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Delhi, 17 December 2009
Beleaguered Textile Industry
UNCERTAIN TIMES AHEAD
By Radhakrishna Rao
The vibrant Indian
textile industry, a major foreign exchange earner and one of the largest
employers in the country, is now confronted with the bleak prospects of massive
job losses following rising cotton prices, robbing the Indian garment export of
its competitive edge.
“The high prices of
cotton have pushed the cost of fabric and its end product. We are now in a
situation where we are forced to reject the repeat orders as we can’t justify
the high prices to our foreign buyers,” regrets the Apparel Export Promotion
Council (APEC). As it is, over the last six months the price of good quality
cotton has zoomed up by over 50 per cent.
Against this backdrop,
the APEC has urged the Central Government to curtail cotton export by
increasing the export duty on cotton. This way, the export of finished products
would provide the Council a greater price realization and help capture a
greater share of the international garment market. And as pointed out by a leading textile
industrialist based in the dynamic textile city of Tirupur, “Domestic firms are suffering due to
higher cotton prices. In particular, the spinning sector will be at the
receiving end. If cotton rates do not cool off, it will definitely affect the
profit margins by 5 per cent to 10 per cent.”
On another front, the
Indian garment export drive is losing ground to competitors like Sri Lanka, Vietnam,
China and Bangladesh. In
addition to the ripple effects of the global recessionary trend, the recent Middle East debt crisis has added to the woes of the
country’s textile sector. Many of the debt-ridden big Indian garment
manufacturing firms and apparel companies have instead started focussing on the
domestic market, where the demand for innovative and quality products is
fortunately picking up.
This apart, the debt and
the increasing interest rates of many of the big textile enterprises is casting
a shadow on their performance. Servicing of debts has brought down the
profitability of many textile firms by a significant extent. “Balance sheet
pressure will continue to be a bottleneck for most textile firms and unless
significant equity is infused, leverage will be a major concern,” warns an
analyst (consumer and retail) at the Indian research arm of Noble Group, a
British Investment Bank.
However, notwithstanding
an improvement in orders from overseas buyers, many of the leading textile
outfits and garment manufacturers would need at least two more quarters to sail
through these troubled times. Most textile players are now banking on the
return of the demand and rise in orders after a year-long lull. This is so as
the dynamic apparel sector boasts of over 27,000 manufacturers, 48,000
fabricators and 1,000-odd manufacturers-cum exporters.
Meanwhile, Union Textile
Minister Dayanidhi Maran has driven home the point that there is an urgent need
to attract and sustain foreign direct investment (FDI) in the textile sector if
India
is to achieve the goals of employment generation and technology up-gradation,
besides attaining a four per cent share in the global trade in textiles and
clothing. “The Indian textile and apparel market is currently valued at US
$40-billion. Most of the global apparel retailers including JC Penny and Dockers and Target have
their sourcing networks in India,”
he observes.
On his part, he has made
a note that the Indian textile and apparel export, which is now worth US
$22-billion, is expected to register a four-fold increase to touch US $90-100
billion over the next 25 years. At least 60 per cent of the textile exports are
to the US
and European markets. There is an urgent need to broaden the product mix and
explore new markets, while maintaining and increasing the share of Indian
textiles and clothing in core markets through product innovation and
diversification.
Meanwhile, analysts of
the textile industry are optimistic of an increasing volume of foreign
investment flowing into the textile sector through the direct route. Some of
the areas where the FDI is expected to rise include apparel sourcing, fabric
production and textile machinery manufacturing. Foreign players are interested
to invest in India
in varying capacities. They are interested in setting up Greenfield
machinery units as India
truly lacks in the sector. Apparel sourcing hubs are also one of the sectors
which are attractive for these players.
As things stand now,
exports make for around 40 per cent of the value of the Indian textile
industry. However, with India
losing ground to the smaller countries in lucrative markets of the US and Europe,
over a million jobs have been lost in the sector, mostly in the
labour-intensive garment and apparel units. Indeed, as pointed out by the APEC,
the Indian garment products are over 20 per cent costlier than those supplied
by competing nations such as China,
Vietnam and Cambodia.
Given the fact that
around five million people are employed in the garment industry, the need to
boost the prospects of the sector with a particular focus on safeguarding their
livelihood opportunities has become all the more pronounced. There is a demand
that the government introduce a special package of effective measures to
bolster the sagging spirits of this industry. It could be in the form of making
available interest-free loans for investment in machineries as well as zero
duty on import of capital goods.
There is no denying the
fact that the Indian textile industry occupies a place of prominence in the country’s
economy. The trump card of this industry is a strong raw materials base, which
is supported by a skilled labour force. But the high cost of power supply as
well as load shedding resorted to by the electricity boards in many States, has
hit the textile industry deep and hard. Moreover, the industry is required to
make a huge investment on real estate as part of the cost of setting up a
production facility. In contrast, the investment on real estate is next to
nothing for a textile production unit in rival China.
The textile industry
which is multi fibre-based using cotton, jute, wool, silk and synthetic fibres,
accounts for four per cent of the Gross Domestic Product. However, the Achilles
heel of the Indian textile industry is the fragmented nature of operations. As
a result, small textile units fail to make it big in the price sensitive
markets—both domestic and global. –INFA
(Copyright,
India News & Feature Alliance)
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