The Indian Textile Industry in 2005
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Case Details:
Case Code : BSTR163
Case Length : 20
Pages Period : 2005
Organization : -
Pub Date : 2005
Teaching Note :Not Available
Countries : India
Industry : Textile
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Competitiveness of Indian Textile Industry
India has a proven advantage in raw material availability as
the world's third largest producer of cotton, second largest exporter of cotton
textiles among low cost countries, and fourth largest exporter of synthetic yarn
and fabric.
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India produces all varieties of cotton. In 2003-04, the industry accounted for
21 per cent of global spinning capacity and 33 per cent of global weaving
capacity. The industry contributed about 25 per cent share of the world trade in
cotton yarn.
The industry has high levels of operational efficiencies in spinning and
weaving: around 96% for spinning and 85-90% for weaving. The skilled manpower
available in India has been relatively low-cost in an industry where labour
contributes the largest component of manufacturing cost in textiles (Refer
Figure II for data on labour cost component of textile units of various
countries).
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"India has a cost advantage of 40% over the US and 30% over 'garment conversion
centers' such as Mexico due to lower labour cost,"said Rajinder Gupta (Rajinder),
Managing Director, Abhishek Industries Ltd.7
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The wide
availability of skilled labour in India has been another differentiator.
India has been adept at traditional apparel-making skills like
embroidery, mirror work and beading, design and at making complex
garments. Some Chinese buyers are planning to manufacture part of their
value added products in India. There are training institutions like the
National Institute of Fashion Technology, which produces nearly 1000
graduates a year, and this has enhanced design capabilities of India in
the fashion industry.
The government is encouraging the textile sector through a liberal
policy on external borrowings and concessions on capital goods imports
for the textile industry. |
With the flight of manufacturing facilities from the west to low-cost countries, analysts feel that India is well positioned to take advantage of the new order to become a global textile and apparel hub.
In spite of all these positive factors, textile export orders for the season beginning January '05 when the quotas ended did not show a sharp increase. Export orders from major retail companies have risen only by 5-6%.
Moreover, these orders have been contracted at prices 5% lower than existing
ones...
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