The Multi-Fibre Agreement ( MFA ) , that had governed the extent of fabric trade between states since 1962, expired on 1 January, 2005. It is expected that, post-MFA, most tariff deformations would bit by bit vanish and houses with robust capablenesss will derive in the planetary trade of fabric and dress. The award is the $ 360 bn market which is expected to turn to about $ 600 bn by the twelvemonth 2010 – hardly five old ages after the termination of MFA. An of import inquiry confronting Indian houses is whether their capablenesss and their diverse supply concatenation are aligned to profit from the opening up of planetary fabric market?
The history of fabrics in India dates back to the usage of black dyes and publishing blocks around 3000 BC. The diverseness of fibers found in India, intricate weaving on its state-of-art manual looms and its organic dyes attracted purchasers from all over the universe for centuries. The British colonisation of India and its industrial policies destroyed the advanced eco-system and left it technologically impoverished. Independent India saw the edifice up of fabric capablenesss, variegation of its merchandise base, and its outgrowth, one time once more, as an of import planetary participant. Today, the fabric and dress sector employs 35.0 manganese people ( and is the 2nd largest employer ) , generates 1/5th of the entire export net incomes and contributes 4 per cent to the GDP thereby doing it the largest industrial sector of the state. This textile economic system is deserving US $ 37 bn and its portion of the planetary market is about 5.90 per cent. The sector aspires to turn its gross to US $ 85bn, its export value to US $ 50bn and employment to 12 million by the twelvemonth 2010 ( Texmin 2005 ) .
The Textile and Apparel Supply Chain comprises diverse natural stuff sectors, ginning installations, whirling and bulge procedures, treating sector, weaving and knitting mills and garment ( and other stitched and non-stitched ) fabrication that supply an extended distribution channel ( see Figure 1 ) . This supply concatenation is possibly one of the most diverse in footings of the natural stuffs used, engineerings deployed and merchandises produced.
This supply concatenation supplies about 70 per cent by value of its production to the domestic market. The distribution channel comprises jobbers, distributers and a big figure of smallretailers selling garments and fabrics. It is merely late that big retail formats are emerging thereby increasing assortment every bit good as volume on show at a individual location. Another characteristic of the distribution channel is the strong presence of ‘agents ‘ who secure and consolidate orders for manufacturers. Exports are traditionally executed through Export Houses or procurement/commissioning offices of big planetary dress retail merchants.
It is estimated that there exist 65,000 garment units in the organized sector, of which about 88 per cent are for woven fabrics while the staying are for knits. However, merely 30-40 units are big in size ( as a consequence of long old ages of reserve of non-exporting garment units for the little graduated table sectors – a ordinance that was removed late ) . While these houses are spread all over the state, there are bunchs emerging in the National Capital Region ( NCR ) , Mumbai, Bangalore, Tirupur/Coimbatore, and Ludhiana using approximately 3.5 mn people. Harmonizing to our estimation, the entire value of production in the garment sector is around Rs.1,050-1,100 bn of which about 81 per cent comes from the domestic market. The value of Indian garments ( eg. sari, dhoti, salwar kurta, etc. ) is around Rs.200-250 bn. About 40 per cent of cloth for garment production is imported – a figure that is expected to lift in approaching old ages.
The weaving and knits sector lies at the bosom of the industry. In 2004-05, of the entire production from the weaving sector, about 46 per cent was cotton fabric, 41 per cent was 100 % non-cotton including khaddar, wool and silk and 13 per cent was blended fabric. Three typical engineerings are used in the sector – handlooms, powerlooms and knitting machines. They besides represent really typical supply ironss. The handloom sector ( including khaddar, silk and some wool ) serves the low and the high terminals of the value concatenation – both mass ingestion merchandises for usage in rural India every bit good as niche merchandises for urban & A ; exports markets. It produces, chiefly, fabrics with geographical word picture ( e.g. , cotton and silk saris in Pochampally or Varanasi ) and in little batches. Handloom production in 2003-04 was around 5493 mn.sq.meters of which about 82 per cent was utilizing cotton fiber. Handloom production is largely rural ( using approximately 10 million, largely, family weavers ) and revolves about master-weavers who provide designs, natural stuff and frequently the loom.
Weaving, utilizing powerlooms, was traditionally done by composite Millss that combined it with whirling and treating operations. Over the old ages, authorities inducements and demand for low cost, high volume, standard merchandises ( particularly saris and gray fabric ) moved the production towards powerloom mills and off from composite Millss ( that were basically full line assortment manufacturers ) . While some similar Arvind Mills or Ashima transformed themselves into competitory units, others bit by bit closed down. In 2003-04, there remained 223 composite Millss that produced 1434 manganese. sq. meitnerium. of fabric. Most of these Millss are located in Gujarat and Maharashtra. Most of the woven fabric comes from the powerlooms ( chiefly at Surat, Bhiwandi, NCR, Chennai ) . In 2005, there were 425,792 registered powerloom units that produced 26,947 manganese. sq. meitnerium of fabric and employed about 4,757,383 workers. Weaving sector is preponderantly little graduated table, has on an mean 4.5 power looms per unit, suffers from out-of-date engineering, and incurs high co-ordination costs. Knits have been more successful particularly in export channels. Strong production bunchs like Tirupur and Ludhiana have led to growing of accoutrements sector every bit good, albeit easy. The hose sector, on the other manus, has mostly a domestic focal point and is turning quickly.
The spinning sector is possibly most competitory globally in footings of assortment, unit monetary values and production measure. Though cotton is the fiber of penchant, semisynthetic fiber ( polyster fiber and polyster fibril narration ) is besides produced by about 100 big and average size manufacturers.
Spining is done by 1566 Millss and 1170 Small and Medium Enterprises ( SME ) . Mills, chiefly located in North India, deploy 34.24 manganese. spindles and 0.385 manganese rotors while the SME units produce their narration on 3.29 manganese spindles and 0.119 manganese. rotors bring forthing 2270 mn kilogram of cotton narration, 950 manganese kilogram of blended narration and about 1106 manganese kilogram of semisynthetic fibril narration every twelvemonth. Worsted and non-worsted spindles ( bring forthing woolen narration ) have besides increasingly grown to 0.604 manganeses and 0.437 manganese severally. Spining sector is engineering intensive and productiveness is affected by the quality of cotton and the cleansing procedure used during ginning.
The processing sector, i.e. , dyeing, completing and printing is largely little in graduated table. The largest amongst these would dye and complete about 5000 m/day. The staying are independent procedure houses ( or portion of composite Millss ) that use automated big batch or uninterrupted processing and have an mean graduated table of about 20,000 m of cloth day-to-day. About 82.5 per cent or 10,397 units are manus processors who dye cloth or yarn manually and dry in unfastened sunlight. Of the staying ( and these usage automated and semi-automated equipment ) , 2076 are independent procedure houses.
Cotton remains the most important natural stuff for the Indian fabric industry. In 2003-04, 3009 manganese kilogram of cotton was grown over 7.785 mn estates. Other fibers produced are silk ( 15742 metric tons ) , jute ( 10985000 bales ) , wool ( 50.7 mn kilogram ) and semisynthetic fibers ( 1100.65 mn kilogram ) . Cotton grows largely in western and cardinal India, silk in southern India, jute in eastern and wool in northern India. Significant qualities of cotton, silk and wool fibers are besides imported by the spinning and knitwork sectors. ( Except for garments, all informations in this subdivision was obtained from OTC 2004 and Texmin 2005. )
Pull offing such a complex supply concatenation requires coordination through first-class managerial patterns, engineering and facilitating policies.
Competitiveness of Indian Textile & A ; Apparel Industry
India is one of the few states that owns the complete supply concatenation in close propinquity from diverse fibers to a big market. It is capable of presenting packaged merchandises to clients consisting a assortment of fibers, diverse count sizes, fabrics of different weight and weave, and a panoply of coatings. This permits the supply concatenation to blend and fit assortment in different sections to present new merchandises and applications. This advantage is farther accentuated by cost based advantages and diverse traditions in fabrics.
Indian strength in spinning is now good established – on unit costs on pealing narration, open-ended ( OE ) narration every bit good as textured narration, Indian houses are in front of their planetary rivals including China. Same is true on some woven OE narration cloth classs ( particularly grey cloths ) but is non true for other woven sections. India contributes about 23 per cent of universe spindles and 6 per cent of universe rotors ( 2nd highest in the universe after China ) . Fifty five per cent of entire investing in engineering in the last decennary has been made in the spinning sector. Its portion in planetary shuttleless loom, nevertheless, is merely approximately 2.8 per cent of universe looms ( and is ranked 9th in the universe ) . The fight in the weaving sector is adversely affected by low incursion of shuttleless looms ( i.e. , 1.69 % of Indian looms ) , the unorganised nature of the sector ( i.e. , fragmented, little and, frequently, un-registered units, low investing in engineering & A ; patterns particularly in the powerloom, processing, handloom and knits ) and higher power duties. There is, nevertheless, a recent tendency of investing in puting up high-tech, stand-alone mid-size weaving companies concentrating on export markets. India besides has the highest deployment of handlooms in the universe ( handlooms are low on productiveness but produce specialised cloth ) . While production and export of semisynthetic fiber ( and filament narration ) has increased over the old ages, Indian industry still lags significantly behind US, China, Europe, Taiwan etc. ( Texmin, 2005. )
Indian fabric industry has suffered in the yesteryear from low productiveness at both terminals of the supply concatenation – low farm outputs impacting cotton production and inefficiency in garment sector due to limitation of size and reserve. Add to this, taint of cotton with attendant addition in cost ( as it affects quality and requires installing of extra procedure to clean and open cotton fibers before teasing operations ) , hapless ginning ( most equipment day of the months back to 1940s ) , high mean defect rates in production procedure ( which besides leads to increase in effectual labor and power costs ) , hank yarn demand, etc. and its fight gets compromised badly. Similarly, treating engineering is chiefly manual and little batch oriented with ocular coloring material matching and Sun drying. This leads to inconsistency in conformity quality. Lead times across the sector continue to be affected by variableness in the supply concatenation – defect rates average over 5 % , mean % of orders on clip is approximately 80 % , discrepancy in order size across houses is high ( e.g. , the coefficient of variableness of mean order size for whirling houses is about 2.6 ) , and on an norm, 16 yearss of gross revenues as work-in-process stock list ( the highest for garment houses ) and an norm of 30 yearss of gross revenues in natural stuff stock list ( the highest for whirling houses ) ( Chandra 2004 ) . Some of the hurdlings ( eg. , reserve in the garment sectors ) including tariff deformations between the organized and unorganised sectors have now been consistently removed by policy enterprises of Government of India and have opened avenues for houses to vie on the footing of their capablenesss.
Trade informations of post-MFA public presentation reveals some interesting tendencies – Indian houses registered a 27 per cent growing in exports to US ( against China ‘s 52 per cent ) during the Jan-April 2005 clip period. Most of this growing has been in fabrics while dresss show fringy additions. Apparels & A ; accoutrements constituted 78 % of planetary exports to USA ( FICCI 2005 ) . ( India is still a comparatively little yet turning participant in the planetary dress market. ) It is expected that India will shortly replace Mexico as the 2nd largest dress provider to the US.
Challenges confronting Indian Textile and Apparel Industry
Textile supply ironss compete on low cost, high quality, accurate bringing and flexibleness in assortment and volume. Several challenges stand in the manner of Indian houses before they can have a larger portion of the planetary market:
Scale: Except for spinning, all other sectors suffer from the job of graduated table. Indian houses are typically smaller than their Chinese or Thai opposite numbers and there are fewer big houses in India. Some of the Chinese big houses have 1.5 times higher whirling capacity, 1.25 times denim ( and 2 times grey cloth ) capacity and about 6 times more gross in garment than their opposite numbers in India thereby impacting the cost construction every bit good as ability to pull clients with big orders. The cardinal inclination is to add capacity one time the order has been won instead than in front of the demand. Customers go where they see both capacity and capablenesss. Large capacity typically goes with standardised merchandises. These houses need to develop the managerial capablenesss required to pull off big work force and design an appropriate supply concatenation. For the size of the Indian economic system, it will hold to hold bigger houses bring forthing standard merchandises in big volumes every bit good as little and mid size houses bring forthing big assortment in little to mid size batches ( the tenseness between the organized and un-organized sectors will hold to be addressed foremost, though ) . Then there is the demand for outgrowth of specialist houses that will consolidate orders, book capacities, manage warehouses and logistics of order bringing.
Skills: Three issues must be mentioned here: ( a ) there is a dearth of proficient work force – there exist hardly 30 programmes at alumnus technology ( including sheepskin ) degrees graduating about 1000 pupils – this is deficient for conveying approximately technological alteration in the sector ; ( B ) Indian houses invest really small in developing its bing work force and the accomplishments are limited to bing proceses ( Chandra 1998 ) ; ( degree Celsius ) there is an acute deficit of trained operators and supervisors in India. It is expected that Indian houses will hold to put near to Rs. 1400 bn by twelvemonth 2010 to increase its planetary trade to $ 50 bn. This sort of investing would necessitate, by our computations, approximately 70,000 supervisors and 1.05mn operators in the fabric sector and at least 112,000 supervisors and 2.8mn operators in the dress sector ( presuming a 80:20 ratio of investing between fabrics and dress ) . The existent constriction to growing is traveling to be handiness of skilled work force.
Cycle Time: Cycle clip is the key to fight of a house as it affects both monetary value and bringing agenda. Cycle clip decrease is strongly correlated with high first base on balls output, high throughput times, low variableness in procedure times, low WIP and accordingly cost. Indian houses have to dramatically cut down rhythm times across the full supply concatenation which are presently rather high ( Chandra, 2004 ) . Customss must supply a turnaround clip of A? twenty-four hours for an order before Indian houses can they anticipate to go portion of larger planetary supply ironss. Indian houses need a strong deployment of industrial technology with peculiar accent on cellular fabrication, JIT and statistical procedure control to cut down lead times on store floors. Penetration of IT for bettering productiveness is peculiarly low in this sector.
Innovation & A ; Technology: A reappraisal of the merchandises imported from China to USA during January-April 2005 reveals that the top three merchandises in footings of per centum addition in imports were Tire Cords & A ; Tire Fabrics ( 843.4 % addition over the old twelvemonth ) , Non-woven cloths ( 284.1 % addition ) and Textile/Fabric Finishing Mill Products ( 197.2 % addition ) ( FICCI, 2005 ) . None of these points, nevertheless, figure in the list of imports from India that have gained in these early yearss of post-MFA. Entry into newer application spheres of industrial fabrics, nano-textiles, place trappingss etc. becomes imperative if we are to turn beyond 5-6 % of planetary market portion as these are countries that are projected to turn significantly. Man-made fabrics comprise about 50 per cent of the planetary fabric market. Indian man-made industry, nevertheless, is non good entrenched. The Technology Upgradation Fund of the authorities is being used to excite investing in new procedures. However, there is small grounds that this deployment in engineering has accompanied alterations in the managerial governments – a necessary status for increasing productiveness and order winning ability.
Domestic Market: The Indian domestic market for all fabric and dress merchandises is estimated at $ 26 bn and turning. While the market is really competitory at the low terminal of the value concatenation, the mid or higher scopes are over priced ( i.e. , ‘dollar pricing ‘ ) . Firms are non taking advantage of the big domestic market in bring forthing economic systems of graduated table to present cost advantage in export markets. The Free Trade Agreement with Singapore and Thailand will let abroad manufacturers to run into the aspirations of domestic purchasers with quality and monetary values that are competitory in the domestic market. Ignoring the domestic market, in the long tally, will endanger the export markets for domestic manufacturers. In add-on, high retail belongings monetary values and high channel borders in India will curtail growing of this market. Firms need to do their supply concatenation leaner in order to get the better of these disadvantages.
Institutional Support: Fabric policy has come long ways in cut downing hindrances for the industry – sometimes driven by planetary competition and, at other times, by international trade ordinances. However, few countries of policy failing stand out – labor reforms ( which is impeding motion towards higher graduated table of operations by Indian houses ) , power handiness and its quality, imposts clearance and shipment operations from ports, recognition for big graduated table investings that are needed for upgradation of engineering, and development of work force for the industry. These are jobs confronting several sectors of industry in India and non by this sector entirely.
In decision, competitory schemes are developed by sector degree houses and its their single and corporate enterprises that secure higher market portion in planetary trade. While one has to be of all time argus-eyed of non-tariff barriers in the station MFA universe, the new market will be won on the footing of capablenesss across the supply concatenation. Policy will necessitate to ease this edifice of capablenesss at the house degree and the flexible schemes that houses will necessitate to invent sporadically.