India: A Big Textile Outsourcing Hub

Indian Textile Industry: An overview

Textile Industry is offering one of the most basic requirements of community and it possess importance; preserve continued growth for developing quality of life. From the manufacturing of raw materials to the delivery of end products, it has gain its kind of position, as a self-dependent sector and with considerable value-addition at every stage of dealing; it is a key input to the country’s economy.

Today the textiles and clothing industry engages an important position in India’s economy. Being the major foreign exchange earner having about 35% in its torso, contributing to about 30 % of India’s exports and 14% of industrial productions, expecting above 6% GDP in 2005, and it considered as the second largest vital sector of employment initiator after agriculture sector.

Present Scenario

Under the World Trade Organization (WTO) Agreement on Textiles and Clothing, the textile quota scheme of quantitative import limitations under the multi-fiber arrangement (MFA) came to an end on 1st January, 2005, hence developing countries like India will flourish in the new competitive atmosphere and as a result, the Indian textile industry will have a stronger place in both their export and domestic markets.

All along with its usual yarn and fabrics, at present India is exporting more than 100 garment product range. Many worlds’ leading brands like Banana Republic, Tommy Hilfiger, Gap, Liz Claibome, Polo etc, are sourcing products from India.

With huge investments, persistence innovations, latest product mix and planned marketing, today, India has come out as a flourishing outsourcing centre for textiles and apparel industry to meet the global requirement of the manufacturing fibers and yarns products. In a view of the rising rapport with major global brands, dismantling of quota system from 2005 era would hit upon India as a main global outsourcing hub.

Competitive advantage & possible growth in Synthetic Textiles Sector

India’s synthetic textile sector is relatively modern and has a high growth potential which will help India to coming out as a major outsourcing hub. With a compounded annual growth rate of more than 22% the exports of MMF textiles have stretched out to a level of US $1.62 billion in 2002-03 starting from small exports in 1954. The export growth in 2002-03 matches up to the preceding year was in the harmony of 30 percent, and the MMF textile sector is the only sector where the performance has exceeds by the target fixed for this year by US $ 115 million.

Indian synthetic textiles are more and more accomplishing new markets along with keeping the market share in the existing markets. At present Indian synthetic textile exports are targeting more than 175 countries worldwide, where Middle East accounted for over 32 percent of our exports and the share of the extremely quality conscious in European Union, approximately 23 percent.

Over the years, the Indian MMF textile sector has built-up an export base; and the share of MMF textile exports in the total Indian textile export has also been raised, the share moved up from 10.38% in 2000-01 to 11.46% in 2001-02 and more to about 14% in 2002-03.

At present Indian exports of synthetic textiles to USA are rising at more than 90% yearly. It has also been observed that export growth will be striking for major MMF textile items after dismantling of quota system from 2005.

Further more, Indonesia, Korea’s export of synthetic textiles are turning down compared to previous year. Manufacturing capacity of Korea has declined by more than 30% in the polyester filament sector in 2002 and in 2003 and it is expected to turn down further more, which will end with a turn down in their exports of polyester filament fabrics. Due to anti-dumping duty on the polyester filament fabrics obtained from Taiwan and Korea, countries like Brazil, gaining of more opportunity for India will exists as a larger synthetic fabrics exporter.

In the world, synthetic textile trade’s share of India is also seeing increasing. The export share of Indian synthetic textiles in worldwide increased from 0.11% in 1971 to 1.12% in 1991 and more to about 3% in 2002. This suggests the rising performance of Indian synthetic textile items in the worldwide market.

Still there is an opportunity to explore new market segments like Latin America and Africa all along with maintaining the share in the established markets like European Union and USA. At this stage an annual growth expected to 15% for synthetic textiles and exports are expected to touch US$ 2.5 billion in 2005-05 and US$ 4.3 billion in 2009-10.

Why India has been emerging as a major BPO Centre?

Indian textile industry with its exclusive return is projected to emerge as a most important supplier to the world. The encouraging aspects, which would promote India’s emergence as a BPO centre for textiles, are as follows:

Strengths:

1. Low labor cost: The industry is mostly labor oriented and automation has taken place in a large amount process, hence availability of cheap labor forces.

2. Low cost of raw material: Cost of raw material sourcing is less in India due to the third largest producer of cotton in the world.

3. Huge Product Selection: Due to many ethnic fashion trends and cultural diversity, it provides more selection of products.

4. Rising domestic textile market: There is an enormous possible growth of industry due to rising incomes and middle class population.

5. Bulky exports: In overseas markets, India has been the established exporter of garments.

6. Government concentration: Textile industry has secure government consideration being a second largest employment generator, which can work for its support.

Opportunities:

1. An optimistic opportunity: International garment retailers are enthusiastic to dealing in India.

Indian textile outsourcing will expand with buyers in the US, Europe and Africa due to huge support of skillful, low-cost workers and adequate raw materials availability in India. Due to cost reduction of successful supply chain management, it will expect global retailer clients like Wal-Mart, JC Penney etc. Earlier, JC Penney, international clothes retailer had sent a team to India to study the textiles industry trend and after proving benefits to them they are showing interest to double the outsourcing from India after the multi fiber agreement comes to an end. And they are optimistic and expecting the growth of Indian textiles industry.

2. Innovative opportunity : Indian Fashion Industry labeled signals of outsourcing

Even, after IT and textiles, fashion outsourcing from India attracts international buyers like Saks Fifth Avenue and Browns, expecting to have wealth on exclusive Indian design aspects which have a ready market abroad. Recently, buyer visitors from Dubai, Pakistan and Hong Kong, US, UK, France visited Lakme India Fashion Week show and got attention, these buyers are seeing an opportunity for western wear with Indian nitty-gritty.

3. Imprint opportunity: The Indian textiles industry is famous for their excellence and charming colors for ages beyond 5000 years and have attracted expert from all over the world. The textiles of India stand the imprint of the excellent craftsmanship of the Indian weaver. The skill of weaving with skillful fingers, sketching models and generating designs, is a great skill which has been offered through generations from father to son, from time immemorial, also regional areas have their particular kinds of weaves and accompaniments providing new attention. The skill of regional arts, generation skills of arts, new screen printing and new digital computer software technology will bring the ever green opportunities to India and will emerge as a global hub of art and design soon.

4. Innovative efforts taken by the Government

. Applications with a project cost of Rs. 18,467 crore have been approved for financing of amount Rs. 8,505 crore, under the Technology Up-gradation Fund Schemes (TUFS), by Ministry of Textiles, India. For the weaving and the processing sector the interest rate subsidy has also been increased under TUFS, which guarantee the production and export of quality value added products.

. Apparel Parks for Exports, and Textile Centers Infrastructure Development Scheme, de-reservation of the garments sector, specialized textile parks, EOUs & EPZs have been set up

. Rise in investment ceilings and FDI is freely permitted in the textile sector

. To improve the productivity and quality of cotton, introduced a Technology Mission on Cotton

. Reduction of basic customs duty on selected textile machinery and spare parts

. Additional Excise Duty on Textiles & Textile Articles (AT&T) and Additional Excise Duty (Goods of Special Importance) Act has been eliminated

. Reduction in Excise duty on polyester filament yarn

. Government policies of liberalization and the innovative supports over the past couple of years have been showed tremendous growth

. Government’s has adopted simplification of procedures and formalities for the exporters.

. The diversified small lot production system dominant in Indian textile industry and can handle better with the changes in shape of demands.

. Investments in the Jacquard Weaving & Printing are increasing in the Indian textiles industry, these high value added quality products will add importance in the world market

. Market Development Assistance (MDA) have been further move up for better marketing to focus Latin America, Africa and Asian regions

. With countries like Sri Lanka, Mercosur, Singapore, South Africa, Bangladesh, Thailand and China etc a series of special trade agreements have been signed which will direct to rapid growth in Indian exports.

. Employment Generation:

The textile sector itself has the potential to create 1.2 crore employment opportunity over the next five years. The government would continue to encourage growth within the textiles industry as it holds huge potential for employment and exports.

Prospecting Market

According to a study by Mc Kinsey, India could be the major supplier to EU and US market after the post quota regime. Though the market share in the post quota regime would determine bases on the various preserve actions to be taken by US and EU, it is accepted that there would be a certain uphold against China, which would limit the growing market share of China in the worldwide market.

The study also points out that the exports of main players of Hong Kong, Korea, Indonesia, Taiwan, Philippines and Thailand would turn down.

Indian textile exports are projected to touch US $15 billion in the fiscal 2005-2006 from US $13.6 billion in the last year. This includes a major share of outsourced by most important retail chains. The exports are expected to touch US $ 50 billion by 2010 of, which the contribution of garments will be US $ 25 billion. The focused segmented markets for Indian textiles and apparels are USA, UAE, UK, Germany, France, Italy, Russia, Canada, Bangladesh and Japan.