Investment In Indian Textile Industry

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Investment In Indian Textile Industry

The scenario of investment in the Indian textile industry started to change after the inception of the special “Textile Package” during the 2003-2004 budget. The recommendations made in the budget included the reforms that are required to be made in the fiscal policy of the Indian textile Industry for attracting investment in this industry. The policy matters associated with restructuring of debt for financial viability of this industrial sector are also being addressed in this budget. A fund was set up in accordance with the recommendations of the aforesaid budget with an initial principal amount of Rs. 3000 crores. This fund was meant for restructuring of the textile sector.

Factors responsible for wooing the investors in Indian textile industry

  • The size of the textile along with apparel market in India is quite big.
  • Performance of this industry has been consistent right from the start of the new millennium.
  • Availability of the skilled labor in India is comparatively cheap in relation to the same in other parts of the world.
  • The policies related to the Foreign Direct Investment in India are comparatively lenient and are transparent in nature among all the developing countries.
  • There is no limit on foreign direct investment in the textile industry and hence 100% direct investment can be done by the foreign capitalists in the Indian textile industry.
  • Foreign Investments done in the Indian Textile Industry through the automatic route offers a hassle-free way of investing. These investments are not required to be approved by the government or the apex bank of India, RBI. The foreign investors are only required to make a notification to the regional office of the apex bank only after receiving the receipt of the remittance. This notification is required to be done within thirty days from the date of receiving the remittance.

    The ministry concerned with the development of Textile Industry in India has formed a special cell for attracting FDI in this sector. Objectives of this special cell for wooing FDI are :-

  • This cell helps the willing foreign companies to find out viable partners meant for floating a joint venture company in order to produce textile products.
  • FDI special cell acts as the mediator between the foreign investor and the different organizations for setting up the textile industry. The specialized helps that are given by this cell involve advisory support along with assistance.
  • At the time of operation of the textile industry set by the foreign investor certain problems may crop up. These problems are sorted out by the FDI cell.
  • FDI cell monitors as well as maintains the data related with the total production of the textile sector. They also collect the stratified data of production by both domestic industry as well as the industry set up by the foreign investor.In the financial year 2005-2006, it has been found out that the percentage share of the textile industry in the total foreign investment done was 1.02%.

    A major development has occurred in the month of July 2007 in the textile industry when Blackstone, an investment management company of USA has bought 50.1% stake of the domestic apparel manufacturing company called Gokaldas Exports. The deal was sealed at the price of Rs 275 per share. After the completion of the stake transfer the promoters of the Gokaldas Exports, the Hindujas, were left with a share amounting to 20%.

    As a part of domestic textile sector expansion, the companies of Indian origin are also not far behind in making investments. Arvind Mills Limited is expanding its production as well as capacity base through the construction of two new industrial set ups in Bangalore and Ahmedabad.

    Another textile company of India named Super Spinning Mills is also acquiring two sick units of Madurai for enhancing their production capacity for meeting the needs generated by the USA market.

    World largest terry towel producing company called Welspun India Ltd. is setting up a textile plant in the state of Gujarat at the initial capital of US$ 220 million.

    The investment scenario is becoming rosier day by day. But a glitch in this smooth road is the constant appreciation of the Indian currency with respect to US Dollar. The textile sector is losing much of its profitability as because the large quantum of textile product produced by it are basically export-oriented. But there is always a saying, “if there is will, there is a way”.

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