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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Excerpts

The Chinese Factor

Trade pacts like NAFTA have given countries like Mexico an advantage over India when competing in the US market. Mexico has close to 30% share in categories 347 and 348, while India's share in these two categories is around 1% (Refer Table IV). India has lagged behind neighboring countries like China, Bangladesh, Sri Lanka and Pakistan for items like 339, 347 and 348 (Refer Table V).

In terms of exports of apparel to the US (in value terms) in 2003-04, the countries that figure in the top 15 in order of their ranks are Mexico, China, Hong Kong, India, Honduras, Dominican Republic, Bangladesh, Korea, Indonesia, Thailand, Philippines, El Salvador, Taiwan, Pakistan and Turkey.

These countries together had a market share of 60.2 per cent in volume terms while they had a value share of 35.2 per cent of the US apparel imports. The average Unit Value Realization (UVR) of India has been rising through the years (Refer Table VI) and India has the highest UVR among the top 15 suppliers.

The immediate competitors at close ranges were China, Hong Kong, Korea, Thailand and Pakistan. India's Asian neighbours UVR rates have been falling, except for China which has been consolidating its position over the years...

Conclusion

The N K Singh Committee on Investment & Growth of the Textile Industry has suggested creating a Textile Industry Reconstruction Fund with an initial corpus of Rs.30 billion for financial restructuring of the textile industry.

In 2004, the textile ministry recommended the abolition of the textiles committee cess, changes in the duty structure for synthetic yarn and reduction in the customs duty for remaining textile machinery to 5 per cent.

"Among measures for reining in raw material costs is lowering of import duty of cotton from 10% to 5% immediately and progressively reducing the same to zero. Existing biases against manmade fibres by way of rationalization of excise duties in line with those leviable on cotton yarn and lower import duties on raw material used to manufacture synthetic yarn need to be removed on a priority basis," said Bhasin...

Exhibits/Figures

Exhibit I: The Multi-Fibre Arrangement (MFA)
Figure I: Direction of Apparel Exports from India in 2004
Figure II: Labour As A Percentage Of Total Cost
Figure III: Export Fabric Mix 2003-04 (%)
Figure IV (a): Moving Averages for Indian Rayon at National Stock Exchange (NSE)
Figure IV (b): Moving Averages for Arvind Mills Ltd at National Stock Exchange (NSE)
Figure IV (c): Moving Averages for Raymond Ltd. at National Stock Exchange (NSE)
Figure IV (d): Moving Averages for Mahavir Spinning Mills Ltd. at National Stock Exchange (NSE)

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