SME Cluster Series 2014 - Mumbai

Dun & Bradstreet - British Airways SME Cluster Series 2014 : Mumbai


Textile Overview

The Indian textile industry is fragmented, with only a few large players and numerous small and medium-size companies. The textiles industry is classified as the hand-spun and hand-woven sector and the capital intensive, organized mill sector, which consists of spinning and composite mills. The decentralized power looms/hosiery and the knitting sector form the largest section of the textiles sector.

The Indian textiles industry produces a wide variety of fibres, from cotton to man-made, wool, silk, jute, and multiple blends catering to different demands and needs of companies. India has become a popular destination for many big global retailers due to its strength of vertical and horizontal integration.

The major sub-sectors within the textiles sector include the organized cotton/man-made fibre textiles mill industry, manmade fibre/filament yarn industry, wool and wollen textiles industry, sericulture and silk textiles industry, handlooms, handicrafts, jute and jute textiles industry, and textiles exports.

The Indian textiles industry plays an important role in the country’s economic growth. According to Twelfth Five-Year Plan, it contributes around 12% to the manufacturing output, 4% to the GDP, and 11% to the country’s merchandise exports. It provides direct employment to over 45 mn people, and is also the second largest provider of employment after agriculture. India is the second largest producer of silk in the world and a major producer of both raw jute and jute products.

Trends in the Domestic Market

As per the Ministry of Textiles, between FY07-FY12, India’s cloth production (including Khadi, wool, and silk) grew at a 2.8% CAGR, mainly driven by the small scale, independent powerloom sector. During the same period, India’s cloth production recorded y-o-y growth in each of the years, except FY09 and FY12. During FY09, cloth production declined by 2% to 54,966 mn sq mtrs, mainly due to lower output by the handloom and decentralized power loom sector. In FY10, cloth production increased 9.8% to 60,333 mn sq mtrs. However, the growth lost momentum during FY11 with production growing 3.7 % to 62,559 mn sq mtrs. The total cloth production however, faced a decline in production by 2% during FY12 to 61,364 mn sq mtrs. During Apr-Aug 2012, cloth production stood at 26,554 mn sq mtrs.

The composition of cloth production has remained more or less unchanged during the past decade. Between FY07-FY12, the average share of cotton in total cloth production was around 49% and average share for non-cotton cloth was 38%. During FY11, production of cotton cloth grew by 9.7% 31.7 bn sq mtrs, declined by 3.5% in FY12 to 30.5 bn sq mtrs, and stood at 14.1 bn sq mtrs as on Aug 2012. Production of non-cotton cloth declined by 4.6% in FY11 and further declined by 0.82% in FY12 to 61.3 bn sq mtrs and stood at 26.5 bn sq mtrs as on Aug 2012.

Export Scenario

Textile exports play an important role in the overall exports of the country. The Indian textiles and clothing industry is one of the largest contributors to the country’s exports. Exports of textiles have increased steadily over the last few years, particularly after 2004, when textiles exports quota stood discontinued.

India’s textiles exports reached US $ 22.2 bn in FY08. However, exports declined 5% to US $ 21.1 bn in FY09 but picked up growth again by 6.5% to reach US $ 22.4 bn in FY10 to US $ 27.8 bn in FY11, an increase of 23.8%. In FY12, textile exports stood at US $ 33.1 bn, an increase of 19.4%. The total textile exports during Apr–Aug 2012 (provisional) were valued at US $ 10.1 bn.

Investment: FDI in textile Industry

In the textile sector, 100% Foreign Direct Investment (FDI) is allowed under the automatic route. The industry attracted FDI worth US $ 1.3 bn between Apr 2000 and Aug 2013, which accounts for 0.62 % of the total FDI inflows in the country.

Future Outlook

The working group of the Twelfth Plan (2012-17) projects an average industrial growth of 11-12% along with significant growth in export and employment. With growth in textiles production, employment in this sector is also expected to grow by 15%. The employment in textiles is expected to increase to 52 mn persons by the terminal year of the Twelfth five-year plan. The working group has estimated the overall growth for exports at 15% with an export target of US $ 65 bn.