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Home textiles: A key driver for textile exports

Prem Malik

After more than 40 years of import quotas, the textile and clothing sector will become subject to the general rules of General Agreement on Tariffs and Trade (GATT) from January 1, 2005. Textiles and clothing are among all the sectors where developing countries like India are likely to gain from multilateral trade liberalisation. It is a sector where relatively modern technology can be adopted at relatively reasonable investment costs. At the same time quality human capital in the form trained and skilled workforce and managerial personnel are needed to produce best designs and marketing of the products.

As India along with China and Pakistan have these favourable factors in their armoury, it is widely believed that these three countries are likely to increase their market shares in the European Union, USA and Canada to a significant extent once the trade quotas are completely phased out. A recent study released by the World Trade Organization (WTO) has clearly indicated that India will double its market share of textiles and clothing in the European Union and USA after 1st January 2005. Similarly a report published by USTR has predicted that the US retailers are increasingly looking towards India (and Pakistan) as alternative sources of supply to China due to their intrinsic strength on design skills, large capacities of yarn & fabrics, wide ranges of apparel and home textiles and availability of large and inexpensive labour.

Emerging trend

Over the last year and half, it is also becoming quite clear that the new found optimism in many quarters coupled with the projected export growth potential of India will, if realised, be driven by surge in exports of apparel and home textiles to the hitherto restricted markets of the west. With closing down of operations of the manufacturing facilities in US and the EU due to their inability to stave off competition from the Asian suppliers, the import penetration of home textiles to the above markets will increase manifold. According to several experts buyers in the developed countries will outsource finished home textiles form countries like India as (i) value addition in home textiles is comparatively much lesser than apparel which makes import of processed fabric for conversion to the nearest production centres unattractive and (ii) proximity to the market place is relatively less important for home textiles unlike fast changing fashion in apparel trade.

More importantly stringent ‘rules of origin’ conditions for made-ups in the post ATC period, which recognises the country as conferring origin where the constituent fabric is formed ignoring all other finishing operations, will drive manufacturers from all over the world to consider India for building new wider width weaving and processing capacities for conversion into made ups.

Therefore, sourcing decision will largely depend primarily on technology in terms of wide width weaving and processing coupled with manufacturing costs and availability of skilled manpower to produce the desired quality. In all the parameters India is favourably poised in translating the emerging opportunities to real business deals as it has reasonable installation of wider width weaving & processing capacities and many are on the pipeline as per available indications.

Rising exports of made-up articles

Exports of cotton made-ups have shown a steady growth over the years rising from US $305.67 million in 1992-93 to US $1205.88 million in 2002-03 marking an increase of 295 per cent during the period of ten years.

The share of cotton made-ups in total cotton textile trade has also been consistently rising. From a share of 21.58 per cent in 1996-97, the share of made ups in cotton textile trade has increased to 34.63 per cent in the year 2002-03.

USA: A case study

It is commonly perceived that removal of quotas will witness a flurry of activities in US home textiles market with imports registering a sharp growth and market penetration level touching a new height and will be as high as apparel. The trend has already been on the horizon. While average growth in imports of textiles and clothing into USA during the years 2002 and 2003 was less than 4 per cent, the same for cotton home textiles is distinctly higher with growth rates being 19.06 per cent and 13.65 per cent, during 2002 and 2003, respectively over the previous years. Home textile imports at US $ 3.9 billion in 2003 now contribute over two-third of the total cotton textiles imports into the US. In addition, the retail level consumption of home textiles in US during the year 2002 was to the tune of US $ 21 billion and such a large domestic demand was primarily met through local production. With the shutting down of local operations in the US, the domestic demand would be met through increased imports and will offer bigger opportunities for suppliers based outside USA. India’s export performance in home textile products to the US has been very impressive and currently at least in three categories it has emerged as a top supplier in the US market. Following section analyses the category wise performance by India in home textile products to the US as compared with other major suppliers.

CAT 360 and 361 (Pillow Cases and Cotton sheets)

India is now the top supplier in these two categories with combined market share of over 19 per cent during the year 2003. It has achieved a growth of around 206 per cent between the year 2001 and 2003 despite these categories were being under restrictions.

CAT 363 (Terry Towels)

Currently, India is holding a market share of around 19 per cent in Cat 363 whose share is incidentally the highest in the basket of all home textile items imported into the US. All available trends indicate that India is expected to grow further by the end of the year 2004. India’s growth rate has been 53 per cent between the years 2001 and 2003, which is higher than the overall growth rate of the market for towels during the period.

Apart from these products, India is also well placed in Cat 369 (basket category including bags, napkins, table linen, cushion covers, pillow shams, curtains, shop and dish towels, etc) and Cat 362 (cotton bed spreads and quilts) in which it is currently ranked second and third respectively in the US market. China is the top supplier in these two categories.

Scenario in European Union

Even in the European market, which has been traditionally a market for grey fabric and cotton yarn, India has improved its presence in th home textile segment too. According to the import statistics of EU for the year 2002, India ranks 4th with a market share of 9 per cent in total home textile import into EU. Turkey, Pakistan and China are holding the first three positions with market shares of 14 per cent, 12 per cent and 10 per cent, respectively. Among the major categories of home textiles, India has already emerged as number one supplier in bedspreads and curtains. The market shares of India in these categories are 42 per cent and 11 per cent, respectively. India is ranked second after China. In rest of the categories also India has improved its position over the years and by the end of this year it is expected to be a major force in the European market. However, Indian exporters needs to put greater thrust in institutional marketing as large scope for blended made ups exist in this segment of the market like hospitals, hotels etc. In addition, home textile manufactures should now look beyond the traditional markets like EU and US and focus their attention in other markets like Japan, Australia etc. Incidentally China is the largest exporter of home textiles in the world and a major part of its export is directed to Japan.

Given this scenario, India is well positioned to take advantage of the emerging opportunities. Factors like cost advantage, manufacturing capacity, availability of raw materials and requisite manpower in terms of technical & design skills is likely to drive Indian home textile business to a new height. But India must increase its investment in wider width weaving and processing and reduce the utility cost like power to the international level.

(The author is deputy chairman, Texprocil)