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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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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Competitiveness of Indian Textile Industry

India has a proven advantage in raw material availability as the world's third largest producer of cotton, second largest exporter of cotton textiles among low cost countries, and fourth largest exporter of synthetic yarn and fabric.

India produces all varieties of cotton. In 2003-04, the industry accounted for 21 per cent of global spinning capacity and 33 per cent of global weaving capacity. The industry contributed about 25 per cent share of the world trade in cotton yarn.

The industry has high levels of operational efficiencies in spinning and weaving: around 96% for spinning and 85-90% for weaving. The skilled manpower available in India has been relatively low-cost in an industry where labour contributes the largest component of manufacturing cost in textiles (Refer Figure II for data on labour cost component of textile units of various countries).

"India has a cost advantage of 40% over the US and 30% over 'garment conversion centers' such as Mexico due to lower labour cost,"said Rajinder Gupta (Rajinder), Managing Director, Abhishek Industries Ltd.7

The wide availability of skilled labour in India has been another differentiator. India has been adept at traditional apparel-making skills like embroidery, mirror work and beading, design and at making complex garments. Some Chinese buyers are planning to manufacture part of their value added products in India. There are training institutions like the National Institute of Fashion Technology, which produces nearly 1000 graduates a year, and this has enhanced design capabilities of India in the fashion industry.

The government is encouraging the textile sector through a liberal policy on external borrowings and concessions on capital goods imports for the textile industry.

With the flight of manufacturing facilities from the west to low-cost countries, analysts feel that India is well positioned to take advantage of the new order to become a global textile and apparel hub.

In spite of all these positive factors, textile export orders for the season beginning January '05 when the quotas ended did not show a sharp increase. Export orders from major retail companies have risen only by 5-6%. Moreover, these orders have been contracted at prices 5% lower than existing ones...

Excerpts >>

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


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