The 21st Shanghai International Nonwovens Exhibition(SINCE)

Overall, India’s textile industry, both the corporate and medium enterprise units, had a lacklustre and flat performance over the last financial year (April 2015 to March 2016), with an average growth of 5-5.5%, compared to an earlier rate of 8-9%.

It is rather disturbing considering that cotton and MMF production was more than adequate, and that the government had considerably funded and assisted new investment in the textile sector by a subvention scheme called TUFS. According to authors and analysts of the textile industry, the root cause stems from three or four core factors; a major one being China changing the cotton and yarn importing policy via maintaining a huge government reserved stock of cotton.

The second key factor is the continued and recessionary demand from key export destinations such as the US, EU, South Korea and Japan. The third [and now serious concern for the future] is the strong emergence of Bangladesh, Vietnam, Cambodia, Mynamar and Ethiopia as the fast-growing producers and exports of garments, with many concessions including duty free imports from the US and EU.

The worst fear for the future is that India may become less competitive when the TPP agreement comes into force in 2018 with huge duty free advantage, especially to Vietnam and others.

In this dynamic and hostile global scenario, the present status of the core textile sectors in India is as follows:

Spinning

The yarn manufacturing sector is one of the largest in the country, with around 4,000 spinning mills having a total capacity of a 50 million spindle equivalent. Yarn spinning also remains a larger employer of rural on-farm workers, and is a leading investment maker in machinery and technology. The majority of funds under the TUFS scheme has been consumed by the spinning sector. Despite such fund infusion and near surplus cotton output, the yarn sector has performed below par, with gross profitability of around 5-7% across mills.

Perhaps the key reason is a weak demand for fabrics, and thus yarns, owing to a fall in exports of garments vis-a-vis competition from five small, newly emerging countries. As an example, over the last 10 months, the price of benchmark 30s comb cotton yarn dropped from FOB value of $3.2/kg to $2.55/kg, while the price of cotton did not come down on a pro-rata basis. Weaker mills could not handle the high cost working capital loans, and had to reduce production capacities.

With the fear that China could unleash its huge cotton reserve at lower auction prices, it is unlikely that cotton and yarns from India would release higher values from now to the close of the cotton year. The weak global sentiments for cotton would also put a spoke in the wheel.

Knitting and weaving

The fabric manufacturing sector is one of the weakest links in the textile value chain, as is the further processing, dyeing and finishing of knitted and woven fabrics. Next to China, the textile industry in India has the largest fabric-forming capacity, except for nonwoven fabrics.

However, most of the installed capacity is resting on millions of slow-speed and outdated power looms, where low productivity and poor fabric quality are serious constraints. For a country that has a fabric output of no less than 72,000 million sq m of all types of fabric, it is disappointing to note there are hardly 30-35000 high-speed shuttleless looms, of which only 5,000 are for widths of more than 190cm. Most of the new shuttleless looms are of type airjet and mainly in the fast-growing denim cloth weaving units, which have capacity of 1,200 million meters p.m.

A low number of shuttleless looms of types airjet and rapier etc has created constraints in terms of providing high-quality fabrics for the garment sector, which has to resort to import hi-value fabrics. Of all looms, there are around 5-8% handlooms, making local fabrics for use in the rural areas and markets.

While spun yarns from India have an 18-20% share in the global yarn trade, fabrics from India have not yet crossed the magical 10% share, even when denim and toweling are added.

Fabric dyeing and finishing

The fabric manufacturing sector is the weakest link in the textile value chain. It has led to the production of quality that is at times not acceptable into exports, even by domestic garment units. The majority of fabric processing units in the country are, at best, small, medium and independent process houses that work more on the “job work” route, rather than creating own-quality fabrics for direct sale to the end user.

Processing units suffer from obsolescent technology, processes, plants and use of non-branded dyes and chemicals. Thus on the grounds of cost saving, it is the fabric quality that is made to suffer.

A good sign is the induction of state-of-the-art dyeing and finishing machinery, with the emergence of home textile and terry towel sectors, where larger textile corporates such as Vardhman Textiles, Trident, Alok Ind and Welspun have brought in advanced technology of high-speed looms, mainly airjet type but in widths of 280-380cm. Like a large share of export in yarns, India’s new focus to beat competitors is via home textiles and towel exports.

The garment or apparel manufacturing sector is indeed important for India’s textile sector, but also to its economy, as it brings FE earnings of around $25bn in the country’s total export basket of $325bn. India’s garment sector is also vital for creating employment and driving the fast-evolving organised retail business.

It is, however, disappointing that with the availability of a large and adequate fabric supply base, and also a large amount of young, fashion-savvy consumers [India has one of the largest young populations below 35 years in the world]. Both the apparel industry and retail have not been performing well. As mentioned above, smaller countries including Vietnam and Bangladesh have crossed India’s garment export turnover, and newly emerging countries of Myanmar and Ethiopia are playing “catch up”.

What plagues the slow growth of India’s garment sector is the low productivity per worker, high cost of importing non cotton or innovative fashion fabrics, an average designer base and fast emergence of competitors such as Vietnam, Cambodia, Myanmar, Bangladesh and Ethiopia.

Road map for the future

With its raw materials base and large size of all sectors of the textile industry, India has the potential to displace China in some textile segments in the next two or three years, but is yet under leveraged. As per industry experts, the time has come for India to make a mid-course correction and grab its rightful share of 10% in the global textile and clothing trade against the present 5-5.5% share. As per textile industry experts and authors, the suggested road map will be the following:

– Increase its share in value-added products such as dyed yarns, finished fabrics and designer apparels at the cost of basic commodity textiles including grey yarns, unprocessed fabrics and basic apparel – Increase its share of the use of man-made fibres such as polyester and viscose at the cost of cotton – Identify and enter into new diversified markets including South America and Russia – Drive the domestic retail markets with fashion textiles at a good price for branded products