Growth of Indian Textile Industry

Growth along with the investment of an industry depends heavily on the economic health of the country. Indian economy grew rapidly during the fiscal year 2006-2007 posting a growth rate of 9.4% p.a. Not only this, India has been performing significantly in the last three years where its average yearly rate of growth has been estimated to be 8%.

The fruits of economic growth has trickled down to people of the state which can be evidenced from the rising per capita income of India. Statistics reveal that during 2001-2007 (up to March 2007) the per capita income of India has increased by sixty two percent and has reached the level of Rs 25,778 or US$ 581.37 per annum.

One of the most beneficial class of this economic growth saga has been the middle income section of the society. The total strength of this class in absolute terms has been found out to be 216 million which is expected to rise to 351 million by 2010. The major demand that is being generated is by a new class of people from the booming IT-BPO sector who are still at their prime age and are outwardly fashion savvy. This has generated huge demand for fashionable dresses which has consequently led to the emergence of some world class Indian designers with their latest fashion apparels.

Propensity of consumption (after excluding all spending on essential items like housing, health, education, etc.) by the average Indian people has increased at the rate of 5% to a total amount of US$ 219 billion in the year 2005. At this time, the organized retail sector has been able to tap a market of around US$ 8.2 billion which is projected to increase to US$ 25 billion by 2010.

Textile industry is one of the major contributors to the total output of the fast growing Indian industrial sector which is at present revolving around 14%. Textile sector's contribution to GDP of India is also significant which currently amounts to 4%. It has been found out that Indian textile industry is one of the major sources of foreign exchange earnings for India and contributes around 16-17% of the total export earning.

From the above discussion it is quite clear to us that the market size of India is growing at a very high pace. That is why the foreign investors are flocking to India for investment purposes in order to get hold of a chunk of this expanding pie. With increasing demand for the products of Indian Textile Industry, new players are jumping in the league to get a slice of the profitable pie and the already existing textile mills are raising their capacity for increasing their supply. Hence, the expansion process of the domestic industry is also not far behind.

Thus, it can be said that the whole Indian economy is on a growing trend which has its obvious impact on every possible sector including the Indian Industry.

Growth In Indian Textile Industry

Indian Textile Industry is going through a major change in its outlook after the expiry of Multi-Fiber Agreement.

Multi Fiber Agreement was introduced in the year 1974 as a short term measure directed towards providing a limited time period to the developed countries for adjusting their textile industries in accordance with that of the developing countries. The textile industries are characterized by their labor intensive nature of commodity production. Availability of surplus labor is abundant in the developing countries. These countries have comparative advantage in the production of textile related products and hence are able to supply goods at a very low price. The basic idea behind this policy was to eradicate all sorts of quota system from the apparel and textile industry all over the world so that a level playing field could be established. This whole process of dismantlement of quota system was completed on 01.01.2005.

Now, this era after MFA is being looked upon by the experts as a means through which the Indian textile and apparel industry is going to grow a much faster pace and would consequently be able to leave a mark on the whole world. Integration of this Indian industry with that of the whole world started from the last period of 1980s. It came up to the top ten league of countries involved in export of textile as well as apparel products after 1998. According to the statistics of United Nations Statistical Division, 2005 it was clear that during the entire 1990s, the average compounded growth rate of clothing item export was more or less 13%. This report has also highlighted the fact that the entire textile industry along with the apparel one has seen a jump in its export from US$ 0.9 billion to US$ 13.5 billion during the period 1985-2003 which accounts to 15 times increase from the base period.

Now, let us see some of the figures in order to understand the absolute as well as relative change in the textile industry in terms of projections from the financial year 2002-2003 up to 2006-2007 where the final financial year represents the projected figure.The total produce of Indian Textile Industry in fabric sector

The figure above shows total produce of Indian Textile Industry in fabric sector along with the produce in all the sub sectors under it. This highlights the fact that the total production of fabricated products by the Indian Textile Industry between the period 2002-2003 and 2004-2005 increased at a moderate rate from 41973 million square meters to 45378 million square meters. But after the MFA period (ie. after 01.01.2005), the same has increased from 45378 million sq. mts to 54260 million sq. mts between the period 2004-2005 and 2006-2007. Hence it is evident that the percentage increase in the fabric textile product during the period 2004-2005 and 2006-2007 has seen a rise of around 16.37% whereas it was only 7.5% during 2002-2003and 2004-2005. Thus, the competitive edge that was created after MFA is quite clear.Now, let us analyze the growth pattern evidenced in the spurn yarn sector.At the eve of the new millennium the total yarn production was hovering around 3160 million Kgs. The rate of growth in spurn yarn production evidenced a sluggish growth up to 2003-2004. But during the next two financial years this production again saw an increasing trend and during the 2006-2007 fiscal the same is expected to surpass the 3700 million Kg mark. The total production of Spun Yarn over the years 1999-2000 to 2006-2007 is summarized in the figure below. It highlights the fact that the growth rate of production in this sector was almost stagnant between the years 1999 and 2004. From the financial year 2004-2005, the total production of yarn geared up and is projected to do still better during the fiscal 2006-2007.