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Indian Textile Industry: 
Prospects and Challenges 

Source: Textile Review 
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Indian Textile Industry: Prospects and Challenges

By: Dr. Amita Pandya & Kirti Manek

Source: Textile Review

Indian textile industry is one of the largest in the world fetching about 27% of the foreign
exchange from its exports and related products. It has witnessed a paradigm increase in
the 'total industrial production' factor owing to the globalization, which, presently
accounts to 14%. The contribution of textile industry towards the gross domestic product
(GDP) of India is around 4% providing employment to over 35 million people. India is
fast establishing itself as a global textile and apparel sourcing hub with its abundant
multi-fibre raw material base, well-established production bases, design capability and
skilled labor force. Yet, infrastructure bottlenecks like the transaction time at ports,
inland transportation time, lack of initiative by textile manufacturers to go in for
technological upgradation, fragmentation of the industry etc., have been limiting it's
growth. However, given the nature and extent of the fragmentation and technology
obsolescence in the decentralized sector, it calls for a focused action plan and
programmes to accelerate and sustain the growth level of the different segments of the
industry.

Textile Industry in India is the second largest employment generator after agriculture. It
holds significant status in India as it provides one of the most fundamental necessities to
the people. It was one of the earliest industries to come into existence in India and
accounts for more than 30% of the total exports. In fact, it is the second largest in the
world, second only to China.

Textile Industry is an independent industry involved in the production of the basic raw
materials to the final products, with huge value-addition at every stage of processing. It
has vast potential for creation of employment opportunities in the agriculture, industrial,
organized and decentralized sectors for both rural and urban areas, particularly for women
and the disadvantaged. It constitutes of the following segments: Readymade Garments,
Cotton Textiles including Handlooms, Man-made Textiles, Silk Textiles, Woollen Textiles,
Handicrafts, Made ups, Coir and Jute.

Till the year 1985, development of textile sector in India took place in terms of general
policies. In 1985, for the first time the importance of textile sector was recognized and a
separate policy statement was announced with regard to development of textile sector. In
the year 2000, National Textile Policy was announced. Its main objective was to provide
cloth of acceptable quality at reasonable prices for the vast majority of the population of
the country, to increasingly contribute to the provision of sustainable employment and the
economic growth of the nation and to compete with confidence for an increasing share of
the global market. The policy also aimed at achieving the target of textile and apparel
exports of US $ 50 billion by 201 0 of which the share of garments will be US $ 25 billion.

Structure of Indian Textile Industry

India's textile industry is also significant in a global context, ranking second to China in
the production of both cotton yarn and fabric and fifth in the production of synthetic fibers
and yarns. Unlike other major textile-producing countries, India's textile industry
comprises mostly of small-scale, non-integrated spinning, weaving, finishing and apparel
enterprises.
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Composite Mills

Relatively large-scale mills that integrate spinning, weaving and sometimes, fabric
finishing are common in other major textile-producing countries but in India, however,
these types of mills now account for about only 3 per cent of output in the textile sector.
About 276 composite mills are now operating in India, mostly owned by the public sector
and many deemed financially "sick."

Spinning

Spinning is the process of converting cotton or man made fiber into yarn to be used for
weaving and knitting. Largely due to deregulation beginning in the mid-1980s, spinning
has become the most consolidated and technically efficient sector in India's textile
industry but the average plant size remains small with outdated technology, relative to
other major producers. In 2002-03, India's spinning sector consisted of about 1,146 small-
scale independent firms and 1, 599 larger scale independent units.

Weaving and Knitting

Weaving and knitting converts cotton, man made or blended yarns into woven or knitted
fabrics. India's weaving and knitting sector remains highly fragmented, small-scale and
labor-intensive. This sector consists of about 3.9 million hand looms, 380,000 "power
loom" enterprises that operate about 1.7 million hand looms and just 137,000 power looms
in the various composite mills. "Power looms" are small firms with an average loom
capacity of four to five owned by independent entrepreneurs or weavers and modern
shuttle less looms account for less than one percent of loom capacity.

Fabric Finishing

Fabric finishing (also referred to as processing), which includes dyeing, printing, and other
cloth preparation prior to the manufacture of clothing, is also dominated by a large
number of independent, small scale enterprises. Overall, about 2,300 processors are
operating in India, including about 2,100 independent units and 200 units that are
integrated with spinning, weaving or knitting units.

Clothing

Apparel is produced by about 77,000 small-scale units classified as domestic

manufacturers, manufacturer exporters, and fabricators (subcontractors). This unique
structure of the Indian textile industry is due to the legacy of tax, labor and other
regulatory policies that have favored small-scale, labor-intensive enterprises, while
discriminating against larger scale, more capital-intensive operations. The structure is also
due to the historical orientation towards meeting the needs of India's predominately low-
income domestic consumers, rather than the world market. Policy reforms, which began in
the 1980s that continued into the 1990s, have led to significant gains in technical
efficiency and international competitiveness, particularly in the spinning sector. However,
broad scope remains for additional reforms that could enhance the efficiency and
competitiveness of India's weaving, fabric finishing, and apparel sectors.
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SWOT Analysis of Indian Textile Industry

Indian textile industry is as old as the word textile itself. Until the economic liberalization
of Indian economy, this Industry was predominantly unorganized but the opening up of
Indian economy post 1990s led to a stupendous growth of this industry.

This industry holds a significant position by providing the most basic need to Indians.
Starting from the procurement of raw materials to the final production stage of the actual
textile, it works on an independent basis.

Strengths

ƒ Huge textile production capacity

ƒ Efficient multi-fiber raw material manufacturing capacity
ƒ Large pool of skilled and cheap work force
ƒ Entrepreneurial skills
ƒ Huge export potential
ƒ Large domestic market
ƒ Very low import content
ƒ Flexible textile manufacturing systems

Weaknesses

ƒ Increased global competition in the post 2005 trade regime under WTO
ƒ Massive fragmentation
ƒ Lack of trade pact memberships
ƒ Import of cheap textiles from other Asian neighbours
ƒ Technology obsolescence
ƒ Poor supply chain management
ƒ Huge unorganized and decentralized sector
ƒ High production cost with respect to other Asian competitors
ƒ Inadequate research and development
ƒ Unfavorable labour laws
ƒ Global logistic disadvantage
ƒ Inappropriate energy supplies to rural and sub-urban areas

Opportunities

ƒ Growth rate of domestic textile industry is 6-8% per annum

ƒ Large, potential domestic and international market
ƒ Product development and diversification to cater global needs
ƒ Elimination of quota restriction leads to greater market development
ƒ Shift towards branded readymade garment
ƒ Increased disposable income and purchasing power of Indian customer
ƒ Emerging Retail Industry and Malls provide huge opportunities for the Apparel,
Handicraft and other segments of the industry
ƒ Greater Investment and FDI opportunities available

Threats

ƒ Competition from other developing countries, especially China

ƒ Continuous quality improvement is need of the hour as there are different demand
patterns all over the world
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ƒ Elimination of quota system will lead to fluctuations in export demand
ƒ Threat for traditional market for power loom and handloom products and their
product diversification
ƒ Geographical Disadvantages
ƒ International labor and environmental Laws
ƒ To balance the demand and supply
ƒ To balance between price and quality

So what are the prospects and challenges for the Textile Industry in the
coming years?

Indian textile has become a tough industry; it is experiencing strong cyclicality, pervasive
pressure across the value chain, overall reduction in price due to overcapacity and
immense competition.

Yet it is also an industry in emergence, with increasing reputation in global markets,

emerging SME's, more foreign direct investments and tremendous strategic production
advantage. Surviving, thriving, and being distinct in such an environment is a worthy
challenge for any textile manufacturer and success of industry will totally be dependent on
how they are handling this slow down.

A closer look at the figure of the Textile Industry since the MFA was withdrawn (1st jan,
2005) and the projected growth till the end of the 11th Five Year Plan (2007 - 2012)
presents the glorious prospect that the sector possess within its wrap.

The Indian Textile sector grew by more than 8% in the last two fiscal years and is projected
to grow at 16% by 2012. Being the second largest employer of Indians after Agriculture, it
currently employs 88 Million people and is expected to generate another 17 million jobs by
2012. The gross value is expected to rise from its present $9309.8 millions to a whopping
$105 billion Industry. It is the third largest of textile to both USA and EU and exports grew
by 24% in last fiscal year. They are likely to grow by 25% in the next 5 years increasing the

2006-2007 By 2012
Capabilities 2005-2006
(estimated) (Projected)
Growth rate (over the last fiscal year) 8.2% Above 8% 16%
Employment 88Million 105 Million
Gross Value $9309.8 Million $115 Billion
Export $17.85 Billion 19.24 Billion $55 Billion
Investment Rs. 64,4 7 8 Oores (Between 2004- 2 00 7) RS.1,50,600 Crores
Share in World Market 3% 7%
* Figures as provided by the Ministry of Textiles, Govt. of India

Indian Textile industry's share in world textile market from 3% to 7%. Thus, the facts and
figures speak for the prospects and potentials of Textile Industry. However the Textile
sector is still in a nascent stage for the world market. The fact can be revealed from the fact
that the appreciating Rupee in six months has resulted in the prices falling from $2.00 to
$1.96 in the price of per sq. mt of cloth and a loss of 5.79 lakh potential jobs in the year
2007-08 as per the study carried out by CITI. These conditions will cause further
problems for an Industry lagging behind technologically in comparison to its prime
competitor, China. The Government has continued and introduced a lot of schemes in
order to safeguard the Indian Textile Industry.
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Status
Changes in provision under 2007-08
Sr. Scheme (continued/introduced)
Union budget
for 2007-08
Scheme for Integrated Continued. (26 of the 30 Provision increased from Rs. 189 Crores
1.
Textile Park (SITP) sanctioned have been approved) to Rs 450 Crores

Technology Provision increased from Rs. 425 Crores to

Continued. for the 11 th Five Year
2. Upgradation Rs. 911 Crores. Handloom sectorwill also be
Plan (2007 - 2012
Fund Scheme (TUFS) covered in it.

Cluster Approach (for Continued. (120 cluster adopted, 100 -150 new clusters to betaken up Rs.321
3.
the Handloom sector) 273 yarn deposits opened) Crores fund for social security Schemes

* Figures as provided by the Ministry of Textiles, Govt. of India

Apart from the above, a series of progressive measures have been planned to strengthen
the textile sector in India:

ƒ Technology Mission on Cotton (TMC).

ƒ Setting up of Apparel Training and Design Centers (ATDCs).
ƒ 100 per cent Foreign Direct Investment (FDI) in the textile sector under automatic
route.
ƒ Setting up two design centres in Gujarat in collaboration with National Institute of
Fashion Technology.
ƒ Setting up a Handloom Plaza in Ahmedabad with an estimated investment of US$
24.6 million.
ƒ Revival plans of the mills run by National Textiles Corporation (NTC). Already, for
the revival of 18 textile mills, US$ 2.21 million worth of machineries has been
ordered for the upgradation and modernisation of these mills
ƒ Setting up a handloom mall with an investment of US$ 24.6 million at Jehangir
Mill in Ahmedabad.

The Government of India has also included new schemes in the Annual Plan for 2007-08
to provide a boost to the textile sector. These include schemes for Foreign Investment
Promotion to attract foreign direct investment in textiles, clothing and machinery; Brand
Promotion on Public-Private Partnership (PPP) approach to develop global acceptability of
Indian apparel brands; Trade Facilitation Centres for Indian image branding; Fashion
Hubs for creation of permanent market place for the benefit of Indian fashion industry;
Common Compliance Code to encourage acceptability among apparel buyers and Training
Centres for Human Resource Development on Public Private Partnership (PPP) mode.

It's not just the present that is shinning like a bright start but also the future, as the textile
export market of India is expected to reach a high of $50 billion by 201 O. This will
eventually make a profit by 300%. In order to attain this target Indian textile industry has
already started improving their design skills, including a combination of various fibers. It
is all set to meet international standards and is planning to invest $5 billion in
machineries very soon.

Most of the international brands like Marks & Spencer, JC penny, Gap have started
procuring most of their fabrics from India. In fact, Walmart, who had procured textile
worth $200 million last year, intends to procure $3 billion worth of textile this year.
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These schemes will be beneficial for the industry but still more needs to be done. Given the
safeguards, it possesses the potential to give any major player in the world market a run
for their money and announce its arrival into the world market in a big way.

Conclusion

The Indian textile industry has a significant presence in the economy as well as in the
international textile economy. It enjoys certain favorable factors that contribute in
retaining its leading position in national and international scenario that can be utilized to
ensure further growth and development. To effectively tackle the critical situations, India
needs to invest in research and development to develop new products, reduce per unit
costs and finally improve its raw material base. It needs to move from the lower end
markets to middle level value for money markets and export high value added products of
international standard. Thus, the industry should diversify in design to ensure quality
output and technological advancement.

References

ƒ Vadhani,R.H., 2005, "Changing Scenario of Indian Textile Industry -II", Express

Textiles, July
ƒ Sivakumar, S., 2010, "Indian Textile Industry and its share in GDP", Textile Review,
April, Vol.5, Issue 4, Pg.39-41.
ƒ Gordon,S. and Hsieh,Y.L., "Cotton: Science and Technology", Woodland
Publication, Manchester
ƒ Indian Textile Industry-Dream of Every Mankind, Igmatex News Magazine, 2009,
August. Rai, I., 2002,"Textile Industry Problems and Prospects in the 21st Century",
Books Treasure Publication, Jodhpur
ƒ Sharma, S.K. and Giri, S., 2005 "Strategic Management Practices in Indian Textile
Companies," Journal of Textile Association, March-April, VoI.6S, No.6, Pg.261-264
ƒ www.ibef.org
ƒ www.bharattextile.com
ƒ www.texprocil.com
ƒ www.economywatch.com
ƒ www.marketresearch.com
ƒ www.pd.cpim.org
ƒ www.ezinearticles.com
ƒ www.indialine.com
ƒ www.fibre2fashion.com

Originally Published in Textile Review, Jan-2011

Dr. Amita Pandya is a Professor & Ms. Kirti Manek is a Ph.D Scholar with Dept. of
Clothing & Textile, Faculty of Family & Community Sciences, The M.S.University of
Baroda, Vadodara.

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