Reviving Indian Carpet Export: A Descriptive Study

*Sharda Hariyani Shubham Singh Sonam Nareliya Shruti Sharma

Abstract
Carpet industry in India is one of the oldest and the most popular industries. India has always had an ancient heritage of carpet weaving, a craft that has assorted skill and expertise from lands as diverse as Persia, China and Afghanistan. However, this artistry is no longer a trade that is still isolated in the villages or towns. Along time, this craft has evolved spreading its wings not only at the domestic front but also the international markets. This paper is an attempt to analyze the export potential of Indian Carpet Industry. The industry has faced tough time due to global economic recession in 2008.This study tries to access whether this downturn has affected the export potential of carpet from India. Key words: Export, Recession, Artisans, CEPC etc.

Introduction The carpet industry is one of the most rapidly growing traditional industries in India. Indian carpets are renowned world over for their exquisite designs, subtle elegance, attractive colors and workmanship. The carpet manufacturing as an art was brought into India by Mughals in 14th Century. It enjoyed royal patronage and the Indian artisans imbibed the techniques of carpet weaving. Over the years, the craft got progressively indigenized depicting Motifs from Indian paintings. In the nineteenth and early twentieth centurys, an extended belt of commercial production was established in the Mirzapur-Bhadohi belt of Uttar Pradesh, Jaipur and its adjacent areas of Rajasthan because of its close proximity to the Rajput and Mughals Kingdom. The carpet manufacturing industry provides livelihood to more than three million artisans belonging to the rural areas of the country. It contributes to the national economy in several ways and provides employment to the rural poor and the economically backward sections of the society. A major portion of the weavers belongs to the backward classes or other minority communities and almost all are living below the poverty line. The carpet industry is a de-centralized industry and is a generational craft where skills are passed on from one generation to another. Capital investment in this industry is meager. But the returns are immense in terms of foreign exchange. Many kinds of carpets are available in India and each carpet in carpet industry in India is unique and caters to the different segment of the society. From the design perspective then there are two major designs available i.e. modern and traditional. Modern designs are more popular in northern European countries whereas traditional are popular in southern European countries but there is no such differentiation of carpet designs for US market. Major home furnishing industry is now moving towards carpet industry. This movement has offered a new market trend for new designs and large market segment. Youth market is now more open to the contemporary and modern carpet industry which has given a new opportunity to the carpet industry. India has far better options than its competitor countries like China in terms of quality and designs. India is more flexible and produces all kinds of carpet.

Carpet Export Promotion Council (CEPC) established in 1982 by the Ministry of Textiles, Government of India has played effective role to facilitate export promotion and development of Indian hand-knotted carpets and floor coverings. CEPC channelizes communication between the carpet manufacturers/exporters and the Government on industry matters. It helps the Government plan export promotion strategies, welfare schemes for carpet weavers and action plans for a more organized growth of this skilled craft sector. CEPC facilitates sourcing for international buyers on one hand and helps Indian exporters penetrate the global markets deeper and wider-both established and emerging ones. CEPC also provides financial assistance for market development and sourcing. It organizes its own trade shows and helps exporters exhibit in various international trade events worldwide. It disseminates information on key markets, fashion trends and emerging business scenario. The magnificence of Indian carpet weaving and the intricate patterns that emerged from it have substantially increased Indias carpet exports and placed it prominently in the international carpet map. In the global carpet scenario, the market share of Indian carpets is expanding rapidly. This paper is an attempt to analyze the export potential of carpet industry and to explore whether there is any effect of global financial crisis 2008 on the export of carpets. OBJECTIVES The main aim of this study is to analyze the export potential of Indian carpet industry and to develop the future strategies for its growth. The study also tries to explore the status of carpet export to major countries like USA and Germany after global economic crisis 2008. Review of literature Indian carpet industry is primarily export oriented industry. There are 1215 carpet manufacturing units recorded and of that 190 are in the organized sector and the rest are in small scale industry sector. Though it experienced a major setback during 1996 -2000 due to the involvement of the child labor, it has overcome the jolt by implying special measures like "rugmark" and "kaleen " labels that ensure the non involvement of child labor. By the early 1990s, facing bans on goods made by children in both the United States and Germany, the two largest overseas markets for Indias carpets, Indian carpet exporters began to agree that their industry needed to change. Perhaps older workers might be more productive than children, after all, since they have more stamina and can tie tighter knots. With assistance from the German embassys export-promotion programme, the carpet industry began to create a social labeling scheme; neither the German nor the American legislative proposals were put into effect (Bhattacharyya and Sahoo, 1996a, 1996b). Indian carpet has a special place particularly in the heart of the people in the developed countries which absorb 88-90% of Indian carpet exports. USA and Germany, the two largest and established markets for carpets together account for 76% of Indias exports. The other developed countries and only a few developing countries account for the rest of the share. Apart from earning foreign exchange, the industry provides employment to a large number of people mostly in rural areas and helps in generating supplementary income for their families. (Carpet Export promotion council CEPC) The carpet industry in India has made significant strides in the recent past and exports of carpets from India touched a level of Rs. 25902 million in 2002-03. This growth is significant in view of

the sluggish market conditions, stiff competition from other major carpet producing countries and other societal constraints. The Indian hand-made carpet industry is a significant contributor to the country's rural economy, which is an export-oriented industry and helps in providing employment. The strength of the industry is the small and medium sized exporters with tremendous export potential and the highly talented crafts persons who have been weaving intricate designs of exclusive floor coverings, Bhadhoi, Mirzapur, Varanasi Region (Uttar Pradesh) boasts of maximum carpet production. The country owes 90% of its carpet production to this region. The belt is known for Fashion Oriented, Hand-tufted, Indo-Tibetan carpets and has a major influence of Buddhist arts and patterns. The place also specializes in traditional woolen carpets and durries. The carpets here are known for their unmatched style and elegance. Other domestic market manufacturers of Panipat, Rajasthan, J&K, and Punjab are the major players who contribute noteworthy revenues to the country (Mayur Basuk, National Seminar cum workshop on
recent R&D Initiatives and Developmental Schemes of wool and woollens )

The carpet industry witnessed a constant growth till 1994-95 and after 1994-95 the export declined due to competition with the other countries like China but during the year 1999-2000 the exports again grew to Rs. 2230 million which is an increase of 176.39 % over the previous year of 1998-99. The export figures have increased steadily from Rs.2976 to Rs.4020 million in the years 2000-01 and 2001-02 successively. The growth of carpet industry in Rajasthan has also contributed to the establishment of a number of ancillary industries like woolen yarn manufacturing and coloring & dyeing units in the state. As a result today about 30 woolen yarn manufacturing plants are operating in the state with full capacity [2].Industry-wise, carpet and rug sales continued to grow by seven percent from 2004 to 2005, wood flooring grew by eight percent, and all hard surfaces grew by five percent. The rise in the rug segment by five percent was a result of the growth in hard surface flooring since even with wood or laminate floors, consumers continue to decorate with area and scatter rugs (Floor Focus 2006 Annual Report). RESEARCH METHODOLOGY The study is exploratory in nature and carried to analyze the trend of Indias export of carpets Analysis of Export potential of carpets from India is based on last ten years data. The source of data is secondary, taken from official websites of government of India, Books and journals for literature review. Trend analysis has been used to analyze the data received from secondary sources.Statistical package (SPSS) is used to fit suitable forecasting model based on last 10 years data. EXPORT STATISTICS The carpet industry in India is an age-old, well established decentralized sector, employing over 2 million rural workers, and who are mostly non-agricultural rural populace. Indian carpet is an export oriented item & above 90% of its production being exported. The industry has made rapid strides during the post-independence era especially during and after 70s in the wake of overseas demand which stimulated carpet production and exports. As a result, exports which were worth around 3 crore in 1947-48 and 11 crore in 1970-71 registered manifold increase and exceeded Rs 1121.13$ million in 2006-07. The global financial crisis started showing its effects from mid 2008. Indian exports is witnessing a shortfall of about 20% against their target of US$ 200 billion for 2008-09 as prevailing domestic economic conditions have caused severe dampening effects on potential exports segments of Indian economy. Job oriented export sector have shown up to 70% negative growth and there is a sharp decline in tea (-20%), handicrafts (-70%), carpets (-32%), oil meals (50%), man-made yarn (-17%), cotton yarn (-19%) and marine products (-19%). After 2007-08 there is a sharp decline in export of carpets due to worldwide economic recession. The

carpet export sector has been encountering tough times in 2008-09 and even in the first few quarters of 2009-10. However, January 2010 heralded good news for small-scale carpet exporters, with the sector clocking an impressive growth. The rise in growth of carpet exports has evoked a sense of optimism among the carpet exporters. Despite recessionary pressures, Indias carpet exports rose by 8.5 percent in January 2010. The growth, needless to say, will be a beacon of hope to the small-scale units given that the upswing will continue during the coming few quarters. Table 1 presents the extent of the exports of carpet and other floor covering from 2000-01 to 2010-11.Figure 1 shows the export trend of carpets. It is worth mentioning here that the export figures was dropped a little in 2008-09 but all other years shows an increasing trend. Although the growing opportunity for carpets in global market is observed but when it is compared with two major importers of carpet vis USA and Germany the results are disappointing. Table 2 and 3 presents the extent of the exports of carpet and other floor covering to USA and Germany from 2006-07 to 2010-11.Figure 2 and 3.shows the export trend of carpets. It is clear that trend of carpet exports is showing downward inclination for both the countries. The export value 495.01 $ million in 2007-08 declined to 386.17 $ million in 2008-09 to USA whereas there is an upward movement in trend from 2010 to 2011 showing a 13.37 % increase (table 2) which is a positive indication for the growth of carpet export. The export value to GERMANY in 2007-08 was 160.78$ million which decreased to 144.48 $ million in 2008-09. It is clear from the figure 2 and 3 that the market showed the strong resistance in year 2009 which was a sign of worry for the carpet manufacturers and exporters. But the growth of 11.93% from year 2009 to 2010 (table 3) brought a sigh of relief to the Indian carpet weavers after facing tough condition from 2007- 2009.

Table 1 - Export of Carpets and other floor coverings

Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Exports(in us $million) 573.62 617.9 734.18 826.88 1,121.13 1,207.54 1,261.76 1,071.03 1,054.42 1,333.65 Growth Rate -9.93 7.53 18.82 12.63 35.59 7.71 4.49 -15.12 -1.55 26.48 TREND VALUES 626.450 705.064121 783.677515 862.290909 940.904303 1019.5177 1098.131 1176.74448 1255.35788 1333.97127 1412.584667 1491.198061 1569.811455

Source: Ministry of Commerce, Government of India(www.commerce.nic.in) , Carpet Export Promotion Council (CEPC),India

Table 2 - Export of Carpets and other floor covering to USA

year 2006-07 2007-08 2008-09 2009-10 2010-2011 2011-12 2012-13 exports(in us million $) 497.99 495.01 386.17 368.53 417.79 -0.6 -21.99 -4.57 13.37 growth rate TREND VALUE 490.474 461.786 433.098 404.41 375.722 347.034 318.346

Source: Ministry of Commerce, Government of India (www.commerce.nic.in) , Carpet Export Promotion Council (CEPC),India

Table 3 - Export of Carpets and other floor covering to Germany

year 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

exports(in us million $) 159.38 160.78 144.48 161.72 153.72

growth rate 0.88 -10.14 11.93 -4.95

TREND VALUE 158.092 157.054 156.016 154.978 153.94 152.902 151.864

Source: Ministry of Commerce, Government of India(www.commerce.nic.in) , Carpet Export Promotion Council (CEPC),India

Future prospectus of Indian carpet Industry The Indian carpet sector registered a decent growth of 8.5 percent in January 2010, thanks to demand finally picking up in the global markets. Although the sector is showing signs of revival, it would still take some time for carpet exporters to recover their losses fully and attain their precrisis growth levels. At present carpet industry is passing through its tough time, especially the hand knotted carpet sector. In this crisis government agencies and financial institution should take forward steps to revive and boost the carpet industry. Rising Inflation is a world-wide phenomenon. Due to increase in price of oil and commodities, raw material costs have increased. Consequently the importers should increase the prices to compensate growing input cost of manufacturing. Due to high inflation the cost of Woolen Yarn, Cotton Yarn and Polyester Yarn have gone up by more than 50% in a period of 6 months. The carpet buyers are unwilling to pay the increased cost of manufacturing. Therefore the Govt. must come forward to assist the industry with subsidies to make carpet competitive in International Market. Bankers and ECGC should be come forward for export business. The Banks are overcharging exporters in the matter of interest, penal interest and charges. So, Reserve Bank of India should monitor & give instruction to banks to maintain transparency between bank & exporter. In order to retain existing weavers, finishers and other artisans and to pull back others who have left carpet weaving and migrated to other occupations, remuneration to weavers and artisans

should be suitably increased and brought to the level higher than MANEREGA wages. Also there is a need to grow the new markets apart from the traditional overseas market. Hence, More MDA Assistance should be made available for carpet exporters to undertake overseas visits for the purpose of marketing, particularly in non-traditional and developing markets. Chinese industry is a biggest threat to Indian carpet industry, in terms of pricing and volumes. The innovative products range with lower volume could be a success mantra for Indian Carpet Industry, in the coming years. The continuous government support through new schemes & training program will be helpful for Indian handmade carpet sector. Possible use of computer aided design cutting methods came up as the major solutions to recapture the market share (B.
Bowonder, J. Swamy and Nrupesh Mastakar)

Conclusion
The rise in exports recorded in January 2010, has given the much-needed push to the small-scale carpet export units, filling them with high hopes that trading conditions will improve in the upcoming days. The trends in export growth are clear indicators of the change. Carpet industry in India will flourish further because of our artistic weavers and their innovative carpet designs. Apart from this Indian carpet industry can produce different kinds of carpet which are not produced by other countries. But on the other hand there are certain weaknesses that must be overcome so that carpet industry in India can flourish further. There should be proper marketing channels for the same. Access to the local as well as foreign customers should be simple and easy. Also something has to be done regarding infrastructure to save production and cost. In addition to this the carpet manufacturing belts should be made easily accessible to the traders. Professional approach, less internal competition, and intellectual property rights should give boost to the carpet industry in India. Indian carpet industry is a unique industry and this is expected to grow in near future but with the channelization and organization of the industry. References: http://www.rajasthanart.com/carpets/ http://www.indiastat.com http://www.india-carpets.com/ (Indian carpet export promotion council) 2006 Annual Report, Floor Focus, May 2006.

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