Introduction

The Textile Industry has been one of the oldest and most important
sectors of the Indian Economy. It is the second largest employment
provider in the country, next to Agriculture; it contributes to almost
one third of foreign exchange earning; contributing to 3% of the !".
India has also been a significant player in the global textile mar#ets. It
is the third largest producer of cotton, the largest producer of $ute, the
second largest producer of sil# and the %
th
largest producer of
synthetic fiber&yarn. India's exports of textiles and readymade
garments gre( by )*% in +**),+**+ and no( stand at over -).
billion. Export of synthetic and rayon textiles rose by +3%. There has
also been a remar#able increase in export of polyester&viscose yarn
by more than 3%%, polyester yarn by /% and polyester spun yarn by
+0%. !uring this period, polyester filament fabrics increased
registered an )0% gro(th and polyester,viscose fabrics increased by
)*%. Textile is a #ey sector for Indian economy. It's the core,
competence of the u$arat and contributes significantly to the gro(th
of u$arat 1tate.
As business scenario has changed from 2an +**%, It's impact (ill be
3uite visible on Indian economy. Ahmedabad is one of the ma$or
cities (here many big textile mills such as 4eliance textile division,
Arvind mill ltd., Ashima textile ltd. etc., are located. It's important to
see ho( this changeover of the present big players because they
contribute significantly to Indian economy in terms of !" and total
employment generated.

THE INDIAN TEXTILE INDUSTRY- A LEGACY OF ITS OWN
The Indian textile industry has a great legacy, (hich is perhaps
unmatched in the history of India's industrial development. India's
textile industry evolved and developed at a very early stage and its
manufacturing technology (as amongst the best. "rior to
coloni5ation, India's manually operated textile machines (ere among
the best in the (orld, and served as a model for production of the first
textile machines in ne(ly industriali5ed 6ritain and ermany.
Indian textiles (ere sought after for their finesse, 3uality and design.
7preference (as given to the Indian (eaving for its s#ill and delicacy'.
"restige trade textiles such as "atola from "atan and Ahmedabad,
and decorative cottons in brilliant color,fast dyes from u$arat and the
8oromandel coast (ere sought after by the 9alaysian royalty and
(ealthy traders of the "hilippines. Textiles have historically formed an
important component of India's exports. 9arco "olo's records sho(
that Indian textiles used to be exported to 8hina and 1outh,East Asia.
Textiles also comprised a significant portion of the "ortuguese trade
(ith India. These included embroidered bedspreads, (all hangings
and 3uilts of embroidered (ild sil# on a cotton or $ute ground.
The attractiveness of fast dyed, multi,colored Indian prints on cotton
:chint5; in Europe led to the formation of the <ondon East India
8ompany in )=**, follo(ed by !utch and >rench counterparts. 6y the
late )=**s there (as such over(helming demand for Indian chint5
that the >rench and the English (ool and sil# merchants had to
persuade their governments to ban the importation of these cottons
from India.
The legacy of the Indian textile industry stemmed from its (ealth in
natural resourcessil#, cotton and $ute. The technology used (as
superior and the s#ills of the (eavers gave the finished product a
most beautiful and ethnic loo#. The India textile industry (ith such a
great pedigree could have gone only one (ay from here. 6ut?.
COLONIZATION - AN END OF THE INDIAN TEXTILE LEGACY
8oloni5ation put an end to India's glorious textile legacy. The 6ritish
#ne( that they could not compete (ith the Indian textile industry and
as a result resorted to complete destruction of the industry. 6y )00*
the domestic mar#et had gro(n to be serviced solely
by the 6ritish manufacturers@ India, once the (orld's leading
exporters of textiles, (as forced to become a net importer. Tariffs
(ere imposed to ma#e sure that the 6ritish goods entered the Indian
mar#et virtually free (hile Indian goods (ere #ept out of the 6ritish
mar#et.
Ane of the aspects of India's freedom struggle, led by 9ahatma
andhi, (as to (ea#en the 6ritish textile industry by (earing
homespun clothes. andhi$i (as convinced that the textile sector
could be a catalyst in advancement of the Indian population by
creating employment for the excess labour pool.
"ost,independence, till about the late )/0*s, the overnment of India
put numerous policies and regulations in place to ensure that
mechani5ation did not occur and that labour,intensive textiles (ere
produced. <arge,scale production (as discouraged by restrictions on
total capacity and mechani5ation of mills. The labour regulations did
not allo( capital investment and resulted in high production costs.
Imposition of price restrictions, along (ith decreased productivity,
severely hampered the competitiveness of the sector.
Till )/0%, the main concerns of overnment policies (ere centered
around import substitution, protection of existing employment in the
organi5ed sector and support for the decentrali5ed sector. These
concerns (ere reflected in the government policies such as
imposition of 3uotas on yarn export, strong exit barriers even for
unviable operations, general discouragement of automation, stringent
licensing for the organi5ed sector and price regulations to handle the
shortages resulting from the licensing restrictions.
4estrictions of such nature only resulted in increasing costs, declining
productivity and loss of the competitive edge. The textile industry had
to be set free from these regulatory burdens so that it could evolve,
gro( and remain competitive in the global mar#et.
REFORMS ERA - RE-EMERGENCE OF THE INDIAN TEXTILE
INDUSTRY
The )/0*s has seen a progressive relaxation of regulatory policies
(ith a vie( to increasing the efficiency and competitiveness of the
industry. The Textile "olicy of )/0% heralded a ne( beginning in the
history of the Indian textile industry. It accepted that the crisis in the
industry (ere neither cyclical nor temporary but (ere rooted in
deeper structural (ea#nesses. It identified the main tas# of the textile
industry as increase in production of cloth of acceptable 3uality at
reasonable prices to meet the clothing re3uirements of a gro(ing
population. It (as envisaged that this basic ob$ective (ould be met
through cost efficiencies and a freer play of mar#et forces rather than
through controls and restrictions. Among other things, the Textile
"olicy of )/0% addressed the issues of ra( material supply at
reasonable and stable prices, progressive reduction of duties on
synthetic ra( materials, removal of entry and exit barriers along (ith
emphasis on technology moderni5ation and increasing the
competitiveness of Indian textiles in the international mar#et.
he )/0% Textile "olicy illustrated the government's attempt to relax
the regulatory burden on the composite mill sector by elimination of
compartmentali5ation in the industry, lifting of restrictions on
composite mill loom capacity expansion and e3uali5ation of taxation
among composite mills, po(er looms and independent processing
units.
The ushering in of the reforms in the )//*s provided a further boost
to the Indian textile industry. In line (ith the general policy of
liberali5ation, several measures (ere underta#en to reduce controls
and bring about greater transparency in the textile sector.
The textile industry (as de,licensed as per the 1tatement of Industrial
"olicy of )//) and the Textile !evelopment and 4egulation Arder of
)//+. 4eforms on the fiscal and external fronts (ere also pursued
(ith rene(ed 5eal.
All these measures liberated the Indian textile industries from the
shac#les of regulation that (ere in place up to the late 0*s. These
steps (ere only a beginning in ensuring that the different segments of
the textile industry become competitive in the (a#e of globali5ation.
TBE IC!IAC TEDTI<E IC!E1T4F , "4E1ECT 18ECA4IA
The textile industry is very crucial to the Indian economy in terms of
its contribution to !" and employment. It contributes about 3% to
the !", accounts for over ).% of total industrial production,
generates 0% of the central excise revenue and contributes around
+.% to total exports. The sector is the second largest employment
provider after the agriculture sector, employing over 30 million people
directly and another %* million indirectly.
The Indian textile and apparel industry occupies a significant position
in the global textile map as it is the third largest producer of cotton
and cellulose fibre&yarn, second largest producer of cotton yarn,
largest producer of $ute, second largest producer of sil# and fifth
largest producer of synthetic fibre&yarn.
The Indian textile industry is highly locali5ed around Gestern India,
Ahmedabad and 9umbai, though there are other centers at Hanpur,
Hol#ata, Indore, 8oimbatore etc. The structure of the Indian textile
industry is both complex and uni3ue. There is the modern
sophisticated mill sector on one hand and the handloom, po(erloom
and hosiery sector on the other. This dualistic manufacturing
structure is dominated by the decentrali5ed or unorgani5ed sector
comprising of the handloom, po(erloom and the hosiery sector. The
po(erloom sector alone accounted for =%% of the total cloth
production in +**3,*..
Bo(ever, the organi5ed sector accounted for only 3% of the total
cloth production during the same period. :4efer to figure on next
page; India is one of the fe( countries that have a presence across
the entire value chain of the textiles and apparel business starting
from fibre production, spinning, (eaving&#nitting, processing to
garment manufacturing.
THE VALUE CHAIN


The Indian textile industry (ith all these advantages is (aiting (ith
bated breath for the post 3uota regime that came in effect from
2anuary ) +**%. The abolition of 3uotas (ill open up a plethora of
opportunities for the Indian textile sector, (hich is favorably placed to
leverage its comparative advantages and increase its mar#et share in
the post 3uota regime.
To have a deep insight of the Indian textile industry, (e studied the
(or#ing of one of the leading Indian companies, TBE A4IIC! 9I<<1
<T!, Ghich gave us the #no(ledge of functioning of a textile mill.
TBE
A4IIC!
9I<<1
<T!.
+.) Introduction
TBE II1IAC.
JTo achieve global dominance in select business built around our
core competencies, through continuous product and technical
innovations, customer orientations and a focus on cost effectivenessK.
The Arvind 9ills <imited is the flagship company of 4s.+* billion :E1-
%%* million; of the <albhai roup.The <albhai roup, founded by
three <albhai brothers,Hasturbhai, Carottambhai and 8himanbhai in
)/*0, has gro(n to become one of IndiaLs most diversified business
houses, (ith a significant presence in the textiles, ready,to,(ear,
agrochemicals and telecom industries in India.
It is the largest cotton textile manufacturer and exporter in India and a
leading player in the branded garments in the domestic mar#ets
through its subsidiaries. The 8ompany's principal businesses consist
of manufacturing and mar#eting of denim fabric, shirts, #nitted fabrics
and garments. Arvind 9ills is the only mill present in all seven
continents and the only one from Asia supplying to some of the
leading international brands.
At Arvind, it is firmly believe that a successful company must play an
active role in the development of the society from (hich it springs.
That besides pursuing its business goals, it should also be a
responsible corporate citi5en.
It has al(ays been actively involved in the educational
institution, hospitals and research institutions of Ahmedabad, our
Bome to(n. It co,pioneered the (orld reno(ned Indian Institute of
9anagement, Ahmedabad :II9A;, and helped set up the Ahmedabad
Textile Industry 4esearch Association :ATI4A;, and The Hasturbhai
<albhai Textile Training 8enter to develop and enhance the s#ills of
textile (or#ers.
The Carottambhai <albhai 4ural !evelopment >und and The
<albhai roup 4ural !evelopment >und (here founded to underta#e
special programmes for the economically deprived. It also assist the
nearby villages, through nutritional programmes, food camps and the
harnessing of solar energy.
The main businesses are denim, shirting, and branded garments.
!enim constituted =M% of turnover in >F//, shirting , /% and
branded garments , =%. Arvind 9ills is IndiaLs biggest producer of
denim, (ith an estimated mar#et share of around =*%. The company
is one of the top five denim manufacturers in the (orld and ran#s
close to leading textile manufacturers such as 6urlington and 8one
9ills of the E1 in terms of denim capacity. 1ome %%,=*% of ArvindLs
total denim production is aimed at the export mar#et and the
company is IndiaLs biggest exporter of textiles. It has recently added
gabardine as a ne( product to its textiles division. It has a strong
presence in middle and upper segments of the denim mar#et. The
customers in the premium segment include manufacturers of
Grangler, "epe, >lying 9achine, etc. 8ottons shirting and bottoms,
mainly fine and superfine cotton shirting are targetted at the upper
segment. In export mar#ets, Arvind 9ills customers include 8apital
9ercury, Axford 1hirts in the E1A, !e(hirst in the EH and Arro( in
6ra5il
Arvind has several brands under its umbrella li#e @,
Arro(@, >ormal (ear catering to the premium end.
Ce(port@, An economic range $eans brand.
>lying 9achine@, The original $eans from the (est.
Excalibur@, Afficial (ear for the economy range.
<ee@, The authentic (ear.
Grangler@, A 2eans for the premium end.
+.+ 6usiness Af Arvind@,
!ECI9@
Arvind 9ills is IndiaLs biggest producer of denim, (ith an estimated
mar#et share of around =*%. The company is one of the top five
denim manufacturers in the (orld and ran#s close to leading textile
manufacturers such as 6urlington and 8one 9ills of the E1 in terms
of denim capacity. 1ome %%,=*% of ArvindLs total denim production is
aimed at the export mar#et and the company is IndiaLs biggest
exporter of textiles. It has recently added gabardine as a ne( product
to its textiles division. It has a strong presence in middle and upper
segments of the denim mar#et. The customers in the premium
segment include manufacturers of Grangler"epe,>lying9achine,etc.
8ottons shirting and bottoms, mainly fine and superfine cotton
shirting are targetted at the upper segment. In export mar#ets, Arvind
9ills customers include 8apital 9ercury, Axford 1hirts in the E1A,
!e(hirst in the EH and Arro( in 6ra5il.
HBAHI1
The Hha#is fabric plant is a part of Arvind "roducts <imited.
This ne( addition to the Arvind Textile 8omplex brings the total
investment in the complex up to 4s. )*,*** million : E1 - +M%
million;. The plant is an integrated facility that sources yarn from
Arvind 9ills at Ahmedabad. It has both (eaving and processing
infrastructure, captive po(er supply, steam generation and a (aste,
(ater treatment plant. The latter ma#es it a 5ero discharge complex
i.e. one that recycles all its (aste,(ater. The product variants
available in Hha#is are 9oles#in, 8avalry T(ill, 6as#et Geave, 9att,
6ro#en T(ill, !uc#, 1ateen, Tussore, 6edford 8ord, Berringbone and
other specialty (eaves.Arvind is finali5ing plans to set up garment
facilities for Hha#his in 6angalore and the pro$ect is at implementation
stage.
1BI4TIC1
Arvind (as already ma#ing cotton shirtings for the Indian mar#et. In
)//*, the company decided to focus on high value shirting, so that it
could expand its mar#ets beyond the borders. 6eing in India (as an
advantage. India is a recogni5ed supplier of fine and superfine cotton
textiles. <ong staple cotton is gro(n indigenously. <abour and input
costs are lo(er than they are in Europe and 2apan :the largest
producers;. There is a trend to shift garment manufacturing a(ay
from Europe to 1outh Asia, Arvind 9ills have proven s#ills in
manufacturing and design and an in,house 4N! set,up. 1o the
company invested in the best technology and set the beams rolling.
All the premium brands Allen 1olly,Arro(, 6enetton, 8olor "lus, <ouis
"hillippe, 9exx, "ar# Avenue, Ian Beusen, Gee#ender and Oodiac
ma#e their shirts from the companyLs shirting fabric. The company
also exports high value cotton shirting fabric to the E1, Europe, >ar
East and the 1AA48 countries. Arvind is the leading exporter of high
value shirting from India. Aur buyers are garment converters,
international buying houses, retailing chains and over t(o hundred
and fifty manufacturers around the (orld, including names li#e
6anana 4epublic, >lex, A", <aura Ashley, Axford Industries, <ouis
"hillipe, Ian Beusen, "olo, 4alph <auren, 1eiden 1tic#er and
Fama#i. arment Exports !ivision in 6angalore manufactures )%***
shirts per day.
HCIT1@
Arvind Hnits is a part of the 79ulti product textile facility' set up by the
"arent 8ompany The Arvind 9ills <td., (ith an investment of E1 - %*
9n in technical collaboration (ith Alamac Hnits Inc. E1A. Arvind
Hnits operates one of Asia's largest vertically integrated #nit(ear
plants, (hich features state of the art e3uipment and (orld class
production capacities. Arvind assures the best 3uality and total
standardi5ation (ith its in,house production from yarn to the final
garment.
Arvind Hnits has been supplying arments to retailers and brands
mostly abroad. arment export sales account for approximately 0=%
of Arvind Hnits' totals sales, the rest going to the !omestic 9ar#et.
Arvind garments are high on 3uality and are preferred by leading
brands the (orld over. >ollo(ing suit are the premier Indian apparel
brands, (hich are also sourcing from Arvind Hnits.
6ATTA9 GEIBT1@
Arvind has recently set up a dedicated bottom(eights plant as part of
Arvind "olycot <imited.
This ne( addition to the Arvind Textile 8omplex brings the total
investment in the complex upto 4s.)**** million :E1 - +M% million;.
The plant is an integrated facility that sources yarn from Arvind 9ills
at Ahmedabad. It has both (eaving and processing infrastructure,
captive po(er supply, steam generation and a (aste (ater treatment
plant. The latter ma#es it a 5ero discharge complex i.e. one that
recycles all its (aste (ater.
The ne( plant manufactures )**% cotton piece dyed fabric (ith
(eights up(ards of =.* o5. In tune (ith the mar#et trends of moving
to(ards softer and more comfortable garments for (earing both at
(or# and at home, Arvind has introduced three exciting ranges of
bottom(eights flats; fabrics@
). 1ports <ine
+. 8omfort <ine
3. 8otton
The product variants available in 6ottom(eights are @
9oles#in ,8avalry T(ill ,6as#etGeave , 9att , 6ro#en T(ill , !uc# ,
1ateen , Tussore , Berringbone
1E61I!IA4F 8A9"ACIE1@
Arvind "roducts <imited
Arvind (orld(ide:9; Inc., 9auritius
Arvind (orld(ide Inc., E1A
Arvind Averseas :9auritius; <td., 9auritius
Arvind 8lothing <imited
Arvind >ashions <imited
Arvind 1tarch "roducts <imited
Atul <imited
Arvind "roducts <imited@
This 8ompany operates through follo(ing independent units.
An#ur Textiles@
An#ur Textile (as originally #no(n as <a#shmi 8otton 9ills and (as
ta#en up by the <albhai group in the year )/M/ as a closed sic# mill.
A ma$or rehabilitation programme (as dra(n up to revive this closed
sic# mill. 9anagerial and technical talent from Arvind 9ills too# up
this challenge to re$uvenate this closed 9ill. Entil the year )//= this
unit (as a division of Arvind 9ills and is currently a division of Arvind
"roducts <td.
+. Arvind Intex@
Ahmedabad, based Arvind Intex (as a sic# unit, The Cagri 9ills
<imited,that Arvind too# over in )//),)//+, and rehabilitated since.
The company produces cotton yarn for the Indian and International
mar#ets, and recently commissioned a completely moderni5ed
spinning unit to produce ring spun yarn for the Indian mar#et.
3. Arvind 8otspin@
Arvind 8otspin, located at Holhapur, 9aharashtra, is one of IndiaLs
largest spinning mill. The 8ompany manufactures )**% cotton yarn
and double yarn in a (ide range of counts and varieties.
Arvind Gorld(ide :9; Inc., 9auritius
Arvind Gorld(ide :9; Incorporated at 9auritius, has branch office in
<ondon (hich acts as agents for Arvind and help in the mar#eting of
!enim, 1hirting, arments and Farn. Arvind Gorld(ide :9; is a
(holly o(ned subsidiary of The Arvind 9ills <imited.
Arvind Gorld(ide Inc., E1A
Arvind Gorld(ide Incorporated at E1A (hich acts as agents for
Arvind and help in the mar#eting of !enim, 1hirting, arments and
Farn. Arvind Gorld(ide Inc. E1A is a (holly o(ned subsidiary of The
Arvind 9ills <imited.
Arvind Averseas :9auritius; <td., 9auritius
Arvind Averseas :9auritius; is the renamed, re,vamped 1hape
>abrics <td., an existing denim,ma#ing units, (hich had a stopped
operation after ma#ing losses. Arvind overseas :9; <td. is a (holly
o(ned subsidiary of The Arvind 9ills <imited. The plant then shifted
tat naroda site, India.
Arvind 8lothing <imited
Arvind 8lothing, an I1A /**+ company, is a collaboration bet(een
The Arvind 9ills <imited and 8luett International <td.:E1A;. The
company manufactures and mar#ets the (ell,#no(n PArro(P brand of
shirts, currently a mar#et leader in the premium shirt category in
India. Arvind 8lothing is (holly o(ned subsidiary of Arvind 6rands
<imited.
Arvind >ashions <imited
Arvind >ashions is a tie,up bet(een Arvind 9ills and I> 8orporation
:E1A;. The company manufactures and mar#ets P<eeP $eans and
accessories in India. Arvind >ashions <imited is (holly o(ned
subsidiary of Arvind 6rands <imited.
Arvind 1tarch "roducts <imited
Arvind 1tarch "roducts is a leading manufacturer of mai5e and
modified starches and other starch based chemicals and
intermediates to cater to the needs of the textiles, pharmaceutical,
chemical, paper and other industries in India. ItsL product line also
includes (hite and yello( dextrin, li3uid glucose :corn syrup;,
dextrose, gluconates, sorbitol, en5ymes, sulfuric acid, activated
carbon, pharmaceuticals, and fertili5ers. Arvind 1tarch "roducts has
collaboration (ith 8"8 International <imited, E1A.
Atul <imited
The 4s.=** crore Atul "roducts, set up in )/.M, is one of the AsiaLs
largest and greenest chemical complexes. The company has gro(n
to become India's largest dyestuffs manufacturer, ma#ing and
mar#eting over +%* varieties of chemical and intermediates, from
basic commodity chemicals to specialty intermediate re3uired for the
agrochemical, defense, dyestuff, leather, paper, pharmaceutical and
textile industries. Atul exports to more than %* countries.
INDIA WORLD TRADE IN TEXTILE AND CLOTHING
The International trade in textile and clothing has had a long history of
managed trade through forced consensus. lobal trade in textiles
and clothing has had a long history of managed trade through forced
consensus. It has been sub$ected to regulation in one form or another
for more than five and a half decades, since )/.M. Ever since the first
voluntary export 3uota (as negotiated by the E1A on 2apanese
textiles exports in )/3% there has been a plethora of national, bilateral
and international rules governing the trade in textiles and clothing
culminating in eneral Agreement on Tariff and Trade:ATT; and
subse3uent formation of Gorld Trade Arganisation.
Gorld Trade in Textile and clothing is expected to increase from a
current level of E1- 3.+ 6n in the Fr +**) to an estimated E1- %.*
6n in +*)*.
8urrent trade in textiles is .3% of total textile and clothing (orld trade
(ith clothing accounting for the rest %M%. The compounded annual
gro(th rate over )//*,+**) (ere as follo(s @
Textiles @ 3.)=%
8lothing @ %.%)%
>uture of this trade , because of Quota phase,out, is expected to be
s#e(ed to(ards a higher gro(th rate in Apparel due to rising retailer
po(er and their interest in sourcing full,pac#age imports to reduce
time and cost. According to pro$ections for the Fr. +*)*, textiles
(ould be compromising of 3+% and clothing (ould account for the
balance =0%. ro(th in the future (orld (ould be coming from
Apparel.
!"rtici#"tion in G$o%"$ T&'ti$& Tr"d&
:as on 2anuary +**.;
T(& To# I)#ort&r*
Apparel Trade
Total global buying in E1- )/%6n :year +**+;
Top % contribute /%%.
TO! + IM!ORTERS IN WORLD
M/.+=
==.3/
)/.)%
)=.)
3./+
*
)*
+*
3*
.*
%*
=*
M*
0*
/*
EE E1 2A"AC BH&8BI 8ACA!A
,
i
$
$
i
o
n

U
S
D
1eries)
Textile Trade
Total lobal buying is E1- )%= 6n :Fr +**),*+;
Top )M contribute M%%.

T(& To# E'#ort&r*
A##"r&$ Tr"d&
Imports into E1
Total E1 buying is E1- ==6n.
Top )* contribute %0% to total E1 imports
Ghile 9exico used to be largest supplier to E1, today that position
has been ta#en by 8hina.
values
in-9illion
4an#
Came of
8ountries +**) +*** )///
Gorld ==3/) %M*/= %M==M
) 8hina /+M% M00. M%=0
+ 9exico 0)/0 M+/= M0*M
3 BH ../0 .++0 ..0+
.
European
Enion +=0+ +%+) +./=
% Bonduras +.0= ++3M ++)%
= Indonesia +.0% )/=3 )0+=
M Horean.4ep. +.M) ++./ +3=)
0
!ominican
4ep +3+M ++3. +3/*
/ Thailand ++=M )M/) )M/)
)* 6angladesh ++3+ )=+/ )==+
India +*=3 )=3* )%=%
Import into EE
values
in-9illion
4an#
Came of
8ountries +**) +*** )///
Gorld M/+=3 0)=.) 0+.%M
)
European
Enion 3)33% 330.+ 3%)/%
+ 8hina 0.+M 0*/* M0.M
3 Tur#ey %.*% %3%) %*03
Total EE buying isE1- M/6n.
Top 3 contribute about =*%
Top )* contribute M0%
Intra EE Trade remains 3uite substantial, ho(ever its seen to be
dropping year on year.

T&'ti$& Tr"d&
Imports into E1.
Total E1 Textiles buying is around E1- )%.% 6n
Top )* contribute 03%

Imports into EE
Total EE Textiles buying is around E1- .%6n.
Top )* contribute 0M%
Intra EE Trade remains 3uite substantial, ho(ever is seen to be
droping year on year.


1ome insight at the Indian figures in relation to the last year:+**.;
trade.
T4A!E AEE9ECT1 AC! 4E1T4I8TIAC1
??A short history

The ATT :eneral Agreement Tariffs and Trade; (as launched at
eneva in )/.0 by +3 countries, including India. It (as a part of
efforts to reshape the (orld economy after the reat !epression
:)/+/,3+; and the 1econd (orld (ar :)/3/,.%;. The AATT
comprised of a trade pact among the member,countries :then more
than a hundred; and an organisation. ATT provides a place for
negotiating trade issues and a frame(or# for guiding the conduct of
trade.

Efforts under the ATT to liberali5e trade have al(ays met (ith
particular difficulties in textiles and clothing. >or more than thirty
years, this sector (as governed by special regimes@ the 1hort Term
8otton Arrangement in )/=), the <ong Term 8otton Arrangement
from )/=+ to )/M3, and the 9ultifibre Arrangement from )/M. to
)//.. It (as of considerable significance, therefore, that after more
than three decades of increasingly complicated systems, 9inisters
decided to include this sector (ithin the scope of the Eruguay 4ound
multilateral trade negotiations in )/0=. 1even years of complex and
difficult negotiations resulted in the Eruguay 4ound Agreement on
Textiles and 8lothing (hich forms part of the global, single
underta#ing ma#ing up the (hole pac#age of results from the
Eruguay 4ound. This section presents a brief historical bac#ground
on the evolution of textiles and clothing trade policies, and describes
the principal effects of these regimes on trade in this sector.
The 8otton Arrangements :)/=),)/M3;
In the period follo(ing immediately after Gorld Gar II, a ma$or part of
international trade (as governed by complex national trade regimes.
"ost,(ar balance,of,payments difficulties in a number of developed
countries (ere cited to $ustify high tariffs, complicated customs
administration, complex import licensing procedures and a (ide
range of 3uantitative restrictions. !uring the )/%*s, ho(ever, trade
restrictions (ere reduced in the (a#e of general liberali5ation efforts
pursued in the ATT and the I9>. The gradual removal of
3uantitative restrictions follo(ing the easing of balance,of,payments
difficulties in the developed countries coincided (ith the
reestablishment of 2apan in (orld trade in textiles and the emergence
of a number of developing countries as exporters of textiles and, to a
lesser extent at that time, clothing. The developing countries, in
particular, benefitting from access to ra( materials and relatively lo(
production costs, particularly (ages, began to rapidly increase the
volume of exports of cotton textiles and clothing to the developed
country mar#ets. The sharp increase in lo( value imports of cotton
textiles adversely affected investment and employment in the
developed countries (hich faced the prospect of rapid closure of
production facilities in the sector leading to serious social problems.
To alleviate the difficulties, some developed countries negotiated (ith
individual governments agreements to limit the 3uantities of exports
of cotton textiles or Pvoluntary export restraintP agreements, as they
came to be #no(n later.
The 9ultifibre Arrangement :)/M.,)//.;
The 9ultifibre Arrangement :9>A;, more formally the Arrangement
4egarding International Trade in Textiles, entered into force in )/M..
It extended the coverage of the restrictions on textiles and clothing
from cotton products to (ool and man,made fibre products :and from
)/0=, certain vegetable fibre products;. The stated ob$ective of the
9>A (as Pto achieve the expansion of trade, the reduction of barriers
to such trade and the progressive liberali5ation of (orld trade in
textile products, (hile at the same time ensuring the orderly and
e3uitable development of this trade and avoidance of disruptive
effects in individual mar#ets and on individual lines of production in
both importing and exporting countriesP. A further aim (as Pto further
the economic and social development of developing countries and
secure a substantial increase in their export earnings from textile
products and to provide for a greater share for them in (orld trade in
theseproductsK.
Aperationally, the 9>A :li#e the cotton arrangements; provided rules
for the imposition of 3uotas, either through bilateral agreements or
unilateral actions, (hen surges of imports caused mar#et disruption
or threat thereof in importing countries. In imposing 3uotas, importing
countries (ere obliged to observe consultation provisions and
specific rules and standards both in determining a situation of mar#et
disruption and (hen introducing and maintaining restrictions on
exporting members. As a norm they (ere re3uired to allo( for an
annual gro(th rate of six per cent in the 3uotas. A statutory body, the
Textiles 1urveillance 6ody, carried out a monitoring and reporting
function and also handled cases of disputes. The 9>A terminated on
3) !ecember )//. upon the entry into force of the GTA and its
Agreement on Textiles and 8lothing on ) 2anuary )//%.
The Agreement on Textile and 8lothing :AT8; :)//%,+**.;
>inally, ATT,Eruguay 4ound :ATT,E4; sa( (hat many could
finally be the end of the sector's especial treatment in the context of
(orld trade liberali5ation@ the Agreement on Textile and 8lothing
:AT8;. The AT8 (as born (ith the ob$ective of fully incorporative the
TN8 sector into GTA rules and discipline but in a gradual process
that (ould give importing countries the transition period to ad$ust their
domestic sector to the ne( rules avoiding sudden and costly
disruption.
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The #ey elements of the Agreement on Textiles and 8lothing :AT8;,
(hich (as finalised during the Eruguay 4ound, are as follo(s @
i. 1etting up of a time,frame for integration of textiles and clothing
products into GTA :ATT,)//.; disciplines , i.e. integration of
textiles :or abolition of 3uotas; (ithin a time frame of )* years in four
stages , abolition of 3uotas on specified products to be )= per cent of
the total volume of imports into the 3uota countries in )//* on the
date of commencement of the agreement on )st 2anuary, )//%; )M
per cent on )st 2anuary, )//0; )0 per cent on )st 2anuary, +**+; and
the remaining ./ per cent on the final day of the transition period i.e.
)st 2anuary, +**%.
ii. "rogressive gro(th of 3uota limits during the period of transition
preceding final integration of the textile sector into T1ATT. >or
products remaining under 3uota, at (hatever stage, the Agreement
lays do(n a formula for increasing existing gro(th rate. Thus, the
annual gro(th rate should be )=%, +%% and +M% higher than the
gro(th rate established for the previous 9>A restrictions under 9>A
bilateral agreements in the three stagesL
iii. Application of safeguard mechanism during the transition
period. A specific transitional safeguard mechanism allo(s
remembers to impose restrictions against individual exporting
countries if the importing country can sho( that both the overall
imports of a product and imports from the individual countries are
entering the country in such large 3uantities as to cause :or to
threaten; serious damage to the relevant domestic industry.
!efinition of Quota @
ATT to enforce anti,dumping of goods introduced the concept of
Quota, This is a type of 3uantitative restriction to produce a healthy
environment of 6usiness to 1hare the domestic industries of the
imported goods.
The 3uota restriction (as meo(ed for country import in to develop
country for saving their domestic "roducers.
TF"E A> QEATA @
"ast "erformance Entitlement :""E; 1ystem
Available levels (ill be allotted pro,rata on the value of exports during
the base year by the applicants in each country,category. Allotments,
ho(ever, (ill be restricted to the average annual export performance
of India in the country,category during the base year.
9anufacturer Exporters' Entitlement :9EE; 1ystem
Allotment under this system shall be made to 9anufacturer,
Exporters' (ho have underta#en substantial modernisation and
upgradation of technology in their plant and machinery during the
base period.
"o(er loom Exporters' Entitlement :"EE; 1ystem.
The Textile 8ommissioner (ill separately notify detailed guidelines
and norms of eligibility for allotments under the "EE 1ystem after
obtaining approval from the 9inistry of Textiles
4eady oods Entitlement :4E; 1ystem
The Textile 8ommissioner may fix the maximum 3uantity that can be
applied for by an applicant for each country category under this
system per day in consultation (ith the Quota Administering Authority
concerned
1ystem of Allotment
Quantities for export in each allotment year shall be allocated
according to the follo(ing systems at rates indicated against each of
them for Farn, >abrics N 9ade,ups :including Bandloom 9ade,ups;.
1ystem of allotment "ercentag
e of annual
level
I FA4C @
:i; "ast "erformance Entitlement :""E; system %%%
:ii; 9anufacturer Exporters Entitlement :9EE; system )%%
:iii; 4eady oods Entitlement :4E; system 3*%
II. >64I81 :other than for categories 3,3a&EE, 3)a and
3+a&8anada;@
:i; "ast "erformance Entitlement :""E; system %%%
:ii; 9anufacturer Exporters Entitlement :9EE; system )%%
:iii; "o(er loom Exporter's Entitlement :"EE; system )%%
:iv; 4eady oods Entitlement :4E; system )%%
III. >A64I81 Rfor EE&category 3, 3a; 8anada category
3)a and 3+&aS@
:i; "ast "erformance Entitlement :""E; system %%%
:ii; 9anufacturer Exporters Entitlement :9EE; system )%%
:iii; 4eady oods Entitlement :4E; system 3*%
II. 9A!E,E"1 :Bandlooms; :under 3uantitative
restraint in E1A;@
:i; "ast "erformance Entitlement :""E; system %%%
:ii; 4eady oods Entitlement :4E; system .%%
I. 9A!E,E"1 :9ill,made&po(erlooms;@
:i; "ast "erformance Entitlement :""E; system %%%
:ii; 9anufacturer Exporters Entitlement :9EE; system )%%
:iii; "o(er loom Exporter's Entitlement :"EE; system )%%
:iv; 4eady oods Entitlement :4E; system )%%
"A1T QEATA??????.IC!IA AC! TBE GA4<!
E9E4IC T4EC!1 AC! T4A!E I11EE1
T4A!E 6<A8H1
An emerging trade issue for the exporting developing countries is the
formation of 4egional Trade 6loc#s. The phase,out of Quotas have
been follo(ed immediately (ith an increasing number of 4egional
Trading Engagements :4TA; that provide preferential access to
certain countries. 1ince )//%, around )/% 4TAs have been proposed
and around more than ))* have already been formed. 1ome of the
large and effective 4TA's are depicted under@
Association of 1outh East Cations:A1EAC T )* 9E96E4 CATIAC;
Corth American >ree Trade Agreement:CA>TA,9ainly E1. 8anada
and 9exico,formed in )//.;
European Enion :EE, a )% nation member union established in )//+,
)3 more to become members;
Asia "acific Economic 8ooperation:A"E8;
9E48A1E4 :Trade net(or# of Argentine, "araguay, 6ra5il,8hile
and Eruguay;

4easons for increase in 4egional Trade
>ollo(ing are some of the reasons that have led to the tremendous
increase in regional trade;
The gro(th in import from lo( cost countries to E1 and EE and
hence increasing competition to domestic producers inspired
A"T arrangement (ith preferential tariff structure.
8omparatively lo(er labours costs compared to costs prevalent
in EE and E1.
A mar#et for all intermediate textile products that EE and E1
ma#e.
6etter control possibilities.
Quic# response possibilities and reduced lead,time because of
proximity and better coordination.
Initiative of EE and E1 textile manufacturers to protect the
domestic textile industry (hen the restrictions have been finally
removed.
4TAs sa( the gro(th of many hitherto non,textile countries emerging
as competitive suppliers (ith benefits of Quotas and negligible rates
of duties.
This provide many ne( options for the retailers to source globally.


ECII4AC9ECTA< I11EE1 @
Eco labeling@
AEHATED 1tandard )**
91T :9ar#en5eichen 1chadstofffgeprufter Textilien;
9ET
European product guarantee
ut &u(
1TEI<9ACC
reen 8otton
E8 Eco label
1(edish Catural conservation society
I1A ).***
,environmental management system
8A!E1 A> 8AC!E8T1 :8A8;
8lean 8loth campaign
8ode of labour practices
,employment is freely choosen
,there is no discrimination in employment
,child labour is not used
,freedom of association
,living (ages are paid
,hours of (or# are not excessive
,(or#ing conditions are decent
G4A"@ (orld(ide responsible apparel production
1A 0*** @ social accountability certification
India as a 1upply 6ase.

"A1T QEATA 4EI9E ??CEG1 AC! 8E44ECT BA""ECIC1
IC!IA
Enion 6udget +**%
6udget +**%,*=@ Textile
After 9ulti >iber Arrangement :9>A; is phased out, the textile
industry of developing economies li#e India (ill have a reason to be
optimistic about the long,term gro(th opportunity. The textile
manufacturers (ill have a chance to increase the share of exports to
the European Enion :EE; and E1 mar#ets.
6udget 9easures
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

!uty on textile machinery reduced from +*% to )*%.
!uties on polyester and nylon chips, textile fibres, yarns and
intermediates, fabrics, and garments to be reduced from +*% to )%%.
Excise duty on "olyester >ilament Farn to be reduced to )=%.
Allocation of 4s ..3% bn for Technological Epgradation >und :TE>;
and a )*% capital subsidy scheme to be introduced for the textile,
processing sector.
3* products related to hosiery and #nitting exempt from the reserved
category.
6udget Impact
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

!uty cuts on textile machinery and the capital subsidy are li#ely to
help reduce funding costs for the manufacturers.

4eduction in duties on manmade fibres is li#ely to boost the sector
prospects, as produces get cheaper and competitive in the export
mar#ets.
"roducts being exempt from the reserved category could help
investments in these segments of the business as the sector opens a
(ide opportunity in the global scenario.
The TE> allocation could be ignored in the sense that the existing
amount is not being fully utili5ed and further addition to the fund is not
li#ely to have any ma$or impact.
1ector Autloo#
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

4eduction in customs duties and the subsidy on capital is li#ely to
boost capital investment in the sector on the bac# of reduced costs.
>urther a decline in excise duties on manmade fibres and polyester
filament yarn is li#ely to ma#e the textile industry more competitive in
the export mar#ets. !e,reservation of certain products is li#ely help
the textile industry increase investments in these segments of
business. iven the vast opportunity in the global scenario, the
measures are li#ely to help the textile companies become more
efficient on the cost front and therefore, positive.

Industry Gish <ist
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

8hange the !E"6 scheme to ma#e it GTA compatible


4educe the excise duty on man,made filament fibres N yarn to 0%


Balve custom duty on synthetic fibre intermediaries , "TA, !9T,
9E and 8aprolactum to )*% from +*%


4educe customs duty on "AF, ">F, C>F and "1> to )%% from +*%


Apparel Export "romotion 8ouncil :AE"8; is pitching for )**% tax
exemption on profits from apparel exports


Exempt texturising companies from mandatory duty


,ud<&t o;&r t(& =&"r*
,ud<&t /--/--0 ,ud<&t /--0--1 ,ud<&t /--1--+
The excise duty rates
on yarns fixed at 0%,
(hich (as not there
earlier. Excise duty
rates on ready to
(ear garments at
)+%.
Excise duty
exemption on
handloom fabrics to
continue and
automatic shuttleless
looms provided
exemption from
excise duty.
The customs duty on
automatic shuttle less
machinery reduced
from +%% to )*%.
4eduction of excise
duty on polyester
filament yarn from
3+% to +.%.
Excise duty on all
#nitted cotton fabrics
and garments
reduced from )+% to
0%.
6asic customs duty
on paraxylene
reduced from )*% to
%%.
Excise duty on
garments reduced
from )+% to )*%.
8envat duty on
handloom and
po(erlooms
(ithdra(n
Instead a ne( tax
regime for the textile
sector introduced
9andatory 8envat
chain stands
abolished.
Co mandatory excise
duty on pure cotton,
(ool and sil#, be it
fibre, yarn, fabric or
garment.
6lended textiles and
pure non,cotton items
li#e polyester,
viscose, acrylic and
nylon to have a
different tax regime.
9andatory excise
duty on man,made
staple fiber at )=%
imposed.
+% education cess
on all taxes



Hey "ositives

ItLs a free (orld@ "ost +**., the 9ulti >iber Arrangement :9>A; has
been phased out. This (ill enable Indian companies to export their
products in any 3uantity to any country as against a specific 3uota
provided for export.

<o(er labour costs@ !ue to cheaper labour available in India as
compared to European countries, the big brands have started
outsourcing garments from Indian companies. Thus, the gro(th
potential expands post +**..

T4> sho(ing results@ In order to restructure the sector, the
government set up a textile reconstruction fund that (ill help in
reducing the effective interest burden on viable textile companies.
This fund targets reduction in interest rate for all borro(ers in range
of 0%,/%. This move has proved to be very successful thus far.

Buge potential@ The government has set an ambitious textile export
target of E1- %* bn by +*)* as compared to E1- )) bn currently.
8onsidering the huge potential in the European and the E1 mar#ets,
it seems possible.


Hey Cegatives

1tringent labour la(s@ Impractical labour la(s also restrict large
players to lay off redundant (or#ers to improve competitiveness.
Though promise of labour reforms have been made n the past, there
has been a lag in terms of implementation.

Bigh fragmentation@ Ane of the biggest dra(bac#s of the India
textile sector is that it is highly fragmented at lo(er levels. Access to
finance and technology has been hard to come by, thus affecting
gro(th prospects of smaller manufacturers.

Iolatile ra( material prices@ 1ince ra( material cost as percentage
of expenses is significant, the textile ma$ors have suffered.
A""A4TECITF IC!IA
A 1GAT Analysis of the Indian Textile Industry
T(& Indi"n T&'ti$& S&ctor
U A large domestic industry, significant for the
country's economy
T At 4s ),.3* bn, accounts for =% of the !"
T At E1- )+ bn, is 3*% of India's exports
T "rovides employment to )0% of India's (or#force
% contribution of textiles in important economic areas
The India Textile has several #ey 1trengths
Abundant 4a( 9aterial Avaibility
Allo(ing the industry to control costs and reduce overall lead,times
across the value chain
India@ Ane of the largest producers of Catural N 9anmade >ibres
<o( 8ost 1#illed <abour
"roviding a distinct competitive advantage fot the Industry
"resence across the value chain
"roviding a competitive advantage (hen compared to countries
li#e 6angladesh, 1rilan#a (ho have developed primarily as
garmenters
4educed <ead times@
9anufacturing capacity present across the entire product range,
enabling textile companies and garmenters to source their material
locally, and reduce lead time.
1uper 9ar#ets@Ability to satisfy customer re3uirements across
multiple product grades, small and large lot si5es, speciali5ed
process treatments etc.
ro(ing !omestic mar#et
Ghich could allo( manufacturers to mitigate ris#s (hile allo(ing
them to build competitiveness
Iibrant domestic mar#et
<o( per capita consumption
Extremely sensitive to fashion fads
Bo(ever there are several (ea#nesses as
>ragmented Industry
Effect of historical overnement policies
<o(er "roductivity and cost competitiveness
Technological Absolescence

Apportunities for Indian Textile
"ost +**% 8hallenges
4N! and "roduct development
1everal potential Threats
8ompetition in domestic mar#et
Ecological and 1ocial a(areness
4egional alliances

"4I9A4F 4E1EA48B 1TE!F
A "rimary 4esearch (as conducted on the Textile units in
Ahmedabad. The ob$ective of the research (as to #no( th( impact of
elimination of Quotas on the textile units in Ahmedabad. This study
(ill help in developing the concept more clearly about textile industry
of Ahmedabad. It (ill examine and (ill try to explore problems or
opportunities offered by 3uota abolishment by GTA to the
Ahmedabad textile industry.
!ata collection method @ Questionnaire
A research (as conducted on .* textile units :Including textile mills,
po(erlooms and process houses; in ahmedabad of (hich 3* units
are presently engaged in Export business. The units varies in nature
of the business activities as (ell as the "roduct categories.
The 4espondents (ere as#ed to cooperate in filing the
3uestionnaire .
The details regarding the pre 3uota and expected effect of 3uota on
their business are collected.
>u&*tionn"ir& d&*i<n
Types of 3uestions included
8lose ended
Apen ended

Li)it"tion*
As this study includes mill of Ahmedabad city only, this study
cannot be generali5ed for the rest of the India.
As population is small, (rong inputs by respondents are li#ely
to create a (rong output of the research.
STUDY FINDINGS ?
.* units of the textile industries (ere studied.Af them +* units are in
manufacturing business, )% units are involved in some process (hile
% units are only acting as a mar#eting agents.
Also the follo(ing table sho(s te product categories in (hich they are
involve@
Farn +. units
Thread +. units
>abric +. units
>abric processing +) units
arment 3% units
Among the .* units, 3* units are presently engaged in exporting
activities (hile among remaining )* , three are planning to enter in
the export mar#et in the coming years. Also of these %*% have no
idea about the impact of 3uota regime on their business (hile among
rest, .*% are expecting the impact on there business.
Af the 3* units exporting, +% units are exporting garments (hile %
units are exporting both garments and >abric.
EE have been the favourite export destination (ith =*% units
exporting (hile +*% units exports in E.1. and %% in middle east.
There is also good number of units exporting to Africa and 1rilan#a.
The impact of elimination of 3uota regime can be vie( in the follo(ing
table @
Enits having Expectation about Increase in Textile business in the
"ost Quota regime @
An domestic mar#et@
Epto
)*%
6et(een
)* to +*%
9ore than
+* %
Total sales ). )* =
"rofitability )/ )) ,
Total
volumes:Quantity;
)* )% %

An export mar#et@
Epto
)*%
6et(een
)* to +*%
9ore than
+* %
Total sales )* )M 3
"rofitability ++ M )
Total
volumes:Quantity;
% M )0

.3% Af the respondents expected the change in export opportunities
by introducing the ne( product line.
It is interesting to note that )** % of the respondent are expecting to
expand their business in ne( countries. They (ill be exporting in ne(
countries in the coming years.
Cature of Investments and structural change made in the 4ecent
"ast :last = months; to prepare for post Quota situation or planning
any such change in the coming :)+; months due to elimination of
Quotas @
The follo(ing table sho(s the number of units planning structural
changes @
)= 8apacity Expansion
)0 Ce( product line
+% Ce( "lant N 9achinery
)) Employees
+0 Ce( Technology
, Autsourcing
, !isinvestment
Thus it can be vie( that +% and +0 units are expanding their
structure by incorporating ne( plants and technology respectively.
It has been found that /3 % of the respondent are facing trade and
non trade discriminations from the develop countries.
Also all of the units are expecting the change in total costs of the
product.
Issues that need to be addressed tp cater to international clients @
.*% of the respondants feels there should be ma$or stress on the
competitive pricing for the export mar#et .
=*% are putting the stress on Improving 3uality standards
$ust )* % are of the vie( that 4TA :4egional Trade Agreements; (ill
be impacting the exports.
3*% of the respondants suggested 8hange in overnment policies
and la(s. According to them labour la(s and rigid tax system are to
be improved to increase exports.
+*% are stressing on reducing lead time in supplying orders.
According to them foreign clients are un(illing to trade (ith Indian
companies because of high lead time in suppying orders.
Emphasis on product innovation and desiging is laid by %*% of the
respondents. There is a need for more designing institute and centers
for imparting designing #no(ledge. This innovation in fabric abd
garment design is must.