Country Profile: India

Country Profile

By Sunil PuriIndian Textile Industry — An OverviewAs the largest contributor to India’s
export revenues, the textile industry plays an important role in the country’s economy.The textile
industry in India is one of the country’s oldest industries and has a major presence in the
national economy, contributing to about 14 percent of manufacturing value-add and one-third of
India’s gross export earnings.The Indian textile industry presents a very complex picture with
visages of the 18th, 19th and 20th centuries, where on the one end of the spectrum is the charkha
(manual spinning wheel) and the handloom, and on the other end are state-of-the-art textile plants
with power looms.Moreover, the industry can be categorized into two sectors — organized, which
includes companies with integrated plants, and decentralized, which includes companies where only
one or two processes take place.For the Indian economy, the textile industry accounts for about 17
percent of its industrial production — estimated at 1,240 billion India rupees (approximately $27
billion) and 8.1 percent of the gross domestic product. Textile exports constitute the single
largest group of commodities in the country’s export basket, contributing about 27 percent to the
nation’s treasury and providing employment directly and indirectly to around 80 million people — in
various activities including cotton and jute growers, artisans and weavers, and the well-educated
technicians for the state-of-the-art plants and the ancillary suppliers.The textile industry is
probably the only industry in the Indian industrial arena that is self-reliant and complete in
value chain from raw materials to the highest value-added products.The industry uses a wide
spectrum of fibers consisting of cotton; jute; silk; wool; man-made fibers, such as polyester,
viscose, nylon, acrylic, polypropylene; and blends of one or more fibers.The strength of the Indian
textile and garment sectors lies in the availability of raw materials, low labor costs,
well-educated supervisory staff, and abundant technical and managerial skills. From an
insignificant export base of less than $3 million at the beginning of the 1970s to between $12
billion and $13 billion today, India has utilized its efficient and competitive raw materials base
to embark on an expansion route. At present, India’s share of the global textile market is only 3
percent, but the aim of the government is to raise this to 10 percent by the year 2010.The Indian
textile industry, according to data released by the International Textile Manufacturers’
Federation, contributes significantly to the world textile production capacity and availability of
textile fibers and yarns. It contributes about 21 percent to the total number of spindles installed
worldwide and 6 percent to the total number of rotors in operation worldwide. With the dismantling
of spindles in China, India has the highest number of spindles in the world. India also has the
highest number of looms (including handlooms) in the world and contributes about 57 percent to the
global total number of looms in operation. Not counting handlooms, the industry contributes 33
percent to that total.In terms of fiber, India is the largest producer of jute, secondlargest
producer of silk, third-largest producer of cotton and cellulosic fibers and yarns, and
fifth-largest producer of man-made fibers and yarns (See Table 1).

The map shows the main Indian states where cotton is grown and wool mills are set up. While
cotton plays an important role in India’s textile industry, the wool sector remains relatively
small and scattered.Major DevelopmentsIn the past 10 years:• Silk production increased from 12.56
million kilograms (kg) to 17.35 million kg.• Man-made fiber production increased from 337.85
million kg to 904.28 million kg.• Annual production of cotton increased from 11.7 million bales to
17.8 million bales. The textile industry, along with the growth in the production of fibers, has
achieved remarkable growth:• Including small-scale industry (SSI) companies, the number of spindles
has increased from 26.67 million to 38.75 million in 2002-03. SSI companies are industrial
undertakings in which the investment in plant and machinery fixed assets does not exceed
approximately $220,000.• The number of rotors increased to 375,000 (inclusive of SSI companies).•
The number of looms has increased from 1.313 million in 1991 to 1.802 million in 2001. However, the
number of looms in the organized sector declined from 178,000 units to 122,000 units in August
2003. On the other hand, the number of handlooms has grown to 3.891 million.• Production of fabrics
has grown from 23.33 billion square meters to 42.31 billion square meters for the year 2002-03,
showing an annual growth rate of 3.96 percent during the past five years.• The fabric mix has
changed as well. Cotton, which used to account for about 66 percent of the fabric production, has
fallen to 49 percent, with the balance coming from blended and synthetic fabrics. This is largely
due to the increase in the production of man-made fibers and fabrics.• As of August 2002, out of
1,866 cotton/man-made fiber textile mills, 192 mills were in the public sector, 159 were in the
co-operative sector and 1,515 were in the privatesector.

The Indian textile industry presents a complex and vibrant picture, in which small-scale
family businesse co-exist with large state-of-the-art multinational companies.CottonCotton is one
of the major crops cultivated in India. It accounts for more than 75 percent of the total fiber
consumption in the spinning mills and more than 58 percent of the total fiber consumption in the
textile sector. Cotton remains the major textile base in India even though there has been a shift
in consumer preferences in recent years toward man-made fibers. With annual yarn production of
about 2 billion kg (SeeTable 2), cotton is the main fiber source for the Indian textile industry
with a 52 percent share. The main cotton producing states are Andhra Pradesh, Gujarat, Haryana,
Karnataka, Madhya Pradesh, Maharashtra, Punjab, Rajasthan and Tamil Nadu.India also is the largest
cotton textile machine importer in the world. The quality of cotton fiber, however, needs to be
improved and contamination levels to be reduced, both of which the industry is trying to achieve by
improving the techniques of ginning and pressing. The government has launched the Technology
Mission on Cotton (TMC) initiative for this purpose. Meanwhile, the ginning and pressing industry
also is taking advantage of the Technology Upgradation Fund Scheme (TUFS) to improve techniques and
effectively increase the availability of quality cotton.

Man-Made FiberThe production of man-made fiber is expected to increase by about 7 percent
during 2002-03. The production of viscose staple, polyester staple and acrylic staple fibers during
2002-03 is expected to increase by 11 percent, 5 percent and 8 percent, respectively. The
production of man-made filament yarn in general is expected to increase by around 8 percent during
2002-03.The production of polyester filament yarn is expected to increase by 10 percent. However,
the production of viscose filament yarn and nylon filament yarn is expected to decline (See Table
4).Polyester is the main man-made fiber used in India. With an annual production of about 18
million tons, it is second to cotton. However, its use is gaining ground because of its properties,
as well as the vagaries of cotton production due to weather. The world trade in man-made apparel
and even made-ups has been rising fast, but India’s share continues to be insignificant.The
government has taken steps to rationalize duties and encourage the production and consumption of
man-made textiles. Among the world’s top 10 polyester companies, two are in India — Reliance
Industries Ltd. and Indo Rama Synthetics Ltd.

SilkIndia is the second-largest producer of silk in the world and has the distinction of
producing all the four varieties of silk. In 2001-02, Mulberry accounted for 91.3 percent, Eri 6.7
percent, Tussah 1.4 percent and Muga 0.6 percent of the total raw silk production in the
country.Silk contributes to about 1 percent of total fabric production. However, its share in
export earnings is approximately 4 percent of textile exports. Value-add by the silk industry,
especially the ratio of capital to value-add is the highest. Unit realization in exports is as high
as 300 Indian rupees per square meter.Raw silk is another important textile base in the country and
the production of raw silk has to be increased for meeting the growing domestic and export demand
for silk products. In the meantime, to meet the shortfall in the supply of superior grade Mulberry
raw silk, the government has permitted the distribution of such silk through specialized
agencies.JuteJute is the cheapest lignocellulosic, long vegetable bast fiber available in the
world. Currently, the annual production of the fiber in India is around 10 million bales of 180 kg
each and about 73 jute mills are operating in the country. In addition, there are several SSI
companies in the decentralized sector producing handicrafts, decorative twines, pulp and paper from
jute and allied fibers and particle board from jute stick.The year 2003 sees another bumper crop of
jute, with a projected harvest of 11.5 million bales. With open stocks estimated at 1.6 million
bales, in addition to 200,000 bales of imports, the total supply position of raw jute is quite
comfortable at a projected level of 13.3 million bales.Consumption of raw jute as estimated by the
Jute Advisory Board is 9 million bales and with industrial/ domestic consumption at 800,000 bales,
there will be no shortage of raw jute for the industry.WoolThe wool industry in the country is
small in size and widely scattered. Forty percent of the woolen units are located in Punjab, 27
percent in Haryana, 10 percent in Rajasthan; the rest of the states account for the remaining 23
percent of the units. A few of the larger units are located in Maharashtra, Punjab, Uttar Pradesh,
Gujarat and West Bengal.As with the textile industry overall, the wool industry in India broadly
falls into the organized and decentralized sectors. The organized sector includes combing plants,
worsted and non-worsted spinning plants and machine-made carpet manufacturing.The decentralized
sector includes knitting plants, weaving plants, hand-knotted carpet facilities and independent
dyehouses.As the availability of fine-quality wool for the organized sector and the hosiery mills
is limited, the industry depends on imports from Australia and New Zealand.

ApparelIt has been estimated that India has approximately 30,000 ready-made garment
manufacturing units and around 3 million people are working in the industry. Today, not only is the
garment export business growing, enthusiasm in the minds of the foreign buyers also is at a high —
many leading fashion labels are being associated with Indian products. India is increasingly being
looked upon as a major supplier of high-quality fashion apparel and Indian apparel has come to be
appreciated in major markets.India has the unique advantage and capability of providing “small-lot
supply” — according to the specification of the buyer within a very short lead time — due to the
diversified structure of the textile industry. India’s supply base is medium-quality, relatively
high-fashion but small volume.The size of the Indian domestic market for garments is estimated to
be around 750 billion Indian rupees (approximately $16.3 billion). Although the Indian apparel
market is going through waves of expansion, apparel retail is at a low of around 6 percent to 7
percent of the total retail turnover.

 ExportsTextile products continue to hold an important role in the total exports of the
country (See Table 3). The textile industry is one of the few industries in India that has the
potential to emerge as a true global player. Its core competence lies in the availability of all
major raw materials, skilled manpower, managerial competence and entrepreneurial skills required to
be a producer and supplier of top-quality textiles at competitive prices.

Winter 2003