The Indian Apparel Industry has taken great paces in the past few old ages and today many of the universe ‘s prima Manner labels are sourcing their merchandises from India. The dress industry is conventionally viewed as a major beginning of employment and foreign exchange coevals. However of late, based on success of East Asiatic Economies, it is besides seen as a taking sector in the fast turning low-income economic systems.
The Indian fabric industry contributes about 14 per cent to industrial production, 4 per cent to the state ‘s gross domestic merchandise ( GDP ) and 17 per cent to the state ‘s export net incomes, ( Beginning: .ministry of Textiles ) . Around 45 % of this comes from garment exports entirely. Delhi, Mumbai, Tirupur, Bangalore and Chennai are the five major garment production hubs, bring forthing entirely for the exports market. Karnataka has a ample presence in the garments and fabrics sector ; many well-known transnational trade names have chosen this province to put up their planetary sourcing Centres. ( Beginning: Cardinal Statistical Organisation ( CSO ) )
As of March 2008, fabric industry provides direct employment to over 35 million people and is the 2nd largest supplier of employment after agribusiness. In add-on to direct employment, the industry generates important employment through forward and backward linkages, both in traditional activities like production of cotton and other natural fibres and in modern industries like fabric design and manners. Apart from the employment potency, the big figure of skilled and unskilled activities in the industry makes the sector highly of import from the position of inclusive growing. ( Beginning: office of fabric commissioner ) .
The dress sector has over 25000 domestic makers, 48,000 storytellers and around 4000 manufacturers/exporters. Over 80 % of these are little operations ( less than 20 machines ) and are proprietary or partnership houses. In 2001, GOI de-notified RMG merchandises from SSI reserve list for obvious grounds. As stated before, cotton dresss constitute major portion of India ‘s dress exports, although cotton appears to be out-thing in current planetary markets with portion worsening from 50 % in 1982 to 38 % in 2003. The export merchandise mix of India is rather interesting with low and mid priced merchandises and besides high manner points. ( Beginning: Rk Gupta Paper )
Harmonizing to the Ministry of Textiles, the cumulative production of fabric during April’09-March’10 has increased by 8.3 per cent as compared to the corresponding period of the old twelvemonth. Garment is the major export merchandise of Indian T & A ; C industry, representing 43 % by value of the entire T & A ; C exports in 2007-08, followed by Made-ups ( 16 % ) , Yarn ( 14 % ) and Fabric ( 14 % ) . EU27 is the largest export market for Indian T & A ; C merchandises, with a portion of 33 % by value of the entire T & A ; C exports in 2007-08 ; UK entirely accounts for 7.5 % of India ‘s entire T & A ; C export value.US is the 2nd largest export market with a portion of 21 % by value of entire T & A ; C exports in 2007-08. Other of import export markets are UAE, China, Italy, Bangladesh and Japan.
Today China ‘s Apparel exports are touching $ 50 billion followed by Mexico ( over $ 8 billion ) followed in the 3rd topographic point with states like India ( $ 6 billion ) , Sri Lanka and Bangladesh ( $ 5-6 billion ) . But along with immense chance there is a menace of increased commodisation of mainstream garments, planetary competition from China and other states. Consequently, Indian Apparel companies are forced to cut down their cost of production and to introduce if they are to interest out new markets.
Harmonizing to one Industry estimates, India can make the mark of US $ 25 billion by the twelvemonth 2010 up from US $ 6 billion at present. But looking at present scenario, the existent inquiry is whether India will travel from current degree to $ 8-9 billion by 2010 or 25 billion by 2010.
India ‘s Apparel Industry has many advantages: Competitive labor costs, abundant natural stuffs ( universe ‘s 3rd largest manufacturer of natural cotton ) , local fabric production, and skilled interior decorators.
2.1.2 SWOT Analysis of Indian Garments Industry:
a ) Strong natural stuff base:
Indian has the largest country under cultivation for cotton across the universe and is the universe ‘s 3rd largest manufacturer of cotton after China and US. It is the most dominant fibre in the garment industry and cotton garments account for about 75 % of the entire Indian dress exports.
India is besides one of the largest manufacturers of adult male made fibre, nevertheless this has non translated into important advantage as Indian companies are non cost competitory due to high grade of atomization in the industry. The easy handiness of cotton is one of the advantages for the Indian dress sector.
B ) Low labor costs:
India has one of the lowest labor rates in the universe, which adds to the higher cost fight of the Indian companies. Labour cost in India is every bit low as 75 cents per hr as compared to 100 cents in China and 120 cents in instance of Thailand and 300 cents in instance of Turkey. ( Beginning: office of fabric commisoner )
Since fabric industry is monetary value sensitive and labour medium, the cost effectivity straight translates into fight.
degree Celsius ) High quality planing
World over, Indian interior decorators are respected for their high accomplishments in planing and prowess. The turning prominence of Indian designs in the universe manner circuit is apparent by the recent successful manner shows of Indian interior decorators in EU and USA. Garments designed by the Indian interior decorators are progressively acquiring credence across the universe. Large dress companies are progressively looking for outsourcing high terminal interior decorator dresss from Indian manner houses.
vitamin D ) Strength across the value concatenation
Unlike other states, India has terminal to stop capablenesss for whirling, weaving, knitting, processing and garment fabrication. The presence across the value concatenation provides cost efficiencies to Indian companies on history of synergisms of operation. Further it enables Indian companies to beginning their stuff locally, thereby cut downing the lead clip and investing in stock lists.
Cardinal Hindrances for the Indian Textile Industry:
The Indian RMG industry is extremely disconnected. There are more than 7,500 exporters registered with the Apparel Export Promotion Council ( APEC ) . The turnover of more than 50 % companies is less than US $ 0.1 million. Further, there are around 100,000 dress makers present in the state both in the organized every bit good as in the unorganised sector.
Fragmented industry which leads to take down ability to spread out and emerge as “ universe category ” participants.
In cloth, big subdivision of the industry is in the power loom and handloom sectors. Global purchasers prefer to beginning their full demands from two to three sellers, and Indian garmenters find it hard to carry through the capacity demands.
Consequence of Historical Government Policies
Historical ordinances though relaxed continue to be an hindrance to planetary fight. The industry continues to be affected by several historical ordinances continue eg absence of a feasible issue option for industry participants.
These ordinances result in a complex industry construction, which is presently an hindrance. On the other manus, in some instances the industry excessively has non taken full advantage of authorities enterprises eg TUF.
Lower Productivity and Cost Competitiveness
Lower cost fight has hampered ability to vie with lower cost planetary participants. This is due to the lower productiveness of labour force in India as compared to other states like China, Sri Lanka etc. Furthermore ; the Indian industry lacks equal economic systems of graduated table and is hence unable to vie with China and other states.
Global participants normally prefer outsourcing in big volume to take advantage of economic systems of graduated table ; nevertheless Indian makers find it hard to carry through big orders due to limited production capacity.
Technology obsolescence has resulted in the demand of important engineering investings to accomplish universe category quality.
The Indian dress sector has been confronting assorted jobs on history of hapless substructure. Due to hapless route conditions, companies face trouble in transporting natural stuff from beginning to the treating units and further in the transportation of finished goods from the warehouses to the ports doing hold in the despatch and bringing of finished merchandises to the concluding finish. Further, due to high traffic there is terrible force per unit area on the port substructure and the cargo suffer holds in custom clearance.
aˆ? Replacement of the MFA by the WTO ended four decennaries of protectionism and is likely to increase planetary trade.
aˆ? Quotas continued for China after 2005.
aˆ? Textile industry identified as a thrust country by authorities for development and publicity of exports.
aˆ? Phasing out of fabric fabrication by western states due to high cost of production. Production installations are likely to travel to developing economic systems and therefore are expected to be major donees.
aˆ? Consolidation in the planetary retail industry easing planetary sourcing.
aˆ? Shift in domestic market towards readymade garments. Per capita domestic fabric ingestion offers room for growing, with increasing disposable incomes.
aˆ? Survival of the fittest – in footings of quality, size, bringing and cost.
aˆ? In the station WTO epoch, competition in the international trade and fabric is likely to be intensified. Competition from other fabric exporting states would necessitate to be faced in the domestic market besides.
aˆ? Threat of dumping with lower duty barriers. However, so far, lowered duties have non increased dress imports into the state.
aˆ? Developed states following non-tariff barriers in the signifier of anti-dumping responsibilities
and Regional Trade Agreements ( though their legality is questionable ) .
2.1.1. Indian Ready Made Garment Industry poised for exponential growing:
The entire market for RMG in 2004-05 was estimated around USD 20.4 billion and is expected to lift to USD 38-40 billion by 2009-10 with a CAGR of 13-14 % per annum. With a portion of more than 68 % in the entire gross revenues gross generated in 2004-05, domestic market has important impact over the wellness of fabric sector. The entire value of domestic RMG market in 2004-05 was around USD 14bn and is expected to turn to USD 24 billion by 2009-10 with a CAGR of 10-11 % .
Cardinal Demand Drivers for domestic market:
aˆ? Rising income degree
aˆ? Rising population of working adult females with high disposable income
aˆ? Changing demographics
aˆ? Changing ingestion forms
aˆ? Increasing trade name penchant
The premium ( branded ) sections are likely to witness higher growing as compared to the generic sections. The increasing penchant for branded dresss and mall civilization of unprompted purchasing coupled with the higher disposable income are likely to assist the branded sections attain a higher CAGR of 18-20 % per annum.
2.1.2. Exports are cardinal driver of Ready Made Garments Industry
The Ready Made Garment sector is the biggest section in the India ‘s fabric export basket, lending over 46 % of entire fabric exports and a small over 12 % of the entire exports from the state. The exports of RMG have grown over the past one and the half decennary at a CAGR of 13 % .
Presently exports account for 31 % of the entire grosss of RMG sector. In 2004-05 the entire exports market was estimated at USD 6.4 billion and is expected to go USD 16 billion chances by 2009-10 turning with a CAGR of 18-20 % .
Key growing drivers of RMG exports are:
aˆ? Abolition of quotas under Multi-fiber understanding ( MFA ) , across the Earth.
aˆ? Imposition of quotas on import from China by the European Union ( EU ) and the US.
aˆ? Increased outsourcing from major international participants.
The quotas imposed over the exports from the low-priced fabrication states like India under the Multi-fiber understanding ( MFA ) , were the cardinal hindrances that had hindered the growing of domestic RMG companies. During the quota regimen exports grew by a moderate CAGR of 6.3 % from USD 4.6 billion in 2000-01 to USD 6.2 bn in 2004-05.
US and EU are two cardinal exports finishs for Indian RMG Companies. Presently with an export value of USD 2.1bn India has a portion of 3 % of entire US dress imports ( in footings of Sq. meitnerium ) and is expected to increase to 6 % by 2010. The entire value of exports from India in 2009-10 is expected around USD 6.8 bn.
The growing in dress exports to the US market would be mostly driven by dresss made from cotton, the section where India has natural advantage.
Indian exports to EU are expected to turn at a CAGR of 25-27 % . Further Indian companies would derive by the quotas limitations imposed over the Chinese companies by the EU. Indian dress exports to EU are expected to turn from USD 1.5 bn in 2004-05 to USD 4.5-5.0 by 2009-10.
The growing in exports of dresss from semisynthetic fibres ( MMF ) is expected to be fringy, as states like China, Vietnam, Philippines and Indonesia are more
competitory than India. Compared to cotton cloth, semisynthetic cloth industry is more disconnected in India.
The abolishment of quotas would besides likely to hike outsourcing chances for Indian companies. Large international organized retail participants such as Wal-Mart, JC Penny, Marks and Spencer, Nike etc has identified India as the cardinal outsourcing finish so as to take advantage of low costs production capablenesss.
2.1.5 Scenario: Post MFA
The Multi-Fiber Arrangement ( MFA ) has governed international trade in fabrics and vesture since 1974. The MFA enabled developed states, chiefly the USA, European Union and Canada to curtail imports from developing states through a system of quotas.
The Agreement on Textiles and Clothing ( ATC ) to get rid of MFA quotas marked a important turnaround in the planetary fabric trade. The ATC mandated progressive stage out of import quotas established under MFA, and the integrating of fabrics and vesture into the many-sided trading system before January 2005.
The Agreement on Textiles and Clothing
ATC is a ephemeral government between the MFA and the integrating of trading in fabrics and vesture in the many-sided trading system. The ATC provided for a stage-wise integrating procedure to be completed within a period of 10 old ages ( 1995-2004 ) , divided into four phases get downing with the execution of the understanding in 1995. The merchandise groups from which merchandises were to be integrated at each phase of the integrating included ( I ) tops and narrations ; ( two ) cloths ; ( three ) made-up fabric merchandises ; and ( four ) vesture.
The ATC mandated that importing states must incorporate a specified minimal part of their fabric and garment exports based on entire volume of trade in 1990, at the start of each stage of integrating. In the first phase, each state was required to incorporate 16 per centum of the entire volume of imports of 1990, followed by a farther 17 per centum at the terminal of first three twelvemonth and another 18 per centum at the terminal of 3rd phase. The 4th phase would see the concluding integrating of the staying 49 per centum of trade.
The terminal to textile quota government on January 1, 2005 has opened batch of chances for Indian Garment Industry. Currently, universe dress trade is more than $ 200 billion yearly which is expected to turn to about $ 655 billion by 2010 and is declarative of the enormous chance for accelerated growing for the sector. There is belief among a subdivision that India happens to be in a better place to derive, from chance to tap the planetary market unhampered by duty barriers, than many other states except China.
The phasing out of the Multi Fibre Agreement ( MFA ) in 2005 was a great chance for little mills to increase garment production for exports. As the market became extremely competitory, merely factories that could bring forth at the lowest cost survived ; many were forced to shut store. Therefore, stiff competition was inevitable among different mills in the state and besides among the states of the 3rd universe that were able to bring forth garments at a much lower cost than India. There were cases where India lost orders to China and Bangladesh. Just a twosome of old ages ago, India was at 2nd place in garment exports, after China ; today it stands 6th with states like Bangladesh and Vietnam higher up the ladder. Again, the force per unit area to bring forth at lower and lower costs is adversely impacting the worker at the lowest terminal of the concatenation
2.1.6 Needs of Indian Garment Industry
Cost fight in Indian garments sector has been restrained by limited graduated table operations, disused engineering and reserve under SSI policies. While retaining its traditional cost advantages of place grown cotton and low cost labor, India needs to sharpen its competitory border by take downing the cost of operations through efficient usage of production inputs and scale operations. Besides, there are demands for rationalisation of charges, levies related to use of export logistics to stay cost competitory.
As radioactive dust to the quota government, there would be consolidation of production and limitation on providing states, which would needfully intend improved graduated table operations. Indian participants should besides incorporate to accomplish operating purchase and show high bargaining power.
It is reported that Chinese fabric houses have already invested to a great extent to spread out and catch immense market portion in the quota free universe. In India, organised participants in this sector would necessitate immense investings to stay competitory in the quota free universe. These participants need to spread out and incorporate vertically to accomplish scale operations and present new engineerings. It is estimated that the industry would necessitate Rs. 1.5 trillion ( US $ 35 billion ) new capital investing in the following 10 old ages ( by 2014 ) to lap the possible export chances of US $ 70 billion. It is estimated that USA and EU together would offer a market of US $ 42 billion for Indian fabrics and garments in 2014. ( Beginning: Exim Bank of India )
Technology would play a lead function in the weaving and processing, which would better quality and productiveness degrees. Inventions would besides be go oning in this sector, as many developed states would introduce new coevals machineries that are likely to hold low manual interface and power cost. Indian fabric industry should besides turn into high engineering manner to harvest the benefits of scale operations and quality. Foreign investings coupled with foreign engineering transportation would assist the industry to turn into hi-tech manner.
Internationally, trading in fabric and garment sector is concentrated in the custodies of big retail houses. Majority of them are looking for few sellers with bulk orders and hence opting for vertically incorporate companies. Therefore, there is demand for incorporating the operations in India besides, from whirling to dress devising, to derive their attending. This would besides convey down the bend around clip and better quality. Indian participants should besides better upon their soft accomplishments, viz. , design capablenesss, fabric engineering, direction and negociating accomplishments.
Garment fabrication concern is order driven. It would be hard for the participants to maintain the work force full clip, even in thin season. This calls for alterations in contract labour Torahs.
Logisticss and supply concatenation would besides play a important function as timely bringing would be an of import demand for success in international trade. The logistics and supply concatenation direction of Indian fabric houses are comparatively weak and needs betterment and efficiency. China has already created a universe category export substructure. Given the volume of projections for exports by India, it may be necessary to make extra export substructure, particularly investing for modernisation of ports. In add-on, India needs to put for making trade name equity, supply concatenation direction and dress industry instruction.
To sum up, the ability of Indian fabric industry to take advantage of quota phase-out would depend upon their ability to heighten overall fight through development of economic systems of graduated table in fabrication and supply concatenation. The demand of the hr therefore is to germinate a well chalked out scheme, aimed at betterment in the degrees of productiveness and efficiency, quality control, faster merchandise invention, speedy response to alterations in consumer penchants and the ability to travel up in the value concatenation by constructing trade name names and geting channels of distribution so as to outweigh the advantages of rivals in the long tally.