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Indian strategy for increasing market access

B K Patodia

Quotaless trade begins from January 1, 2005, and various countries have been preparing for this day by investing huge amounts in technology to face severe and stiff competition.

As per latest WTO statistics, the world exports of textiles in 2002 amounted to US$ 152.15 billion and clothing to US$ 200.85 billion. Thus, the total world exports of textiles/clothing in 2002 aggregated to US$ 353 billion. India’s exports of textiles and clothing were of the order of US$ 12.5 billion. Hence India’s share in the world exports worked out to 3.54 per cent. Coming to cotton yarn, India continues to be the largest supplier with 25 per cent share in the world exports. As regards cotton fabrics and made-ups, India holds the second rank after China.

Global retail chains have been exploring world-wide sources of supply especially from vertically integrated production units. This is because they would like to be assured of quality products. Obviously, units which will be in a position to adapt their production programmes to meet the changing consumer demand alone will survive. And the Indian textile industry is working towards this goal.

The textile industry in India plays a very crucial role in the Indian economy. It accounts for 14 per cent of industrial production and contributes almost 25 per cent to total exports. It is the second largest provider of employment after agriculture. It provides direct employment to about 35 million people in the textile industry and to 82 million people, if we take into account both direct and indirect employment.

India has the distinction of producing almost all types of raw materials - both natural and man-made. India has the highest area under cotton cultivation in the world. However, it is the third largest producer of cotton, after China and USA. In the current year, the productivity of cotton has surged from about 300 to 372 kg per hectare. In terms of spindleage, it is next only to China. As of February, 2004 the total installed spindles were 37 million. In addition, 4,80,000 open end rotors were in place. India continues to be the largest exporter of cotton yarn, enjoying a share of 25 per cent in world exports.

This has come about because the spinning industry in India has been continuously investing huge amounts towards modernisation and upgradation of its equipments.

While India’s exports of textiles/clothing increased by 92 per cent between 1992-93 and 2000 -03, the tempo has slackened during the last five years, 1998-99 to 2002-03 to 30 per cent. In anticipation of elimination of quotas, all the stakeholders have been investing massive amounts towards induction of the latest technology. For achieving value addition, R&D activities are being strengthened. For this, there is increasing use of information technology and creation of CAD/CAM based latest designs. Textile units in India are being encouraged to consolidate their production activities to meet the new challenges.

Under the New Textile Policy 2000, the government of India has set a target of exports of textiles/clothing at US$ 50 billion to be achieved by 2010. For achieving the target, the government has initiated various measures like Technology Upgradation Fund Scheme, Technology Mission on Cotton and rationalisation of fiscal structure.

India has been consciously following a policy of progressive reduction in import tariffs. Currently, the maximum customs duty rate is 20 per cent. With the reduction in the import tariffs, imports of textile/clothing have also witnessed a rising trend. In order to impart competitiveness to the textile industry, import duty on high technology machines has been slashed to five per cent. Technology Mission on Cotton launched by the government aims at improving productivity and quality of cotton. Vigorous efforts are afoot to bring down the contamination level. For this purpose, steps have been taken to augment supply of quality seed, upgrade market yards and modernise ginning/processing factories.

Of the total export target of textiles/clothing at US$ 50 billion, the target for clothing exports has been set at US$ 25 billion. To achieve this, additional production of 14 billion metres will be needed. We already have the facilities for processing 4 billion meters in modern process houses. Thus the additional investments for processing 10 billion meters of fabrics will be required. For creation of capacities of world class technology, the total investment both for weaving and processing is estimated at Rs 500 billion or US$ 11 billion.

With the rising population and scope for exports of value-added products, the potential for the growth of Indian textile industry is vast. And overseas players can participate in the Indian effort.

The Indian government has recognised the importance of the clusters approach. It is, therefore, contemplating to extend support to small and medium enterprises through common infrastructural facilities. The government is also seized of labour and power reforms. ITMF’s cost comparision studies have revealed that power cost in India is among the highest. The government is therefore exploring measures to rationalise the power cost. Various schemes have been launched to improve infrastructural facilities.

There is a tremendous potential for the growth of technical textiles in India. The government has identified this segment as one of the thrust areas, and here again, the industry can achieve a lot with support from international players.

While spinning in India is largely in the organised sector, weaving, processing and garmenting sectors are, by and large, fragmented. Presently, 105,000 looms are in the organised sector, 1.72 million looms in the decentralised powerloom sector and 3.8 million looms in the handloom sector. Similarly, the processing sector is also fragmented. In the context of globalisation, both the industry and government have realised the benefits that accrue from economies of scale and therefore efforts are afoot to consolidate the capacities. The industry has undertaken programmes for improving productivity and restructuring production to match with international quality standards.

India has certain built-in advantages like adequate indigenous raw materials, a vast pool of skilled labour and well-trained technocrats. Because of the flexible production systems, India is in a position to produce a wide variety of products of latest designs to cater to the domestic and overseas demand. Thus, the opportunities for sourcing supplies from India are immense.

The United States International Trade Commission has recently brought out a study on ‘Textiles and Apparel: Assessment of the competitiveness of certain foreign suppliers to the US Market’. The study has highlighted the need for reducing the risk of sourcing from only one country. The study advises US importers to plan to expand the trade relationship with other countries and especially with India which has a very large manufacturing base to produce wide range of textiles and apparel at competitive prices. I have already highlighted the built-in advantages in India. I ardently believe that India can be depended upon as a stable supplier of quality textiles and clothing at competitive prices.

(The author is vice-chairman and managing director, GTN Textiles)