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8/8/2019 MIEC PrRep. Textile
1/25
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MicroeconomicsTextile Industry Analysis
9/25/2010
By Group P1Savan V Shah
Shalabh SrivastavaSudip Kar
Umang Sharma
Kirti Mishra
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CONTENTS
ABOUT THE INDUSTRY...................................................................................3
IMPORTANCE....................................................................................................4
DOMESTIC ROLE..............................................................................................4
INTERNATIONAL IMPORTANCE...................................................................7
GOVERNMENT INITIATIVES..........................................................................9
MAJOR PLAYERS............................................................................................12
INDUSTRY STRUCTURE................................................................................14
PRODUCTIONFUNCTION & PROFITABILITY ANALYSIS..........16
INTRODUCTION
The Indian textile industry is one of the largest in the world with a massive raw
material and textiles manufacturing base. Our economy is largely dependent on the
textile manufacturing and trade in addition to other major industries. About 27% of
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the foreign exchange earnings are on account of export of textiles and clothing
alone. The textiles and clothing sector contributes about 14% to the industrial
production and 3% to the gross domestic product of the country. Around 8% of the
total excise revenue collection is contributed by the textile industry. So much so,
the textile industry accounts for as large as 21% of the total employment generated
in the economy. Around 35 million people are directly employed in the textile
manufacturing activities. Indirect employment including the manpower engaged in
agricultural based raw-material production like cotton and related trade and
handling could be stated to be around another 60 million.
A textile is the largest single industry in India (and amongst the biggest in the
world), accounting for about 20% of the total industrial production. It provides direct
employment to around 20 million people. Textile and clothing exports account for
one-third of the total value of exports from the country. There are 1,227 textile mills
with a spinning capacity of about 29 million spindles. While yarn is mostly produced
in the mills, fabrics are produced in the power loom and handloom sectors as well.
The Indian textile industry continues to be predominantly based on cotton, with
about 65% of raw materials consumed being cotton. The yearly output of cotton
cloth was about 12.8 billion m (about 42 billion ft). The manufacture of jute products
(1.1 million metric tons) ranks next in importance to cotton weaving. Textile is one
of Indias oldest industries and has a formidable presence in the national economy
in as much as it contributes to about 14 per cent of manufacturing value-addition,
accounts for around one-third of our gross export earnings and provides gainful
employment to millions of people. They include cotton and jute growers, artisans
and weavers who are engaged in the organized as well as decentralized and
household sectors spread across the entire country.
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IMPORTANCE
The Textile Sector in India ranks next to Agriculture. Textile is one of Indias oldest
industries and has a formidable presence in the national economy in as much as it
contributes to about 14 per cent of manufacturing value-addition, accounts for
around one-third of our gross export earnings and provides gainful employment to
millions of people. The textile industry occupies a unique place in our country. One
of the earliest to come into existence in India, it accounts for 14% of the total
Industrial production, contributes to nearly 30% of the total exports and is the
second largest employment generator after agriculture.
Textile Industry is providing one of the most basic needs of people and the holds
importance; maintaining sustained growth for improving quality of life. It has a
unique position as a self-reliant industry, from the production of raw materials to
the delivery of finished products, with substantial value-addition at each stage of
processing; it is a major contribution to the country's economy.
ROLE OF TEXTILE INDUSTRY IN THE INDIAN ECONOMY
Role of Textile Industry in India GDP has been quite beneficial in the economic
life of the country. The worldwide trade of textiles and clothing has boosted up the
GDP of India to a great extent as this sector has brought in a huge amount of
revenue in the country.
In the past one year, there has been a massive upsurge in the textile industry of
India. The industry size has expanded from USD 37 billion in 2004-05 to USD 49
billion in 2006-07. During this era, the local market witnessed a growth of USD 7
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billion, that is, from USD 23 billion to USD 30 billion. The export market increased
from USD 14 billion to USD 19 billion in the same period.
The textile industry is one of the leading sectors in the Indian economy as it
contributes nearly 14 percent to the total industrial production. The textile industry
in India is claimed to be the biggest revenue earners in terms of foreign exchange
among all other industrial sectors in India. This industry provides direct employment
to around 35 million people, which has made it one of the most advantageous
industrial sectors in the country.
Some of the important benefits offered by the Indian textile industry are as follows:
India covers 61 percent of the international textile market
India covers 22 percent of the global market
India is known to be the third largest manufacturer of cotton across the globe
India claims to be the second largest manufacturer as well as provider of
cotton yarn and textiles in the world
India holds around 25 percent share in the cotton yarn industry across the
globe
India contributes to around 12 percent of the world's production of cotton
yarn and textiles
The Role of Textile Industry in India GDP had been undergoing a moderate increase
till the year 2004 to 2005. But ever since, 2005-06, Indian textiles industry has been
witnessing a robust growth and reached almost USD 17 billion during the same
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period from USD 14 billion in 2004-05. At present, Indian textile industry holds 3.5
to 4 percent share in the total textile production across the globe and 3 percent
share in the export production of clothing. The growth in textile production is
predicted to touch USD 19.62 billion during 2006-07. USA is known to be the largest
purchaser of Indian textiles.
Following are the statistics calculated as per the contribution of the sectors in
Textile industry in India GDP:
India holds 22 percent share in the textile market in Europe and 43 percent
share in the apparel market of the country. USA holds 10 percent and 32.6
percent shares in Indian textiles and apparel.
Few other global countries apart from USA and Europe, where India has a
marked presence include UAE, Saudi Arabia, Canada, Bangladesh, China,
Turkey and Japan
Ready made garments accounts for 45 percent share holding in the total
textile exports and 8.2 percent in export production of India
Export production of carpets has witnessed a major growth of 42.23 percent,
which apparently stands at USD 654.32 million during 2004-05 to USD 930.69
million in the year 2006-07. India holds 36 percent share in the global textile
market as has been estimated during April-October 2007
The technical textiles market in India is assumed to touch USD 10.63 billion
by 2007-08 from USD 5.09 billion during 2005-06, which is approximately
double. It is also assumed to touch USD 19.76 billion by the year 2014-15
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By 2010, India is expected to double its share in the international technical
textile market
The entire sector of technical textiles is estimated to reach USD 29 billion
during 2005-2010
The Role of Textile Industry in India GDP also includes a hike in the investment flow
both in the domestic market and the export production of textiles. The investment
range in the Indian textile industry has increased from USD 2.94 billion to USD 7.85
billion within three years, from 2004 to 2007. It has been assumed that by the year
2012, the investment ratio in textile industry is most likely to touch USD 38.14
billion.
INTERNATIONAL IMPORTANCE
Developed countries' exports declined from 52.2% share in 1990 to 37.8 % in 2002.
And that of developing countries increased from 47.8% to 62.2 % in the same
period. In 2003 the exports figures in percentage of the world trade in Textiles
Group (for select countries) were:
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The above chart clearly shows that export of world trade in textile group. Among
world textile group EU occupies 34.80% of export, next China at 15.90%, USA at
6.40%, Republic of Korea at 6.00% Taipei, Ch at 5.50%, India and Japan at 3.80%
respectively, Pakistan at 3.40%, turkey at 3.10% and Mexico at 1.20%.
In Clothing Sector the figures were as below in 2003 in percentage of total experts
globally:
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The exports of readymade garments as per AEPC certification data for the last five
years are as follows: -
**Qty in Million PCs and Value in Million US$.
The above table clearly depicts the export of readymade garments for the last five
years. In the year of 2001-2002 the value of export of readymade garment is
395.23 and in the year 2005-2006 the value is 8200.00. From 2001-2002 it started
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increasing and in the year 2004-2005 it declines and again in the year 2005-2006 it
increases.
Government Initiative
In the Union Budget 2010-11 presented in February 2010, the Finance Minister
made the following announcements to benefit the textile industry:
The central plan outlay for the industry has been enhanced to US$ 1.03
billion. Of this US$ 521.4 million is for TUFS, US$ 76 million for SITP, US$ 80.2
million for handlooms, US$ 69.3 million for handicrafts and US$ 98.4 million
for sericulture.
Allocation for textiles and jute industry is US$ 713.4 million.
The total allocation for village and small enterprises sector which include
handicrafts and handlooms is US$ 210.3 million.
US$ 31.5 million has been provided for development of mega clusters in
handlooms, handicrafts and powerloom sectors.
Customs duty at 4 per cent for import of readymade garments for retail sales
has been withdrawn.
The micro small medium enterprises in textiles sector have been given full
CENVAT credit on capital goods in one instalment in the year of receipt of
such goods and the facility of payment of excise duty in quarterly basis.
Investments
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According to the Minister for Textiles, Mr Dayanidhi Maran, around US$ 5.35 billion
of foreign investment is expected to be made in India in the textile sector over the
next five years.
The textiles industry has attracted foreign direct investment (FDI) worth US$ 817.26
million between April 2000 and March 2010, according to data released by the
Department of Industrial Policy and Promotion.
S Kumars Nationwide has formed a joint venture (JV) with Donna Karan
International to design, produce and distribute the entire range of DKNY
menswear apparel across the world except Japan for 10 years. The new
venture will invest US$ 25 million for expansion of Donna Karans menswear
brand and expects to record sales of about US$ 140 million in the next three
years.
The Andhra Pradesh government has allocated over 1000 acres of land for
the Brandix India Apparel City (BIAC) in the states special economic zone
(SEZ), which was inaugurated in May 2010. The apparel city is expected to
attract an investment of US$ 1.2 billion (around Rs 5,400 crore).
Private equity firms TPG and Bain Capital have picked up stakes in children
apparel retailer Lilliput Kidswear for US$ 27 million and US$ 60.7 million
respectively.
Italian sportswear maker Lotto is planning to invest US$ 10 million over the
next five years to capture 7 per cent of Indias branded sports apparel and
equipment market. The brand, which started its stand-alone retail chain in
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manufacturing denim apparel. Its sales are around US$ 300 million.
Raymonds
Raymonds has the large, diversified integrated business model, which
is spread across the value chain from yarn to retail. It is specialized in
Diversified woolen textiles. ItA already supplies to some US retailers.
Reliance Textiles:
Reliance Textiles is one of the major Textile Company that is in
business of fully integrated manmade fiber. It has capacity of more
than 6 million tones per year. It has joint venture partners like,
DuPont, Stone & Webster, Sinco (Italy) etc.
Vardhaman Spinning deals in spinning, weaving and processing
segment of the industry. It is planning to double its fabric processing
capacity to 50 million meters. It is an approved supplier to global
retailers like GaP, Target and Tommy Hilfiger. Its sales are little over
US$ 120 millions
Welspun India(Manufactures terry towels)
Century Textiles (Composite mill, cotton & Man-made)
Morarjee Mills (Fully integrated Composite Mill)
Indo Rama (Cotton and Man-made)
GTN Textiles (Cotton Yarn and Knit Fabrics)
Ginni Filaments Ltd. (Yarn and Fasbric)
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LNJ Bhilwara Group (Diversified and vertically integrated denim producer
with spinning and weaving capacity)
Mafatlal Textiles (Fully integrated Composite Mill)
Modern Group(Diversified, producer of denim, syntax and thread)
Ashima Syntex (Man-made Fiber)
KG Denim (Fabrics)
Sanghi Polyesters Ltd. (Manmade Fiber)
Nova Petrochemicals (Man-made Fiber)
S. Kumar Synfabs Ltd. (Home furnishing and Suit Fabrics)
Bombay Dyeing Ltd. (Composite and fully integrated)
Rajasthan Petro synthetics (Diversified)
BSL Ltd. (Textiles)
Garware Polyester (Diversified)
Banswara Syntex(Composite)
National Rayon Corp. (Man-made fiber)
GSL India Ltd. (Threads)
Indian Rayon (Man-Made Fiber)
Alok Textiles (Cotton and Man-made Fiber Textiles)
Sharda Textile Mills (Man-made Fiber)
Birla Group Dormeuil Birla VXL Ltd. (Fully integrated woolen textiles)
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Structure of Indias Textile Industry (Monopolistically
Competitive)
Unlike other major textile-producing countries, Indias textile industry is comprised
mostly of small-scale, nonintegrated spinning, weaving, finishing, and apparel-
making enterprises. This unique industry structure is primarily a legacy of
government policies that have promoted labor-intensive, small-scale operations and
discriminated against larger scale firms:
Composite Mills. Relatively large-scale mills that integrate spinning, weaving
and, sometimes, fabric finishing are common in other major textile-producing
countries. In India, however, these types of mills now account for about only 3
percent of output in the textile sector. About 276 composite mills are now operating
in India, most owned by the public sector and many deemed financially sick.
Spinning. Spinning is the process of converting cotton or manmade fiber into
yarn to be used for weaving and knitting. Largely due to deregulation beginning in
the mid-1980s, spinning is the most consolidated and technically efficient sector in
Indias textile industry. Average plant size remains small, however, and technology
outdated, relative to other major producers. In 2002/03, Indias 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, manmade, or
blended yarns into woven or knitted fabrics. Indias weaving and knitting sector
remains highly fragmented, small-scale, and labor-intensive. This sector consists of
about 3.9 million handlooms, 380,000 powerloom enterprises that operate about
1.7 million looms, and just 137,000 looms in the various composite mills.
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Powerlooms are small firms, with an average loom capacity of four to five owned
by independent entrepreneurs or weavers. Modern shuttleless looms account for
less than 1 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).
PRODUCTION FUCTION (Regression Analysis)
SUMMARY
OUTPUT
Regression Statistics
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Multiple R 0.997585
R Square
0.99517
5Adjusted R
Square 0.994885Standard
Error 81.56673Observatio
ns 89
ANOVA
df SS MS F
Significa
nce F
Regression 5
1139011
46.7
2.3E+
07
3423.98
58
1.527E-
94
Residual 83
552209.9
474
6653.
13
Total 88
1144533
56.7
Coefficie
nts
Standard
Error t Stat P-value
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept
5.60746
4
15.88493
166
0.353
01
0.72497
94
-
25.9870
3
37.201
95
-
25.987
03
37.201
95Capital
Employed
0.04577
2
0.018038
915
2.537
4
0.01303
85
0.00989
33
0.0816
51
0.0098
93
0.0816
51Cost of
Productio
n
0.98029
3
0.028842
754
33.98
75
1.768E-
50
0.92292
63
1.0376
6
0.9229
26
1.0376
6Selling
Cost
1.69224
7
0.231507
183
7.309
7
1.513E-
10
1.23178
86
2.1527
06
1.2317
89
2.1527
06
PAT
0.31674
2
0.069601
318
4.550
81
1.81E-
05
0.17830
79
0.4551
76
0.1783
08
0.4551
76R&D
Expen.
8.22446
1
1.953992
569
4.209
05
6.46E-
05
4.33804
86
12.110
87
4.3380
49
12.110
87
As per the data collected from Capitaline, above is the regression analysis done for
generating the Production Function. Further the R-Square value has come out to be
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0.995 which showthat this is a good quality regression. None of the variables
have come out to be insignificant hence there is no multi-co-linearity.
Interpretations:
1) The first variable Capital Employed has a coefficient of 0.45772,
then its P- Value has come out to be 0.0130 which tells
that it is a significant variable.
2) Then with it all the variables have P-Value much less than 0.1 which
tell that are highly significant.
Now as per the coefficients, the Production Function comes out to be,
Q = 5.61+ (0.046*A) +(0.98*B)+(1.69*C)+(0.32*D)+(8.22*E).
Where:- A- Capital Employed.
B Cost Of Production.
C Selling Cost.
D Profit After Tax.
E R & D Expenditure.
PROFITABILITY ANALYSIS :
SUMMARY OUTPUT
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RegressionStatistics
Multiple R0.2656
67
R Square0.0705
79AdjustedR Square
0.01249
StandardError
0.083286
Observations 52
ANOVA
df SS MS F Significance F
Regression 3
0.025284
0.008428
1.215018
0.314418
Residual 480.3329
580.006
937
Total 510.3582
42
Coefficients
Standard
Error t Stat P-
value
Lower95%
Upper95%
Lower95.0%
Upper95.0%
Intercept
0.015571
0.019829
0.785232
0.436176 -0.0243
0.05544
-0.024
30.055
44
TotalExp.
6.67939
3.551555
1.880694
0.066088
-0.46149
13.82027
-0.461
4913.82
027
Marketing
0.07292
0.09517
0.766202
0.447308
-0.11843
0.264273
-0.118
430.264
273
R&DExp.
-0.0005
0.002318
-0.215
630.830
19-
0.005160.004
162
-0.005
160.004
162
Interpretation: Marketing variable & R & D Expense variable are coming out to be
insignificant. Total Expenditure variable alone is significant.
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Where: Total Exp (E) = Total Exp. /Net Sales
Marketing Exp. = Mkt. Exp/Net Sales
R & D Exp. = R & D Exp. /Net Sales.
The Profitability Function thus comes out to be:
P = 0.015 + 6.68*(E).
INDUSTRY ANANLYSIS
The Indian textile industry is one of the leading textile industries in the
world. Though it used to come under unorganized sector few years back, the
scenario changed dramatically after the economic liberalization of the Indian
economy. Liberalisation gave the much-needed push to the textile industry,
which has now successfully become one of the largest in the world.As per the
last statistics available from the Annual Report 2009-10 of the Ministry of
Textiles, "The Indian textile industry contributes about 14 per cent to
industrial production, 4 per cent to the country's gross domestic product
(GDP) and 17 per cent to the country's export earnings." Additionally, it
provides direct employment to over 35 million people and is the second
largest provider of employment after agriculture.
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The report further says "The current domestic market of textile in India is
expected to increase up to US$ 60 billion by 2012 from the current US$ 34.6
billion. The share of exports is also expected to increase from 4% to 7%
within 2012." Textile Accessories are also an important part of this segment.
Strengths of the Indian Textile Industry
India's biggest strength lies in its big pool of cheap and talented workforce.
However, apart from it there are few other important factors which
contributes to its strength like
Huge Domestic Market consumption (due to its own population).
Tremendous Export Potential (Indian products are in great demand
among the western importers)
The new age creative and risk taking entrepreneurs.
Use of latest technology which produces high quality multi-fiber raw
material.
Supportive government policies.
The Indian Textile Industry has its fair share of weakness like:
The increased global competition due to WTO policies.
Use of outdated manufacturing technology from the low end suppliers.
Inefficient supply chain management.
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Additionally, this sector is still unorganized at many levels and needs a
lot of government reforms for further improvisation.
Opportunities
The western countries are now setting up their manufacturing units in India
which single handedly opens up a wide array of possibilities for all the
stakeholders within the textile industry.
Experts believe that the golden era of Chinese textile and apparel exports is
over and the production base of global textiles is gradually shifting from
China to India, Pakistan and other low cost destinations.
Threats:
Even though experts claim that China is past its glorious days, still one
cannot afford to take china lightly and has to keep in mind the capability of
Chinese exporters to supply quality products at cheap prices. Indian textile
exporters cannot afford complacency and need to be on their toes for any
changes within the international trade community.
+
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CONCLUSION
Global textile production has witnessed the growth of an astounding 25
percent (including the Textile Accessories) in the last decade. Asian markets
will continue to spearhead the growth of the textile industry in the years to
come and the textile industry could go beyond the current $500 billion mark
any time soon.
The Indian textile industry has a significant presence in the Indian
economy as well as in the international textile economy. Its contribution to
the Indian economy is manifested in terms of its contribution to the industrial
production, employment generation and foreign exchange earnings. The
industry also contributes significantly to the world production of textile fibres
and yarns including jute. In the world textile scenario, it is the largest
producer of jute, second largest producer of silk, third largest producer of
cotton and cellulosic fibre\yarn and fifth largest producer of synthetic
fibre\yarn. Textile Industry is providing one of the most basic needs of people
and the holds importance; maintaining sustained growth for improving
quality of life. 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 etc.
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REFERENCES
www.tradeget.com
www.ibef.org
www.bharattextile.com
texprocil.com
www.economywatch.com
www.marketresearch.com
pd.cpim.org
meaindia.nic.in
ezinearticles.com
www.indialine.com
www.business.mapsofindia.com
www.ibef.org
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