Growth Prospects of Indian Textile Industry 1223881557761512 8

8/3/2019 Growth Prospects of Indian Textile Industry 1223881557761512 8

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Growth Prospects of Indian

Textile Industry ± HomeTextile focus

J. N. SinghTextile Commissioner



Indian Textile Sector - Overview

Key contributor to GDP

4 percent of GDP

14 percent of National Industrial

productionSignificant forex earner

15 percent of exports

Employment generator

Provides direct employment to 35million people

2004-05

Textile Mills

Spinning Mills Nos. 2,012

Composite Mills Nos. 1,566

Exclusive weaving mills Nos. 202

Capacity Installed

Spindles Million Nos. 37.47

Looms Lakh Nos.1.03

Powerloom Lakh Nos. 19.03

Handloom Lakh Nos.38.91

Textile exports $ billion 17.8

Textile imports $ billion 2.2



What is the Indian Market Size (Bn US $)

2005-06

Export Domestic Total % to Total

Apparel 8.64 19.22 27.86 59.28

Textile 9.24 9.99 19.14 40.72

Total 17.88 29.12 47 100



Home Textile Market Globally

Global Home Textile Market is estimated at

US $12b in 2005, and is expected to grow at

16% C AGR and reach US $22-25b By 2010. India ranks 2nd in the global market with a

share of approx. 9-10% of market share.

India's home textile exports expected to growfrom $1.2 billion now to $5 billion by 2010

Great opportunity to be the market leader.



Our Vision 2010

± Market size of US$95 Bn

Export Target- US $ 50 Billion

(National Textile Policy, 2000) Domestic market - US$ 45 Billion

(CRISIL Study, 2004)

± India¶s market share in Wor ld textiles trade to grow from

3% to 6%.

± Growth Projections of 20% in exports, 16% domestic



R easons for Optimism: Growth

in fabric production

4

-0.15

1

7

9

12

-2

0

2

4

6

8

10

12

14

2001-02 2002-03 2003-04 2004-05 2005-06 2009-10

(Expected)

P e r c e n t a g e



R easons for Optimism: Growth in

Investments in Textile sector Investments under TUFS have grown

significantly recently.

Project cost sanctioned under TUFS

1320 14383289

7349

15032

30000

0

5000

10000

15000

20000

25000

30000

35000

20 01-02 2002-03 20 03 -04 2004-05 2005-06 20 06 -07

(Es timated)

( R

s .

c r o

r e

)



R easons for Optimism :Growth in

exports

-10

15

9

4

2224

-15

-10

-50

5

10

15

20

25

30

2001-02 2002-03 2003-04 2004-05 2005-06

(Provisional)

2006-07

(Initial figures)

P e r c e n t a g e



Winners and Losers in EU Market

2005 over 2004

SRILANKA

THAILAND

VIETNAM

INDONESHIA

TUNISIA

MOROCCO

RUMAINA

PAKISTAN

B'DESH

INTRA EU

INDIA

TURKEY

CHINA

-20 -10 0 10 20 30 40 50

Gainers: China, India, Turkey

Losers: Thailand, Pakistan, Indonesia



Romania

South Korea

Turkey

China

USA

Pakistan

T

aiwan

India

Indonesia

Bangladesh

0 5 10 15 20 25 30 35 40

EU MARKET VARIATION JAN ± JUN

2006/05



Hong Kong

Mexico

Canada

Vietnam

Pakistan

Indonesia

Bangladesh

Cambodia

India

China

-20 -10 0 10 20 30 40 50

US IMPORTS OF TEXTILE AND

APPAREL PERCENT VARIATION

2005/04



Mexico

Canada

Hong Kong

China

India

Pakistan

Banglade

sh

Vietnam

Cambodia

Indonesia

-15 -10 -5 0 5 10 15 20 25 30

US IMPORTS OF TEXTILE AND

APPAREL PERCENTAGE VARIATION

JAN ± SEPT.2006/05



DRIVERS OF DOMESTIC GROWTH :

Demand Side Factors: Increasing Income Levels

Distribution of households by income category

Classification Income class 2001-02 2005-06* 2009-10* CAGR

Deprived <90 135,378 132,250 114,394 -3.6

Aspirer s 90-200 41,262 53,276 75,304 9.0

Seekers 200-500 9,034 13,813 22,268 12.7

Strivers 500-1000 1,712 3,212 6,173 17.7

Near rich 1000-2000 546 1,122 2,373 20.6

Clear rich 2000-5000 201 454 1,037 22.9

Sheer rich 5000-10000 40 103 255 25.4

Super rich >10000 20 53 141 27.7

Total 188,193 204,283 221,945 2.1* - Projections

Note : Income is in Rs.¶000 per annum at 2001-02 prices and the households are in µ000sSource : NC AER



Favorable Demographics for

Home Tex ± The population of India is expected to increase from 1029 million to 1400 millionduring the period 2001-2026.

± The population profile of India is shifting towards a larger composition of peoplein the age group 15-59 .India most favourably placed globally. Out of the total population increase of 371 million between 2001 and 2026, the share of the age-group 15-59 year s in this total increase is 83 percent.

± The low median age of population means a higher current consumptionspending vs savings

± The growth in population is taking place in the urban area. Out of the total population increase of 371 million during 2001-2026 in the country, the share of increase in urban population is expected to be 249 million.

± Favourable Demographics- increasing young population and that too in theurban area- coupled with rising income levels will act as a key growth factor for the Indian textile and Fashion Industry



Increasing Working Female

Population

10

15

20

25

30

1961 1971 1981 1991 2001 2005 (E) P r o p o r t i o n o f w o

r k i n g f e m a l e t o t o t a l f e m

a l e p o p u l a t i o

( p e r c e n t )

Source : CENSUS



Increased usage of credit cards and availability

of cheap finance

The use of credit cards (plastic money) has increased

significantly in the last 3-4 years. The number of credit

cards issued has grown at 26 per cent per annum in the past

5 years while debit cards have grown by a whopping 113 per

cent. Increase in the number of installations of electronic

data converter machines will provide fillip to impulse apparel

purchases.



Demand Driver- Domestic

Housing Boom Asian Development Bank expects that by 2008, the

housing deficit will be 22 mn units and by 2030 Indiawill be requiring upto 10 mn housing units every year.

A very huge requirement for home tex. The Real estate sector has given phenomenal

returns in the last 2-3 years as per the global trend. A property owner is now more inclined to buy/renovatehis home furnishings etc.

The domestic housing boom is further enhanced bythe reducing age of Indian borrower- from 43 years in1995-99 to 33 years in 2005-9.



Drivers of Domestic

Growth:Supply side factor :R etailing R evolution - Growth so far

196.7 208.1 222.0

3.9

6.2

7.8

2.0

3.0

3.5

180.0

190.0

200.0

210.0

220.0

230.0

240.0

2003E 2004E 2005P

U S D B

i l l i o n

1.5

2.0

2.5

3.0

3.5

4.0

P e r c e n t

Total retail industry Organised Penetration



Five year outlook

222.0 304.2

7.8

24.3

3.5

8.0

100.0

200.0

300.0

400.0

2005 P 2010 P

U S D B

i l l i o n

1.5

2.5

3.5

4.5

5.5

6.5

7.5

8.5

P e r c e n t

Total retail industtry Organised Penetration



Growth of Mall Space

From 2 mn sq ft in 2001 , we had 28 mn sq ftof mall space in 2005 ± and by end 2008, the

eight Indian large cities will have a supply of 66 mn sq ft and the next seven large citiesabout 13 mn sq. ft.

The entry of R eliance, Aditya Birla group,

expansion of Futures and now of Bharati-Walmart is expected to further sizzle Indianmarket.



Drivers of Export Growth

Dismantling of the MF A regime and the full play tothe Indian entrepreneurship.

Progressive dismantling of the textile and massapparel industry from the Western world. India is amajor player to fill this gap. The current quantitativerestriction on China is helping India.

Buying of several Western brands by Indian industry,thus facilitating entry in EU and US.

Increasing modernization of Indian textile and apparelmanufacturing sector in response to the increasedglobal demand and facilitated by the TUFS scheme.



Global Housing Boom

According to estimates by The Economist , the totalvalue of residential property in developed economiesrose by more than $30 trillion over the past five years,to over $70 trillion, an increase equivalent to 100% of

those countries' combined GDPs . The global boom in house prices has been driven by two

common factors: historically low interest rates haveencouraged home buyers to borrow more money; andhouseholds have lost faith in equities after stockmarkets

plunged, making property look attractive . Naturally as people buy more property or as their

property becomes costlier , the propensity tospend on home-textile increases significantly.



Real Clothing Prices

Index, 1994=100

70

80

90

100

110

120

1995 1996 1997 1998 1999 2000 2001 2002 2003

United States

South Korea

Germany

Thailand

Japan

China



Strategy of various

Stakeholders



Strategy for the GOVERNME NT

1.Further investments must continue to beencouraged- TUFS should be continued (maybe with some modification)

TUFS help to processing sector ± Vital for

home tex Year TUFS all segments (in

crores)

Processing (in

crores)

P.c %

2002-3 1438 210 14.63

2003-4 3289 260 7.91

2004-5 7349 986 13.42

2005-6 15032 1157 7.7

2006-7 (april-sept) 9335 2081 22.30



3. HR D

Governments in PPP mode with theindustries must invest heavily in training

in the textile sector because a hugeshortfall of over 40 lakh workers isexpected in the next 5 years.



4.High Transaction Costs Issues:

± According to EXIM Bank Study (2002), transaction cost is

very high in Textile & Gar ments Sector ranging from 3-10%

± Owner ship of exports ± less support from State

Governments

± Non-refundable incidence of State Taxes ± VAT, Entry Tax,

Luxury Tax, Mandi Tax, Electricity Duty, Octroi, etc.

Proposal:

± To consider refund of State / Local levies through

appropriate refund mechanism



5.High Power Cost

I ssues:

High power cost:

Cross subsidisation

Frequent power interruption

Competitors¶ Edge:

Country Cost(Cent /

KWH)

Country Cost(Cent /

KWH)

India 8.87 Indonesia 3.65

China 6.04 Bangladesh 3.49



High Power Cost

Proposal:

± Export oriented textile units be exempted from cross

subsidy

± Duty free import of furnace oil to units for captive power

generation

± Uninterrupted power supply for export oriented textile

cluster s



Industry¶s Strategy

Integration- Moving up/down the full value chain.Leading Home-tex players like Welspun, Alok arenow fully integrated, with strong competencies in

spinning, weaving,and finishing.

Scale- Massive expansion plans of existing as alsonew players to take advantage of this unprecedentedopportunity. Smaller companies, some of whom arein unrelated businesses, are also foraying into hometextiles - Gangotri Textiles, KG Denim, S KumarsNationwide, Bannari Amman Spinning, to name afew.



Brand presence- there has to be greater shift towards branded products.Realization

that real value addition comes only after branded sale.

Domestic- S paces brand of Welspun

Carmichael House of S.Kumars

International- Purchase of Christy by acquiringCHT Holding by Welspun.

Dan R ivers and R oseby¶s by GHCL.



Designer labels will also have to bebrought in to counter the pull of top

international labels like Tommy Hilfiger,Zegna, Mark and Spencer and likelypresence of Italian Pozzi Industria

Tessile and Ralph Lauren. Alliance withIndian designers important over here.



Future ?

The home-textile sector in India is in for BOOMING TIMES.

Save for major implementationproblems, India poised to become aleader in this sector.



THA NK

YOU

Growth Prospects of Indian Textile Industry 1223881557761512 8

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