Government officials and business leaders believe the Indian textile and apparel industry is set for spectacular growth. The country's economic fundamentals are good, it has a number of production advantages, and government reform is speeding up. But are they wise to be in such a bullish mood? Jozef De Coster reports from New Delhi.

At the recent Tex-Styles India fair in New Delhi, several speakers, Textile Minister Vaghela included, declared that the Indian textile and apparel industry is set for spectacular growth, especially in exports.

Indian textile and apparel exports are expected to jump from around US$15bn in 2005 to US$80-85bn by 2010.

The National Textile Policy's earlier export target for India's textile and apparel sector was US$50bn by 2010. However, following India's strong 2005 performances, the Union Textile Ministry has revised its export target to US$85bn. Nearly 60% of this amount is likely to be garments.

In 2005 - the first quota-free year - India was the best performer on the international textile scene after China. The country succeeded in increasing its textile and apparel exports to the US (up by 36%, according to Textile Minister Vaghela) as well as to the rest of the world (up by 20%).

Leading foreign companies such as Wal-Mart, Gap, JC Penney, Levi Strauss, Marks & Spencer and Next increased their sourcing from India.

In response to increasing demand, ambitious capacity-building investments were undertaken. Over 25 medium and large textile and apparel firms got listed on the bourses to raise capital for their expansion plans. And foreign institutional investors such as Citigroup and Temasek took stakes in Indian textile firms.

A number of new textile fairs were also announced: Intex (International Apparel Fabrics & Accessories Trade Fair India) was launched in October 2005, a Fibres & Yarns Exhibition will make its debut in April 2006, and the first Texworld India (fabrics) and the first autumn edition of Tex-Styles India will take place in October of this year.

An unstoppable force?
There are some reasons why uncritical officials and hands-on textile business leaders believe that India's textile and apparel industry has become an unstoppable force.

First, the economic fundamentals of the country are good. Real GDP growth per annum in 2003-2005 was close to 8% and is expected to remain high. India is a stable democracy with a young population, more university graduates (2.5m in 2004) than China, a vast pool of technical and especially ICT talent, lots of English speaking managers, and well developed financial and legal systems. 

Then comes the usual chant on India's comparative advantages in the field of textiles and garment production. India has it all: a complete supply chain in cotton and other basic raw materials from fibre to high value added garments and made-ups.

The country also boasts a modern spinning mill sector and a versatile powerloom, hosiery and handloom sector. Skilled labor is abundant and very cheap.

Dr Shyam S Agrawal, resident director of ITPO in Frankfurt, points out that India has the largest cotton acreage in the world, the highest loomage (including handlooms, accounting for 61% of the world total). India is the largest producer of jute, the second largest producer of silk, the third largest producer of cotton fibre and the fifth largest producer of manmade fibre/yarn.

Thirdly, the role of the Government has changed. Reform, which in the words of T Kannan, managing director of Thiagaraja Mills, actually means "the unravelling of a host of mistakes made by successive governments" has speeded up.

The production of garments and knitwear is no longer restricted to small companies and the ban on foreign investment in the garment retail sector has been partially lifted.

The just-published Indian budget for 2006-2007 reveals that the government will continue liberalising imports (especially of manmade fibres and yarns) and stimulating investments through financial incentives (the Technology Upgradation Fund) and the creation of integrated textile parks and employment-generating apparel parks.

Textile Minister Vaghela declared that the 25 projected apparel parks will each generate at least 15,000 new jobs in the coming 18 months (375,000 in total). 

Also, Indian textile and apparel entrepreneurs feel confident that the international sourcing community will continue to rely on the county as the best alternative to China. They point out that in 2005 the textile superpower China had to make export concessions, not India.

Sugata Sarkar, deputy director of Texprocil, the Cotton Textiles Export Promotion Council, believes that importing countries will in future think twice before attacking India for its dumping practices. He says: "For four years we fought a landmark battle in a bedlinen anti-dumping case introduced by Eurocoton. Finally, we won."

Investment announcements
Nothing illustrates the bullish mood of the Indian textile and apparel industry better than the constant announcements of new investments.

Reliance Industries is considering a mega US$160m injection in its textiles business. Major investments have also been announced by spinners such as KSL Industries, Winsome, Lakshmi Works, Bannari Amman Spinning Mills, while India's leading bed linen and towel exporters (Alok, Welspun, Abishek, and Sharadha) are all furiously expanding their capacities.

Jindal Worldwide plans to invest nearly US$6m in a new 10m m² capacity denim plant. Orient Clothing, which originally made basic garments for the US market, has successfully upgraded its machinery and re-educated its workers to the satisfaction of design-oriented customers like Oasis, Karen Miller, Next, and Esprit.

The textile city of Surat, known for its burgeoning powerloom sector (650,000 looms), is undergoing an energetic modernisation. Industry sources say that Chinese machinery suppliers expect to sell 20,000 looms in 2006 in Surat alone.

Many investments aim at vertical integration, like the start-up, in January 2006, of a trousers factory by the Bhilwara group in Bangalore. Bhilwara is a major producer and exporter of yarns and fabrics (exports of US$204m in 2004-05).

According to SK Babbar, the group's assistant general manager, the present production of 3,000-4,000 trousers per day is expected to reach 14,000 trousers per day. The group boasts good ties with Marks & Spencer.

Textiles producer S Kumars Nationwide Ltd intends to invest more than US$20m in retail activities in 2006-07, expanding its Reid & Taylor retail outlet chain and bringing international apparel and fashion brands to India.

By Jozef De Coster.

Tex-Styles fair in March 2006