The Textile Industry - Part Iv

By Author: Aniket
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The rise of Indian Textile Industry

The economic health of the country acts as a barometer when it comes to growth and investment of the textile industry. Prior to recession, India economy was throbbing, posting a robust growth rate of 9.4 percent p.a. The benefits of economic growth undoubtedly seeped its way down to the people of the country as evidenced by the rising per capita income of India.

The rise in the purchasing power of the middle class, thanks to booming IT-BPO sectors, triggered a huge demand for fashionable clothes which led to the emergence of some world class Indian designers launching latest designer apparels. The Indian middle class, at present, stands somewhere around 351 million.

Today, the textile sector contributes about 14 percent to industrial production, 4 percent to the country's gross domestic product (GDP) and 16.63 percent to export earnings.

Therefore, one can easily assume that market size of India is growing at an accelerated pace. Little wonder, foreign investors are making a beeline for investment in India in ...
... an attempt to get hold of this expanding pie. With increasing demand for Indian textiles in the global markets, even new players are trying to cash in by jumping into the fray and even the existing mills are planning to raise their capacity so as to increase supply.

Thus it can be said the whole of Indian economy is growing which has had a palpable impact on every potential sector including the Indian Industry.

The rise of Indian Textile Industry

After the end of Multi-Fiber Agreement, Indian Textile Industry went through a major change in its outlook.

Multi Fiber Agreement was launched in the year 1974 in an attempt to bring in line both the textile industries of the developed countries and that of the developing countries. The textile industries are known for their labor intensive nature of commodity production. In fact labor has always been in surplus in developing countries. So naturally these countries are at better advantage in the production of textile related products and hence are able to supply goods at lowest prices. The fundamental idea behind the policy was to stamp out all kinds of quota system, and offer a level playing to all the countries of the world. The whole process of dismantling the quota system was over by 01.01.2005.

MFA is being looked upon as a stepping stone by the experts with the help of which the Indian textile and apparel industry is expected to grow at a much faster rate. The assimilation of Indian industry with whole world started off from 1950s. Slowly, but surely it made its way into the top ten league of countries involved both in the export of textile and apparel products after 1998. According to the statistics released by United Nations Statistical Division, 2005, the average compounded growth rate of clothing item exports was around 13 percent. The report also underlined the fact that the textile industry alongside the apparel industry witnessed a jump of almost US$0.9 billion during 1985-2003 which is almost 15 times better than the base period.

The production of fabricated products by the India Textile Industry between 2002-2003 and 2004-2005 increased at a rate from 41973 million square meters to 45378 million square meters. But with implementation of the MFA, the same increased from 45378 million sq. mts to 54260 million sq mts during the period between 2004-2005 and 2006-2007. Hence one can say there was a percentage increase in the fabric textile product from 7.5 percent during 2002-2003 and 2004-2005 to 16.37 during the period between 2004-2005 and 2004-2007. Thus the competitive edge bestowed by MFA is quite clear.

New developments in Indian Textile Industry

On an annual basis the cotton textile industry posted a growth rate of around 14.8 % while the products produced by textile industry clocked a growth rate of above 11%. The textile sub-sector involving silk, wool and man-made fibers have also seen a sharp increase in its growth witnessing 8.2% on a yearly basis.

Year 2006-2007 witnessed a significant rise in the production of spun yarn sector by almost 10.3%.

Highest rate of growth has also been recorded in the Hosiery sub-sector and power loom sub-sector amounting to 10.1% and 8.8% respectively.

Export rate of cotton textiles showed a growth rate of 21.47%.

Export rate of man-made textiles was 19.03%. Hence it can be concluded that growth rate of textile sector was phenomenal after the disintegration of the MFA regime. The primary reason being the competitive edge enjoyed by the Indian textile industry globally. However, the real issue being the export earnings of the industry had fallen significantly with the falling of US Dollar price with regards to the Indian Rupees. Thus, the experts are a bit concerned about the growth of the Indian Textile Industry in the upcoming years.