1 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

Indian Handloom Industry 2009-2014 VISION FOR

Statement Flow
1. 2. 3. 4. 5. Executive Summary Introduction Estimates of Opportunities for the Handloom Industry Investments and growth Agenda for Growth

2 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

Handloom Industry poised for significant growth

Indian handloom industry is working on a vision to capture market worth USD 15 bn by FY2014 The domestic household market potential is estimated to be USD 60 bn and FOB value of exports at USD 50 bn by FY2012 The principal drivers of growth would be World-wide recession slowing down non-handloom production 5.7% p.a. growth in world trade in textiles and clothing from USD 479 bn in 2005 to around USD 700 bn in 2012 Indias share in the export market to increase from current 4% to around 7% by FY2012 Domestic household market growth to be driven by increase in penetration of organised retail, favourable demographics and rising consumption & income levels In order to achieve the above growth, the production output of the handloom industry would need to almost double by FY2014 from current levels. The higher growth in value would result from manufacturing of more value added products Need to increase the output would call for investments to the tune of just Rs. 5,000 Cr. (USD 1 bn) during FY2009-2014 Consequently the industry could potentially generate additional employment for 10 million people of poor rural classes and skill. Indirect employment of 5 million are expected through the allied sectors.

3 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

Agenda for stakeholders

After a series of suicides across the country, handloom production has stabilized through market support and cluster development programmes. However, Key segments such as cooperatives have lagged behind in response Investments under cluster development programmes have had a positive impact on productivity as is evident from rising production without significant addition in working capacity

The following areas require support from Government, in collaboration with the industry, in order to enable the sector to become globally competitive and aid in achieving the Vision targets Facilitating capital investment through Extension of TUFS to handloom industry until FY2012 Reducing the cost of procuring working capital from institutional sources Establishing handloom parks Attracting IDI into the sector Accelerating investments in the marketing segment Strengthening the domestic textile market regulation through Indian Textile Labelling Act Addressing infrastructural constraints and reducing transaction costs Ensuring adequate availability of fibre for domestic consumption Facilitating manpower training The agenda for the handloom producers (master weavers, cooperatives and companies) is to drive competitiveness and customer acceptance through focus on strengthening supply chains, developing innovative designs, compliance with quality requirements, brand promotion and acquiring scale

4 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

Handloom sector continues to employ large number of people in rural, semiurban and urban areas of India. In some states such as Andhra Pradesh, Tamilnadu, Kerala and Karnataka, Uttar Pradesh, Gujarat, Rajasthan, North Eastern States, Madhya Pradesh, Orissa, West Bengal, this sector is visibly large and dominant in certain categories of clothing. Market for handloom products is still large and wide. There is good domestic market as well as international market. There are die-hard consumers who would support handloom products for every reason they can hold onto. Handloom sector continues to provide direct and indirect employment. There are estimatedly 32 other sectors which are dependent on handloom production, in various ways, including transportation, financial services, marketing services, service and maintenance services, hotels, etc. Many handloom centres are well known tourist spots, drawing visitors from far places of India and foreign countries as well. Thus, part of the tourism industrys fortunes is also influenced by handloom sector and its fame. Handloom sector has umbilical linkage with cotton farmers and rural farm economy. Agricultural labour gets employment in handloom sector in nonagricultural seasons. Handloom sector has self-sustaining mechanisms, including training for young weavers, irrespective of gender. The inheritance of skills, resources and capacities is beyond the realm and reach of any modern training and educational institution. It is a facilitation process, which is not dependent on the government and or any modern formal institution. There is also sufficient flexibility for all types of communities to take up handloom production as a profession. Handloom sector is part of the culture and ethos of India and its glorious past. It has emotional bondage with nationalism and the champions of nationhood. It had a principal role in public opinion formation during the Independence struggle against the imported goods and imposed industrialisation. Handloom production has significant contribution to the national GDP and export earnings. Thus, it has some influence over the foreign exchange levels and the well-being of the economy.

5 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

DEVELOPMENT OF HANDLOOM INDUSTRY

Employment to 30 million Mainstay of rural and semi-urban employment Exports reaching Rs.4,000 crores Annual turnover of Rs.50,000 crores Market demand of Rs.1 lakh crores The per capita purchase of cotton textiles in handloom sector is 0.88 metres and aggregate consumption at all India level is estimated to be 989 million metres. National level consumption of pure silk textiles produced on handlooms was 116 million metres and 6 million metres in woollen in 2006
DEFINITION OF THE SECTOR The handloom industry comprises:

the treatment of raw materials, i.e. the production and preparation of various textiles fibres "Natural" fibres include cotton, wool, silk, jute, etc. the weaving of various products: carpets body wraps (sarees, dhotis, etc) dress materials the transformation of fabrics into products such as:

o o o o

6 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

o o

garments home textiles (such as bed linen, table linen, toilet linen, kitchen linen, curtains, etc)

The distribution sector constitutes the last element of the sector and is therefore important for all handloom products which are sold to the final consumer. Although some handloom companies have set up their own distribution networks in the framework of their vertical integration strategy, the manufacturing and distribution sectors remain very different in their characteristics and nature, and should therefore be treated separately.

ECONOMIC AND SOCIAL IMPORTANCE OF THE HANDLOOM INDUSTRY

A few years in the last decade were very difficult for the handloom industry with significant declines in production and employment. The handloom sector is predominantly a household-based industry. Enterprises of less than 4 employees account for 60% of the workforce in the handloom sub-sector and produce almost 50% of value added. In India, the handloom industry is concentrated in about 15 States, accounting for about three quarters of Indian production of handmade textiles, including Andhra Pradesh, Tamilnadu, Kerala, Karnataka, Rajasthan, West Bengal, Uttar Pradesh, followed by Gujarat. On average, the handloom sector plays a more important role in the economy and employment of various Indian states. As regards the performance, more than 80% of handloom production in value is sold on the domestic market and about 10 percent in external markets despite limited access to many third markets. However, there remain significant impediments to trade in handloom products, especially in some of the largest and more competitive countries, and the handloom industry could increase production and exports to those parts of the world when the impediments are lifted. By comparison with manufacturing as a whole, it is worth noting that domestic markets are of higher importance for the handloom industry. In general, on the basis of developments in productivity, labour costs, quality of products, and international trade performance, it can be said that the handloom sector remains competitive internationally and has improved its position. Many of the States are very dependent upon the handloom industry in terms of value added and employment, and the existence of a huge productivity gap poses major challenges to policy makers.

7 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

CHARACTERISTICS OF THE HANDLOOM SECTOR

The handloom sector has been subject to a series of radical transformations over the last few years, due to a combination of technological changes, evolution of the different production costs, and the emergence of important international competitors. Such changes are likely to continue in the foreseeable future, and the definitive elimination of subsidies which has been applied for the past two decades will bring in additional competition. In response to past competitive challenges, the handloom industry has undergone a process of restructuring and technological progress. Handloom weavers have improved their competitiveness by substantially reducing or ceasing mass production and simple fashion products, and concentrating instead on a wider variety of products with a higher valueadded. Moreover, handloom weavers are world leaders in markets for body wraps (esp. sarees), as well as for high quality textiles with a high design content. Competitiveness has also been retained by sub-contracting, or relocation of production facilities, to semi-urban and urban areas. The competitive advantages of the handloom sector are now found in a focus on quality and design, innovation and technology, and high value-added products. At the same time, globalisation and technological progress have led to the need to think of clustering strategy. Still playing an important role for some activities, cooperation at local, district or regional level has increasingly proved adequate to ensure that the chain of production remains at close geographical proximity to the markets. Therefore, clustering of its diversified activities is now also based on a wider geographical area. Handloom products generally have a positive quality mark-up. Equally the handloom industry has a leading role in the development of new designs. These trends towards higher value-added products need to be continued and accelerated, if the handloom sector in India is to remain competitive.

Dayanidhi Maran, Domestic consumption is what can drive any industry, it is not very particular to textile, be it any industry. Today if India is surviving the economic slowdown is because of the domestic consumption.

8 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

Estimates of Opportunities for the Handloom Industry

Rising power costs

Rising production cost for non-handloom textile products

Slow down in imports, esp. fabric and clothes

Slow down in raw material exports, esp. cotton and cotton yarn

Environmentally-acceptable production methods

Skilled labour at low wages and growing market demand No major investments on infrastructure is required

9 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

Market size potential for the Textile Industry is USD 110 bn by FY 2012
Overall market size to grow at more than 13% p.a. Export market growth would be driven by a 5.7% p.a. growth in world trade to USD 700 bn by CY2012 (USD 677 bn in CY2011) from USD 479 bn in CY2005

Indias share to increase to around 7% by FY2012 from current 4%

Domestic market growth to be driven by favourable demographics, rising income levels and increased penetration of organised retail
Increasing retail penetration Textiles and clothing retail comprise 40% of organised retailing in India

Share of organised retailing is expected to increase from 3.5% currently to 8% by FY2010

Higher disposable income levels Proportion of major consuming class (population with annual income > USD 2,000) has risen from 20% in FY 1996 to 28% in FY 2002; and is expected to move up to 35% by FY 2006 and to 48% by FY2010 Higher level of working women Propensity to spend in the case of working women is higher by around 1.3 times as compared to a housewife. According to census report, population of working women has increased to 26% in FY 2001 from 22% in FY 1991 Increase in nuclear families Average household size has decreased from 5.57 in 1991 to 5.36 in FY2001. Per household consumption increases as a result of formation of nuclear families this in turn would drive consumption and boost the retail industry Baby boomer effect The percentage of earning population (15 to 60 years) in the total population is rising. In FY 2000, the 15-60 age group boasted of 593 mn people i.e. 58.3% of the total population and over the next 15

01 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

years, the strength of 15-60 age group is expected to increase to 782 mn, a share of 62.8% in the total population Higher growth & income levels in urban population At present, organised retailing is focused on metros and gradually expanding in Tier-2 cities. Over the next 10 years, growth in retailing is largely expected to take place in urban areas.

Urban population in 15-60 age group is expected to grow from 164 mn (18% of total) in FY 2000 to 287 mn (23% of total) in FY2015

Increased usage of credit cards Use of credit cards (plastic money) has increased significantly in last 3-4 years. Number of credit cards issued has grown at 26% p.a. in past 5 years while debit cards have grown by 113%. Increase in the installations of card machines will provide fillip to impulse apparel purchases

11 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

 Investments have lagged expectations because of Low returns Decreasing government budget allocations (from 23 percent in 1997 to 7 percent in 2009) Raw material shortages and price escalation Decreasing access to institutional working capital Unfair market competition

21 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

Utilising opportunities in general

Positive handloom growth public policies are required Higher budget allocation of Rs.5,000 crores to sustain employment Increasing access to raw materials, especially hank yarn Direct subsidies

Utilising Opportunities in Investment

Moratorium on all loans cooperative and non-cooperative for two years Provide interest on all government delayed dues Infrastructure assistance under TUF scheme Increase institutional credit to atleast Rs.10,000 crores at 3 percent interest Include handloom sector in textile industry stimulus package

Utilising Opportunities in Markets

Enactment of Indian Textile Labelling Act, for non-handloom textile products Mandatory labelling of all textile products, esp. powerloom

Utilising Opportunities: Policy Factors

31 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD

 Review of National Textile policy 2000 Reform programme for handloom support institutions Encouragement of efficient handloom co-operatives through classification Increase import duty on silk fabric Decrease duty on silk yarn

Utilising opportunities: International

Inclusion in WTO NAMA and FTA negotiations HS classification for handloom products (already announced) Representation for appropriate handloom representatives on all textile decision making bodies

41 egaP

moc.liamg@ihtnod.yddern :liam-e ,yddeR ahmisaraN .D .rD