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Indian Apparel and Textile Industry

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Indian Apparel and TextileThe apparel and textile industry occupies a unique and important place in India. One of the earliest industries to come into existence in the country, the sector accounts for 14% of the total Industrial production, conduces to about 30% of the total exports and is the second largest employment creator after agriculture.

The apparel and textile industry caters to one of the most basic requirements of people and holds importance; maintaining the prolonged growth for improved quality of life. The sector has a unique position as a self-reliant industry, from the production of raw materials to the delivery of end products, with considerable value-addition at every stage of processing. Over the years, the sector has proved to be a major contributor to the nations' economy.

Its immense potential for generation of employment opportunities in the industrial, agricultural, organized and decentralized sectors & rural and urban areas, especially for women and the disadvantaged is noteworthy.

History
The history of apparel and textiles in India dates back to the use of mordant dyes and printing blocks around 3000 BC. The foundations of the India's textile trade with other countries started as early as the second century BC. A hoard of block printed and resist-dyed fabrics, primarily of Gujarati origin, discovered in the tombs of Fostat, Egypt, are the proof of large scale Indian export of cotton textiles to the Egypt in medieval periods.

During the 13th century, Indian silk was used as barter for spices from the western countries. Towards the end of the 17th century, the British East India Company had begun exports of Indian silks and several other cotton fabrics to other economies. These included the famous fine Muslin cloth of Bengal, Orissa and Bihar. Painted and printed cottons or chintz was widely practiced between India, Java, China and the Philippines, long before the arrival of the Europeans.

The Indian Textile Industry Overview

The diversity of fibers found in the country, intricate weaving on its state-of-art manual looms and its organic dyes has attracted buyers from all across the world for centuries. Before the introduction of mechanized ways of spinning in the early 19th century, all Indian silks and cottons were hand spun and hand woven, a highly popular fabric, called the khadi. Independent India saw the development and building up of textile strength, diversification of its product range, and its emergence, once again, as an important player in the world industry.

The Indian Textile Industry Overview
Today, the Indian apparel and textile industry employs around 35.0 million people (and is the 2nd largest employer), yields 1/5th of the total export earnings and contributes 4 % to the GDP thereby making it the largest industrial sector of the economy. The sector aims to grow its revenue to US$ 85bn, its export figures to US$ 50bn and employment to 12 million by the year 2010 (Texmin 2005).

The Indian textiles industry that already has an overwhelming presence in the economic life of the country, has been given a further boost with the scrapping of quotas in global trade of textiles and clothing. In the post quota period, the size of industry has expanded from US$ 37 billion in 2004-05 to US$ 49 billion in 2006-07. During this period, while the domestic market has grown from US$ 23 billion to US$ 30 billion, exports has increased from around US$ 14 billion to US$ 19 billion.

As a matter of fact, the apparel and textile is the largest foreign exchange earning sector in the country. Being a direct employment provider to over 35 million people and and with continuing growth momentum, the role of this sector in Indian economy is bound to increase.

Indian Exports of Apparel & Textile – Facts & Figures Product-wise Export Share
Commodities 2005-06 (Million US$)
Readymade Garments 6038.69
Cotton Textiles 3290.31
Man-made Textiles 1948.72
Wool & Woolen Textiles 66.57
Silk Textile 406.82
Total 11751.11
Add handicraft, Coir & Coir Manufacturers and Jute
Total 13065.24

Sector-wise Analysis
Readymade garments Accounts for around 45% of the country’s total textiles exports. The exports we amounted to US$ 7.75 billion (2005-06), recording an increase of 28.69 % over the exports during 2004-2005.

During the first quarter of 2006-07 the exports have amounted to US$ 2.17 billion, recording an increase of 15.70% over the exports during the corresponding period of 2005-06.
Cotton textiles including handlooms Cotton Textiles i.e. yarn, fabrics and made-ups (Mill made / Powerloom / Handloom) account for more than 2/3rd of our exports of all fibers/yarns/made-ups. The exports were amounted to US$ 4.49 billion, recording a healthy increase of 26.78% over the exports 2004-05.

During the first quarter of 2006-07 the cotton textiles including exports of handlooms have amounted to US$ 1.25 billion, recording an increase of 25.70% over the exports during the corresponding period of 2005-06.
Man-made textiles During 2005-06, man-made textile exports have amounted to US$ 2 billion, which reflects a decline of 2.47% over the exports during the 2004-05.

During the first quarter of 2006-07, exports have amounted to US$ 0.52 billion, which reflects an increase of 13.15% over the exports during the corresponding period of 2005-06.
Silk textiles During 2005-06, the exports of silk textiles were amounted to US$ 0.69 billion, recording an increase of 16.37% over the exports during 2004-05.

During the first quarter of 2006-07 the export figures were to US$ 0.165 billion, which reflects an increase of 4.23% over the exports during the corresponding period of 2005-06.
Woolen textiles The woolen textile exports during 2004–05, were US$ 0.42 billion, recording an increase of 23.4% as compared to the corresponding period of 2003-04.

During the first quarter of 2006-07 the export of woolen textiles have amounted to US$ 0.114 billion that reflects an increase of 11.96% over the exports during the corresponding period of 2005-2006.

Future Outlook
At present, the Indian apparel and textile sector is struggling to survive because of increasing costs of raw material, poor off take of yarns coupled with the poor realization from yarn dealers and a sharp rise in interest rate and, the worse, the rising value of the Indian rupee. As the industry is aiming an export turnover of $50 billion by 2010, amounting to more than US$ 100 billion including that for domestic consumption, it is imperative that the country leverages its underlying advantages and builds capabilities to place itself as a complete solution provider rather than only a manufacturer.

Exports feeling the brunt of the rising rupee
The increasing value of Indian rupee is hitting exporters, with India's textile exports to USA taking a plunge in value terms even though volumes have soared during the period Jan-Apr 2007. During the period April-Jan 2007, exports of apparel and textile products to US declined by 0.43% in value terms though export volumes increased by 7.49% as compared to the corresponding period in the earlier year.

Remedial Measures
The textile exporting community of the country is looking to reduce dependency on the US market and is focusing towards the European market for attaining further growth and to fight currency pressure. This is because of the fact that even though the rupee strengthens itself to Rs. 39.54 against the dollar, the Euro-rupee equation is comparatively at a higher exchange price of Rs. 56.

While many exporters are in talks with European buyers to increase revenues from the European market, keeping long-term interests in mind, they are also hoping to ramp up domestic operations, improve production and manufacturing efficiencies. For example, some companies are trying to convince their existing clients in Europe to shift from paying in dollars to Euros. Some companies are also pondering over market diversification with more emphasis on Europe.

According to industry experts, these are only short-term benefits and will not be beneficial to small and medium enterprises to cope up with the appreciation of rupee. They are expecting the government to take some measures on CENVAT accumulation along with cancellation of 1% NCCD from POY. To compete with cheap imports, duty on various raw materials / intermediates needs to be rationalized.

As per industry statistics, the European market cannot offer as much volumes as the American market fetches. Secondly, there will always be a resistance to the incremental prices, which exporters can enforce upon their foreign clients. Hence, targeting the burgeoning domestic market, which has significant growth potential should be the long-term strategy for the Indian textile sector. Besides this, while some bigger companies have managed to plug losses by hedging, it is time for the smaller companies too, to look at this option, as the textile industry has had to grapple with issues such as job cuts and profit losses this year.