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Sectoral Strategies for Export - The Indian Textile Industry: The Road Ahead…

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Sectoral Strategies for Export The Indian Textile Industry: The Road Ahead... Lavanya Swaminathan EXECUTIVE SUMMARY The global textile industry is set to undergo a significant transformation. On December 31,2004, the Agreement on Textiles and Clothing (ATC) will expire, and with it the quota system for international trade in textiles and clothing will no longer be used to govern international trade. By 2005, all quotas on clothing and textiles will have disappeared. As a result, the textile industry in India is going to face greatly increasing competition after 2005. Much of this competition will come from China, whose high capacity to produce textiles is held back today only by the ATC quota system. As in many other countries, India's textile sector is one of its oldest industries and tends to be more traditional in terms of organization and business practices. The traditional nature of the textile sector is going to be a significant barrier to India for stepping up its performance after the elimination of the quota system. Recently, India has been very successful at supplying the global service economy, which has not required the robust build-up in physical activity that textile trade requires. India's industrial sectors have grown at a modest rate in the 1990s, although at a slower pace compared to the previous decade. In contrast, its services and information-based industries have grown at such a fast pace as to become the dominant sector in GDP growth and it appears this trend is likely to continue. Clothing and textiles, unfortunately, falls within the industrial category and even without the expiration of the ATC, its domestic producers face tough times ahead. This report tries to analyze the textile industry in detail, starting from its ancient and established roots more than 5000 years ago until present times. We assess the current situation and present the country's business structure, major competitors, as well as current changes and challenges. ...read more.


In addition to China, other developing countries are emerging as serious competitive threats to India. Looking at export shares, Korea (6%) and Taiwan (5.5%) are ahead of India, while Turkey (2.9%) has already caught up and others like Thailand (2.3%) and Indonesia (2%) are not much further behind. The reason for this development is the fact that India lags behind these countries in investment levels, technology, quality and logistics. If India were competitive in some key segments it could serve as a basis for building a modern industry, but there is no evidence of such signs, except to some extent in the spinning industry. 6.SWOT ANALYSIS OF THE INDIAN TEXTILE INDUSTRY 6.1 Strengths * Highly trained manpower-technical and managerial. India has a competitive advantage because of the low wage rates in this labour intensive industry. * High availability of all raw materials (India is one of the largest producers of cotton yarn in the world and there is a good availability of other fibres like silk, polyester, viscose). * Availability of wide varieties of cotton fibre and has a fast growing synthetic fibre industry. * India is highly competitive in spinning and has a presence in all parts of the value chain. * India accounts for 24 per cent of the world's installed capacity of spindles and is one of the largest exporters of yarns in international market. The industry contributes about 25 per cent share of the world trade in cotton yarn. * The apparel industry is one of India's largest foreign exchange earners, accounting for 12 per cent of the country's total exports. * The constituents of garment industry are very diverse in terms of their size, production facility, the type of apparel manufactured, the quality of output, fabric requirement, price sensitivity, etc. 6.2 Weaknesses * A major gap in Indian textile industry is its fragmented industry structure with a dominance of small scale. ...read more.


Hence, regionalisation of trade in textiles and clothing, anti-dumping and countervailing duties, increased customs checks to ensure that trans-shipment activities do not take place, rigorous application of ethical standards to prevent child labour or 'sweatshops' and compulsion to adapt eco-labels, will be some of the key drivers and trade parameters determining exports of textiles and apparels after 2004 In such a scenario countries need to develop an action plan and a strategic approach to plan the challenges ahead. Our recommendations on the basis of our in-depth analysis of the sector are as follows: * Ensure that one set of WTO trade barriers is not replaced with another * Sectoral associations, together with the government, will have to shoulder more responsibilities to ensure that their members follow the rules and comply with international quality and environmental standards * Information technology should be applied to sell the product and also to gather information and to exchange it * Improve the market responsiveness - understand consumer trends, address buyer needs * Achieve optimal utilisation through rationalisation of products and outsourcing * Obtain international certification for quality, systems and processes * Organising seminars to create awareness in overseas markets * Undertake capital restructuring * Reduce finance burden through swapping of high cost debt with low cost debt * Facilitate entry to new markets and new products * Eliminate system anomalies * Provide financial incentives for eg Re-orient TUFS scheme to provide targeted subsidy for the processing and weaving sectors * Frame standards for quality and actively promote the players to undertake certifications from international agencies From the above it is clear that while the industry can legislatively demand proper policy input from the government in an attempt to improve its competitiveness abroad, the initiative for modernisation and innovation for improving competitiveness has to come inter alia from the industry. This requires management of a different kind - in global sourcing of materials and marketing, on-line, real time supply chain systems and virtual manufacturing management. Above all, it requires operating discipline and organizational commitment to resources and talent. ...read more.

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