| Indian textiles industry is a well-established with | | | | manner. In the last 3 years Pakistan exported 4 |
| showing strong features and a bright future. In fact, | | | | times more pillowcases to USA than India! Pakistan, |
| the country is the second biggest textiles | | | | to note, is among the most important cotton |
| manufacturer worldwide, right after China. Similar | | | | producers worldwide and has been blessed by |
| force is demonstrated in the cotton production and | | | | preference agreements with EU and US even during |
| consumption trend where India ranks just after China | | | | the quota-imposed periods. Pakistani Government has |
| and USA. The textiles manufacturing business is a | | | | understood the game and is encouraging |
| pioneer activity in the Indian manufacturing sector | | | | development through implementation of a 6% |
| and it has a primordial importance in the economic life | | | | R&D aid programs. Others, like Turkey are also |
| of the country, which is still predominantly based on | | | | in the race. |
| the agro-alimentary sector. Employing around 35 | | | | Budget Measures |
| million people, textiles industry stands as a major | | | | Technology Upgradation Fund (TUF) increased |
| foreign currency revenue generator and further | | | | toRs5.4bn from its previous Rs4.4 bn |
| proves it in its 14% share of industrial production and | | | | Interest subsidy provision on term loans available for |
| the 16% of export revenues it generated. | | | | those in the handloom field has been increased from |
| Textiles industry is not limited to manufacture and | | | | Rs2.0bn to Rs2.4bn |
| export of garments. The success of Indian textiles | | | | Excise duty has been reduced by half on all artificial |
| lies in effective vertical integrations policies which | | | | fiber yarn and is now at 8% |
| have helped operators in taming the processes which | | | | Import duty reduced from 15% to 10% on all artificial |
| while lying beyond simple manufacturing exercise do | | | | fiber yarn |
| have a serious impact on it, for example, raw | | | | Impact of Budget |
| material treatment. Thus, cotton, jute, silk or wool | | | | Decrease in excise duty on artificial fibre has been |
| and even synthetic material are also produced by this | | | | implemented to favor cheaper production costs and |
| industry to complement and strengthen the garments | | | | ensure competitiveness on export market. |
| manufacturing industry. Almost one quarter of the | | | | SSIs are expected to grow further with interest |
| world's spindle activities is hosted in India, again | | | | subsidy on handloom sector loans. |
| positioning itself just after China. Looming is another | | | | The TUF, with its interest subsidy, provides textiles |
| important element that accounts for significant | | | | operators with interesting funding plan for their |
| activity in this industry; in fact, it takes an impressive | | | | expansion and development strategies. |
| 61% share including handlooms. The country is also | | | | Textiles parks creations will undeniably help in |
| significant textiles fiber and yarn manufacturer on the | | | | boosting the overall industry. 10 dedicated areas have |
| world scene, taking on its own a 12% share of the | | | | already been identified and 7 of them already |
| world's production volume. India ranks on the second | | | | sanctioned. A special Scheme for Integrated Textiles |
| place as regards in production of silk and cellulose | | | | Parks is meant to help in realization of such |
| fiber and yarn whilst standing on the fifth position | | | | objectives. |
| when it comes to synthetic fiber and yarn. | | | | Sector Outlook |
| Indians have well understood the importance of | | | | The future of the textiles industry seems to be |
| staying one step ahead of developments in the world | | | | bright in all aspects. As such Government places all its |
| economic environment. The industry is now preparing | | | | trust and relies sector for its strong 'employment |
| itself to take share of opportunities expected to | | | | creation' capability, more precisely in the garments |
| arise out of the market freed from quota restrictions | | | | manufacturing side. Lowering tax burdens on |
| and other trade barriers. Industry operators are | | | | companies will play an important part in cutting down |
| increasingly moving towards modernization and | | | | production costs and boosting competitiveness, |
| expansion as encouraged by the so-designated | | | | increasing ability to tap high-volume orders from the |
| Textile Upgradation Fund Scheme implemented by | | | | global market. Modernization would enable companies |
| Government. | | | | provide quality and volume solutions which is in |
| The local textile sector is now at a critical stage | | | | constant demand by international buyers. |
| where it should prepare itself to rise and grab the | | | | Industry Wish List |
| opportunities that are available through liberalization of | | | | A reduction of 5% in the customs duty on |
| the international market. Manufacturers however, | | | | manufacturing inputs for textiles machines. The rate |
| were caught in inadvertence as new players started | | | | is currently between 10% and 15%. |
| to creep on the market at a time when most | | | | Textiles products would continue to carry the specific |
| operators had attention on imminent opportunities | | | | duty imposition, which may be extended to other |
| coming from a quota-free market. Strategies and | | | | SAFTA member countries. |
| policies were mainly targeted towards expansion and | | | | Reduction from 15% to 10% on customs duty |
| modernization leaving more space to domestic | | | | imposed on synthetic fiber. |
| players. Now it obviously appear that the latter have | | | | Apparel Export Promotion Council (AEPC) is targeting |
| had ample freedom to strengthen them and they are | | | | elimination at 100% of all taxes on apparel exports. |
| now more prepared than export-oriented companies. | | | | Positives Aspects |
| Lack of competition is eroding enthusiasm, impacting | | | | The Technology Upgradation Fund Scheme (TUFS) |
| on activity on the European and USA markets. With | | | | pushed an additional 10% capital subsidy in acquisition |
| the removal of quotas and similar trade barriers, | | | | of processing machines; with a view to help in |
| observers expect the market to provide new | | | | expansion plans. Processing sectors are expected to |
| opportunities with evaluations reaching S$1.4bn for | | | | reap the benefits of such a measure in the long term. |
| towels and US$1.8 in bed linen. China's impressive | | | | Union textiles has exposed a White paper, named |
| production capacity and its growing strength | | | | Vision 2010 where it gives clear indications as regards |
| compelled Europe and USA markets to some serious | | | | its objectives and targets concerning the US bn |
| reflections. To bring a halt to massive invasion of | | | | export market. |
| their products, EU and USA have imposed trade | | | | Operators are increasingly considering consolidation |
| restrictions, which also encourage retailers to review | | | | methods to strengthen production capacity, which |
| their sourcing strategy through diversification out of | | | | would put them in better position on the global and |
| China. Now, undoubtedly India has good cards to play. | | | | free market. As such, mergers and takeovers are |
| With traders realizing the threat of relying on a single | | | | currently very frequent with companies tying up with |
| manufacturing source such as China, India could do | | | | smaller one to tackle global challenges. |
| well in proposing a valuable alternative to buyers on | | | | However, continuing TUFS have been stopped after |
| the international scene, but this is only possible | | | | March 31, 2007 by the Textiles Ministry. The ministry |
| through an adequate and appropriate development | | | | has asked the TUFS nodal agencies and banks not to |
| strategy and macro-economic policy. | | | | process further new loans with instant effect. |
| In that view, many manufacturing companies in India | | | | As per the sources, the estimated budget provision |
| are rushing towards expansion and modernization | | | | set for reimbursing the interest subsidy for the TUFS |
| options. Manufacturers are having recourse to fund | | | | loans for the fiscal 2006-07 was only Rs 535 crore, |
| raising programmes pushing EPS to higher growth, | | | | but the required funds for the subsidy is about Rs |
| dissolving equity on its way. Business collaborations | | | | 1,515 crore, which comes to three times higher than |
| with foreign players, creation of buying offices and | | | | the set provision. |
| Government's effort to enhance quality production | | | | Negative Aspects |
| and export are many visible signs of Indians coming | | | | India is somewhat lagging behind technology in the |
| into force on the global market. | | | | garments manufacturing sector and this seriously |
| Geared with expanded capacities | | | | hinders increase in exportable production. Shuttleless |
| The new opportunities have carried along Indian | | | | looms in India accounted for 9.3% of total looms in |
| home-textiles manufacturers in the expansion | | | | 2003. USA shows 94.8% in the same category whilst |
| strategy direction. The Textile upgradation fund has | | | | Austria reveals 95.2%. Clearly India is well behind with |
| helped many such operators to increase capacity | | | | only Pakistan showing up at 7.6%. |
| during the last three fiscal years. Such expansion | | | | Labor regulations are a major concern in India causing |
| strategies have not only had an impact on production | | | | great harms to the industry at various levels. With no |
| volume, also assisted companies in better providing | | | | clear legislations, strikes and similar issues often bring |
| customized products. | | | | business to complete halts. |
| Value addition - route to higher price realizations | | | | Obviously, finding solutions in such conditions is a time |
| Terry towels coming from the Indian factories | | | | and effort wasting enterprise, much to the dismay of |
| accounted for almost 21% of the world market. With | | | | the industry or even the whole economy of the |
| another 19% share in the bed linen market, India | | | | country. |
| stands as a quality supplier to the USA. Indian | | | | The geographical location of India as compared to its |
| products are more focused towards innovation and | | | | competitors is a rather uncomfortable but natural |
| quality. Visible efforts in quality improvement, | | | | disadvantage. Producers like Mexico, Brazil or even |
| innovations through R&D programmes, and | | | | China have a good proximity with Europe and US |
| other value-added features bring a whole new | | | | markets and this pays on the global trade market. |
| dimension to the Indian products. In turn this resulted | | | | Impacts are mainly felt on transportation cost, |
| in higher profit as compared to other regional | | | | delivery times, etc. |
| producers. | | | | Handloom Reservation Order and the Hank Yarn |
| Customized and high-value added products are | | | | Obligation order are examples of obsolete and |
| generally not affected by change in market | | | | unnecessary regulations that indulge operators in a |
| parameters. As such, there were no exceptional price | | | | time-wasting and complicated maze of procedures. |
| fluctuations on Indian markets during quota removal | | | | This mainly affects local operators, giving impression |
| period. But such was not the case with other regional | | | | that the domestic markets is going opposite way to |
| competitors' products, such as China, where prices | | | | international market whereby liberalization is a key |
| were cut down significantly favoring buyers. | | | | element. |
| Higher competition with neighboring country | | | | Conclusion |
| China reacted to quota removals by invading the US | | | | The home textile sector is in a good position to |
| market with its textiles production. The US had no | | | | activate and encourage developments in the overall |
| other choice than to re-introduce trade barriers to | | | | domestic textile industry. With more emphasis on |
| calm down the situation encouraging traders to | | | | product having longer cycles than those average |
| diversify purchasing options and thus giving India an | | | | apparels, the home textiles manufacturing is more |
| unexpected push on the global market. | | | | protected than its apparel counterparts. Those |
| The situation is not completely in the pocket for | | | | wishing to reap the benefits of opportunities have to |
| India, however. It should remain on its guards as its | | | | show good preparatory dispositions as well as |
| neighbors start to embark on similar global adventure | | | | willingness to stay on the forefront of the global |
| with an enthusiasm and motivation packed attitude. | | | | competition game - without these; we could see |
| Pakistan and Bangladesh are growing at fast pace, | | | | regional competition grabbing most of the market |
| shortening the gap with India in an impressive | | | | share. |