Indian Textile Industry

Global Crisis & it’s Impact

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AGENDA

• Introduction

• Glorious past

• Present scenario

• Slowdown in Growth

• Slowdown in Exports

• Slowdown in Investment

• Declining Profitability

• Employment

• Recommendations 2

INTRODUCTION

• Second largest employer in India after agriculture in today’s scenario.

• The Indian textile industry is estimated at $52 billion.

• In the XI Five Year Plan, textile industry was expected to grow at 16% per annum and attain a size of $115bn by 2012.

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GLORIOUS PAST

• Known as world’s textile hub from the pre-maurya civilisation.

• Transit for the golden silk route.

• British colonial rule help to establish eastern Manchester in Ahmedabad and part of Bombay presidency.

• Post independence boom- due to favoured quota import policy by developed nation.

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PRESENT SCENARIO• Global manufacturing backyard • Supply to all textile and retail majors like Dolce

and Gabbana, Gap, Mark & Spencer, Zara and Harrod’s.

• Global VC major like Blackstone picking up shares in Gokaldas exports and Himatsingasiede.

• Knit ware hub at Ludhiana and Tirupur and dedicated textile SEZ by Adidas in Nellore, AP.

• Indian majors Spentex, GHCL and Welspun making buy-out the iconic brand like Roseby.

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SLOWDOWN IN GROWTH

• The growth rate in the textile industry became 0.8 % in 2008-09 (April-August).

• The growth rate of Wool, Silk & Man-Made Textiles sector became negative (-1.2%) in the first five month in the year (April-Aug).

• The jute textile segment also declined in 2008-09 by 7.4% as compared to the 33% growth in 2007-08.

• Textile products picked up slightly (5.8%) in 2008-09 as compared to 3% in 2007-08. 6

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SLOWDOWN IN EXPORTS

• Indian textile export increased to $19 billion.• In April- May 2008-09, the textile exports were

$3.4 billion, compared to $2.8 billion in April- May 2007-08.

• U. S. Clothing & clothing accessories sales have plunged in September 2008 vis-à-vis August 2008 by 2.3%.

• The share of both Textiles as well as Readymade Garments (RMGs) in total exports of India has been falling since 2006-07. 8

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SLOWDOWN IN INVESTMENT

• In April-July 2008-09, the amount of investment has become one third compared to the level in April-July 2007-08.

• In the year 2007-08, only 470 applications were received for the capital subsidy scheme for Powerloom Units as compared to 863 applications received in 2006-07.

• The amount of FDI in the textile sector has increased slightly to only $37.9m FDI in the textile sector in 2008-09 (April- July). 10

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Declining Profitability

• Profitability of textile sector has been falling since June 2007.

• The profitability declined by 99% in quarter ending June 2008.

• According to CMIE sources the profitability plunges @45% in June 2007 to @99% in June 2008.

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Slowdown & Impact on Employment

• As on March 31st 2007 textile sector provided employment to 35 million people directly.

• Provides indirect employment to another 88 million people in the country.

• To provide employment to an additional 10 million people in the 11th five year plan.

• Current global financial crisis leads to blanket job cut of 5 million specially in artificial textile & weaving sector(Source: Economic Times).

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Recommendations

• Increase duty drawback rates

• Moratorium on Term Loans

• Interest Subvention

• Extension of Sunset Clause

• Custom and Excise Duty on Synthetics

• Technology Up-gradation Fund Scheme

• Exemption from Service Tax15

Recommendations(contd…)

• Excise Duty on Textile Machinery & Spares to be reduced

• Reduction of Custom Duty on Textile Machinery

• Exemption route to be extended to Export Oriented Units (EOUs)

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Recommendations(cont.)

• Fringe Benefit Tax under Sec 115 of the Income Tax Act

• Refund of State Taxes & Duties to Exporters

• Uniform rate of VAT on Industrial Inputs

• Reduction of Excise Duty on Man–Made fibre Products

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THANK YOU

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