|
 |
|
| PREFACE | FOREWORD | EXECUTIVE SUMMARY | METHODOLOGY | INDUSTRY REPORT | SME INSIGHTS| COMPANY LISTING| SPONSORS | ||
|
||||||
|
||||||
The phasing out of the international quota system is a major turning point for the Indian textile industry – an opportunity and a threat. The textile industry is among the SME intensive sectors in India, largely an outcome of government policies during the early years of Independence. Focusing on promoting domestic employment, large-scale production in the textile industry was curtailed through restrictions on total capacity and level of mechanisation. Several textile items were reserved for the small scale segment. These policies promoted the extensive growth of small scale textile enterprises that were highly labour intensive, though it eroded the competitiveness of the industry and acted as a disincentive for capital investment.
These policies -- pursued from the 1950s to the 1970s -- resulted in the dominance of the decentralised powerloom and handloom sectors in the textile industry, which are mainly small and medium scale enterprises. In fact, many of the large textile companies are also conglomerates of medium sized mills. Statistics released by the Ministry of Textiles shows a highly fragmented industry, except in the spinning sub-segment. The organised sector contributes over 95% of spinning, but hardly 5% of weaving fabric. Small Scale Industries (SSIs) perform the bulk of the weaving and processing operations.
De-reservation of textile products has been a priority area for the government since 1997, which was believed to be the most effective way to foster productivity and efficiency within the sector. All textile items were removed from the reservation list by 2005. These measures were a prerequisite to compete globally in the post-MFA regime. As trade barriers come down and capital mobility increases, large, organised and integrated firms will gain importance in establishing a presence in the global market and to tap opportunities.
In the new scenario of a quota-free world, the readymade garments sector will play a crucial role in the economy, in terms of contributing to exports as well as employment generation, considering its inherent labour-intensive nature. In the cloth production segment, the hosiery and mill sectors are likely to be the gainers.
Defining MSMEs
The Micro, Small and Medium Enterprises Development Act, 2006, which came into effect from October 2, 2006, define SMEs on the basis of investments in plant and machinery.
For enterprises engaged in the manufacture of goods:
Micro - Investment in plant and machinery less than Rs 2.5 mn
Small - Investment in plant and machinery over Rs 2.5 mn but not exceeding Rs 50 mn
Medium – Investment in plant and machinery in excess of SSI limit but less than Rs 100 mn
For enterprises engaged in providing or rendering of services:
Micro - Investment in equipment not exceeding Rs 1 mn
Small - Investment in equipment over Rs 1 mn but not exceeding Rs 20 mn
Medium – Investment in equipment is in excess of SSI limit but less than Rs 50 mn
Buyer-Driven Network
The global textile industry, a buyer-driven network, is dominated by retailers, marketers and manufacturers. In the newly defined business environment for textiles, retailers like Zara, H&M, etc. have redefined the life of fashion trends from the earlier five to six months to around two months. In this scenario of such short shelf-life, the small scale operations of Indian SME apparel manufacturers gives them the flexibility to service custom-made orders at low cost. It is likely that India will become a preferred destination for global manufacturers and retailers as well, and big opportunities for SMEs are forthcoming.
Today, apart from the big Indian textile manufacturers like Gokuldas Exports, Alok Industries, Raymonds, Welspun India, Arvind Mills and Madura Garments, several small and medium sized apparel manufacturers have also become significant contributors to the total apparel exports of the country. Cotton knitwear suppliers of Tirupur, hosiery suppliers of Ludhiana and suppliers of home textiles from Tamil Nadu, Kerala and Punjab, among others, have been accepted as high quality and cost effective apparel suppliers in international markets.
These regions are also SME dominated textile clusters that have emerged either due to market access, availability of raw material or private initiatives. The textile industry of India operates largely in the form of clusters -- mostly natural clusters -- with roughly 70 textile clusters producing 80% of the country’s total textiles. Based on a UNIDO study conducted on SME clusters in India, some noteworthy textile clusters include:
Panipat, accounting for 75% of the total blankets produced in the country
Tirupur, responsible for 80% of the country’s hosiery exports
Ludhiana, which accounts for 95% of the country’s woollen knitwear produced.
Cluster-based Approach to Development
Inspite of some natural advantages such as low costs and flexibility, the SMEs suffer from disadvantages of being in a relatively isolated environment.
The Government of India’s cluster development initiatives, involving technical assistance, subsidies for technology upgradation and marketing support, have strengthened the competitiveness of the SMEs, which has also consolidated their position in the global value chain. A case in point is the initiative undertaken by the Textile Committee under the Ministry of Textiles, which has undertaken a cluster-based programme for capacity building in textile and clothing SMEs in across 20 clusters in the country.
Some key benefits of a cluster based approach for developing SMEs are:
Among the successes of the Textile Committee’s cluster development initiatives has been the acquiring of intellectual property rights protection for the Pochampally Ikat tie-and-dye sari, from Andhra Pradesh. It is the first traditional Indian craft to receive this status of XXVIII geographical branding, and is expected to benefit at least 100,000 weavers in the state. The powerloom clusters in Sholapur and Salem are also following suit in acquiring geographical indications protection.
Another successful initiative is seen in the Terry Towel cluster of Solapur, where some major interventions were undertaken by the committee such as setting up of a polytechnic institute, acquiring quality certifications for some of the units, setting up an export consortium and establishing networks.
The concentration of textile firms in the form of clusters is to a natural advantage for adopting a cluster-based development approach of the textile SME segment. International and domestic experience has proved that this approach has helped firms in attaining competitiveness -- a requisite in today’s new market.
Linking with the Global Value Chain
An inevitable outcome of the opening up of the textile markets is the rationalisation of supplier base by large retail chains such as Wal Mart and Gap. Under such circumstances, it will be difficult for small enterprises to individually meet the requirements of these international buyers. Hence, it will be essential to build value networks through linkages with large players who can win large orders, while smaller players service these orders.
This entry into value networks will not only link up small players to the global value chain but also assure a market for their products. Incorporation of textile SMEs as third and fourth tier suppliers will be an effective way of ensuring that they gain from the growing demands of the global market. However, here the role of the government and the large textile companies will be imperative.
SWOT Analysis of Indian Textile SMEs
| Strengths | Weaknesse |
|
|
| Opportunities | Threats |
|
|
Indian Textile Clusters
|
|