, Sloan Management Review, Vol. 40, Issue. 1, pp. 720.

Assocham, (2007). Ministry of Textiles: Indian Textile - weaving a global spin

Ben-Porath, Y. (1980), The F-Connection: Families, friends, and firms and the organization of exchange. Population and Development Review, Vol. 6, Issue. 1, pp. 130. Besanko D. Dandrove, D. Shanley M. & Schaefer S. (2003), The Economics of Strategy, John Wiley and Sons, New York.

Bhushi, U.M. Pharsiyawar, S.M. (2004), Some perspectives in Handloom and Powerloom Textile Industry- A Case Study, International Engineering Management Conference, Working Paper. Blake, A. & Sinclair, M. T. (2003), "Tourism Crisis Management: Responding to September 11", Annals of Tourism Research, Vol.30 , Issue. 4, pp. 813-832. Cavusgil, S. T. (1997), Measuring the potential of emerging markets: An indexing approach, Business Horizons, Vol. 40, Issue. 1, pp. 8791. Jones, G., & Rose, M. B. (1993). Family capitalism. Business History, Vol. 35, Issue. 4, pp. 116. Chandra.P (2006), The Textile and Apparel Industry in India, Oxford University Press Church, R. (1993), The family firm in industrial capitalism: International perspectives in hypotheses and history. Business History, Vol. 35, Issue. 4, pp. 1743. Dowling, J.M (2008), Future Perspective on the Economic Development of Asia, Advance Research in Asian Economic Studies, Vol.5, pp. 10-50

Drozdow, N., & Carroll, V. P. (1997). Tools for strategy development in family firms. Sloan Management Review, Vo. 39, Issue 1, pp. 7588.

Dunning, J.H (1998), Explaining International Production, Unwin Hyman, London. pp. 140-168. Enders, A. & Knig, A. (2004), Towards an Integrated Perspective of Strategy: The Value-Process Framework, Working Paper, pp. 1-22. Fox, N. (2006) Using Interviews in a Research Project, National Institute for Health Research, Trent Research and development Support Unit, Working paper, pp. 1-40 Francis, June & Collins-Dodd, Colleen (2000), The Impact of Firms' Export Orientation on the Export Performance of High-Tech Small and Medium-Sized Enterprises. Journal of International Marketing, Vol. 8, Issue 3, pp. 84-103 Harish Ahuja Interview, (2007) Home fashion India, Vol. 6, Issue. 3, p-62

Havard University, Working paper, pp. 1-62 Home Fashion India (2007), Vol.6, Issue. 3, pp. 19

IBEF, ICRA Management Consulting Services Limited(2006); Indian textile industry, Garten, J. E. (1997a). Troubles ahead in emerging markets. Harvard Business Review, Vol. 75, Issue. 3, pp. 3850. Gillham, B. (2000), Case Study Research Methods. London; New York: Continuum.

Jayalaxmi J. Shah (1985): "A comparative analysis of two major cotton textile centres of India: Bombay & Ahmedabad". Treballs de la Societat Catalana de Geografia, Vol 3, pp. 87-106 Karagozoglu, N. & Lindell, M. (1998), Internationalization of Small And Medium-Sized Technology-Based Eirms: An Exploratory Study, Journal Of Small Business Management, Vol. 36, Issue 1, pp. 44-59. Kathuria & Bhardwaj (1998), Export quotas and Policy constraints in the Textile and Clothing market, Policy Research Working Paper; The World Bank. Vol.1, pp. 24.

Kim, D. Kandemir, D. & Cavusgil, T.S. (2004), The Role of Family Conglomerates in Emerging Markets: What Western Companies Should Know, Thunderbird International Business Review, Vol. 46, Issue. 1, pp. 1338.

Khanna, T. & Palepu, K. (1997). Why focused strategies may be wrong for emerging markets. Harvard Business Review, Vol. 75, Issue. 4, pp. 4151.

Kock, C. J. & Guillen, M. F. (2001). Strategy and structure in developing countries: Business groups as an evolutionary response to opportunities for unrelated diversification. Industrial and Corporate Change, Vol. 10, Issue. 1, pp. 77113.

Landes, M. MacDonald, S. Singh, S.K. Vollrath, T. (2005) Growth Prospects for Indias Cotton and Textile Industries, Economic Research, United States Department of Agriculture, Working paper. Leadbeater, (1993), The Indian Cotton-Mill Industry and the legacy of Swadeshi, The Politics of Textiles, pp. 14-15. Liu, H. & Sun, L. (2003), "Beyond Phase-out of Quota in Textile and Clothing Trading: WTO-Plus Rules and the Case of US Safeguards against Chinese Exports in 2003", Centre for Financial and Management Studies, pp. 1-20

Lund, A.M. (2001), Measuring Usability with the USE Questionnaire Vol 8, Issue. 2

Mayor, J. (2005), Not Total Naked: Textile and Clothing Trade in Quota Free Environment, Journal of World Trade, Vol. 39, Issue. 3, pp 393-426. Nords, H.K. (2004), The Global Textile and Clothing Industry post the Agreement on Textiles and Clothing, World trade Organisation, Working Paper.

(2007), Overview of the textile industry in India, The Indo-Italian Chamber of Commerce and Industry. Report Panthaki, M.K, (2008), Organic Cotton and Natural Dyes to take over Cotton and Synthetic Dyes, Home Textile Views, Vol. 11, Issue. 4, pp. 8. Porter, M. (1979) How Competitive Forces Shape Strategy, Harvard Business Review, Vol. 57, Issue. 2, pp. 137-145. Porter (1985) Competitive advantage: Creating and sustain superior performance, pp. 4-7. Porter (1990) The competitive advantage of Nations, pp. 3-100. London: Mcmillan

Porter, M. E. (1998), The Competitive Advantage of Nations (with a new foreword), The Free Press, New York.

Poter, M.E. & Ketel, C.H.M (2003), UK Competitiveness: moving to the next stage Economic and Social Research Council. Vol. 3, pp. 1-55.

Prasad & Ghauri (2004), Global Firms and Emerging Markets in an Age of Anxiety, pp. 121-136

Ramachandran, V. (2001) Export Competitiveness and the Market for Textiles: key issues, evidence from firm interviews, and policy suggestions, Center for International Development, pp. 1-62 Ramachandran, V. & Himes, M. (2001), "EXPORT COMPETITIVENESS AND THE MARKET FOR TEXTILES: key issues, evidence from firm interviews, and policy suggestions", Center for International Development, pp. 1-62 Rangarajan, C. Annual Report (2007) Tex summit

Reinert, K.A., (2000), Give us virtue, but not yet: Safeguard actions under the Agreement on Textiles and Clothing, The World Economy, Vol. 23, Issue. 1, pp. 25-55.

Report (2006), Indian brand equity foundation, KPMG. Tewari, M. (2006), Post-MFA adjustments in Indias textile and apparel industry: emerging issues and trends, Indian council for research on international economic relations, Working Paper no. 167 Texsummit (2007), Home fashion India, Vol. 6, Issue. 3, pp. 19. United Nations (2006), Diverging growth and Development, World Economic and Social Survey. Chapter 3, pp. 54. United Nation Conference on Trade and Development (2005), TNCs and the Removal of Textiles and Clothing Quotas Utamsingh, V. (2003), "SWOT Analysis of the Indian Textile Industry: Implications for Maharashtra", Textile Confrence-2003, Seminar

Verma, S. (2002), Export Competitiveness of Indian Textile & Clothing Industry, Indian Council for Research on International Economic Relations, Working paper no. 9

Ward, J. L. (2000). Reflections on Indian family groups, Family Business Review, Vol, 13, Issue. 4, pp. 271278.

Web References: Bharat Textiles (2007), Textile news 2007, Available from: http://www.bharattextile.com/newsitems/2007821) [Accessed: 20.08.2008] Bombay Dyeing, Company Profile, International activities and exports, Available from: http://www.bombaydyeing.com/company.htm, [Accessed: 25.08.2008]. Datamonitor (2007), The Textile Industry Global Profile, Available from: http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=25766813&site=ehost-live. [Accessed: 09.09.2008]

Dhanabhakyam, M. & Shanthi, A. "Indian textile industry An overview", Available from: www.fibre2fashion.com [Accessed 07.08.2008]

Domain-b (2008), India's post-quota textile exports to EU, US decline, Available from: http://www.domain-b.com/industry/Textiles/20080620_textile.html, [Accessed: 23.08.08]

Dutta, D. (2003),Insight into India - part I, Available from: http://www.3isite.com/articles/insight1.htm, [Accessed: 15.09.2008]

Emerging SMEs of India textile, Available from: http://www.dnb.co.in/SMEstextile/overview.asp, [Accessed: 13..08.2008]

Fibre2Fashion, (2006), India Textile weaves success stories, Available from: http://www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=11520. [Accessed: 05.09.2008].

Fibre2fashion (2006), Textile exports excel registering 22% rise, www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=10961, 24.08.09]

Available from: [Accessed:

Jute Fabric Manufacturers & Exporters. Available from: http://www.fabrics manufacturers.com/industry-overview.html [Accessed: September 13, 2008].

Kanungo, A.K. (2007), World textile market India must weave new designs, Available from: [Accessed: http://www.thehindubusinessline.com/2007/06/13/stories/2007061300490900.htm, 01.09.2008]

India Brand Equity Foundation, Textiles & Apparel: Market & Opportunities, Available from: http://www.ibef.org/artdisplay.aspx?cat_id=172&art_id=19785. [Accessed:19.09.2008]. Infoline News, Textile sector investment, on Available from: http://www.indiainfoline.com/news/innernews.asp?storyId=76063&lmn=1&cat=19.[Accessed: 12.09.2008].

Kavitha, N. (2007), Textile Industry in Indian Scenario, on the Fibre2fashion, Available from: www.fibre2fashion.com/industry-article/8/728/textile-industry-in-indian-scenario1.asp. [Accessed: 10.08.2008]

Ministry of Textiles, Foreign Direct Investment Policy in Textiles, Available from: http://texmin.nic.in/fdi/fdi_main.htm, [Accessed: 14.09.2008]

Myiris, Investment Newsletter Business Profile For Bombay Dyeing Company, Available from: http://myiris.com/shares/company/writeDet.php?icode=bomdyemc#fut [Accessed: 31.08.2008].

Reuters India (2008), Welspun eyes home textile firms abroad, Available from: http://in.reuters.com/article/businessNews/idINIndia-31298820080108, [Accessed: 19.08.2008]

Reuters India, Textile Exports Report, Available from: http://in.reuters.com/article/domesticNews/idINBOM3068620080508?pageNumber=1&virtualBran dChannel=0. [Accessed: 18.09.2008]

Trident Group, Home Textiles, Company Profile, International activities and export, Available from: http://www.tridentindia.com/irj/portal/anonymous, [Accessed: 03.09.2008]. Saheed, A.H.H. (2007) Quota-Free Era: Changes in the Last Two Years, Asian Textile Business, Available from: http://findarticles.com/p/articles/mi_qa5358/is_200704/ai_n21286518?tag=content;col1, [Accessed: 13.09.2008] Srinivasan, G. (2005), Textile industry holds promise with removal of quota regime Available from:http://www.thehindubusinessline.com/2005/12/08/stories/2005120802290800.htm, [Accessed: 12.08.2008] Trivedi, D. (2007), Brand building in textiles important, says Plan panel, Available from: http://www.thehindubusinessline.com/2007/10/10/stories/2007101051190500.htm, [Accessed: 15.09.2008] Vardhman groups of companies, Available from: http://vardhman.in/, [Accessed: 07.09.2008]

Welspuntowels, The yearly Turnover, Available from: www.welspuntowels.com [Accessed: 01.09.2008]

World Textile Industry, Available from: http://www.economywatch.com/world-industries/textileindustry.html, [Accessed: 02.09.2008]

(2008), A Stronger Rupee Tests the Fabric of India's Textile Exporters, Available from: http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4258, [Accessed: 15.08.2008]

(2008), Cotton Textiles India, Available from: www.texprocil.com, [Accessed: 30.08.2008]

(2008), Textiles: textile and Apparel Sourcing, Available from: http://www.ibef.org/artdispview.aspx?in=73&art_id=18085&cat_id=123&page=3, [Accessed: 02.09.2008] (2008), Textile, 15.09.2008] Available from: http://www.ibef.org/industry/textiles.aspx, [Accessed:

(2007), Bombay Dyeing & Mfg Company Limited, Available from: http://myiris.com/shares/company/writeDet.php?icode=bomdyemc#fut, [Accessed: 06.09.2008]

(2007), Logistics firms suffer due to poor port facilities, The Financial Express, Available from: http://www.mjunction.in/market_news/logistics_1/logistics_firms_suffer_due_to.php, [Accessed: 08.09.2008]

(2007), Special Economic Zones for textiles in India, Available from: http://www.yarnsandfibers.com/revamp_ir/report_fullstory.php3?id=408&p_type=45&story_type= F [Accessed: 15.08.2008]

(2006), Indias Textile and Apparel Industry: Opportunities for Sourcing and Collaboration, Textiles Intelligence, Available from: http://www.researchandmarkets.com/reportinfo.asp?report_id=358514, [Accessed: 20.08.2008]

(2006), Crying need for labour reforms, Economic Survey, Available http://www.financialexpress.com/news/Crying-need-for-labour-reforms/48409/.[Accessed: 23.07.2008]

from:

(2006), India : Textile exports excel registering 22% rise, Available from: http://www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=10961, [Accessed: 12.08.2008]

India: Textile weaves success stories, fibre2fashion, (2006), Fibre2fashion, Textile exports excel registering 22% rise 2006, on the Fibre2fashion Available from: www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=10961;[Accessed 12.09.2008

(2006) Indian textile industry: Porter analysis..., Available from: http://www.equitymaster.com/detail.asp?date=3/31/2006&story=1, [Accessed:24.08.2008]

(2008), Vietnam, Pakistan outdo India in US, EU textile markets, Available from: http://www.ficci.com/news/viewnews1.asp?news_id=1990, [Accessed 12.08.2008]

APPENDIX 1 Indias Cotton Trend in Last Six Decades

Source: Cotton Advisory Board

APPENDIX 2 Sample of the questionnaire used for primary research:

Q.1 How long have you been in this industry?

Q.2 what are the major products you export?

Q.3Who all are your international key clients?

Q.4 According to you what are the strengths and weaknesses of Indian textile industry?

Q.5 How do you envisage/ foresee the growth of the Indian textile industry?

Q.6 How the industry should organize its capacities to meet global buyer expectations?

Q.7 What are the factors Affecting Competitiveness of this industry? a. Domestic: b. Global:

Q.8 What has been the growth in revenue (%) of your organization?

Q.9 What are your companys future plans? a. Entering into new market

b. Diversification c. Marketing initiatives d. Capacity expansion e. Modernization f. Any Other, Please Specify

Q.10 Do you observe any effect on the textile industry due to increase in inflation and economic slowdown globally? If yes, please elaborate

Q.11 Which market do you cater more, US or EU and why? If any other please specify

Q.12 How do you observe India vis a vis China?

Q.13 Do you face any hindrances in cross border transactions? If yes, please specify.

Q. 14 How do you think the industry should the industry channelize its skill-base? India lacks technology, but it also has one of the lowest labour costs in the world, Comment. ,

Q.15 What kind of concessions and rebates government provides you with?

Contact details: Name: Address: Email id:

Thank you for helping me with my research