Wednesday, April 20, 2011

Textile and Apparel Industry India Report

Today I have come across a government study (US Goverment study) regarding the textile and apparel industry in India.  This is NOT new news because the report is from March 2001.  Yes, that is 2001 NOT 2011.  Anyway, although the info is out dated, it is still interesting to see the study from a decade ago.  It is good to compare what was stated back in 2001 compared to the reality of the India apparel and textile industry of today.

If you are really interested in India fashion, you may want to check out the India Fashion Week section on Apparel Search and also visit the India Apparel Industry section.
Below is a brief portion of the textile and apparel industry India report from March 2001 : Publication 3401.  You can find the full textile and apparel industry India report at http://www.usitc.gov/publications/332/working_papers/pub3401.pdf

Learn about apparel industry reports on Apparel Search.

The views expressed in this staff study are those of the Office of Industries, U.S. International Trade Commission. They are not necessarily the views of the U.S. International Trade Commission as a whole or any individual commissioner.

The study examines India’s textile and apparel industry in terms of its structural anomalies and other key factors inhibiting the growth of the industry, competitive strengths and weaknesses of the industry, government programs designed to help improve the competitiveness of the industry, tariffs and other market access barriers impeding growth in trade and investment, and product sectors that offer opportunities for growth in U.S. trade and investment.
Industry Structure

The textile and apparel industry is one of the leading segments of the Indian economy and the largest source of foreign exchange earnings for India. This industry accounts for 4 percent of the gross domestic product (GDP), 20 percent of industrial output, and slightlymore than 30 percent of export earnings. The textile and apparel industry employs about 38 million people, making it the largest source of industrial employment in India. The study identifies the following structural characteristics of India’s textile and apparel industry:
  • India has the second-largest yarn-spinning capacity in the world (after China), accounting for roughly 20 percent of the world’s spindle capacity. India’s spinning segment is fairly modernized; approximately 35 to 40 percent of India’s spindles are less than 10 years old. During 1989-98, Indiawas the leading buyer of spinning machinery, accounting for 28 percent of world shipments. India’s production of spun yarn is accounted for almost entirely by the “organized mill sector,” which includes 285 large vertically-integrated “composite mills” and nearly 2,500 spinning mills.
  • India has the largest number of looms in place toweave fabrics, accounting for 64 percent of the world’s installed looms. However, 98 percent of the looms are accounted for by India’s powerloom and handloom sectors, which use mostly outdated equipment and producemostly low-value unfinished fabrics. Composite mills account for 2 percent of India’s installed looms and 4 percent of India’s fabric output.
  • The handloomand powerloomsectorswere establishedwith government support, mainly to provide rural employment. These sectors benefit from various tax exemptions and other favorable government policies, which ensure that fabrics produced in these sectors are price competitive against those of composite mills.
  • The fabric processing (dyeing and finishing) sector, the weakest link in India’s textile supply chain, consists of a large number of small units located in and around the powerloom and handloom centers. The proliferation of small processing units is due to India’s fiscal policies, which favor small independent hand- and power-processing units over composite mills with modern processing facilities.
  • The production of apparel in Indiawas, until recently, reserved for the small-scale industry (SSI) sector, which was defined as a unit having an investment in plant and machinery equivalent to less than $230,000. Apparel units with larger investments were allowed to operate only as export-oriented units (EOUs). As a result, India’s apparel sector is highly fragmented and is characterized by low levels of technology use.
Competitive Position of India’s Textile and Apparel Industry

India’s share of global exports of textiles and apparel increased from 1.8 percent in 1980 to 3.3 percent in 1998. However, India’s export growth was lower than that of most Asian countries during that period. The study identifies a number of competitive strengths of the Indian textile and apparel industry :
  • India has a large fiber base, and ranks as the world’s third-leading producer of cotton, accounting for 15 percent of the world’s cotton crop. India produces a wide variety of cotton, providing operational flexibility for domestic textile producers. In themanmade fiber sector, India is theworld’s fifth-largest producer of polyester fibers and filament yarns and the third-largest producer of cellulosic fibers and filament yarns.
  • India is theworld’s second-largest textile producer (after China), and is diversified and capable of producing awide variety of textiles. The spinning segment is fairly modernized and competitive, accounting for about 20 percent of world cotton yarn exports.
  • India’s textile and apparel industry benefits from a large pool of skilled workers and competent technical and managerial personnel. India’s labor is inexpensive; hourly labor costs in the textile and apparel industry average less than 5 percent of those in the U.S. textile and apparel industry. The study also identifies the competitive weaknesses that have impeded the growth of India’s  textile and apparel industry:
  • Policies of the Government of India (GOI) favoring small firms have resulted in the establishment of a large number of small independent units in the spinning, weaving, and processing sectors. Sources in India claim that GOI policies have provided competitive advantages for the small independent units over the generally larger composite mills, discouraged investments in newmanufacturing technologies, and limited large-scale manufacturing and the attendant benefits of economies of scale.
  • Sources in India also claim that because of the GOI policies, small units have significantly lower production costs than the composite mills, use low levels of technology, and producemostly lowvalue-added goods of lowquality that are less competitive globally.
  • India’s textile industry depends heavily on domestically produced cotton. Almost two-thirds of domestic cotton production is rain fed, which results in wide weather-related fluctuations in cotton production. Moreover, the contamination level of Indian cotton is among the highest in the world. According to sources in India, the cotton ginning quality is poor, contributing to defective textile products.
  • The GOI policy reserving apparel production for the SSI sector had restricted the entry of large-scale units and discouraged investment in new apparel manufacturing technologies. As a result, most Indian apparel producers do not benefit from economies of scale.
  • The competitiveness of India’s apparel sector is adversely impacted by an inadequate domestic supply of quality fabrics. Fabric imports are subject to high duty rates and other domestic taxes that increase the cost of imported fabrics. Another major weakness of the Indian apparel sector is a lack of product specialization which, along with a limited fabric base, has limited India’s apparel production and exports to low value-added goods.
  • India has high energy and capital costs,multiple taxation, and lowproductivity, all of which add to production costs. As a result, textile and apparel products from India are less competitive than those of China and other developing countries in the international market.
Read more of the textile and apparel industry India report.  Also, you can learn more about the textile and apparel industry on Apparel Search or join in the discussion about the fashion industry at the Fashion Industry Network.

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You can discuss textiles in the textile group discussion at FIN.

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You may want to check out the Indian Textile Association website as well.

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