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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"It is difficult to find such a large-scale industry in the country that is so disorganized as the Indian textile industry."1

-Arvind Singhal, Chairman, KSA Technopak, in 2004.

"We have acted, but very late. The industry is backloaded with the technological obsolescence and sub-scale of operations."2

-S P Oswal, Chairman, Vardhman Group, in 2005.

"Indian players also need to focus on reduction in lead time through cost-cutting measures, as many a time the low labour cost benefit gets offset by the high infrastructure expense."3

-Sampa Bhasin, Associate Director, Ernst & Young Pvt. Ltd., in 2005.

Introduction

Global trade in textiles and apparel4 is expected to increase from US$ 356 billion in 2003 to US$ 600 billion by 2010.5 The textile industry accounted for 22% of India's Rs 2,551 billion exports in 2002-03 and 17 percent of India's total exports of Rs 1,070 billion during April-July 2004. It has been predicted that post-January 2005 (Refer Exhibit I for details about MFA) India's share in apparel exports would increase from 2.5 per cent in 2003-04 to 5 per cent by 2008. In 2003-04, 75 per cent of India's apparel exports were to USA, the European Union and Canada (Refer Figure I). India's share in the global textile trade was forecasted to grow the fastest of all countries, post-MFA, as its quota allocation in developed countries during the MFA was among the lowest.

The growth of the Indian textile industry right from the 1970s has been adversely affected by the quota regime, lack of industry-friendly government policies and technological obsolescence.

Yet, the industry thrived because of the assured business under the quota system. To meet the challenges of the post-MFA setup, the Government of India (GoI) established an industry reforms process, which aimed to remove the handicaps arising from small-scale reservation and cumbersome procedures associated with the tax regime in India.6 Vision 2010, a plan which was the result of interaction between the government and the industry, has envisaged growth in the textile industry from US$ 36 billion (Rs 1609 billion) in 2003-04 to US$ 85 billion (Rs 3697 billion) by 2010, giving an annual growth target of 11-12 percent. Vision 2010 also proposes the creation of an additional 12 million jobs.

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1] Indrajit Basu, "A damp squib for Indian textiles,"http://www.atimes.com/atimes/South_Asia/FF08Df03.html, June 8, 2004.

2] "How should India face the post-MFA world?"The Economic Times, January 11, 2005.

3] "How should India face the post-MFA world?"The Economic Times, January 11, 2005.

4] In this report, textile industry includes fibres, yarn, fabrics, made-ups and apparels.

5] As per a CII report on Textile Industry.

6] From the 1970s, apparel manufacturing in India was reserved for the small-scale sector. It was only in 2002 that the GoI dereserved apparel manufacturing.

 

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