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Growth Prospects of Indian Textile Industry

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A property owner is now more inclined to buy/renovate his home furnishings etc. ... From 2 mn sq ft in 2001 , we had 28 mn sq ft of mall space in 2005 and by end ... – PowerPoint PPT presentation

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Title: Growth Prospects of Indian Textile Industry


1
Growth Prospects of Indian Textile Industry
Home Textile focus
  • J. N. Singh
  • Textile Commissioner

2
Indian Textile Sector - Overview
  • Key contributor to GDP
  • 4 percent of GDP
  • 14 percent of National Industrial production
  • Significant forex earner
  • 15 percent of exports
  • Employment generator
  • Provides direct employment to 35 million people
  • 2004-05
  • Textile Mills
  • Spinning Mills Nos. 2,012
  • Composite Mills Nos. 1,566
  • Exclusive weaving mills Nos.
    202
  • Capacity Installed
  • Spindles Million Nos.
    37.47
  • Looms Lakh Nos.
    1.03
  • Powerloom Lakh Nos. 19.03
  • Handloom Lakh Nos.
    38.91
  • Textile exports billion
    17.8
  • Textile imports billion
    2.2

3
What is the Indian Market Size (Bn US )

2005-06
Export Domestic Total to Total
Apparel 8.64 19.22 27.86 59.28
Textile 9.24 9.99 19.14 40.72
Total 17.88 29.12 47 100
4
Home Textile Market Globally
  • Global Home Textile Market is estimated at US
    12b in 2005, and is expected to grow at 16 CAGR
    and reach US 22-25b By 2010.
  • India ranks 2nd in the global market with a
    share of approx. 9-10 of market share.
  • India's home textile exports expected to grow
    from 1.2 billion now to 5 billion by 2010 Great
    opportunity to be the market leader.

5
Our Vision 2010
  • Market size of US95 Bn
  • Export Target- US 50 Billion
  • (National Textile Policy, 2000)
  • Domestic market - US 45 Billion
  • (CRISIL Study, 2004)
  • Indias market share in World textiles trade to
    grow from 3 to 6.
  • Growth Projections of 20 in exports, 16
    domestic

6
Reasons for Optimism Growth in fabric production
7
Reasons for Optimism Raw Materials
  • India is now the 2nd largest producer of cotton
  • 2nd largest producer of Silk
  • Very well placed in Man-made Fibres too.

8
Reasons for Optimism Growth in Investments in
Textile sector
  • Investments under TUFS have grown significantly
    recently.

9
Reasons for Optimism Growth in exports
10
Winners and Losers in EU Market 2005 over 2004
  • Gainers China, India, Turkey
  • Losers Thailand, Pakistan, Indonesia

11
EU MARKET VARIATION JAN JUN 2006/05
12
US IMPORTS OF TEXTILE AND APPAREL PERCENT
VARIATION 2005/04
13
US IMPORTS OF TEXTILE AND APPAREL PERCENTAGE
VARIATION JAN SEPT. 2006/05
14
DRIVERS OF DOMESTIC GROWTH Demand Side
Factors Increasing Income Levels
Distribution of households by income category Distribution of households by income category Distribution of households by income category Distribution of households by income category Distribution of households by income category Distribution of households by income category
Classification Income class 2001-02 2005-06 2009-10 CAGR
Deprived lt90 135,378 132,250 114,394 -3.6
Aspirers 90-200 41,262 53,276 75,304 9.0
Seekers 200-500 9,034 13,813 22,268 12.7
Strivers 500-1000 1,712 3,212 6,173 17.7
Near rich 1000-2000 546 1,122 2,373 20.6
Clear rich 2000-5000 201 454 1,037 22.9
Sheer rich 5000-10000 40 103 255 25.4
Super rich gt10000 20 53 141 27.7
Total 188,193 204,283 221,945 2.1
- Projections Note Income is in Rs.000 per
annum at 2001-02 prices and the households are in
000s
Source NCAER
15
Favorable Demographics for Home Tex
  • The population of India is expected to increase
    from 1029 million to 1400 million during the
    period 2001-2026.
  • The population profile of India is shifting
    towards a larger composition of people in the age
    group 15-59 .India most favourably placed
    globally. Out of the total population increase of
    371 million between 2001 and 2026, the share of
    the age-group 15-59 years in this total increase
    is 83 percent.
  • The low median age of population means a higher
    current consumption spending vs savings
  • The growth in population is taking place in the
    urban area. Out of the total population increase
    of 371 million during 2001-2026 in the country,
    the share of increase in urban population is
    expected to be 249 million.
  • Favourable Demographics- increasing young
    population and that too in the urban area-
    coupled with rising income levels will act as a
    key growth factor for the Indian textile and
    Fashion Industry

16
Increasing Working Female Population
Source CENSUS
17
Increased usage of credit cards and
availability of cheap finance
  • The use of credit cards (plastic money) has
    increased significantly in the last 3-4 years.
    The number of credit cards issued has grown at 26
    per cent per annum in the past 5 years while
    debit cards have grown by a whopping 113 per
    cent. Increase in the number of installations of
    electronic data converter machines will provide
    fillip to impulse apparel purchases.

18
Demand Driver- Domestic Housing Boom
  • Asian Development Bank expects that by 2008, the
    housing deficit will be 22 mn units and by 2030
    India will be requiring upto 10 mn housing units
    every year. A very huge requirement for home tex.
  • The Real estate sector has given phenomenal
    returns in the last 2-3 years as per the global
    trend. A property owner is now more inclined to
    buy/renovate his home furnishings etc.
  • The domestic housing boom is further enhanced by
    the reducing age of Indian borrower- from 43
    years in 1995-99 to 33 years in 2005-9.

19
Drivers of Domestic GrowthSupply side factor
Retailing Revolution - Growth so far
20
Five year outlook
21
Growth of Mall Space
  • From 2 mn sq ft in 2001 , we had 28 mn sq ft of
    mall space in 2005 and by end 2008, the eight
    Indian large cities will have a supply of 66 mn
    sq ft and the next seven large cities about 13 mn
    sq. ft.
  • The entry of Reliance, Aditya Birla group,
    expansion of Futures and now of Bharati-Walmart
    is expected to further sizzle Indian market.

22
Drivers of Export Growth
  • Dismantling of the MFA regime and the full play
    to the Indian entrepreneurship.
  • Progressive dismantling of the textile and mass
    apparel industry from the Western world. India is
    a major player to fill this gap. The current
    quantitative restriction on China is helping
    India.
  • Buying of several Western brands by Indian
    industry, thus facilitating entry in EU and US.
  • Increasing modernization of Indian textile and
    apparel manufacturing sector in response to the
    increased global demand and facilitated by the
    TUFS scheme.

23
Global Housing Boom
  • According to estimates by The Economist, the
    total value of residential property in developed
    economies rose by more than 30 trillion over the
    past five years, to over 70 trillion, an
    increase equivalent to 100 of those countries'
    combined GDPs .
  • The global boom in house prices has been driven
    by two common factors historically low interest
    rates have encouraged home buyers to borrow more
    money and households have lost faith in equities
    after stockmarkets plunged, making property look
    attractive .
  • Naturally as people buy more property or as their
    property becomes costlier , the propensity to
    spend on home-textile increases significantly.

24
Other Export Drivers
  • The IMF forecasted a 4th continuous year of
    income increase globally at 4.7- naturally
    leading to a more than higher purchase of
    textiles including home-tex.
  • Also a phenomenon of decline in textile prices
    over a continuous period esp in developed
    economies- driving higher the worldwide demand of
    textiles and clothing.

25
Real Clothing PricesIndex, 1994100
China
Japan
Thailand
Germany
South Korea
United States
26
  • Strategy of various
  • Stakeholders

27
Strategy for the GOVERNMENT
  • 1.Further investments must continue to be
    encouraged- TUFS should be continued (may be with
    some modification)
  • TUFS help to processing sector Vital for home
    tex

Year TUFS all segments (in crores) Processing (in crores) P.c
2002-3 1438 210 14.63
2003-4 3289 260 7.91
2004-5 7349 986 13.42
2005-6 15032 1157 7.7
2006-7 (april-sept) 9335 2081 22.30
28
2. Continuance of textile infrastructure schemes
  • SITP ( Scheme for Integrated Textile Parks) has
    had a huge success 26 parks approved. GOI
    contribution to be 866 crores with another 1250
    crores to come from private sector. Estimated
    investment of Rs.13445Cr.
  • Need to continue such schemes on the PPP model.

29
3. HRD
  • Governments in PPP mode with the industries must
    invest heavily in training in the textile sector
    because a huge shortfall of over 40 lakh workers
    is expected in the next 5 years.

30
4.High Transaction Costs
  • Issues
  • According to EXIM Bank Study (2002), transaction
    cost is very high in Textile Garments Sector
    ranging from 3-10
  • Ownership of exports less support from State
    Governments
  • Non-refundable incidence of State Taxes VAT,
    Entry Tax, Luxury Tax, Mandi Tax, Electricity
    Duty, Octroi, etc.
  • Proposal
  • To consider refund of State / Local levies
    through appropriate refund mechanism

31
5.High Power Cost
  • Issues
  • High power cost
  • Cross subsidisation
  • Frequent power interruption
  • Competitors Edge

Country Cost (Cent / KWH) Country Cost (Cent / KWH)
India 8.87 Indonesia 3.65
China 6.04 Bangladesh 3.49
32
High Power Cost
  • Proposal
  • Export oriented textile units be exempted from
    cross subsidy
  • Duty free import of furnace oil to units for
    captive power generation
  • Uninterrupted power supply for export oriented
    textile clusters

33
Industrys Strategy
  • Integration- Moving up/down the full value chain.
    Leading Home-tex players like Welspun, Alok are
    now fully integrated, with strong competencies in
    spinning, weaving,and finishing.
  • Scale- Massive expansion plans of existing as
    also new players to take advantage of this
    unprecedented opportunity. Smaller companies,
    some of whom are in unrelated businesses, are
    also foraying into home textiles - Gangotri
    Textiles, KG Denim, S Kumars Nationwide, Bannari
    Amman Spinning, to name a few.

34
  • Brand presence- there has to be greater shift
    towards branded products.Realization that real
    value addition comes only after branded sale.
  • Domestic- Spaces brand of Welspun
  • Carmichael House of S.Kumars
  • International- Purchase of Christy by
    acquiring CHT Holding by Welspun.
  • Dan Rivers and Rosebys by GHCL.

35
  • Designer labels will also have to be brought in
    to counter the pull of top international labels
    like Tommy Hilfiger, Zegna, Mark and Spencer and
    likely presence of Italian Pozzi Industria
    Tessile and Ralph Lauren. Alliance with Indian
    designers important over here.

36
Future ?
  • The home-textile sector in India is in for
    BOOMING TIMES.
  • Save for major implementation problems, India
    poised to become a leader in this sector.

37
THANK
  • YOU
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