Growth Prospects of Indian Textile Industry

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Growth Prospects of Indian Textile Industry
Home Textile focus

• J. N. Singh
• Textile Commissioner

2
Indian Textile Sector - Overview

• Key contributor to GDP
• 4 percent of GDP
• 14 percent of National Industrial production
• Significant forex earner
• 15 percent of exports
• Employment generator
• Provides direct employment to 35 million 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

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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
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Home Textile Market Globally

• Global Home Textile Market is estimated at US
  12b in 2005, and is expected to grow at 16 CAGR
  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 grow
  from 1.2 billion now to 5 billion by 2010 Great
  opportunity to be the market leader.

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Our Vision 2010

• Market size of US95 Bn
• Export Target- US 50 Billion
• (National Textile Policy, 2000)
• Domestic market - US 45 Billion
• (CRISIL Study, 2004)
• Indias market share in World textiles trade to
  grow from 3 to 6.
• Growth Projections of 20 in exports, 16
  domestic

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Reasons for Optimism Growth in fabric production
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Reasons for Optimism Raw Materials

• India is now the 2nd largest producer of cotton
• 2nd largest producer of Silk
• Very well placed in Man-made Fibres too.

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Reasons for Optimism Growth in Investments in
Textile sector

• Investments under TUFS have grown significantly
  recently.

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Reasons for Optimism Growth in exports
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Winners and Losers in EU Market 2005 over 2004

• Gainers China, India, Turkey
• Losers Thailand, Pakistan, Indonesia

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EU MARKET VARIATION JAN JUN 2006/05
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US IMPORTS OF TEXTILE AND APPAREL PERCENT
VARIATION 2005/04
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US IMPORTS OF TEXTILE AND APPAREL PERCENTAGE
VARIATION JAN SEPT. 2006/05
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DRIVERS OF DOMESTIC GROWTH Demand Side
Factors Increasing Income Levels
Distribution of households by income category Distribution of households by income category Distribution of households by income category Distribution of households by income category Distribution of households by income category Distribution of households by income category
Classification Income class 2001-02 2005-06 2009-10 CAGR
Deprived lt90 135,378 132,250 114,394 -3.6
Aspirers 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 gt10000 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
000s
Source NCAER
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Favorable Demographics for Home Tex

• The population of India is expected to increase
  from 1029 million to 1400 million during the
  period 2001-2026.
• The population profile of India is shifting
  towards a larger composition of people in 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 years in this total increase
  is 83 percent.
• The low median age of population means a higher
  current consumption spending 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 the urban area-
  coupled with rising income levels will act as a
  key growth factor for the Indian textile and
  Fashion Industry

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Increasing Working Female Population
Source CENSUS
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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.

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Demand Driver- Domestic Housing Boom

• Asian Development Bank expects that by 2008, the
  housing deficit will be 22 mn units and by 2030
  India will 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/renovate his home furnishings etc.
• The domestic housing boom is further enhanced by
  the reducing age of Indian borrower- from 43
  years in 1995-99 to 33 years in 2005-9.

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Drivers of Domestic GrowthSupply side factor
Retailing Revolution - Growth so far
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Five year outlook
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Growth of Mall Space

• From 2 mn sq ft in 2001 , we had 28 mn sq ft of
  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 cities about 13 mn
  sq. ft.
• The entry of Reliance, Aditya Birla group,
  expansion of Futures and now of Bharati-Walmart
  is expected to further sizzle Indian market.

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Drivers of Export Growth

• Dismantling of the MFA regime and the full play
  to the Indian entrepreneurship.
• Progressive dismantling of the textile and mass
  apparel industry from the Western world. India is
  a major player to fill this gap. The current
  quantitative restriction 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
  apparel manufacturing sector in response to the
  increased global demand and facilitated by the
  TUFS scheme.

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Global Housing Boom

• According to estimates by The Economist, the
  total value of residential property in developed
  economies rose 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 have encouraged home buyers to borrow more
  money and households 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 to
  spend on home-textile increases significantly.

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Other Export Drivers

• The IMF forecasted a 4th continuous year of
  income increase globally at 4.7- naturally
  leading to a more than higher purchase of
  textiles including home-tex.
• Also a phenomenon of decline in textile prices
  over a continuous period esp in developed
  economies- driving higher the worldwide demand of
  textiles and clothing.

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Real Clothing PricesIndex, 1994100
China
Japan
Thailand
Germany
South Korea
United States
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• Strategy of various
• Stakeholders

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Strategy for the GOVERNMENT

• 1.Further investments must continue to be
  encouraged- TUFS should be continued (may be 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
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2. Continuance of textile infrastructure schemes

• SITP ( Scheme for Integrated Textile Parks) has
  had a huge success 26 parks approved. GOI
  contribution to be 866 crores with another 1250
  crores to come from private sector. Estimated
  investment of Rs.13445Cr.
• Need to continue such schemes on the PPP model.

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3. HRD

• Governments in PPP mode with the industries must
  invest heavily in training in the textile sector
  because a huge shortfall of over 40 lakh workers
  is expected in the next 5 years.

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4.High Transaction Costs

• Issues
• According to EXIM Bank Study (2002), transaction
  cost is very high in Textile Garments Sector
  ranging from 3-10
• Ownership 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

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5.High Power Cost

• Issues
• 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
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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 clusters

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Industrys Strategy

• Integration- Moving up/down the full value chain.
  Leading Home-tex players like Welspun, Alok are
  now fully integrated, with strong competencies in
  spinning, weaving,and finishing.
• Scale- Massive expansion plans of existing as
  also new players to take advantage of this
  unprecedented opportunity. Smaller companies,
  some of whom are in unrelated businesses, are
  also foraying into home textiles - Gangotri
  Textiles, KG Denim, S Kumars Nationwide, Bannari
  Amman Spinning, to name a few.

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• Brand presence- there has to be greater shift
  towards branded products.Realization that real
  value addition comes only after branded sale.
• Domestic- Spaces brand of Welspun
• Carmichael House of S.Kumars
• International- Purchase of Christy by
  acquiring CHT Holding by Welspun.
• Dan Rivers and Rosebys by GHCL.

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• Designer labels will also have to be brought in
  to counter the pull of top international labels
  like Tommy Hilfiger, Zegna, Mark and Spencer and
  likely presence of Italian Pozzi Industria
  Tessile and Ralph Lauren. Alliance with Indian
  designers important over here.

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Future ?

• The home-textile sector in India is in for
  BOOMING TIMES.
• Save for major implementation problems, India
  poised to become a leader in this sector.

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THANK

• YOU