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The project aims at studying the textile industry of India in general and
textile export from India post MF regime in particular. The project studies
the various aspects of WTO agreement and its implications on the textile
export .it also studies how the termination of Multi Fibre agreement
benefited India and its competitiveness vis a vis other global players like
China, Korea and Vietnam. It also highlights various aspects pertaining to
Indian textile industry like its comparative advantage in textiles and
garments with respect to other countries, which emanates from the low wage
costs and access to domestically produced fabrics and other inputs.
Profile of the Indian Textile Industry
100% NON-
BLENDED/MI
YEAR COTTON COTTON TOTAL
XED FABRICS
FABRICS
1991-92 13.71 2.90 6.26 22.87
1992-93 15.57 2.57 6.36 24.50
1993-94 15.92 3.58 6.72 26.22
1994-95 15.24 3.27 7.47 25.98
1995-96 16.32 3.48 8.19 27.99
1996-97 16.24 3.98 9.08 29.30
1997-98 15.94 4.57 10.41 30.92
1998-99 13.07 4.13 10.99 28.19
1999-00 14.16 4.48 11.91 30.55
2000-01 14.22 4.50 11.96 30.68
2001-02 14.82 4.69 12.46 31.97
2002-03 14.40 4.38 12.59 31.37
2003-04 13.41 4.51 13.09 31.01
2004-05 14.08 4.11 15.32 33.51
By O/o the Textile Commissioner
Textile Trend :
It is the second largest employer after the agriculture sector in both rural
and urban areas. India has a large pool of skilled low-cost textile workers,
experienced in technology skills.
Almost all sectors of the textile industry have shown significant
achievement.
Besides natural fibres such as cotton, jute and silk, synthetic raw material
products such as polyester staple fibre, polyester filament yarn, acrylic
fibre and viscose fibre are produced in India.
Exports of Textiles
At present, (2004-05) the exports of textiles (including
handicrafts, jute, and coir) account for about 17% of total
exports from India and are the largest net foreign exchange
earner for the country as the import content in textile goods
is very little as compared to our other major export products.
Further, the export basket consists of wide range of items
containing cotton yarn and fabrics, man-made yarn and
fabrics, wool and silk fabrics, made-ups and variety of
garments.
Textile Exports at a Glance 2005-06 & 2004-05
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Sector-Wise Analysis
Readymade Garments
Man-Made textiles
Coir
In 1995, the MFA was integrated into the WTO via the
Agreement on Textiles and Clothing (ATC)
January 1, 2005, was a momentous day in the annals of world trade since it
signaled the end of three decades of restrictive trade practices in textiles in
the form of Multi Fibre Agreement or MFA, better known as quota regime.
Introduced in 1974 by nine countries- Canada, France, Germany, Italy,
Portugal, Spain, Greece, UK and US – the quota regime restricted imports
from as many as 39 countries with India and China being the worse hit .The
system of quota was intended to provide breathing space for industrialized
nations to allow less developed countries like Bangladesh ,and from
countries with which they had preferential trade agreement ,like Mexico to
compete .the complete phase out of the MFA by 2005 under Agreement on
textiles and clothing(A$C) put an end to quantitative restrictions. for
exporters in India it gives a tremendous opportunity to boost export.
A report by leading rating agency Fitch said;”the cost of retaining the MFA
have evidently outweighed its benefits. Protectionism has skewed global
distribution ,employment and investment pattern but has also failed to stem
the slide in Textile and Clothing (T $ C) employment in industrialized
countries.” the report also notes that for each job saved in developed world,
as many as 35 jobs were lost in the developing world, notably in India and
China.
The Fitch report like many other reports, is particularly bullish on the
prospects for India and China I the post quota regime. The report estimates
that while India could benefit to the tune of 8.4%of its current external
receipts (CXR or export earnings), I the case of china, it would be a gain of
3.9%of its CXR.
According to Mr. Raghav of leading consultancy KSA Technopak:” There
would be three key determinants for a nation to succeed in post quota
regime. These are raw material production base, ability to convert raw
material into finished goods, the low cost of operations, and reliability as a
supplier.
India, Mr. Gupta notes, has the benefit of being strong on all four counts and
is poised to do well in the post quota regime. While admitting the dominance
of China as a leading supplier of textile and clothing, Mr.Gupta says there
are enough safeguards to prevent it from monopolizing the market.
The china safeguard allows the erstwhile quota deploying nations to regulate
imports. it works like this-incremental supplies in a specific category would
be limited to 7% year-on-year till 2008. Interestingly enough, the Chinese
government on its part has already moved in to rein its overzealous exporters
by levying an export tax covering some key categories like
CAT347/348(trousers and shorts). According to Mr. Rajan Hinduja of
Golakdas exports, although Indian exporters could see a marginal rise in
apparel exports arising out of the Chinese decision (to impose the tax), the
move is not likely to have a major impact as India accounts for under
5%share of the US market
India can only be perceived as a threat when it reaches the level of china
which meets around 25% of the US imports. But there is a flip side to the
post quota story. For one, the abolition of quotas is expected to hit some
countries really hard .Textiles and Clothing which accounted for 18% of
Vietnam’s export earnings in 2003 are expected to witness a slide thanks to
rising competition from India and China in the post quota era.
Similar is the story with Tunisia which derives a whopping 48% of its export
earnings from this sector. Another worrisome issue could be the rise of non
tariff barriers. While short term measures of reciprocal market access and
transitional safeguards are currently being put in place by the industrialized
nations, the downside risk remains that political pressure may increase non
tariff restraints as a new line of defense.
WHO GAINS AND WHO LOSES:
• CHINA 3.9%
• INDIA 8.4%
• TURKEY -2.2%
• PHILIPPINES -1.7%
• INDONESIA -0.9%
China is undisputed leader in the world textile sector, making a quarter of the
apparel sold world wide. But India enjoys few key benefits over china
,which will come into play in the post quota era.
CUTTING EDGE:
Sections of Indian textile industry which are likely to pick up the most:
The garment industry stands to gain most directly post MFA.In the last 10
years, the quotas on other textile items(outside the garment)have been
gradually lifted to meet the requirements of the ATC.The developed
countries have kept the removal of quotas on garments to the final phase. So
it is only in 2005 that the market for garments will completely open up.
International retailers are also increasingly sourcing apparel from China and
India, which is a positive development for garment industry. The cotton
spinning industry may also benefit ,but indirectly. It may see a surge in
domestic demand from garment exporters.
While the export dat published by DGCIS are contentious, the information
available from leading importingcountries like USA and EU show that
india’s performance has been highly encouraging in the post quota period ,he
pointed out. Referring to specific products ,patodia pointed out that india’s
export of items like cotton yarn , knitted fabrics and home textile products
have registered a positie growth. Import of home textile categories from
India into the US like pillowcases (56.24%), sheeting(56.31%) bed
spreads(12.06%) and towels(19.11%) have registered impressive growth.
In the European union too. India has shown a positive growth of 6.82%
during the period jan-april 2005. considering the decline in overall imports
from extra- EU sorces into the European union,india’s performanceshould be
considered commendable.india’s growth has been achieved not only in
garment items but also in hone textile products like cotton bed linen, table
toilet linen ,etc.
With fresh restrictions been put up on china by the EU and imminent threat
of further restrictions being imposed by the US, exportes of textiles and
garments from India have good opportunities to increase their sales in these
markets.
Invaluable help has been provided to the Government of India in the area of
framing of policies that have a bearing on the exports of cotton textiles. This
has helped in the creation and nurturing of a healthy trade climate and
exporter-friendly policies which have been the primary reasons for the boom
in exports. The role played by TEXPROCIL in the finalisation of the Multi
Fibre Arrangement and in the negotiations at the World Trade Organisation
has been extremely commendable
The rise in exports has spawned a spate of protection measures, amongst
them being the fervent efforts by the European industry to protect their own.
Anti-dumping has been one of the first attempts in this direction. This has
been followed by anti-subsidy investigation
An export of Indian cotton textiles has shown tremendous growth in all
categories: yarn, fabrics and made-ups reaching more than 4 billion US$ in
value terms and covering over 185 countries spanning 5 continents.
India has become one of the world's largest exporters of yarn for every kind
of application from hosiery to weaving. Fabrics account for a third of India's
cotton textile exports. Made-ups from India can be found on the shelves of
the leading departmental store across the globe.
India has a natural competitive advantage in terms of a strong and large MFA
base, abundant and cheap skilled labour, and presence across the entire value
chain of the industry ranging from spinning, weaving and garment
manufacturing. However, both productivity and efficiency have to be
stepped up in order to meet the challenges of global competition. There must
be a bold and reasonable price policy for cotton all over India, to enable the
textile and garment industry to grow and catch up with China.
In India, presently due to the presence of big players doing everything under
one roof is going to benefit the textile sector to grow and consolidate in
newer markets world-wide, by exploiting the economies of scale available in
post MFA. This is going to be one of the important factors in determining
India’s competitiveness
INTERIM REPORT