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ITMA birmingham 2003

Structural shift in Indian textile industry

P Nayak

Over the last two decades, consumer preference of fibres, sector of manufacture and product types have undergone significant changes. These changes have attributed to the changes in manufacturing scenario, changes in the existing fibre category, increasing preference for readymade garments and also changes in price factor. To analyse this overall shift in the whole textile industry, it is important to closely examine the changes in the pattern and composition of demand for textiles.

Trend in domestic demand

Clothing is the most important item of family expenditures in India next only to food. The unique feature of India’s textile economy is that the bulk of production emanates from small, decentralised unorganised sector. The total demand for textiles can be broadly classified into three categories based on the sectors of its consumption e.g domestic, household sector and non-household sector which includes institutional, industrial and technical textiles and exports. Among these sectors, the domestic household alone consumes 60 per cent, the non-household sector 21 per cent and the export sector for 19 per cent of the total cloth production in India. Domestic household sector has its own significance to analyse its demand for textiles. Per capita consumption is the index that is almost invariably used in discussion about domestic demand. Per capita consumption as a measure has its usefulness in the analysis of consumer preferences and possibly as a broad indicator of economic progress. The more pertinent index for the assessment of the prospects for manufacturing sector is the aggregate demand by all individuals, institutions and exports.

During the period from 1981 to 2000, per capita consumption for all textile has increased from 12.31 linear metres to 17.84 linear metres. It shows that per capita demand for all textiles grows by 0.46 per cent per annum (0.6 per cent in urban areas and 0.3 per cent in rural areas). In other words, there is stagnancy in the per capita demand for textiles as a whole across the country. The total domestic consumption has been rising at a rate which is less than the annual growth of 2.2 per cent of population over the two decades. Again there is dissimilarities in the growth rates of cotton and manmade/blended textiles. The growth rates of cotton and manmade/blended textiles are -1.16 per cent and 2.9 per cent, respectively. Within this broad framework two points can be explained in detail. Firstly, there is a pointed shift in consumer preference away from cotton to synthetic fibres and their blends. The second relevant point is that the consumer expenditure on textiles has been rising in real terms, i.e after adjustments have made for inflation. The swing from cotton textiles to manmade/blended textiles has been held responsible for stagnation in consumption of textiles by households for all textiles.

Fibre demand and manufacturing

The purchase of textiles consists of different fibre category. Fibre can be of natural, manmade and blended types. Fibre categories broadly can be classified as cotton, manmade and blended/mixed. Trends in consumption of fibres — cotton versus manmade/blended — all over the world show cotton retains a share of 30 to 40 per cent depending on the climatic condition in the user country. In India cotton continues to dominate the textiles market up to 1997 but there after a significant share of market goes in favour of manmade/blended fibre.

Consumption of cotton fibre

It is quite obvious that cotton continues to hold major market share over the period from 1981 to 1990. But at the same time it is also true that share of cotton in consumption of cloth declines from 78 per cent to 53 per cent over the first decade from 1981 to 1990. It shows the annual growth rate of - 1.8 per cent over the period. Major decline occurs in 1989 — from 61.7 per cent in 1988 to 55.7 per cent in 1989. So the year 1989 can be considered as a crucial phase for decline in consumption share of cotton textiles. Significant share of the decline comes from the rural areas (32 per cent) as compared to urban areas (30 per cent). It is also clear from the fact that the rate of growth of cotton fibre in rural areas is -1.08 per cent where as that in urban areas is - 0.74 per cent. Cotton has remained popular among urban consumers. Consumption of cotton fibre over the first decade from 1981 to 1990 shows that cotton continues to be dominant fibre but with a decreasing share.

In the second decade from 1991 to 2000, the cotton consumption shows a different picture. Cotton consumption by domestic sector has declined from 52 per cent to 40 per cent over the period. It depicts an annual growth rate of -1.2 per cent.

It is interesting to see that in 1995, the dominance of cotton in the market has gone and the major share of the market goes to man-made/blended fabrics. So 1995 is the crucial year for the change in the market share. Another point to note here is that there is a significant fall in the cotton fibre consumption in rural areas. But in urban areas, cotton is still a preferred fibre compared to blended and synthetic. The growth rate of cotton consumption in the urban areas is 2 per cent over the second decade.

Consumption of manmade/blended fibre

Polyester is the most common synthetic fibre today. It offers the possibility of blending with cotton in order to impart desirable properties of comfort and also reduction in the cost of the final product with increased service life.

Per capita purchases of manmade/blended cloth has been increased from 2.4 linear metres in 1981 to 6.2 linear meters in 1990. So there is a threefold increase in the per capita consumption over the first decade.

The market share of manmade/blended fibre is increasing steadily from 1981 to 1990. Its market share in 1990 was 44 per cent, which has increased from 20 per cent in 1981. The rate of growth of consumption of manmade/blended fibre is 4.5 per cent over the first decade. Growth rate of consumption is more significant in rural areas (4.8 per cent) as compared to urban areas (3.6 per cent). So the shift from cotton to manmade and blended cloth is more pronounced in rural areas than urban areas.

Second decade also depicts the same picture by showing the significant shift from cotton to manmade and blends. There was 6.5 linear metre per capita consumption in 1991, which has been increased to 10.31 linear metre in 2000. In the percentage share the per capita consumption has been increased from 45 per cent to 58 per cent over the second decade. The rate of growth of consumption is 2.6 per cent in all India level in the second decade. Here also the story is the same — rural consumption of blended and manmade cloth is predominant (3.2 per cent growth) over the urban consumption (1.5 per cent growth rate).

Within the framework of stagnancy of per capita consumption of all textiles, there has been a remarkable switch from cotton to manmade/blended fibre. It is felt that a substantial shift towards polyester fibre consumption has occurred due to its easy availability and it is cost effective alternative to cotton.

From the above analysis of fibre consumption, it can be concluded that in first decade consumption market is dominated by cotton (more than half of the market share) but in the second decade from 1991 to 2000, the market dominance is taken over by manmade/blended cloth consumption. The cotton consumption decreases over the decade. Cotton becomes less popular in rural areas. Consumption of cotton has declined in two decades for rural areas but the rate of decrease is more in second decade than the first one. The manmade/blended textiles have gained the market significantly at the cost of cotton over the past two decades. The customer preference for blended and manmade textiles is more pronounced in rural areas.

This sing of preference from cotton to manmade/blended textiles depends on several direct and indirect factors. The valid reasons are price factor, maintenance, durability, excise duty and policy implications.

In case of maintenance the manmade and blended cloth have easy care properties in addition to colour fastness to washing, sunlight and limited shrinkage. On the policy front, there were some encouraging steps taken to bring forward the manmade/blended fibre in the market. The primary aim of the 1985 textile policy is to increase the production of cloth of acceptable quality at reasonable prices to meet the clothing requirements of a growing population. To achieve this, the policy proposes to eliminate the structural rigidities, which have existed in the past, such as compartmentalisation, based on various sectors on fibre usage. The policy favours to do away with the fibre specific and sector specific compartmentalisation of the industry and restructuring it according to the stages of its manufacturing process, viz spinning, weaving and processing. It has suggested augmenting the availability of manmade fibre/yarn at reasonable prices by creation of capacities, reduction in fiscal levies on such fibre/yarn.

It gears up the fibre flexibility in the use of various fibres. Plant size of fibre producers is being enlarged and excise duty revised downward. The excise duty has been reduced drastically from 23 per cent in 1990 to 18 per cent in 2000. This has shrinking cost effect on the production and consumption of polyester staple fibre.

(The author is director, market research, Textiles Committee)