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1.1 Global Textiles and Clothing Industry
A $480 bn market which is expected to grow to about $700 bn by the year 2012, yes we are talking about the world trade of textiles and apparels-barely five years after the expiry of MFA. The Multi-Fibre Arrangement (MFA), that had governed the extent of textile trade between nations since 1974, expired on 31st December, 2004. It is expected that, post-MFA, most tariff distortions would gradually disappear and firms with robust capabilities will gain in the global trade of textile and apparel. Quotas on textile and apparel meant multi country and multi vendor sourcing for the buyers. While the abolishment of quotas has presented the buyers with an option to source from the most efficient and cost effective vendors and countries, for the suppliers it has opened the Pandora's box: stiff global competition driven by low costs and new legislation.
The first two years of quota free trading has seen a number of changes taking place in the apparel and textile trade: a shift in the supplying bases, a decline in the sourcing prices & re- orientation of the buyer-supplier relationship. While the phase out of quotas has seen clear emergence of supplier regions (China and South Asia), it hasn't wiped out the vulnerable countries. The countries like Bangladesh, Indonesia, Vietnam and Cambodia etc., which were expected to lose business, have on the contrary seen an increase in their exports to key destinations in the first two years. This is partly due to the fact that a number of buyers have not altered their sourcing strategy drastically and also due to various steps taken by apparel industry in these countries to improve their competitiveness.
An important question Indian firms are facing is whether their capabilities and their diverse supply chain are aligned to benefit from the opening up of global textile market?
1.2 Indian Textiles and Clothing Industry
The history of textiles in India dates back to the use of mordant dyes and printing blocks around
3000 BC. The diversity of fibres found in India, intricate weaving on its state-of-art manual looms and its organic dyes attracted buyers from all over the world for centuries. India saw the building up of textile capabilities, diversification of its product base, and its emergence, once again, as an important global player.
The Indian Textiles Industry has an overwhelming presence in the economic life of the country. Apart from providing one of the basic necessities of life, the textiles industry also plays a pivotal role through its contribution to industrial output, employment generation, and the export earnings of the country. It contributes about 14 per cent to industrial production, 4 per cent to the GDP, and
16.63 per cent to the country's export earnings. It would provide direct employment to over 35 million people by 2010 (Texmin 2005), which includes a substantial number of people from less privileged sections of society. The textiles sector is the second largest provider of employment after agriculture. Thus, the growth and all round development of this industry has a direct bearing on the improvement of the economy of the nation.
The Indian textiles and apparel industry has an unbalanced structure, 95 % of the industry is the unorganized and only 5 % is the organized. Sector consolidation process in certain segments, to take advantage of economies of scale is necessary. This will generate more employment, as smaller operations affect cost and competitiveness.
1.3 India's Position in Global Textiles and Clothing Industry
• India's position in the World Textiles Economy Second largest producer of raw cotton.
• Second largest producer of cotton yarn.
• Second largest producer of cellulosic fibre/yarn.
• Second largest producer of silk.
• Fourth largest producer of synthetic fibre/yarn.
• Largest producer of jute.
The Indian textiles industry is one of the largest textiles industries in the world. With the abolition of quotas in 2005, Indian Textiles and Apparel exports grew by 19% to reach US$ 17 billion in
2005-06. Indian exports increased in both the major destinations of US and EU. Indian exports to US increased by 27% to reach US$ 4.6 billion, while exports to EU increased by 18% to reach US$ 6.2 billion. Despite falling prices, Indian exports were able to maintain their UVR to US and EU. Indian exports also benefited in the latter half of the year due to safeguards on China. On the account of increasing exports, most of the Indian companies experienced healthy growth in their top and bottom lines. The exports of Textile and Garments have reached to US $ 19.2 billion in
2006-07.