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Overview of Apparel and Textile Industry -2010
In 2009, world apparel production stood at US$140 billion, with 71% of productio
n accounted for by Asian countries. The developed nations/regions such as US and
European Union ( EU ) accounted for 11% and 14% of global production respectively.
Being a matured industry, growth rate of the Global Textile and Apparel industry
is in sync with the growth rate in global GDP. Of the total apparel retail mark
et valued at approximately US$500 billion in 2009, the developed nations/regions
like US and EU accounted for 33% and 30% respectively.
The Indian textile and apparel industry is estimated to be worth Rs. 2,700 billi
on in fiscal year 2010. It has been estimated on the basis of industry interacti
ons. Approximately 65% of the total textile and apparel production (wholesale pr
ice level) is consumed domestically. India s domestic textiles and apparel consump
tion is estimated at Rs. 1,750 billion (wholesale price level), of which apparel
s account for approximately 71%. India exported US$20 billion worth of textiles
and apparel of which 45% are apparel exports.
The textile and apparel industry is one of the largest and the most important se
ctors in the Indian economy in terms of output, foreign exchange earnings and em
ployment. It contributes approximately 14% to India?s industrial production, 4%
to the country?s GDP and 17% to the country s export earnings. It provides direct
employment to over 35 million people and is the second largest provider of emplo
yment after the agricultural sector. Thus the development of this sector has an
overall impact on the economy. The Indian textile and apparel industry contribut
es approximately 4% to the global textile and apparel market. Since the textile
industry has such economic importance, it has always attracted the Government s at
tention. Therefore, the Government has introduced policies such as the Technolog
y Upgradation Fund Scheme ( TUFS ), Scheme for Integrated Textile Parks ( SITP ), low ex
cise duty, high import duty (to discourage imports) and National Textile Policy
to develop the textile sector.
Indian Apparel Industry
Estimates say (based on industry interactions) that the Indian apparel market gr
ew at a CAGR(compound annual growth rate) of 6.5% from Rs. 1,225 billion in fisc
al year 2005 to Rs. 1,675 billion in fiscal year 2010 (wholesale level). The Ind
ian apparel market comprises domestic apparel consumption and exports. The domes
tic market is estimated to be worth Rs. 1,250 billion in fiscal year 2010 (at wh
olesale level). Spending on domestic retail apparel has grown at a high rate of
approximately 13 14%. The apparel market size at the retail level is estimated at
Rs. 2,000 billion in fiscal year 2010. The retail purchases on apparels is expec
ted to double to approximately Rs. 4,000 billion by fiscal year 2015, a CAGR of
approximately 15%. Factors expected to contribute to the growth of the Indian ap
parel industry include:
Ø Rising levels of disposable income;
Ø Growing preference for ready-to-wear apparels;
Ø Increasing penetration of organised retail;
Ø Changing consumer habits;
Ø Increasing trend towards urbanization; and
Ø A comparatively younger populace.(ordinary people of particular country or area)
.
Source: sebi.gov.in

Indian Apparel Industry: Concerns for 2010

http://www.fibre2fashion.com/industry-article/24/2398/indian-apparel-industry-co
ncerns-for-20101.asp
Apparel industry faced a grueling 2009, bitten hardly by the pangs of recession.
Apparel industry is one of the important sectors in manipulating the countrys e
conomy, revenue, trade and employment generation. The industry has short life cy
cle, volatile and unpredictable demand, and tremendous product variety with long
and inflexible supply process. With the New Year giving new hopes to people all
around the world, there are a few concerns for the apparel industry owners to w
atch out.
Eclipse of Recession:
Green shoots of recovery follow the twinge of recession. While the apparel indus
try is seeing silver linings around the clouds of the global turmoil, the indust
ry will also have to prepare themselves to face the hangover of recession.
Textile merchants comment that, they were not feeling confident about their busi
ness during the past year, but are hoping for the forthcoming weeks. Decreases i
n the purchasing power of the consumers foretell an unpleasant market condition.
Sales figure during the festival season of October was almost 20% lesser as com
pared with the previous years figures during the same period. Owners involved in
to export business are facing adverse situation. In the present scenario, those
who manufacture only quality goods would manage to make a ransom. Manufacturers
who are able to produce high quality of products and are willing to sell them at
a competitive price, alone will be able to sustain themselves in the market.
Death of Mega deals in Outsourcing:
2010 will witness the customers eschewing mega deals seeking more flexible appro
aches to outsourcing. Contracts will be more focused on core processes with shor
t and less expensive transition periods and a reduced ROI on investment timescal
es.
Rising Labor Costs:
Textile industry generates the maximum number of employment opportunities in Ind
ia next to agriculture. It is a labor intensive industry, and employs approximat
ely 40 million people. India was able to perform well over its counterparts in t
he textile sector during the past decades, due to the abundant and cheap availab
ility of labor force. Currently, labor is getting very expensive. This affects t
he cost advantage of the country. People of the poor masses are also hit badly,
as textile industry is more labor intensive, and is the second largest employer
of the country. Semi skilled and unskilled rural people, who were not able to ge
t profits in agriculture, have moved from the villages to work in textile indust
ries. Due to the rise in labor cost, several million people in textile industrie
s have lost their jobs. A recent survey states that four million workers in the
textile industry have lost their jobs over the past six months, and another four
million jobs are estimated to be at stake in the next six months.
Sweatshop Free Business:
Apparel industry is known for its payment on piece rate system, where workers ar
e paid on the basis of the number of garments they complete. This makes it possi
ble for the manufacturers for easy exploitation of wages. Most of the low wage w
orkers are vulnerable to wage theft, where they are made to work more and are pa
id very less, or they are not paid for their overtime work. In some industries,
workers are made to work for even up to 80 hours for a week without proper overt
ime payments. Female workers are more prone to wage violation comparatively over
male workers.
Industry experts believe that this system of wage practice will encourage wage c
ompetition among the suppliers, and stop the retailers in driving down the pay.
Though companies will not suddenly start paying this wage, it is optimistically
expected that positive changes are likely to happen in the near future.
Competition from Neighboring Countries:
Indian apparel industry is in the global radar, attracting the attention of othe
r international countries. For the apparel industry, cost of the fabric makes al
most 60% of its selling price. Increase in the cost of fabrics simultaneously re
sult in an increase in the cost of apparels for Indian garment exporters. Due to
this, the industry is facing severe competition from its business counterparts
like Sri Lanka, China, and Bangladesh. India will have to struggle hard to prolo
ng the competition, as its cost of production is high.
Indian apparel industry is optimistic for revival and a quick growth. Industry o
wners positively hope that during 2010, the industry will grow and provide emplo
yment to more number of people.

The Textile and Apparel Industry in India

http://managementfunda.com/the-textile-and-apparel-industry-in-india/
Introduction
The Multi-Fibre Agreement (MFA), that had governed the extent of textile trade b
etween nations since 1962, expired on 1 January, 2005. It is expected that, post
-MFA, most tariff distortions would gradually disappear and firms with robust ca
pabilities will gain in the global trade of textile and apparel. The prize is th
e $360 bn market which is expected to grow to about $600 bn by the year 2010 â barel
y five years after the expiry of MFA. An important question facing Indian firms
is whether their capabilities and their diverse supply chain are aligned to bene
fit from the opening up of global textile market?
The history of textiles in India dates back to the use of mordant dyes and print
ing blocks around 3000 BC. The diversity of fibres found in India, intricate wea
ving on its state-of-art manual looms and its organic dyes attracted buyers from
all over the world for centuries. The British colonization of India and its ind
ustrial policies destroyed the innovative eco-system and left it technologically
impoverished. Independent India saw the building up of textile capabilities, di
versification of its product base, and its emergence, once again, as an importan
t global player. Today, the textile and apparel sector employs 35.0 mn people (a
nd is the 2nd largest employer), generates 1/5th of the total export earnings an
d contributes 4 per cent to the GDP thereby making it the largest industrial sec
tor of the country. This textile economy is worth US $37 bn and its share of the
global market is about 5.90 per cent. The sector aspires to grow its revenue to
US $85bn, its export value to US $50bn and employment to 12 million by the year
2010 (Texmin 2005).
The Textile and Apparel Supply Chain
The Textile and Apparel Supply Chain comprises diverse raw material sectors, gin
ning facilities, spinning and extrusion processes, processing sector, weaving an
d knitting factories and garment (and other stitched and non-stitched) manufactu
ring that supply an extensive distribution channel (see Figure 1). This supply c
hain is perhaps one of the most diverse in terms of the raw materials used, tech
nologies deployed and products produced.
This supply chain supplies about 70 per cent by value of its production to the d
omestic market. The distribution channel comprises wholesalers, distributors and
a large number of small retailers selling garments and textiles. It is only rec
ently that large retail formats are emerging thereby increasing variety as well
as volume on display at a single location. Another feature of the distribution c
hannel is the strong presence of â agentsâ who secure and consolidate orders for produce
s. Exports are traditionally executed through Export Houses or procurement/commi
ssioning offices of large global apparel retailers.
It is estimated that there exist 65,000 garment units in the organized sector, o
f which about 88 per cent are for woven cloth while the remaining are for knits.Â
However, only 30â 40 units are large in size (as a result of long years of reservati
on of non-exporting garment units for the small scale sectors â a regulation that wa
s removed recently). While these firms are spread all over the country, there ar
e clusters emerging in the National Capital Region (NCR), Mumbai, Bangalore, Tir
upur/Coimbatore, and Ludhiana employing about 3.5 mn people. According to our es
timate, the total value of production in the garment sector is around Rs.1,050â 1,100
bn of which about 81 per cent comes from the domestic market. The value of Indi
an garments (eg. saree, dhoti, salwar kurta, etc.) is around Rs.200â 250 bn. About 40
per cent of fabric for garment production is imported â a figure that is expected t
o rise in coming years.
The weaving and knits sector lies at the heart of the industry. In 2004-05, of t
he total production from the weaving sector, about 46 per cent was cotton cloth,
41 per cent was 100% non-cotton including khadi, wool and silk and 13 per cent
was blended cloth. Three distinctive technologies are used in the sector â handlooms
, powerlooms and knitting machines. They also represent very distinctive supply
chains. The handloom sector (including khadi, silk and some wool) serves the low
and the high ends of the value chain â both mass consumption products for use in ru
ral India as well as niche products for urban & exports markets. It produces, ch
iefly, textiles with geographical characterization (e.g., cotton and silk sarees
in Pochampally or Varanasi) and in small batches. Handloom production in 2003-0
4 was around 5493 mn.sq.meters of which about 82 per cent was using cotton fibre
. Handloom production is mostly rural (employing about 10 million, mostly, house
hold weavers) and revolves around master-weavers who provide designs, raw materi
al and often the loom.
Weaving, using powerlooms, was traditionally done by composite mills that combin
ed it with spinning and processing operations. Over the years, government incent
ives and demand for low cost, high volume, standard products (especially sarees
and grey cloth) moved the production towards powerloom factories and away from c
omposite mills (that were essentially full line variety producers). While some l
ike Arvind Mills or Ashima transformed themselves into competitive units, others
gradually closed down.  In 2003-04, there remained 223 composite mills that prod
uced 1434 mn. sq. mts. of cloth. Most of these mills are located in Gujarat and
Maharashtra. Most of the woven cloth comes from the powerlooms (chiefly at Surat
, Bhiwandi, NCR, Chennai). In 2005, there were 425,792 registered powerloom unit
s that produced 26,947 mn. sq. mts of cloth and employed about 4,757,383 workers
.   Weaving sector is predominantly small scale, has on an average 4.5 power looms
per unit, suffers from outdated technology, and incurs high co-ordination costs
. Knits have been more successful especially in export channels. Strong producti
on clusters like Tirupur and Ludhiana have led to growth of accessories sector a
s well, albeit slowly. The hosiery sector, on the other hand, has largely a dome
stic focus and is growing rapidly.
The spinning sector is perhaps most competitive globally in terms of variety, un
it prices and production quantity. Though cotton is the fibre of preference, man
-made fibre (polyster fibre and polyster filament yarn) is also produced by abou
t 100 large and medium size producers.
Spinning is done by 1566 mills and 1170 Small and Medium Enterprises (SME). Mill
s, chiefly located in North India, deploy 34.24 mn. spindles and 0.385 mn rotors
while the SME units produce their yarn on 3.29 mn spindles and 0.119 mn. rotors
producing 2270 mn kg of cotton yarn, 950 mn kg of blended yarn and about 1106 m
n kg of man-made filament yarn every year. Worsted and non-worsted spindles (pro
ducing woolen yarn) have also progressively grown to 0.604 mn and 0.437 mn respe
ctively. Spinning sector is technology intensive and productivity is affected by
the quality of cotton and the cleaning process used during ginning.
The processing sector, i.e., dyeing, finishing and printing is mostly small in s
cale. The largest amongst these would dye and finish about 5000 m/day. The remai
ning are independent process houses (or part of composite mills) that use automa
ted large batch or continuous processing and have an average scale of about 20,0
00 m of cloth daily. About 82.5 per cent or 10,397 units are hand processors who
dye cloth or yarn manually and dry in open sunshine. Of the remaining (and thes
e use automated and semi-automated equipment), 2076 are independent process hous
es.
Cotton remains the most significant raw material for the Indian textile industry
. In 2003-04, 3009 mn kg of cotton was grown over 7.785 mn acres. Other fibres p
roduced are silk (15742 tonnes), jute (10985000 bales), wool (50.7 mn kg) and ma
n-made fibres (1100.65 mn kg). Cotton grows mostly in western and central India,
silk in southern India, jute in eastern and wool in northern India. Significant
qualities of cotton, silk and wool fibres are also imported by the spinning and
knitting sectors. (Except for garments, all data in this section was obtained f
rom OTC 2004 and Texmin 2005.)
Managing such a complex supply chain requires coordination through excellent man
agerial practices, technology and facilitating policies.
Competitiveness of Indian Textile & Apparel Industry
India is one of the few countries that owns the complete supply chain in close p
roximity from diverse fibres to a large market. It is capable of delivering pack
aged products to customers comprising a variety of fibres, diverse count sizes,
cloths of different weight and weave, and a panoply of finishes. This permits th
e supply chain to mix and match variety in different segments to deliver new pro
ducts and applications. This advantage is further accentuated by cost based adva
ntages and diverse traditions in textiles.
Indian strength in spinning is now well established â on unit costs on ring yarn, op
en-ended (OE) yarn as well as textured yarn, Indian firms are ahead of their glo
bal competitors including China. Same is true on some woven OE yarn fabric categ
ories (especially grey fabrics) but is not true for other woven segments. India
contributes about 23 per cent of world spindles and 6 per cent of world rotors (
second highest in the world after China). Fifty five per cent of total investmen
t in technology in the last decade has been made in the spinning sector. Its sha
re in global shuttleless loom, however, is only about 2.8 per cent of world loom
s (and is ranked 9th in the world). The competitiveness in the weaving sector is
adversely affected by low penetration of shuttleless looms (i.e., 1.69 % of Ind
ian looms), the unorganized nature of the sector (i.e., fragmented, small and, o
ften, un-registered units, low investment in technology & practices especially i
n the powerloom, processing, handloom and knits) and higher power tariffs. There
is, however, a recent trend of investment in setting up hi-tech, stand-alone mi
d-size weaving companies focusing on export markets. India also has the highest
deployment of handlooms in the world (handlooms are low on productivity but prod
uce specialized fabric). While production and export of man-made fibre (and fila
ment yarn) has increased over the years, Indian industry still lags significantl
y behind US, China, Europe, Taiwan etc. (Texmin, 2005.)
Indian textile industry has suffered in the past from low productivity at both e
nds of the supply chain â low farm yields affecting cotton production and inefficien
cy in garment sector due to restriction of size and reservation. Add to this, co
ntamination of cotton with consequent increase in cost (as it affects quality an
d requires installation of additional process to clean and open cotton fibres be
fore carding operations), poor ginning (most equipment dates back to 1940s), hig
h average defect rates in production process (which also leads to increase in ef
fective labour and power costs), hank yarn requirement, etc. and its competitive
ness gets compromised severely. Similarly, processing technology is primarily ma
nual and small batch oriented with visual colour matching and sun drying. This l
eads to inconsistency in conformance quality.  Lead times across the sector conti
nue to be affected by variability in the supply chain â defect rates average over 5%
, average % of orders on time is about 80%, variance in order size across firms
is high (e.g., the coefficient of variability of average order size for spinning
firms is about 2.6), and on an average, 16 days of sales as work-in-process inv
entory (the highest for garment firms) and an average of 30 days of sales in raw
material inventory (the highest for spinning firms) (Chandra 2004).  Some of the
hurdles (eg., reservation in the garment sectors) including tariff distortions
between the organized and unorganized sectors have now been systematically remov
ed by policy initiatives of Government of India and have opened avenues for firm
s to compete on the basis of their capabilities.
Trade data of post-MFA performance reveals some interesting trends â Indian firms re
gistered a 27 per cent growth in exports to US (against Chinaâ s 52 per cent) during
the Jan-April 2005 time period. Most of this growth has been in textiles while a
pparels show marginal gains. Apparels & accessories constituted 78% of global ex
ports to USA (FICCI 2005). (India is still a relatively small yet growing player
in the global apparel market.)Â It is expected that India will soon replace Mexi
co as the second largest apparel supplier to the US.
Challenges facing Indian Textile and Apparel Industry
Textile supply chains compete on low cost, high quality, accurate delivery and f
lexibility in variety and volume. Several challenges stand in the way of Indian
firms before they can own a larger share of the global market:
Scale: Except for spinning, all other sectors suffer from the problem of scale.
Indian firms are typically smaller than their Chinese or Thai counterparts and t
here are fewer large firms in India. Some of the Chinese large firms have 1.5 ti
mes higher spinning capacity, 1.25 times denim (and 2 times gray fabric) capacit
y and about 6 times more revenue in garment than their counterparts in India the
reby affecting the cost structure as well as ability to attract customers with l
arge orders. The central tendency is to add capacity once the order has been won
rather than ahead of the demand. Customers go where they see both capacity and
capabilities. Large capacity typically goes with standardized products. These fi
rms need to develop the managerial capabilities required to manage large work fo
rce and design an appropriate supply chain. For the size of the Indian economy,
it will have to have bigger firms producing standard products in large volumes a
s well as small and mid size firms producing large variety in small to mid size
batches (the tension between the organized and un-organized sectors will have to
be addressed first, though). Then there is the need for emergence of specialist
firms that will consolidate orders, book capacities, manage warehouses and logi
stics of order delivery.
Skills : Three issues must be mentioned here : (a) there is a paucity of technic
al manpower â there exist barely 30 programmes at graduate engineering (including di
ploma) levels graduating about 1000 students â this is insufficient for bringing abo
ut technological change in the sector; (b) Indian firms invest very little in tr
aining its existing workforce and the skills are limited to existing proceses (C
handra 1998);Â (c) there is an acute shortage of trained operators and supervisor
s in India. It is expected that Indian firms will have to invest close to Rs. 14
00 bn by year 2010 to increase its global trade to $ 50 bn. This kind of investm
ent would require, by our calculations, about 70,000 supervisors and 1.05mn oper
ators in the textile sector and at least 112,000 supervisors and 2.8mn operators
in the apparel sector (assuming a 80:20 ratio of investment between textiles an
d apparel). The real bottleneck to growth is going to be availability of skilled
manpower.
Cycle Time : Cycle time is the key to competitiveness of a firm as it affects bo
th price and delivery schedule. Cycle time reduction is strongly correlated with
high first pass yield, high throughput times, low variability in process times,
low WIP and consequently cost. Indian firms have to dramatically reduce cycle t
imes across the entire supply chain which are currently quite high (Chandra, 200
4). Customs must provide a turnaround time of ½ day for an order before Indian firm
s can they expect to become part of larger global supply chains. Indian firms ne
ed a strong deployment of industrial engineering with particular emphasis on cel
lular manufacturing, JIT and statistical process control to reduce lead times on
shop floors. Penetration of IT for improving productivity is particularly low i
n this sector.
Innovation & Technology: A review of the products imported from China to USA dur
ing Januaryâ April 2005 reveals that the top three products in terms of percentage in
crease in imports were Tire Cords & Tire Fabrics (843.4% increase over the previ
ous year), Non-woven fabrics (284.1% increase) and Textile/Fabric Finishing Mill
Products (197.2% increase) (FICCI, 2005). None of these items, however, figure
in the list of imports from India that have gained in these early days of post-M
FA. Entry into newer application domains of industrial textiles, nano-textiles,
home furnishings etc. becomes imperative if we are to grow beyond 5â 6% of global mar
ket share as these are areas that are projected to grow significantly. Synthetic
textiles comprise about 50 per cent of the global textile market. Indian synthe
tic industry, however, is not well entrenched. The Technology Upgradation Fund o
f the government is being used to stimulate investment in new processes. However
, there is little evidence that this deployment in technology has accompanied ch
anges in the managerial regimes â a necessary condition for increasing productivity
and order winning ability.
Domestic Market : The Indian domestic market for all textile and apparel product
s is estimated at $26 bn and growing. While the market is very competitive at th
e low end of the value chain, the mid or higher ranges are over priced (i.e., â dolla
r pricingâ ). Firms are not taking advantage of the large domestic market in generati
ng economies of scale to deliver cost advantage in export markets. The Free Trad
e Agreement with Singapore and Thailand will allow overseas producers to meet th
e aspirations of domestic buyers with quality and prices that are competitive in
the domestic market. Ignoring the domestic market, in the long run, will peril
the export markets for domestic producers. In addition, high retail property pri
ces and high channel margins in India will restrict growth of this market. Firms
need to make their supply chain leaner in order to overcome these disadvantages
.
Institutional Support : Textile policy has come long ways in reducing impediment
s for the industry â sometimes driven by global competition and, at other times, by
international trade regulations. However, few areas of policy weakness stand out
â labour reforms (which is hindering movement towards higher scale of operations by
Indian firms), power availability and its quality, customs clearance and shipme
nt operations from ports, credit for large scale investments that are needed for
upgradation of technology, and development of manpower for the industry. These
are problems facing several sectors of industry in India and not by this sector
alone.
In conclusion, competitive strategies are developed by sector level firms and it
s their individual and collective initiatives that secure higher market share in
global trade. While one has to be ever vigilant of non-tariff barriers in the p
ost MFA world, the new market will be won on the basis of capabilities across th
e supply chain. Policy will need to facilitate this building of capabilities at
the firm level and the flexible strategies that firms will need to devise period
ically.