Assessing the Prospects for India Textile and Clothing Sector NMCC
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Assessing the Prospects for India’s Textile and Clothing Sector July 2009 i Project Leader Dr. Jatinder S. Bedi Study Team Mr. Radheshyam Verma Research Associate Dr. Pradip Biswas Consultant Mr. Sanjeev Kumar Research Analyst Ms. Minal Kapoor Research Associate Mr. Rajkumar Research Associate Mr. Raghav Gupta Trainee ii Foreword The Textiles and clothing industry is the second most important economic activity in the country in terms of employment generation (after agriculture). It is also one of the major sources of export earnings for the country. Its share in manufacturing value added is estimated currently at about 12 percent. The textile industry is presently in a state of flux due to the severe contraction in export and domestic demand in the wake of global economic and financial crisis. Major business restructuring is taking place across the industry. The government is also considering measures to support the industry on which livelihood of millions of people is dependent. The industry is afflicted by slow and uneven modernisation across various segments. Insufficient modernisation is especially the case with dying and processing, weaving, garments, non-woven and technical textiles segments. Existing policies for modernization such as Technology Upgradation Fund Scheme (TUFS) and policy to attract FDI need to be properly designed to allow investments where they are most essential. This requires an understanding of the state of the textile and clothing industry so that relevant policy decisions are taken on the basis of facts and figures. This study is an attempt to provide alternative estimates of basic parameters of the industry (number of units, output, value added, employment, number of machines/looms, etc.). The study provides a review of the government policies and programmes for the industry by analysing the relevant documents. It provides some insights into the corrections required in various policy measures and explores various measures to make the industry more efficie nt and competitive. The study looks at a wide range of aspects such as stages of processing, sectors of production, their competitiveness, retail marketing, number of intermediaries involved from factory stage to final consumer stage and margins and value addition by them. It also looks into the state and potential of technical textiles in India. We are grateful to Ministry of Textiles and Ministry of Commerce and Industry, Government of India, and the Confederation of Indian Textile Industry for entrusting this study to us. We acknowledge their support not only in terms of funding this study but also for their inputs through discussions at various stages of the study. We hope that the study will be helpful in better understanding the constraints faced by textiles and clothing industry and help the decision makers in formulating policies which could help the industry to sharpen its competitive edge, especially in facing the current global economic slowdown. Suman Bery Director General NCAER iii Contents Acknowledgment Executive Summary Introduction Chapter 1 Indian Textiles and Clothing Industry in Mill Sector 1.1 The Structure of Textiles and Clothing Industries 1.2 Performance Indicators for the Mill Sector 1.2.1 Spinning Sector 1.2.2 Trends in consumption and exports of yarn 1.2.3 Capacity Utilization of Spinning Mill 1.2.4 Yarn-fibre ratio 1.2.5 Output Capital, Output Labour and Capital Intensity ratios 1.2.6 Capital stock per Spindle, Output per Labour 1.3 Independent Weaving Mills 1.3.1 Capacity Utilization 1.3.2 Fabric -Yarn Ratio 1.3.4 Output Capital Ratio 1.4 Composite Mill 1.4.1 Capacity Utilization 1.4.2 Output Capital Ratio, Output Labour Ratio and Capital Labour Ratio 1.5 Garments 1.5.1 Capacity Utilization 1.5.2 Output Capital, Output Labour, Capital Intensity and Wages per Employee Ratios Chapter 2 State of Overall Textiles and Clothing Industry in India 2.1 Spinning Sector 2.2 Weaving Sector 2.3 Made-ups 2.4 Processing Activity 2.5 Knitted and Crocheted Products 2.6 Technical Textile 2.7 Embroidery Work 2.8 Manufacture of Wearing Apparel 2.9 Overall Textiles and Clothing industry 2.10 Estimates of Cotton and Synthetic Fabric s Production in Powerloom, Handloom and Hosiery Sector Chapter 3 Analysis of NCAER, 2008-09 Survey data 3.1 A note on Sampling Procedure adopted for selection of Clusters Including Artisanal Clusters 3.2 Size-wise Estimates of Handloom and Powerloom Sector Units Producing Cotton and Synthetic Products 3.3 Per Unit Ratios for Units Producing Fabrics as one of their products/product 3.3.1 Units run with the aid of power and producing fabrics 3.3.2 Units run without the aid of power and producing fabrics 3.4 Estimates of Production, Employment, Looms Installed for Units Producing Fabrics as one of their products/product on the basis of Field furvey data using multipliers 3.4.1 Powerloom Sector 3.4.2 Handloom Sector iv 3.4.3 Powerloom and handloom sector 3.5 Major Characteristics of Surveyed Clusters across Different Segments of the Industry 3.5.1 Powerloom Sector 3.5.2 Hosiery Sector 3.5.3 Handloom Sector 3.5.4 Apparel Chapter 4 Domestic Demand Pattern of Textiles and Clothing 4.1 Trend in Consumption of Various Textiles Items 4.1.1 Concepts and definitions for various categories of textiles 4.1.2 Pattern of changes in consumption using Textile Committee data for the year 1990, 2000 and 2006 4.1.2.1 Woven Textile in Piece Length 4.1.2.2 Woven Garments in Piece Length 4.1.2.3 Woven Readymade Garments 4.1.2.4 Woven Household Varieties 4.1.2.5 Hosiery Varieties (knitted varieties) 4.1.3 Change in the Consumption of Various Items in Clothing Expenditure Using NSSO Data for year 1993-94 and 2004-05 4.2 Changes in consumption demand across income groups us ing NSSO data 4.3 Expenditure and Price Elasticity of Textile Items 4.3.1 Methodology of estimation for expenditure elasticity 4.3.2 Price Elasticity 4.3.3 Projection of Domestic Demand for 2011-12 and 2015-16 based on Elasticities derived in Bedi & Cororation, IFPRI(DP), 2008 4.3.4 Summary 4.4 Retailing 4.4.1 Apparel Retailing in India 4.4.2 Structure of Retailing in India 4.4.3 Retail Location in India 4.4.4 Growth of Retail Market in India 4.4.5 FDI Policy in Retail 4.5 Value Chain Analysis 4.5.1 Purchase of fabrics/ garments by the traders 4.5.2 Sale of fabrics/ garments 4.5.3 Prevailing price at various stages 4.5.4 Conclusion Chapter 5 Exports and Import of Textiles and Clothing 5.1 Exports 5.1.1 Exports of Fibre from India to the Rest of the World 5.1.2 Exports of Yarn from India to Rest of the World 5.1.3 Exports of Fabric (Excluding Knitted) from India to the Rest of the World 5.1.4 Exports of Knitted/ Crocheted Fabric from India to the Rest of the World 5.1.5 Exports of Readymade Garments (Knitted/Crocheted) From India to the Rest of the World 5.1.6 Exports of Readymade Garments (Non-Knitted/Crocheted) From India to Rest of the World 5.1.7 Exports of Made-Ups from India to Rest of the World v 5.2 Imports 5.2.1 Imports of Fibre from World to India 5.2.2 Imports of Yarn from World to India 5.2.3 Imports of Fabric (Excluding Knitted) from World to India 5.2.4 Imports of Knitted/ Crocheted Fabric from world to India 5.2.5 Imports of Readymade Garments (Knitted/Crocheted) from World to India 5.2.6 Imports of Readymade Garments (Non-Knitted/Crocheted) from World to India 5.2.7 Imports of Made-Ups from World to India 5.3 Competitiveness of Indian Textiles 5.3.1Competitiveness Mainly in Grey/ Unprocessed and low Value Added Products 5.3.2 Relative Competitiveness of Powerloom Sector viz Other Sector of Production 5.3.3 Lack of Dyeing Facilities 5.3.4 Supply Chain Management 5.3.5 Low Labour Cost in Production of Indian Apparel 5.4 Export Potential Chapter 6 Technical Textiles 6.1 Problems and measures to promote growth in technical textiles segment Chapter 7 Skill Gap in Textile and Clothing Industry 7.1 Nature of Skill Gap 7.2 Segment-wsie Skill-gap 7.3 Labour Laws and Skill Gap 7.4 Existing Institutions 7.5 Mill Sector 7.6 Handloom 7.7 Powerloom 7.8 Garments 7.9 Measures to Improve the Institutions Chapter 8 Investments in Textiles and Clothing Sector 8.1 Investment Pattern of the Textiles and Clothing Industry: 8.1.1 Investment in Factory Sector 8.1.2 Investment in Non-factory Sector 8.1.3 Total Investment in the Industry 8.2 Foreign Direct Investment in Textiles and Clothing Sector 8.3 Technology Upgradation Fund Scheme (TUFS) and Investment Pattern 8.4 Investment Requirement of the Industry References Appendix vi vii List of Tables Table 1.1 Production of cotton and synthetic yarn Table 1.2 Consumption and import, export of cotton, synthetic and filament yarn Table 1.3 Average Capacity Utilization (%) in Spinning Mills Table 1.4 Average Yarn-Fibre Ratio and WPI of Fibre and Yarn for Spinning Mills Table 1.5 Regression Results for Yarn-fibre Ration in Value on Time Table 1.6 Count Composition of Cotton Yarn Produced in Mills (SSI & non-SSI) Table 1.7 Trends in Output Capital, Output Labour and Capital Intensity Table 1.8 Capital Stock per Spindle Table 1.9 Average Capacity Utilization (%) in Weaving Mills Table 1.10 Average Fabric -Yarn Ratio (in value terms) Table 1.11 Regression Estimate on Fabric - yarn Ratio Table 1.12 Trends in Output Capital Ratio Table 1.13 Average Capacity Utilization (%) in Composite Mills using prowess data Table 1.14 Trends in Output Capital, Output Labour and Capital Intensity Table 1.15 Average Capacity Utilization (%) in Readymade Garments Units Table 1.16 Trends in Output Capital, Output Labour and Salaries per Employee