India Battles New Challenges

ith a history that stretches back thousands of years, the Republic of India’s textile
industry has withstood many challenges to become a key industry and economic contributor. Today, in
the post-Multi-Fiber Arrangement era, the textile sector of that southern Asian country — bordered
by Pakistan, China, Bangladesh, Nepal, Bhutan and Myanmar; and between the Arabian Sea to the
southwest and the Bay of Bengal to the southeast — faces new challenges and competitors.
Nevertheless, the industry continues  Ministry of Textiles.

India’s global textile share is 4 percent, while the country captures 2.8 percent of the
world’s apparel market. In 2005-06, the sector exported goods worth US$17.1 billion — up from US$14
billion in 2004-05 — or 16.6 percent of the country’s total exports. Among those goods were
ready-made garments, cotton textiles, man-made fiber textiles, wool and woolen goods, silk,
handicrafts, coir and jute.

With such an extensive history, it might not be a surprise that the industry’s production
capabilities range from traditional handweaving and handspinning to modern mills. The ministry
notes that the largest section of the industry comprises the decentralized powerlooms and hosiery
and knitting sectors. On the other end of the spectrum, handweaving and handicrafts offer
considerable employment opportunities and potential for foreign exchange and export earnings. Other
signs of India’s textile strength are that it is the largest producer and second-largest exporter
of jute goods, the second-largest producer of silk — producing approximately 18 percent of the
world’s total raw silk production — and the seventh-largest producer of wool — accounting for 1.8
percent of worldwide wool production.

With regard to the industry’s structure, in its 2005 International Textile Machinery
Shipment Statistics report, the International Textile Manufacturers Federation (ITMF), Switzerland,
noted India’s installed spinning capacities, as reported in 2004, numbered 37.5 million
short-staple spindles — second in the world only to China, which had 67 million short-staple
spindles — and 990,000 long-staple spindles — third in the world behind China, with 3.6 million
long-staple spindles, and Italy, with 2.6 million long-staple spindles. Open-end capacity that year
totaled 501,140 rotors, third behind China and Russia. In the weaving sector that year, Indian
firms reported 9,640 shuttleless looms and 90,230 shuttle looms. Capacities in 2004 for filament
weaving looms and wool weaving looms were 1,500 and 7,300, respectively.

The Ministry of Textiles has offered a more comprehensive look at the industry’s major
subsectors in its Annual Report 2006-07. The following are highlights of some of the subsectors.


Decentralized Power Looms

As of March 31, 2006, the power looms subsector — which produces various cloth products,
including greige and processed fabrics — consisted of 430,000 units with 1.94 million power looms.
The ministry projected the number of power looms to rise to 1.95 million in 2006-07. Of the total
cloth produced in India, 62 percent of it came from the power looms subsector, and the ministry
estimates that more than 60 percent of the country’s cloth exports originated from that sector.
With its employment of 4.86 million workers, the power looms subsector comprised approximately 60
percent of total textile industry employment.


Organized Cotton/Man-Made Fiber Industry

With almost 1 million workers, the cotton and man-made fiber industry is India’s largest
organized industry employer, according to the Ministry of Textiles. The 1,818 textile mills — with
a capacity of 35.4 million spindles, 448,000 rotors and 69,000 looms in the non-small-scale
industries sector, as of January 31 — also make it the largest in terms of number of units. Spun
yarn production reached 3.5 billion kilograms in 2005-06 and is expected to reach 3.8 billion
kilograms during 2006-07. Weaving capacity numbered 86,000 looms in March 2005 and fell to 69,000
in January 2007. Cloth production in the mill sector, which totaled 1.58 billion square meters in
2005-06, is projected to reach 1.73 billion square meters in 2006-07.



As the major raw material for the country’s domestic textile industry, cotton is essential
to the industry’s livelihood, employing some 50 million people in related areas such as
cultivation, processing and trade. The Ministry of Textiles notes the country is the second-largest
cotton producer in the world, producing 16.8 percent of worldwide cotton supply; and has the
largest cultivated area, with about 9 million planted hectares. However, the ministry also
acknowledges that the country falls behind other major cotton producers, with production of 467.4
kilograms of cotton per hectare (kg/ha) in contrast to the global average of 728 kg/ha — although
2005-06 productivity in the State of Gujarat did match the global average.

According to the April 10, 2007, US Cotton Market Monthly Economic Letter of Cary,
N.C.-based Cotton Incorporated, the United States Department of Agriculture reported India is the
third-largest cotton producer both in terms of 480-pound bales, with 19.1 million bales produced in
the 2005-06 marketing season; and in metric tons, with 4.1 million metric tons produced that
marketing season. China and the United States lead the pack of global cotton producers. With regard
to consumption, India is second to China in terms of 480-pound bales — 16.5 million bales used in
the 2005-06 marketing season — and metric tons — 3.6 million metric tons used in the 2005-06
marketing season.


Post-Multi-Fiber Arrangement View

India’s textile industry has grown rapidly since the Multi-Fiber Arrangement ended in 2004,
according to the Indian government’s Press Information Bureau. Exports to the United States and
Europe have risen 26 percent and 18 percent, respectively. However, India’s Ministry of Finance
notes in its 2006-07 Economic Survey that while fabric production and the value of textile exports
have increased, China continues to lead in terms of textiles and apparel exports. China’s global
textile and apparel share in 2005 was 24.7 percent — worth US$115.1 billion — in comparison to
India’s 3.4-percent share, worth US$16.1 billion. Dr. Seshadri Ramkumar of the Nonwoven and
Advanced Materials Laboratory at Texas Tech University, Lubbock, Texas, and co-chairman of the
INDA-India Committee of the Association of the Nonwoven Fabrics Industry (INDA), Cary, N.C., may
have said it best in his recent feature: “The Indian elephant lags behind the Chinese dragon” (See “
Good Times Ahead for India,” TW Asia, March/April 2007).

The ministry’s Working Group on Textiles and Jute Industry for the country’s 11th Five Year
Plan (2007-12), has studied the industry’s major challenges. Structural weaving and processing
weaknesses, a lack of capacity in India’s textile machinery manufacturing sector, and a fragmented
garment industry as well as a fragmented and technologically slow textile-processing sector were
highlighted. Other challenges included rigid labor laws and infrastructure difficulties regarding
electricity, other utilities and road transport. The group also examined the country’s textile
training facilities.

Shri E.V.K.S. Elangovan, minister of state for textiles, said the government has
counteracted such challenges by introducing programs that support and invest in the industry. For
example, the Technology Upgradation Fund Scheme provides funds to the country’s textile producers
to upgrade existing technology or set up new technologically advanced units. The Scheme for
Integrated Textile Parks initially will create 26 industrial clusters, with facilities for
processes such as spinning, sizing, texturizing, weaving, processing and apparel production. Other
forms of support include the reduction of customs on imported machinery, the creation of Apparel
Training and Design Centres and the National Institute of Fashion Technology, and other measures to
strengthen and upgrade the industry.

As part of the effort to assist the industry’s growth, the Confederation of Indian Textile
Industry (CITI), based in New Delhi, has developed its vision for 2007-12. The Indian textile
industry’s umbrella organization has set the goal that the domestic market and exports will be
worth US$110 billion by fiscal year (FY) 2012 — more than double the US$52 billion value in FY
2006. Production value will therefore need to increase 16 percent annually from US$27 billion in FY
2005, to reach US$76 billion in FY 2012. Increased technical textiles usage and the production of
more value-added products will bring about that value increase, CITI notes. Production output will
need to almost double by the end of the period to achieve such growth.

Main drivers of such growth will include a 5.7-percent annual increase in world textile and
apparel trade; an increase in India’s export market share, to around 7 percent by FY 2012; and
apparel exports, accounting for 60 percent of the country’s total textile exports by FY 2012. On
the home front, the domestic market will expand as the result of growing consumption and income
levels, increasing organized retail and demographic changes. Increased technical textile and home
textiles usage will raise domestic non-apparel consumption.

The fact remains that India’s textile industry is prominent in the country’s economy as well
as globally. Government and industry advocates such as CITI will continue to push the industry to
grow in new directions, to remain technologically advanced and to make production even more
economically viable. By doing so, the industry will be able to adapt to global changes and to take
on whatever challenges and competitors that may come its way.

May/June 2007