India races into the post-quota era
The first export statistics for 2005 suggest India has made an impressive entry into the quota-less era. Jozef De Coster, reporting from India, finds the industry is booming, with a wave of investment in weaving and processing, students clamouring to train as fashion or textile designers, and record attendance at this year's Tex-Styles India trade fair.
Subodh Kumar, India's textile commissioner, is a thoughtful man. Contrary to most of India's high-ranking textile spokesmen, he doesn't brandish the official target of $50 billion Indian textile exports in 2010.
He argues, however, that ICMF (Indian Cotton Mills Federation) forecasts are realistic: Indian textile exports, apparel included, can grow annually at 18 per cent, to reach $40 billion by 2010.
But even attaining the $40 billion export mark in 2010 will be a daunting task. In 2004, Indian textile exports amounted to around $14 billion (of which $5.1 billion was apparel). Many things will have to fall in place to allow the Indian textile and garment industry to multiply its exports nearly three-fold in only six years time.
Soaring industry interest
It's true that India has made an impressive entry into the quota-less era, with the first export statistics for 2005 suggesting a roaring start.
Subodh Kumar, textile commissioner
Indian handicraft worker
The number of foreign visitors at the 2005 edition of Tex-Styles India soared to an all-time high of just over 5,000, from 3,966 in 2004. Tex-Styles India is the major textile show, annually staged by the India Trade Promotion Organisation in New Delhi at the end of February.
A strong wave of investment can presently be seen in weaving and processing. Most of the big Indian textile players are boasting full order books. Those who previously set up factories in Nepal, Sri Lanka or Bangladesh to grab larger volumes of quota are hurriedly dismantling them and moving them back to India.
Fashion has never been so hot in India as it is today. Tens of thousands of bright young people apply for an education as a fashion or textile designer. There's also positive news from the government's side: the budget measures proposed by the Finance Minister at the end of February went a long way in the direction suggested by the textile commissioner in his recent Action Plan.
In January 2005, India's overall exports were 33 per cent up on January 2004, apparently driven by Indian garment exporters making the most of the abolition of quotas. This didn't come not as a surprise, since India used to utilise nearly 100 per cent of its export quota both to the US and EU.
The general lack of interest from weavers and textile processors for the investment incentives provided by the 46 billion TUFS (the Technology Upgradation Funds Scheme for the textile industry, launched five years ago) has suddenly turned into a kind of investment fever.
According to exhibitors, the last edition of ITME (India-International Textile Machinery Exhibition), in Mumbai in December 2004 was the busiest textile machinery fair ever in India.
A recent study by the Federation of Indian Chambers of Commerce and Industry (FICCI)* stated that 83 per cent of the key players in the Indian textile industry are planning new investments in the coming 12 months.
Some Indian experts estimate that the textile industry in India will invest nearly $4.5 billion in the next 12-18 months, thereby creating 12 million jobs. Textile Minister Vaghela is more realistic, putting the expected number of new jobs at 1 million.
Current investments include expansion projects like those of Century Textiles, India's biggest exporter of cotton fabrics. Century is investing nearly €25 million to expand its existing denim capacities by 10 million metres.
JCT Ltd, India's biggest nylon filament weaver, is doubling its yarn as well as its fabric capacities. Gokaldas Exports, India's largest clothing exporter (32,000 workers), has earmarked €6 million for installing several new factories this year.
In the home textile sector, current expansion investments by sector leaders Welspun and Abhisek (Trident group) are catapulting India to the number one position in terry towelling and bath linen.
Most major investments are not just about quantity. In November 2004, a new Schoeller factory for treating fabrics and knits with the patented NanoSphere finishing technology has been inaugurated.
The plant is a joint venture between Schoeller of Switzerland and the Indian entrepreneur Sanjeev Swamy. It will act as a hub for many global textile and garment manufacturers to process their fabrics from India. Among the customers are Columbia Sportswear, Dockers/Levi's, Pierre Cardin, Reebok and Timberland.
Bright prospects for buyers…
Global buyers like Wal-Mart, Gap, Target and Li & Fung are upscaling their Indian offices. Wal-Mart is reported to currently source $700 million worth of textile and apparel from India and wants to increase that amount to $5 billion in the next five years.
On 26 February 2005, some 30 Indian garment suppliers staged a fashion show in Delhi's Hyatt hotel to the delight of a delegation of Karstadt-Quelle buyers who concluded that India offers bright prospects for creative cloth collections at prices of less than 100 euros a piece.
The 5,000 foreign buyers who visited Tex-Styles India 2005 in New Delhi were largely American and European shop owners specialising in oriental articles. Also included were a number of big American companies (JC Penney, Sears, Wal-Mart) and important European groups (Marks & Spencer, Matalan Retail, Metro, Giorgio Armani, Bon Marché, Vroom & Dreesman) - all of which sent buyers to Delhi.
Never before have so many young Indians applied for an education as fashion or textile designer.
Gauri Kumar, director general of NIFT (the National Institute of Fashion Technology) says: "When this Institute started in 1987, only 20 per cent of our students were boys. Today, there are more boys than girls among our 3,920 students, which proves that the Indian middle class pays due respect to 'fashion' as a possible career."
At the start of the current academic year, more than 12,000 youngsters applied to the New Delhi branch of NIFT, which has only 1,400 seats.
The Indian textile and apparel industry, which used to neglect local fashion talent, is now keen to get the best and the brightest. One half day in early March 2005 saw all end-of-course NIFT students placed in companies.
Among the budget measures proposed on 28 February 2005 by finance minister Chidambaram, two were of particular interest to the Indian textile industry. Firstly, the tax reforms aimed at putting the Indian manmade fibre industry on a more level playing field with the cotton industry; and secondly, the reduction in customs duties on textile machinery.
NIFT fashion institute in Delhi
Benetton shop in Mumbai
The excise duty on polyester yarns has been reduced from 24 per cent to 15 per cent, a boon for India's Reliance Industries since the takeover of Trevira, the world's largest producer of polyester, and for other fibre producers like Century Enka, Indo Rama Synthetics, and Sanghi Polyester.
Customs duties on imported manmade fabrics go down from 20 per cent to 15 per cent, which will increase competition in the domestic market to the advantage of Indian garment makers.
The customs duties on textile machinery decrease from 20 per cent to 10 per cent. This still places Indian textile investors in an unfavourable position against their Chinese competitors who import manufacturing equipment at zero duty.
Winners and losers
The broadly accepted thesis that China and India will be the main winners of quota abolition, to the detriment of Bangladesh, Sri Lanka, Cambodia and even regionally privileged suppliers to the US and EU markets, is taken for granted by the Indian industry.
According to Darshan Mehta, president of leading denim manufacturer Arvind Mills, the big mass discount buyers will continue heading for China, while the buyers who need smaller lots with more complicated needlework will look at India.
Not all classes of Indian textile companies, however, will gain from quota abolition. The real winners are expected to be the big as well as the very small companies.
The big ones because they have the production capacities, investment clout and also often the entrepreneurial spirit to fully exploit India's comparative advantages (raw material, abundant cheap labour, rich textile tradition); the very small ones because their main trump card - creativity at a cheap price - can only profit from liberalisation.
Hand printed textiles and scarves, as well as shawls, sari goods and knotted carpets represent an important share of India's handicraft industry, which in total employs around 6 million people (compared with 15 million jobs in the textile and garment industry proper).
Among the medium sized companies, largely corresponding with the so-called 'powerloom industry,' enterprise mortality will probably be very high in the near future.
Out of the 1.7 million looms in the powerloom sector, 82 per cent are still shuttle looms. It can be expected that thanks to the further removal of restrictions, the modern weaving mills, whose share in Indian fabric production fell from 70.22 per cent in 1951 to 3.44 per cent in 2004, will leap to their former position.
While the dramatic effects of sudden joblessness on hundreds of thousands of industrial textile workers in Bombay and Ahmedabad during the 80s and 90s (suicides, self-burnings, fasting to death, loss of security, stability and dignity) has been described in recent books**, it's likely that the fate of the numerous Indian workers who are about to lose their jobs in obsolete powerloom and other small companies will remain unnoticed.
* 'Ending Multi-Fibre Agreement and the Indian textile industry,' 2004
** 'Ripping the Fabric. The Decline of Mumbai and its Mills.' Darryl D'Monte.
Oxford University Press, 2002;
'The making and unmaking of an industrial proletariat in India,' Jan Breman, Amsterdam, November 2002.
By Jozef De Coster.
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