The Indian textile industry: International Competitiveness By Gunja Saluja 2008

A Dissertation presented in part consideration for the degree of MA Management

Abstract
This paper identifies the international competitiveness of Indian textile indust
ry. The Indian textile industry is one of the largest in the world, with a huge
raw material and textile manufacturing base. Due to its extensive input, it occu
pies an exceptional place in the Indian market place. Today this sector is highl
y globalised but, it is further organizing itself to crave a bigger share to bec
ome the market leader. This large and ancient industry has carved out a special
niche for itself as a facilitator of the countys economic growth and participativ
e development. However, since few years this industry was striving to recover fr
om a stage of stagnation but today it is growing at a very fast pace. This disse
rtation elucidates the relevant literature on international competitiveness, and
further describes various macro economic factors which are affecting the econom
y of India. The researcher has used qualitative research methods in order to sat
isfy the objectives of this research. Later, the findings have been discussed wi
th the industrys SWOT analysis. Lastly, the conclusion of this study discusses th
e limitations and recommendations.

Acknowledgement
First and foremost, I would like to thank god for his blessings which helped me
in completing this dissertation. I would also like to express my sincere thanks
to my supervisor, Mr. Rajesh Kumar for his support and guidance throughout this
research by answering to my queries. I am also very grateful to the interviewees
, for their cooperation for filling up the questionnaires and giving interviews.
Most importantly, I would like to thank my elder sister Ridhi Saluja, without w
hose support this dissertation would not have been completed. Lastly, I would li
ke to thank Jaskaran Singh Ghumman for his undying support and strength during m
y laborious times.

Table of contents
1. 1.1 1.2 1.3 1.4
Page No.

Introduction... 1 Introduction
................ 3 Research motivation 4 Structure of dissertati
2. 2.1 2.2

Literature review... 6 Introduction

2.2.1.3 The threat of substitutes.....14 2.2.1.4 The treat of new entr

5 Productivity/. 16 Increase in global trade
2.6 Conclusion..... 22
3. 3.1 3.2 3.3 3.4 3.5

Industry Profile 24 Emergence of Indian Textile Industries

try... ... 28 Geographical spread..... 29 A gl
4. 4.1

Macro economic factor affecting Indian textile industry... 35 Introduction

4.2 Government regulation.. 35 4.2.1 Qualitative improvement

4.2.4

The technology upgradation fund scheme (TUFS) ... 4.2.5 Texsummit 2007
37 38 38
4.3 FDI policies...... 4.4
Dismantling the quotas..... 39

4.5 Agreement of on textile and clothing.. . 42 4.6 Appreciation of rup

5. 5.1 5.2
Indias position in the world textile market. Overview of the world textile
ajor competitors ..
43 43 44
5.3
International scenario of textile industry 5.3.1 Performance of India in
a in the European market.
44 45 46
6.

Methodology...48 6.1 Research methodology

7. 7.1 7.2

Findings and Analysis.52 Introduction

7.4.2 Labour reforms..62 7.4.3 Fragmented infrastructure

lusion.66
REFERENCES

APPENDIX 1 Indias Cotton Trend in Last Six Decades ...81 APPENDIX 2 Sample

Chapter 1: Introduction
1.1 Introduction: The Indian textile sector plays an exceptionally significant r
ole in shaping the economy of India notably in terms of employment, foreign exch
ange earnings and share in value added. This sector is the second largest sector
after agriculture (Texsummit, 2007). It has come of age and is gaining acknowle
dgment on the world platform with excellent textiles manufacturing base and avai
lability of massive raw material. India being the second largest producer of cot
ton in the world, makes it self sufficient, by providing a competitive edge to i
ts competitors worldwide in terms of cost of raw material. Along with abundant c
otton production, India has availability of highly skilled labour at very low pr
ices. The Indian economy is fundamentally dependent upon manufacturing of textil
es and its trade. There are many reasons for this industry being so important fo
r Indian economy as it contributes (4% of GDP) as well as the countrys export (14
% of Indias total exports) and provides employment to the masses (85 million peop
le employed + additional 12 million expected to find jobs by 2010) (Texsummit, 2
007). The government says that Indias share in world textile can reach to 8% by 2
010 (http://www.fabrics-manufacturers.com). This sector also enjoys a strategic
significance due to its foremost contribution to exports and existence of enormo
us small and medium enterprises (SMEs). With dismantling of the quota system in
January 2005, investments in the textile sector have been raising and the export
percentage too has increased drastically (Mayer, 2005). Other government initia
tives such as setting up of SEZs (Special Economic Zones) for textiles, and allo
wing 100% foreign direct investment in the textile sector have not only helped i
n creating opportunities for Indian entrepreneurs, but also for global investors
. The structure of

worldwide trade in textiles also marked a significant turnaround after this peri
od, as all the textile and clothing products can be traded globally without quot
a-restrictions. The elimination of quota restrictions on the export of textiles
under the Agreement on textile & clothing did facilitate India in escalating its
market share of its major importers, but the growth rate remained much below th
e expectations. The dismantling of the quota regime symbolizes both an opportuni
ty as well as a threat. It can be an opportunity for the reason that markets wil
l no longer be restricted and, also the domestic market will be exposed to compe
tition. At domestic front, robust economic growth, rising demand, increasing con
sumerism, expanding organized retail and textile SEZs would provide healthy atmo
sphere for the growth of industry, whereas it also act as a threat, as markets w
ill no longer be assured by the quotas. However this sector has been doing reall
y well and has reached $ 47 billion market (Home fashion, 2007) but there has be
en a slowdown in this industry from past few years and the factors like, rigid l
abour laws, technology obsolescence, lack of training facilities, low capacity,
fragmented structure, poor foreign investment and infrastructure constraints con
tinue to trouble the industry . Today, in the international textile market, Chin
a is the biggest competitor of India, followed by turkey, Taiwan, Mexico, Bangla
desh, South Korea, Indonesia and Pakistan which are the emerging rivals. It is t
herefore essential to identify the true competitiveness of Indian textile firms
in order to make a true evaluation of the scenario. This study will therefore ev
aluate the international competitiveness of the Indian textile industry. It will
reveal the immense potential of the Indian textile industry which will enable t
his sector to realize its lawful place in the economy globally.

And further, it will examine the Indias export-competitive performance with respe
ct to United States and European Union.
1.2 Scope and objective of the study: India possesses many strengths and opportu
nities in textile sector. But there is a great need to study this industry as it
is structurally flawed and its expansion depends upon curative actions and thei
r effectiveness. It has a lot more potential to do, as compared to what it is pe
rforming today. However the industry is inherent with lot of experience, availab
ility of cheap labour, abundant raw material and supporting government initiativ
es; but, it lacks behind in many other aspects. Therefore the study will reveal
various prospects which are yet to be tapped in this sector. The practice of civ
ilizing the structural aspect of Indian textile market initiated first in 1985 T
extile Policy. The objective of this study is to assess the competitiveness of I
ndian textile industry. Since this industry is largely cotton based, the study w
ould focus on the cotton industry as well. With the abovementioned objectives, i
t will first identify the potential of Indian export market which have shown a r
emarkable growth in value and have a substantial credence in the Indian export m
arket on the basis of performance of Indias export to Europe and United States. F
ollowed by the various government policies, and lastly the strategies and initia
tives that should be taken to upgrade this sector.
1.3 Research Motivation: Authors decision to choose the Indian Textile Industry a
s her research topic, comes from her own personal, and very strong interest in t
he area. She has worked in this field for about 2

years and has had a firsthand experience of the textile market in India. While t
he market size is huge and the potential to grow is immense, India is still stru
ggling on many grounds. The thesis sheds light on the areas that need to be work
ed upon and also the strategies that can help the Indian firms to strengthen the
ir position in the world market. After having done the study, author presumes to
see herself in a better position to assess the scenario of the textile market i
n India and overseas. Also now for her professional textile career in future, sh
e feels equipped with a better sense of understanding and a broader perspective
to make choices and decisions in business. The driving force behind this researc
h was not only the interest in this field, but also her passion to successfully
run a textile firm some day. It definitely made the entire research journey more
meaningful and worthwhile.
1.4 Structure of dissertation: The dissertation focuses upon the International C
ompetitiveness of Indian textile Industry. Chapter 1 which will provide an overv
iew of textile industry in India, followed by Chapter 2, which will review the r
elevant literature on it. The industry profile along with geographical diversity
is presented in chapter 3. The macro economic situation of Indian Textile Indus
try with various government policies are defined in chapter 4. Chapter 5 talks a
bout Indias competitive performance internationally. Chapter 6 lays down the meth
odology that has been used to collect the primary and secondary data. Finally ch
apter 7 summarizes the analysis and findings, followed by conclusion in chapter
8.

Chapter 2: Literature Review

2.1 Introduction: Every dissertation includes a literature survey and a developm
ent of theory which is relevant to its scope. Therefore this chapter will now co
ncentrate on the literature element, which has already paid attention on the iss
ue of Competitiveness, Productivity and Global Expansion in relation to industry
. There are many researchers who have explored the idea of competitiveness and i
ts importance. This literature review has been prepared by critically evaluating
and exploring the relevant studies that has been carried out by various researc
hers. It is divided into five sections which will evaluate the work of various r
esearchers on competitiveness, productivity, increase in global trade and Family
Conglomerates. In Section 2.2 Porters work is assessed as it is the most signifi
cant theory which created debate on competitiveness, along with the arguments of
other researchers as well, followed by Section 2.3 and section 2.4 which will a
ccentuate the study on productivity and increasing global trade. Section 2.5 wil
l concentrate on the theory of family conglomerates as it has a great relevance
to the industry that is being researched. And it will conclude with the summary
of all above sections. However, it is important to observe that there is not sub
stantial literature available on this topic, therefore the research will largely
be based on the facts and issues which have been explored earlier on the topics
like competitiveness, productivity and expanding global trade.

2.2 Competitiveness: 21st century began with a lot of turbulence, challenges and
many opportunities as well. Continued existence and success in such turbulent t
imes depends a lot on competitiveness of the concerned industry. The concept of
competitiveness is multidimensional as well as relative. The core stone of debat
es on competitiveness was first given by (Porter, 1990) which was also published
later as a book, Competitive Advantage of Nations (CAN). His central idea in th
is book was to elucidate the reasons why some social groups, economic institution
s and nations advance and prosperous (Porter, 1990). According to him a global st
rategy is one in which a firm sells its product in many nations and employs an i
ntegrated worldwide approach to doing so (Porter, pp 54 1990). He further adds th
at every business should try to achieve competitiveness through positioning (Bosch
, 1997). Competition, according to (Porter, 1985) determines the appropriateness
of a firms activities that can contribute to its performance, such as a cohesive
culture, innovations, or a good implementation. Since the dissertation is evalu
ating the international competitiveness of an industry, it will therefore highli
ght the four broad factors of a nations environment that will describe that, how
a firm achieves international success in a particular industry, (Porter, 1990).
These four attributes are now commonly known as national diamond. These attribute
s are as follows: Factor conditions, demand conditions, related and supporting i
ndustries, and
firm/strategy/rivalry. It is the most fundamental unit of analysis given by port
er, in which the function of a single factor cannot be analyzed individually, si
nce the result of one determinant is dependent on others. The framework has been
developed by using the theory of five forces by porter which will be further di
scussed.

This model will help in analyzing that why some nations are more competitive, wh
ile others are not, also, there are some industries in the nation which are more
competitive than others. Therefore it will help in understanding a nations compa
rative position in the global competition. All the determinants are briefly expl
ained ahead in this chapter. Below fig. 1 is the model by Porter on The Competit
ive Advantage of Nation. Fig. 1 Porters Diamond Model for the Competitive Advanta
ge of Nations
Source: Porter 1998 pp.127 The factor conditions, as (Porter, 1990) suggests, re
fers to that, what is the nations position in factors of production? In other wor
ds we can say that an industry in order to be successful requires an appropriate
supply of factors at its home base. Therefore, for an excellent performance fro
m an organization, the simple attributes or factors like human resources, land,
labour, capital and infrastructure should be sufficient and must be defined at a
disintegrated level. The mere availability of these factors is not enough for ad
vantage but its way of deployment towards effective and efficient utilization is
crucial (Porter, 1990, pp. 74). He also

points out that the exceptionally high quality factors can also be one of the mo
st significant advantage. Every country possesses set of particular factor condi
tions of its own; therefore, it will build up its industries for which the parti
cular set of factor conditions is optimal. Further, the factors can be categoriz
ed as general and specialized factors. The general factors which are commonly kn
own as non-key factors, such as unskilled labour, can be easily obtained by any ot
her organization. The specialized factors on the other hand are the key factors of
production which are not inherited but created, such as capital, skilled labour
, infrastructure which helps in generating sustained competitive advantage becau
se they cannot be easily duplicated by other firms. The second corner of the dia
mond model is related to various demand factors which have a direct impact on th
e pace of innovation and product development in the country. The most essential
attributes of home demand are composition of home demand, the size and pattern of
growth of demand and the anticipatory nature of demand which reflects global tr
end (Porter, 1990, pp. 86). He argues that it is very important for an economy to
have a sophisticated domestic market. If the buyers in the home country are dem
anding it motivates the company to innovate and to meet high standards in order
to improve the firms competitiveness constantly and to achieve national advantage
in a country, the home base should provide prior signal of demand trends to its
domestic supplier before its foreign competitors.
The third determinant to achieve national advantage is the presence in the nation
of supplier or related industries that are internationally competitive (Porter,
1990, pp.100). A firm enjoys more benefits of innovative inputs and cost effecti
veness, if the local supporting industries are

more competitive. This effect gets strengthened as soon as the suppliers the var
ious suppliers become strong competitors globally. From above all the arguments
this can be concluded that it is not necessarily the size of the base market whi
ch matters, but also the degree with which the firms are encouraged to innovate
to achieve competitiveness. Hence, a big home market which will enable to meet t
he above three conditions and can successfully compete globally.
The last corner of the diamond model is concerned with structures and strategies
developed by domestic firms. (Porter, 1990, pp. 71) explains it as conditions in
the nation governing how companies are created, organized, and managed, and the
nature of domestic rivalry. Various cultural aspects like working principles, in
teraction between the employees, employee - employer relationship, plays a very
significant role. Distinctive corporate objectives such as commitment amongst la
bor force are also of great significance. All these factors are influenced large
ly by the structure of control and ownership.
(Porter, 1990) also argues that to achieve competitive advantage on a more globa
l scale it is important for firms to understand the trend of domestic rivalry an
d the strategies played by them.
Lastly, Government and chance are two such factors which influence the above four fa
ctors, but they themselves are not the determinants. The governments job in porte
rs model is to act as a catalyst and as a challenger to encourage the firms to in
spire them to achieve competitive performance at a much higher level. Together t
hese six factors structure a system, thus explaining that why some companies flo
urish more than others. This model therefore

identifies the degree to which, firms can hold advantage of their home-base, to
develop relations with other countries to become more efficient on a global fron
t.
The above model is further supported by porters five force model which will evalu
ate the competitiveness of Indian textile industry.
2.2.1 Porters five force model: The textile industry is dynamic to the core. With
dismantling of quotas in 2005 the competitive global scenario this industry has
changed evidently. This dynamism can be well explained by conducting industry a
nalysis using Porters model. According to (Porter, pp 4, 1985) the collective str
ength of these five competitive forces [] determine industry profitability becaus
e they influence the prices, costs, and required investment of firms in an indus
try. It is one of the most powerful analytical models for evaluating the form of
competition that exists in an industry. (Porter, 1985, pp. 7) also adds that ever
y industry is unique and has its own unique structure [and this] five-forces fra
mework allows a firm to see through the complexity and pinpoint those factors th
at are critical to competition in its industry, as well as to identify those str
ategic innovations that would most improve the industrys [] profitability. It will
therefore help in outlining the key forces that will asses and determine the lev
el of competitiveness and will illustrate that how these forces are interrelated
. The fig. 2 presents the Porter analysis on Indian Textile Industry. Fig. 2 Por
ter analysis for Indian Textile Industry

Source: Indian Brand Equity Foundation, 2006 According to this model there are f
ive forces which determine the competitiveness of an industry in the long-run. T
he five competitive forces are: i. ii. iii. iv. v. The bargaining power of buyer
s The bargaining power of suppliers The threat of substitutes The threat of new
entrants The rivalry among existing competitors
2.2.1.1 The bargaining power of buyers: The bargaining power of buyers will eval
uate the demand scenario of the industry. Presently the global textile industry
is worth US $ 52 billion (Texsummit, 2007). The markets that dominate the trade
in textiles globally are US and European markets, and the demand for home textil
es and apparel is expected to grow at a much higher rate as it holds competitive
edge against its neighboring countries. This industry is expected to grow by US
$ 115 Billion by

2012 (Texsummit, 2007). Though China is expected to be the supplier of choice in c

omparison to India as India lacks in various factors such as fragmented structur
e, technological obsolesce, rigid labour issues, lack of skill and training, but
it is among one of the low cost producing countries therefore maximum importers
will aim to alleviate their risk of outsourcing only from one country (www.equi
tymaster.com). But as (Rao, 2008) put the situation [] is about to change, with th
e government planning several initiatives to boost production of these textiles,
and industry is also waking up to the potential of the segment 2.2.1.2 The barga
ining power of suppliers: This force of porter analysis will therefore assess th
e supply scenario of this industry. Textile is largely cotton based industry, an
d India is playing a significant role in the worlds cotton market. What lends Ind
ia cost advantage in apparel and home textiles is abundant supply of locally gro
wn long staple cotton. Further, various efforts are being made to improve the co
tton yield to ensure higher productivity. India has now bypassed the United Stat
es and has become the second largest producer of cotton in the world in the year
2007. The following fig. 3 shows Indias growing cotton trend. Fig. 3 Indian cott
on trends: The new green revolution

Source: The Financial Express 2007

It also enjoys the availability of cheaper labour cost over many developed count
ries like US, Hong Kong, South Korea, Taiwan. It is one of the biggest advantage
s because of lower wage rate the overall production cost comes down, giving rise
to economies of scale.
2.2.1.3 The threat of substitutes: The threat of substitutes depends upon variou
s factors such as the relative price and performance of substitutes, buyers willi
ngness to substitute and the cost of switching to other substitutes (Porter, 199
0). The availability of substitutes in the market lower down the profitability a
nd magnetism of the industry as the price level need to get restricted. There ar
e many low cost producing countries like Pakistan and Bangladesh where the labou
r cost is almost 50% cheaper (Reference), proving a threat to Indias export marke
t. This has been felt by many exporter according to the research conducted throu
gh questionnaires.

2.2.1.4 The threat of new entrants:

The threat of new entrants in the industry increases competition to a great exte
nt. But it also brings new capacity in the market. Threats seriousness largely d
epends upon the barriers present and it also depends that how the existing compe
titors of the industry react to it (Porter, 1979; Besanko, 2003). In an economy
with quota free regime every one aims at capacity expansion then, but this resul
ts into flooded small player in the domestic market since they cannot venture in
to global markets. This weakens the pricing scenario for all the domestic player
s. Apparently there are no rigid barriers to enter the domestic market in textil
es, which increases the competition even more. For example, even if, the biggest
denim exporter (Arvind Mills), home textiles (Welspun and Alok Industries) or b
randed apparels (Raymond) think of consolidation with international companies, e
ven they will also not be able to protect their margins, unless they are capable
of tapping a significant part of the international market (www.equitymaster.com
).
2.2.1.5 The rivalry among existing competitors The intensity of rivalry among ex
isting competitors depends upon factors like: the structure of competition, the
structure of industry costs, strategic objectives, degree of differentiation, en
try and exit barriers, and switching costs (Porter, 1990). The rivalry of Indian
textile industry, globally, depends upon various factors like; Indias poor logis
tics, fragmented infrastructure and unskilled labour. These all factors are a ma
jor thumbs-down to Indian economy on the global front. This analysis therefore h
elps in summarizing the porters work on competitiveness which helped in analyzin
g the relevant literature on this industry, that in spite of being structurally
so

flawed, it has huge potential to compete globally. The following section will no
w throw light on the theory of productivity. 2.3 Productivity: The productivity
of a country depends upon the productivity of the companies operating in that co
untry. As (Dowling, 2008) puts that productivity is the most important determina
nt in the long run of a nations standard of living, since it is the root of growt
h of national per capita income. The income growth of few developing countries i
n percentage is given below in Table 1. Table1. Income growth of few developing
countries 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Average China India
Pakistan 8.3 5.8 1.8 9.1 3.8 3.1 5.3 10 8.5 4.8 7 10.1 7.5 6.4 6.2 9.9 8.1 8.4 4
.5 9.5 7.6 6.5 4.7 8.8 7.8 7.3 5.5 8.8 8 7 5.1 8.9 8 7.2 5.3 8.7 7.7 6.9 5 9.21
7.28 5.94 5.08
Thailand 2.2
Source: Dowling, 2008, pp 50 Also, as given by (porter, 1998) international trad
e allows a nation to raise its productivity by eliminating the need to produce a
ll goods and services within the nation itself. Therefore a country should speci
alize in those market sectors in which its companies are relatively more prolifi
c than its international competitors. The literature that is based on productivi
ty can be quantified by three different measures. First is the output per worker
, which measures the productivity of individuals separately in active employment
(Blake and Sinclair, 2003). The second way to calculate productivity is time ba
sis

production, which will measure the labor productivity by no of hours worked. The
third measurement to quantify the productivity is known as the total factor pro
ductivity and measures output per unit of inputs (Blake and Sinclair, 2003). The
methodology of expansion of accounting explains that growth in productivity res
ults from increase in physical capital, workers ability and total factor producti
vity (TFP) (Porter and Ketels, 2003). However, TPF (total factor productivity) d
o not attributes directly towards capital and labour, but it stresses on high le
vel of innovation and upgraded usage of technology. These were some of the compe
titive measures for an industry to compete with its rivals globally. Increase in
the level of productivity will help a firm, in developing a strong base, in dom
estic as well a in the international market. Now, to understand Indias relative p
erformance, the need for globalization by various researchers is explained to be
low.
2.4 Increase in global trade: Today each and every sector of the market has been
globalised firmly. It has not only transformed the overall economy of developed
countries, but it has not only shaken up the, but has also shaken up the forthc
oming industrialized centers to give themselves a boost in order to continue com
petitive position. But why and how do these economies operate elsewhere in the w
orld. Why do they need to get globalised? The following literature will through
light on all those relevant issues. According to (Karagozoglu & Lindell, 1998) s
aturation of domestic market, future prospects in the global market and signific
ant return from foreign firms are the key motives for internationalisation to oc
cur. Another important reason that nations persuade the firms to become internat
ional is to earn foreign exchange. Further, Francis and Collins-Dodd, (2000)

adds that the practical approach pooled with less conservatism direct towards ex
port success. They also established a theory on negative relation between export
performance and conventional strategies followed by various countries and there
fore suggested that if a firm wants to compete globally conservative behavior wi
ll hinder its growth tremendously. Thus firms trading globally should open up th
eir thoughts and policies if they crave for growth and expansion in businesses.
Globalization has not just changed the face of the developed counties and cities
, but it has shaken the upcoming industrial centers to give them a face lift in
order to remain competitive. Dowling (2008, p10-11) puts that in the last two yea
rs, [the] exports have grown over 25% per year with China and India included and
a very healthy 16% even without China and India from the Asia pacific region. Bo
th domestic as well as international trade has been on a remarkable growth. Dowl
ing (2008) further adds that there are many traditional theories that exist on in
ternational trade with various competencies to gain competitive edge. But he emp
hasizes on modern international trade theory which is based on the idea of produ
ct differentiation and monopolistic competition to expand internationally. It al
so highlights the importance of other factors like, economies of scale and upgra
dation in influencing the pattern of trade worldwide. Globalization has also str
engthened the substance of new product development and innovation schemes which
are the essential determinants for growth in trade and the capability of countrys
economy to vie in the world market. Table 2 below illustrates the growth patter
n of merchandise exports in percentage in few of the Asian countries: Table 2: G
rowth pattern of merchandise exports in few of the Asian countries 2001 China Ho
ng 6.8 -5.8 2002 22.4 4.9 2003 34.6 12.1 2004 35.4 15.9 2005 28.4 11.2 2006 20 1
1 2007 17 9

Kong Korea Taiwan Malaysia -14 -17.3 -10.6 7.9 6.4 7.2 5.2 4.8 20.3 -2.4 20.7 10
.5 11 15 18.2 23.3 9.2 30.6 20.7 20.9 24.3 21.6 23.9 12.7 12.1 8.8 12 15.7 15 15
.8 8.9 11 9 17.8 9.5 15.3 17 8 8 7.4 15.1 6 12 17 8
Singapore -10.5 Thailand India Sri Lanka -7.1 -1.6 -12.8
Source: ADB Dowling, 2006
This has also been supported by United Nations, (2006) which shows a direct rela
tion between a countries growth in terms of its GDP and growth in the exports. T
his report states that, International trade can help in economic growth and play
an important role in growth divergence across countries. It can be done by impro
ving export opportunities through economies of diversification or by introducing
production activities previously undertaken in industrialized countries (Dowling
, 2008, p-21).
2.5 Family conglomerates - Strategy for emerging markets: The concept of family
conglomerates is one of the most emerging strategies, especially in the developi
ng economies. A typical FC is explained by (Ben Porath, 1980) [] is owned as well
as controlled by a family, and is dominated by a single founder, however other
family members can also help as managers in the company. The majority of respons
ibility and other controlling rights are directed by the family members (Church
1993; Drozdow and Carroll 1997). They generally make use of capital, which is in
ternally generated and also take loans from

government for growth and development (Prasad and Ghauri, 2004). Although FCs are
owned
and controlled by a family, there are other factors that shape a business. These
include national culture and economic policies (Ward, 2000).
In todays highly globalised world, this strategy has immense growth potential and
can be an excellent business partners for Western companies (Cavusgil, 1997; Ga
rten, 1997; Kock and Guillen, 2001). These markets do not only provide cheap lab
or and raw material, they also have ability to generate good revenues. Also ther
e are many companies in industrialized countries who depend on international mar
kets for both economies of scale as well as profits (Prasad and Ghauri 2004). Bu
t, there are many western countries, which prefer strategic alliances, due to la
ck of experience in such markets (Kock and Guillen 2001). Also FCs comes with ce
rtain risks tagged along. Which includes fragmented infrastructure (sales, marke
ting), due to which many important factors gets affected, like; poor distributio
n systems, narrow communication control, political instability, improper regulat
ory discipline and a high level of product diversion (Arnold and Quelch 1998; Ga
rten 1997a; Khanna and Palepu 1997). The concept of FCs from the stage of introd
uction to its internationalization has been explained in detail by Prahalad and
Ghauri. According to them, FCs, most importantly, should realize the needs of th
eir local market consumers, while making an investment for their enterprise. Pra
sad and Ghauri puts that in many countries, for the expansion of FCs, government
plays a very significant role. As supported by (Jones and Rose 1993), this can
be in form of tax incentives, subsidies and special loans. Therefore it becomes
very important for them to keep positive relations with the government. Foreign
coalition: As the FCs grow and reach at the stage of maturity, FCs focus on compet
ition with domestic rivals and seek out new business opportunities in foreign ma
rkets to

increase economies of scale (Kock and Guillen 2001). What arises at this stage i
s the need for expansion, extensive access to resources required and organizatio
nal knowledge which will lead them to form joint ventures, international treatie
s, and agreements on licensing with Western companies (Kock and Guillen 2001). A
nother reason of partnership is need to upgrade administrative and technological
capabilities. As the second or third members of the generation gets involved in
the business, who are usually more skilled and educated, they perhaps start hir
ing special expert managers of different fields from outside the family (Jones a
nd Rose, 1993). They might require a new organizational structure which will mee
t the challenges of expansion due to international competition (Prasad and Ghaur
i, 2004). The common pattern of growth as put by (Dent and Randerson 1997) is gr
adual expansion by initiating ventures with a foreign partner, which involves, i
mporting or exporting inputs, subcontracted components and manufactured goods.
Finally, FCs then have a tendency to penetrate into cooperative agreements which
are related to technical know-how, production and marketing (Luostarinen and Hel
lman 1994). While some, by establishing wholly owned auxiliary and joint venture
s overseas, and act like world class corporate (Prasad and Ghauri 2004). As tech
nology becomes vital to retain competitive advantage, they widen up their compan
y by developing their own technology and R&D centers (Kock and Guillen 2001).
2.6 Conclusion: The core objective of this chapter was to identify and then to e
valuate the literature on competitive growth and productivity of developing coun
tries. However, it laid emphasis on

competitiveness of Indian textile industry. Porters work on Competitive advantage

of nations was the base or this chapter. Four corners i.e. (diamond model) were
incorporated with five forces of porter to analyze the industry thoroughly. It
is to be noted that there exists many other theories on growth and competition,
but there is no precise literature on the Indian textile industry. Therefore the
following research on this industry will help to fill this gap.

Chapter 3: Industry Profile

3.1 Emergence of Indian textile industry: In the past, India has been one of the
most important players in the global textile market. It is estimated that about
three centuries ago it produced close to 25% of the worlds cloth (Rangarajan, 2007
). But, the international competitiveness of Indian textile industry went throug
h a sharp decline in the era during Second World War. The British manufacturers
penetrated so much into Indian economy that there was influx of foreign goods in
to the Indian markets. As Ox-ford History of India puts it, the machine goods o
f Lancashire together with the free trade policy had killed the Indian cotton in
dustry (Shah, 1985). This situation is revealed in table 3 which shows flooding o
f foreign goods in India.
Table 3 Exports of cotton goods from Lancashire to India (In million Yards) Year
Cotton piece goods 1835 52 1907 2532 1913-14 3159
Source: Shah (1985) It was long after independence in 1947 when the government o
f India gave protection to this sector for its economic development. In late 196
0s exceptional growth was seen in textile firms of Tamil Nadu. Other centers lik
e Delhi, Mumbai and Kanpur then grew gradually. This liberalization in the econo
my helped in resurgence of the Indian textile industry. It then started re-estab
lishing itself in the course of 20th century, when Britain started losing its po
sition as most important textile manufacturer.

Like many other countries, the textile sector then became one of the most signif
icant sectors for the economy of India. Soon after abolition of quotas in 2005 I
ndia strengthen itself in international textile market. It is today Indias most r
ooted sector which provides direct employment (formal and informal) to an estima
ted 38 million people nationwide9 (compared to the estimated 1.2 million employe
d in the IT sector, and about 650,000 in the booming Business Process Outsourcin
g industry (Tewari, 2005). An overview of textile export growth from India durin
g last decade has been shown in Figure 4 Figure 4. Indias textile export growth 1
991-2003
Source: UN Statistical Data, (2005) As it is evident, from above figure that the
Indias textile exports took off in mid 1990s with US topping the charts followed
by UK and then other EU countries. The export growth has been very slow in this
sector. In past ten years there is no drastic change especially in the European
economies, reasons being fragmented infrastructure, unskilled labour, poor port
facilities and rigid labour reforms. It also shows that Indian exporters have a
lot of dependence

on the US economy, which has recently reduced the profit margins of Indian expor
ters due to depreciation of US dollar.
3.2 Role of textile industry in the Indian economy: The textile industry in Indi
a is one of the major and most important sectors in the economy especially in te
rms of foreign exchange earnings, employment and production in the country. It i
s presently growing at 20% and accounts for 4% of Indias GDP. It also contributes
14% to the Industrial Production and employs about 35 million people (indo Ital
ian chamber, pdf). The entire size of the textile sector is worth $ 47 billion i
n which domestic market is at $ 30 billion and the overseas market at $ 17 billi
on. This industry attracted Rs. 33000 crore of investment during the fiscal year
2006-07, which was up by 51 percent from Rs. 21850 crore in the former year (As
socham Report, 2008). The percentage contribution of textiles exports in total me
rchandise exports of India is 15.56% with textiles exports comprising 7.41% and
readymade garments 8.15%. Yet, India accounts for mere 3.9% of world textile exp
orts (www.thehindubusinessline.com). The following fig. 5 shows Indias market shar
e in world textile market in the year 2007.

Fig.5 Indias market share in world textile market

Source: Kavitha, (2007) Furthermore, this industry is the countrys biggest foreig
n export earner, contributing 35 percent of the gross export earnings. It also p
lays a crucial role by providing employment to millions of craft persons and far
mers as it has a very close relationship with the rural economy which is the ult
imate source of chief fibre crops such as wool, cotton, silk, jute and handicraf
ts. According to a recent report, it has been evaluate that out of every six hou
seholds in India one is either directly or indirectly dependent on this sector (
www.texprocil.com). India also has several advantages over its competitors, not
only does it produce the worlds second largest amount of cotton, it also offers l
ow cost skilled labour and has an abundant availability of raw material. Since,
last seven year this industry was striving to recover from a stage of stagnation
. The growth rate of this sector was as low as three to four percent. But it has
now recovered and is currently increasing at the rate of nine to ten percent (L
andes, et.al, 2005). However, the industry since last few months has been going
through tough times due to depreciating value of

US dollars. Now, in order to identify the means by which this sector can channel
ize its available resources and skills, it is important to understand the struct
ure of Indian textile industry.
3.3 The structure of the Indian Textile Industry: The Indian textile industry is
divided into two sub sectors i.e. the organized and the decentralized sector, a
s illustrated by (Chowdhury, 1995). The organized sector involves various textil
e mills positioned all over the country i.e. Maharashtra, southern India, and Gu
jarat, where as various handlooms and power looms in small rural areas forms the
decentralized sector. Since independence, the decentralized sector has witnesse
d a substantial and continuous growth but the government policies in the area of
organized sector forced only the restricted growth in the organized sector (Lea
dbeater, 1993). The legacy of tax, labour, and various other regulatory policies
forms the unique structure of the Indian textile industry that has dominated th
e growth in small-scale, labour-intensive enterprises, but it largely discrimina
tes against larger scale, more capital intensive operations. The structure is th
e result of historical orientation of the Indian government towards local market
and population, rather than focusing on the world market. (Landes, et.al, 2005)
The Industry pundits describe the Indian Textile Industry as a composition of c
omposite mills and spinning, weaving, fabric finishing and apparel making enterp
rises. The spinning industry is the most modern and internationally competitive
among all these classified classes whereas the weaving sector has been believed
to be highly fragmented and small scale using outdated technology (Landes, et.al
, 2005).

The handloom sector, a section of decentralized textile industry is a highly lab

our intensive section that incorporates as a major source of employment to milli
ons of household weavers along with preserving culture and heritage of the natio
n. Due to its labour intensive nature, the sector enjoys various tax exemptions
and discounted interest rates by the government and is often motivated through v
arious government policies and acts (Landes, et.al, 2005).
3.4 Geographical Spread: The Indian textile industry is highly diverse in size a
nd its geographic concentrations. It is diversely situated throughout the Indian
sub-continent. The strong hold of textiles in certain small cities is the most
striking feature of this country. There are more than 1,500 structured spinning
units of large scale, and over 280 composite mills which are vertically incorpor
ated from spinning to finished fabric http://www.3isite.com/articles/insight1.ht
m. The most wellknown places in India, known for textile manufacturing and its t
rade are Tirupur, Ludhiana, Surat, Panipat, Delhi, Bangalore and Chennai

Fig 6. Geographical diversity of Textile Industry

Source: Self Northern India, which includes cities like Panipat, Ludhiana, Delhi
are the leading manufacturers and traders of textile goods. Panipat, a district
in Haryana and is known by the name of City of Weaver. It is the biggest textile
cluster in India which is well-known for manufacturing low priced handloom produ
cts (Especially Home Products). There are more than 15000 power looms in the reg
ion with the capital investment of Rs. 76.20 crore which provides employment to
28000 people (Assocham Report, 2008). Total exports from this district in the ye
ar 2005-06 was Rs. 2200 crore mostly to countries like, Germany, Australia, Cana
da and Japan. There is also a huge amount of export of carpet from this city whi
ch

accounts to Rs. 120 crores, reason being, existence of 65 Carpet woolen spinning
units, manufacturing 72 Lacs Kgs/day Carpet yarn with annual turnover of Rs. 17
5 crores (Assocham Report, 2008). Another small city in Punjab, Ludhiana, is a m
ajor supply hub of woolen knits, which is worth $ 200 million to some of the lea
ding fashion houses of EU and US. The capital city, Delhi, is the leading export
axis for apparel is known for its excellent designing and merchandising skills.
The garment retail sector is growing rapidly in this country. It is also turnin
g out new products such as shoddy and acrylic blankets, tapestry, upholstery, ar
t silk, polyester, polypropylene and shoddy yarns (Home fashion, 2007). The sout
hern part of India is a hub for cotton production. Tripura, a city in the east o
f Coimbatore city, in Tamil Nadu accounts for 90%of Indias cotton knitwear export
, which is worth Rs. 5,000 crore (Home fashion, 2007). There has been a drastic
change since 1980, in the belt of this small sized, unorganized sector, which re
cently became more technologically developed. There are about 7000 units which p
rovide employment opportunities to more than one million people (Bhushi et al,20
04). The export import policy of 2002-2007 made a creditable tribute for its con
tribution to the export of India which now calls it a Town of Export Excellence. C
hennai is also one of the largest apparel manufacturing city, especially industr
ies located in the Ambattur-Padi industrial zone. Another metropolitan city is B
angalore, has been famous for its silk production since ages, is now emerging as
a technical textile city, including foundation garments and tailored clothing.
It presently accounts for 30 percent of countrys total apparel exports which is a
mounting to Rs. 40,000 crore, carrying 1800-2000 textiles and garmenting units i
n nearby centers like Salem and Coimbatore (Home fashion, 2007). It has also pro
mpted global brands like Calvin Klein, Next, Gap and many more.

This geographical overview of textile industry is apparently an indicative of re

lative strengths at various locations, because at the same time there are many i
ndividual companies with equivalent strengths which do not exist in these concen
trations.
3.5 A glance at major textile players in the Indian market: 1. Vardhman Textiles
: Vardhman textiles are the most integrated textile producer of India. This Grou
p was established in the year 1965 and is setup in Ludhiana. Since then, the Gro
up has developed its organization manifolds and aims to be the biggest world cla
ss textile group manufacturing varied range of goods for the global textile mark
et. Vardhman Group of companies seeks to attain customer delight through excelle
nce in manufacturing and customer service based on extremely creative combinatio
n of state-of-the-art technology. It has the market share of 2.37 percent in cot
ton and blended yarn industry with the total sales of Rs 2294.67 Crores in the y
ear ending 31st March 2008 (http://vardhman.in/.) 2. Welspun India ltd: Welspun,
a US $ 3000 million company, started in 1985, leads the export market in terry
towels and currently has a turnover of US $ 1500 million (Datamonitor, 2007). It
s operations are spread across the whole globe with an excellent distribution ne
twork dealing with products like Bath robes, rugs, towels and saw pipes, exporti
ng in more than 32 countries including U.S.A., U.K, Canada, Australia, Italy, Sw
eden and France (www.welspuntowels.com). WIL is also planning to acquire firms f
rom Europe and Australia which can comprehend its range of towels, bath robes an
d bed linens. The constant appreciation of rupee has led the

company to take this decision as it will spread risk by cutting down its dollar
billing to half of the revenue (Reuters India, 2008; Welspun eyes home textile f
irms abroad). 3. Century Textiles: Century textiles & industries limited is a Mu
mbai based company which was started in the year 1897. Today it is Asias one of t
he biggest cotton textile mill. In such an extremely
competitive global market, Century s cloth has carved a niche for itself. In the
last 20 years Century Textiles has spent more than US $ 58 million for moderniz
ing the plans and upgrading its technology. The total sales of this company in y
ear ending 31st March 2008 were 3850 Crores. (www.centurytext.com) 4. Bombay Dye
ing: Bombay dyeing established in 1879, is one of the oldest textile companies o
f India, is a flagship company of the Wadia Group dealing into manufacturing and
marketing of textiles and polyester fabrics. Its total sales in the year ending
31st March 2008 was Rs. 959.01 Crores (www.bombaydyeing.com). It has recently e
ntered into foreign market, a 50:50 Joint venture agreement for a development pr
oject in Mumbai with Larsen and Toubro. The company has been exporting in many c
ountries like USA, Europe, Australia and New Zealand. An exceptional strength th
at this company stands with is its distribution chain all over India, is control
ling more than 600 exclusive showrooms all over (www.myiris.com).
5. Aditya Birla Nuvo Limited: Another diversified conglomerate is Aditya Birla N
uvo Ltd. who has launched many new businesses for Indias premier business house,
the Aditya Birla Group. It operates a dozen businesses under its fold, varying f
rom textiles to telecom (www.adityabirlanuvo.net). The

razor sharp focus on each business has facilitated its turnover to reach US $ 1.
8 billion (Datamonitor, 2007). Its key business segments include viscose filamen
t yarn (VFY), carbon black, branded garments, textiles and insulators with its m
anufacturing units in India, Thailand, Indonesia, Malaysia, Philippines, Egypt,
Canada, Australia and China (www.jayashreeiril.com). 6. Raymond: The Raymond Gro
up, established in 1925 and within few years, transformed from being an Indian t
extile major to an international conglomerate. With more than 60% of market shar
e in India, Raymond Ltd. is today the largest integrated producer of fabric in t
he world (www.raymondindia.com). With the turnover of about US $ 475.1 million (
Datamonitor, 2007) this group is one of the largest players in Fabrics, denim, c
osmetics, air charter and many more. It also manufactures Kamasutra condoms and
high end surgical gloves. It is vertically and horizontally incorporated to prov
ide their customers total textile solutions. There are very few companies global
ly, which offer such a diverse product range of more than 20,000 different range
of worsted suiting to cater to customers across occasions, age groups, and styl
es (www.raymondindia.com).

Chapter 4: Macro economic factors affecting Indian textile industry

4.1 Introduction: In the last two decades, the Indian textile industry has never
looked this self-assured with itself as it does today. India today is a intensi
fied economy, gaining global attention from all over the world with government c
hanging its role to facilitate rather than to regulate the industry along with s
upportive policies for textile industry and most importantly, the western market
s increasingly accepting Indias differentiated position as a textile source vis--v
is the other Asian industries countries. These all are the factors which have br
ought in a new perspective to India as a textile nation.
In an attempt to enhance India s share in the world textile souk, several progre
ssive steps are being taken by the Government. The Indian government has been ac
ting as a catalyst to promote this industry; as it is one of the most significan
t sectors of the economy. To make the industry more competitive several policies
have been introduced by the Government.
4.2 Government regulations:
Till 1985, the growth of Indian textile sector used to take place in very genera
l terms. It was in the year 1985; the significance of textile sector in India wa
s realized for the first time. A separate policy was declared to promote this in
dustry. Later, National Textile Policy was announced, in the year 2000 which aim
ed at availability of adequate quality cloth at reasonable rates, catering to th
e majority of Indias population (put some ref). It also aimed at providing employ
ment to a large number of population. The same year also became evident because
the government took initiatives of setting up apparel parks; 2002 and 2003 showe
d a

gradual decline in excise duties for most types of fabrics while 2004 offered th
e CENVAT system on an optional basis (www.dnb.co.in).
4.2.1 Quality improvement: The government is also emphasizing to improve the qua
lity level by getting renowned quality certification. Out of 250 textile compani
es that have been taken up by the Commission, 136 are certified by ISO 9001. Oth
er certifications targeted by the Textile Commission are ISO 14000 Environmental
Management Standards and SA 8000 Code of Conduct Management Standards (Indian B
rand Equity Foundation, 2006).
4.2.2 Modernisation: Various other measures have been taken to modernise the tex
tile processing sector in addition to interest imbursement. The government of In
dia in its Union Budget of 2005-06, announced a credit linked capital support of
10 per cent (Indian Brand Equity Foundation, 2006). Scheme for Integrated Texti
le Park (SITP) has been introduced which is on track to offer world class infras
tructure conveniences for setting up their textile units through the Public Priv
ate Partnership model. Along with that, for procurement of highly developed mach
ines in powerloom sector; the government endow with 20 per cent of capital subsi
dy for procurement of modern machinery in the powerloom sector.
Recently, Indias inclination towards western designers and other international br
ands (from UK, Italy, and France) has been observed to enter into a joint ventur
e to cater the domestic market with more varieties. Carrera invested US$ 252.7 m
illion in textile projects in India

(Indian Brand Equity Foundation, 2006). Many Italian brands like Lotto and Paner
ia watches, signed brand franchising deals with Indian players.
4.2.3 Setting up of SEZs: This industry has been requiring superior quality infr
astructure since centuries besides other structural up- gradation, and this need
has led the government to initiate certain policies which will result in higher
economies of scale with greater efficiency. Special Economic Zones (SEZ) establ
ished by government are such policies only, which are being considered as an eng
ine of economic development supported by quality infrastructure. In 2005 the Mah
arashtra government proposed to setup two special economic zones in Navi Mumbai
and Nagpur (Home Fashion, 2005).
4.2.4 The Technology Upgradation Fund Scheme (TUFS) Other encouraging factor inc
ludes, Technology Upgradation Fund Scheme (TUFS) launched by government of India
in April 1999, Recognising that technology is the key to being competitive in t
he global market (Indian Brand Equity Foundation, 2006). This scheme has enabled
various organisations to access interest loans at a much lower rate for technol
ogy Upgradation. It is a scheme in which, reimbursement of five percent of inter
est rates charged by the financial institutions and various banks is given back.
This ensures availability of credit at global rates for technology upgradation.
To an extent, it has also helped in curbing the Chinese export market (fibre2fa
shion, 2006).

4.2.5 Texsummit, 2007: The Texsummit, 2007 was an initiative taken by ministry o
f textiles, Government of India, to explore new growth paradigms. Texsummit is e
xpected to bring in a paradigm shift and freshness in approach to its vital indu
strys healthy development and rapid growth in a manner that India can truly reali
ze the vast opportunity of becoming a global textile power both as a source as w
ell as a consumer. The two-day Texsummit, scheduled for August 31st September 1,
2007 at Vigyan Bhawan in New Delhi, was attended by over 500 industry experts,
economists, academicians, from across the textile value chain. All the export pr
omotion councils and industry associations, without an exception were actively i
nvolved in the effort. The event aimed at evolving a cohesive action plan and mo
st importantly, unifies the thought process of the organized and unorganized seg
ments and sub-segments of this US$ 52 billion industry, expected to reach to US$
115 billion by 2010 (Texsummit, 2007).
4.3 FDI policies: As liberalisation in the economy has gathered up, FDI policies
in the textile industry has reformed to a great extent. The biggest driving for
ce for the government has been the manufacturing area as for most of the foreign
investors it is much safe to invest in building manufacturing potentials. Follo
wing this, the government is executing various schemes like integrated textile a
nd apparel sites. However this sector allows 100% FDI, but the firms are not tak
ing enough initiatives to tap this opportunity (Home Fashion, 2007).

4.4 Dismantling of quotas: For many years, the worlds textile market was subjecte
d to a trade regime called Multi fibre Arrangement (MFA). For more than thirty y
ears, many rich nations have sheltered their domestic textile industries from lo
w-priced import goods being created in poorer countries. Dismantling of textile
quotas in January 2005 then ushered an era of liberated trading through fair com
petition. This led to globalization in the textile industry which has offered lo
ng-term benefits along with many other improvements in this industry. The Multi
Fibre Arrangement (MFA) Appendix1, originally sanctioned in 1947 terminated in D
ecember 2004, shot up the exports by 22%. According to two economists of Interna
tional Monetary Fund (IMF),
Abolition of these quotas correspond to a brilliant prospect for India economy t
o improve its global export market share in textile trade by suitable policy res
ponse and nurturing an environment to overcome specific constraints now plaguing
the industry
(www.thehindubusinessline.com). Table 4: Export value of textile industry 2004-2
005 Export Value US $14 Bn of textile industry 2005-2006 US $ 17.52 Bn 2006-2007
US $18.73 Bn 2007-2008 US $ 21.46 Bn
(Source: Textile Minister, Shri Shankar Singh Vaghela, India Infoline News Servi
ce / Mumbai Aug 13, 2008 10:27) Table 5. The textile export products America, Un
der MFA MFA categories 218 219 225 Product Description Fabrics of yarn of differ
ent colours Duck fabric Blue Denim Fabric

313 317 362 363

Cotton Sheeting Fabric Cotton twill fabric Cotton Bedspreads and Quilts Cotton t
erry and Other Pile Towels
Table 6. The textile export products to EU, Under MFA MFA categories 1 23 2 3 (i
ncl. 3A) 9 20 39 (Source: Verma, 2002) The world textile production and trade be
gan to re-orientate due to elimination of the MFA quotas. The overall production
in this industry tracked major boost in output especially in developing countri
es, such as India, Pakistan, and China. India being one of the leading producers
of cotton offers an advantage over its other competitors. The abolition of MFA
quotas has not only enhanced the growth rate of exports in textiles, it has also
pushed the country to attain international competitiveness in such a regulated
manufacturing sector. D K Nair, Secretary General, Confederation of Indian Texti
le Industry said Cotton exports from the country rose by more than 20 percent in
terms of volume post quota regime (http://www.fibre2fashion.com). Now if we see a
bolition of quotas as such a boom to the industry, it has also proved to be a ma
jor threat (Kathuria and Bhardwaj; 1998) as too many imported textile goods floo
ded in Product Description Cotton yarn Staple yarn Cotton woven fabric Synthetic
woven fabric Cotton Terry towel and Linen Woven Bed Linen Woven table linen

India market making the export scenario much more competitive than ever. However
, the India government has initiated various reforms to meet the challenges of p
ost-MFA setup, which intended to encourage huge capital investments and tighten
up arduous procedures related to the tax regime. The Textile Vision 2010 was a r
esult of interaction between the Indian textile industry and the government whic
h foresees around 12% annual growth in the textile industry from US$ 36 billion
now to US$ 85 billion by 2010. Further, Vision 2010 also intends the conception
of an additional 12 million jobs through this initiative (http://www.dnb.co.in).
4.5 Agreement on Textile and Clothing: Another most significant outcome was the
ATC (Agreement on Textile and Clothing) agreement by Uruguay Round finally addr
essing developing countries concerns, as the ATC was designed to facilitate the in
tegration of the textiles and clothing sector into GATT 1994 (Reinert, 2000) Beyo
nd Phase-out of Quota in Textile and Clothing Trading. 4.6 Appreciation of rupee
: Also, the appreciation of rupee has bought a sharp focus for exporting industr
ies, particularly the textile sector. The Government is also trying to construct
an environment to draw an investment of Rs 1,40,000 crore in the Eleventh Plan
period once the textiles and garment exports are probable to rise from the curre
nt $14 billion to $40 billion.
(www.thehindubusinessline.com). Thus, the introduction of such policies led to I
ndias market presence in world textile market and increased foreign investment in
this sector. And with elimination of quantitative boundaries on textile goods,
liberalisation in huge investment projects and dismantling of quotas has resulte
d presence of Indian Market amongst several big brands.

Chapter 5: Indias Position in the World Textile Market

5.1 Overview of world textile market: It was long back when the history of growt
h in World Textile industry started in Britain, because the weaving, knitting an
d spinning machines were originally invented there. Gradually, cotton, wool, sil
k, and other such raw materials started being produced in high quantities all ov
er the world. Despite of the fact that the industry was originated in UK, but fr
om 19th Century the manufacturing of textile goods passed on to regions like Nor
th America and Europe when the merchandising process at these places came into f
ull operation (www.economywatch.com). Later on countries like China, India and J
apan concentrated more on this sector by dynamically industrializing their econo
mies. China, Hong Kong and India then became top producers of textiles due to im
portant factors like abundant availability of cheap labour. According to statist
ics, the current global textile market possesses worth of more than $400 billion
. The industry has been facing both, the opportunities as well as severe competi
tion in such a competitive scenario. It has also been forecasted that the textil
e production worldwide will increase by 25 percent from the year 2002 to 2010 an
d in this regard the Asian region will be the most significant contributor (http
://www.economywatch.com). There have been several measures taken by World Trade
Organization (WTO) to uplift and strengthen this sector. In 1995, WTO rehabilita
ted its MFA strategy and implemented Agreement on Textiles and Clothing (ATC), s
pecifying that the WTO member nations will get rid of quotas on textiles.

5.2 International trade and profile of major competitors: Today, the global text
ile and apparel trade is approximately US$500 billion, and is expected to grow b
y US$800 billion by 2010 (www.findarticles.com). European union and United State
s together lead the consumption, which is 64 percent in clothing and 39 percent
in textiles in 2004 (Indian Brand Equity Foundation, 2006).. There are other sig
nificant consumers as well like, Australia, Japan, and New Zealand especially of
home textile products (Indian Brand Equity Foundation, 2006). The universal quo
ta regime was in place for decades which finally ended on January 1, 2005, excep
t for few small countries. Elimination of these quotas bought a major transforma
tion in the world economy. It also helped many developing nations like India to
lift their economy from poverty and helped them in eradicating complex problems
like unemployment.
5.3 International scenario on textile industry: From a very long time, the world
apparel and textile industry is growing slowly but steadily. In 2007, this indu
stry generated total revenues of US $1.6 trillion and by 2012; it is expected th
at this industry will show a compound annual growth rate of 4.3% generating tota
l revenue of US $2 trillion. (Datamonitor, 2007). Fearing to lose their respecti
ve domestic markets, many countries like U.S, E.U and Turkey have recently impos
ed quotas on the Chinese exports. Indian exporters see this as a huge opportunit
y to expand their businesses across the nations and also comprehend the fact tha
t Indian exports would also be imposed with quotas if the importing nation feels
to protect their domestic market. The questions that need to be answers are whe
ther Indian exports could be bear by the existing capacities of the global marke
t? Whether there is a possibility that India in

the future can create a niche for itself? And whether India has the capability
to market its own products properly? The author has answered to these questions
in the analysis and discussion section. The following paragraphs will describe
the performance of the Indian apparel and garment industry in the two major mark
ets of world-US & EU. Indian textile industry is showing phenomenal growth rate
recently and is going great guns! The Indian textile industry registered drastic
increase in the exports sale after the abolition of the quota regime. Currently
, India possesses 4 % of global market share which will grow at least to 8% by 2
010 and will have the total value of US $50 billion (Texsummit, 2007).
5.3.1Performance of India in the US market: Indian textile exports after the rem
oval of quota, during the period from January to April 2005 grew by 27% while Ch
inese industry in the same period grew by 52% (Chandra 2006). In the first nine
months of the year 2005, market share of the Indian textile industry increased f
rom 4.4% to 5.2% and this share is expected to grow up to 15% by the 2008. (IBEF
, ICRA 2006) According to Mr. Harish Ahuja, MD Shahi Exports states, India has p
erformed extremely well in the home textile business. He explained that there ar
e bright prospects for Indian textile industry in trading home textiles internat
ionally and expects that this market will increase to US $ 10 billion in 2010.
As believed by Verma (2002), growth in this sector is approaching by the value u
pgradation of rather than from capacity expansion. According to the industry sou
rces, first rank in the home textile is occupied by the terry towels, second by
the bath rugs and then follow other made ups.

The increase usage of the wide width looms have resulted in the rise of exports
in this segment. After China and Mexico, India is the third largest exporter of
textile to U.S. Lately; China s URV has declined by 14% whereas on the other han
d India has maintained its URV (Texsummit, 2007 & Confederation of Indian textil
e industry (CITI).
5.4.2 Performance of India in the European market: In the EU market, after the q
uota regime India s exports grew by 16% and market share increased from 6.0% to
7.3% in the 1st nine months of CY2005. By the end of 2008 it is expected to be 9
.0% (IBEF, ICRA Presentation (2006). Indian textile exports also showed the impr
essive growth in the EU market and grew by 16% and simultaneously increased its
market share from 6.0% to 7.3% in the first nine months of 2005. It is expected
that by 2008, market share of the Indian textile industry would increase to 9% (
IBEF, ICRA Presentation, 2006). India as in the case of US is placed on the thir
d position in the list of textile exporters in the EU market after China and Tur
key. Because of the duties imposed by the EU on the Chinese imports, Indian text
ile exports posed favorable, due to which China s UVR decreased by 40% and India
n UVR increased by 6% (Texsummit, 2007).
Terry towel is one of the most renowned exports by the Indian textile industry w
hich is very popular in EU market. But the period from 1995 to 2007, exhibits th
e declining trend in both US and EU markets which is mainly due to the hardening
of the prices (FICCI, 2007). Indian textile industry is facing threats from the
many other countries other than China, like Pakistan, Bangladesh and Vietnam. I
t is reported that in the year 2007, India was the fourth largest exporter to US
where as Pakistan was above India, it was spotted second (FICCI, 2007).

Indian firms are also performing really well, in the Asia Pacific region. There
are many companies operating Singapore, Japan, and Indonesia. Efforts are also b
eing made to develop trade between India and various Middle East countries like
Bahrain. Lately, many home textile manufacturers have embarked on introducing co
llections by using organic materials. It was recently reported that turkey has b
een surpassed by India, and is the largest cotton producer today (Panthaki, 2008
). Organic cotton is the cotton that is grown without using pesticides or chemic
als, and is grown in virgin soil. The demand for organic cotton in increasing tr
emendously all over the world and is more in the European countries. Companies i
n US (Pottery Barn, West Elm) too are going organic. Another important raw mater
ial for textiles, which is gaining demand in the export market, is Jute. Various
steps are being taken by the researchers, to ensure that the quality of jute ex
ported from India, should match the global market standards.

Chapter 6: Methodology
6.1 Research methodology:
This chapter will outline the various research methods used by the author to eva
luate the competitiveness of Indian textile industry. To analyze a study there a
re basically two academic research methods, Qualitative research approach and qu
antitative research approach (Saunders et al. 2003). Both these research methods
are used differently for different research purposes. In relation to data colle
ction for this dissertation, qualitative methods have been used which includes q
uestionnaires and semi-structured interviews. The research was conducted to eval
uate the International Competitiveness of Indian Textile Industry. It is therefo
re based on various competitive advantages that India has over other countries a
nd certain limitations because of which it lacks to compete with other strong na
tions.
The dissertation required both, primary as well as secondary data in order to ev
aluate the complex global strategies. The secondary data, to analyze the industr
ys future moves; was gathered from various books, magazines, companys annual repor
ts, and web access. The quotations from the interviewees have been used in the n
ext chapter to evidence and support the analysis. Whereas the primary data colle
cted, was through various interviews and the questionnaires; conducted with seve
nteen textile exporters of India that how do they compete globally. It enabled t
he author to unfold many important issues and a realistic global scenario regard
ing the topic.

6.2 Questionnaires: For a market research, collecting data from questionnaires i

s the most common method. Questionnaires are very economical to gather data from
a potentially vast number of respondents. They are often, one of the most feasi
ble ways to reach a large number of people (Arnold M. Lund, 2001). Questionnaire
s are used to collect specific data from market, which cannot be gathered elsewh
ere from, for example: books, newspapers and internet access. It is so because t
he data collected from this source will be original. The author has used open en
ded questions as it allows the respondents to better express their answer as the
y are most suitable for an explanatory research.
6.3 Interviews: Qualitative interviews are often used in an exploratory way whic
h explores the subjective interpretations of collective experiences. It is a val
uable research method for exploring data on understandings and different peoples
opinions about a subject matter. (Arksey and Knight, 1999, p.2, 2007). It can be
broadly classified into three types: structured, semi-structured, and unstructu
red. The type of interviews used for this dissertation is semi-structured. The q
uality of the data gathered in an interview depends on both the interview design
and on the skill of the interviewer (Author Nick Fox). Gillham (2000) explain t
hat how interviews are one of the best research techniques. Firstly, it is more
flexible, suitable when the sample of research is small, secondly, they are appr
opriate when questions are open ended, requiring detailed response, lastly, when
the information is sensitive in character and the interviewee may only reveal i
t during face-to-face conversation.

6.4 Locations for the research conducted: The Indian textile industry being seco
nd largest in the world has a huge potential to perform much more. The industry
is poised to meet the ever increasing global competition. This made the author t
o choose India as her research area. This industry is geographically too diverse
because of which the primary data collected, was concentrated among few areas l
ike, Haryana, Punjab, Delhi and Maharashtra. Northern region of India is the mos
t imminent region of textile industry, gaining recognition worldwide. The survey
conducted was in regions like, Gurgaon, Delhi and Panipat. Other than this Mumb
ai, capital of Maharashtra has been the biggest textile hub in India. The questi
onnaires were being filled in person, where as interviews conducted on telephone
. 6.5 Interpretations of the data: Data interpretation has been done by using bo
th primary as well as secondary data. The questionnaires and interviews intended
to gain the appropriate information regarding the study. The information gather
ed primary resource i.e. (from the interviews and questionnaires) were put toget
her to divulge the real situation of the market. The data collected from the sec
ondary resource was also evaluated in similar way. 6.6 Limitations of the resear
ch: During the research the biggest constraint faced by the author was her being
in United Kingdom and conducting research on Indian firms. This made the task m
ore complex as many research areas couldnt get covered due to restricted access t
o resources as well as time constraint. During authors visit to India, she manag
ed to conduct only seven interviews personally, whereas the rest of the intervie
ws and questionnaires were through telephone and emails respectively.

Another limitation recognized by the author was, availability of incomplete and

broken information by the interviewees, which aroused due to confidential purpos
es. The interviewees were not comfortable in revealing the figures of their comp
anys revenue. The following chapter will lay down the discussions and authors find
ings, which will disclose the limitations of Indian textile industry, along with
the recommendations to enhance the industry future prospects.

Chapter 7: Findings and Analysis

7.1 Introduction: This chapter will provide a comprehensive analysis of the ques
tionnaires and interviews conducted during the research. In total five descripti
ve questionnaires and twelve interviews have been analyzed. The research questio
ns are based on the macro economic factors affecting Indian textile industry and
the author identified that this industry is facing many challenge, and therefor
e recommendations have been provided to overcome those limitations. A sample of
questionnaires has been provided in the Appendix 2. The questions used for quest
ionnaire are same for the interviews also. The first section of this chapter wil
l therefore interpret the data followed by various challenges faced regarding th
e fragmented infrastructure, government policies and drawbacks of international
trade trends; finally concluding with various recommendations to improve this se
ctor. 7.2 Evaluating the Competitive Performance of India: After reviewing all t
he questionnaires and the interviews, when questioned about the competitive perf
ormance of India globally, out of seventeen, twelve considered China to be the b
iggest obstacle in its way to be the international leader. Whereas some of them
believe that India should follow the efficient strategic model of China. Today I
ndia and China are the most rapidly growing economies, with an advantage of hold
ing almost half of the total population. Both these countries are influencing th
e international issues in all the businesses, global trade and the overall envir
onment. Mr. Sahil Guglani, Managing director of Savoy creations believes

that today India ranks second in the world textile market and now the only main c
hallenge it faces is to beat China. India should therefore focus and work upon it
s problem areas. The analysis will now elucidate the competitive performance of
India with respect to China in terms of Infrastructure, labour reforms, internat
ional trade trends and government policies. 7.2.1 Infrastructure: As far as the
infrastructure is concerned China is much ahead of India. The Chinese Government
has been investing a lot as compared to India for the development of its infras
tructure, believing that it attracts the foreign investors to a great extent. No
w being specific to the textile industry, the companies operating in China are m
uch more cautious about the production quality, the technology used, health and
education of the employees etc. This is where India needs to catch up really fas
t. Particularly the port services in India have been criticized from all over th
e world. To be more precise towards different sectors, the port facilities in In
dia are extremely disorganized and have received criticism from all over the wor
ld. According to the director of Bertling Logistics, Mr. Josi Morreale, "The lac
k of Indian port infrastructure is not allowing us to provide service through ou
r own Panamax vessel, which has resulted in an increase in per unit transport co
st by as much as 10%" (www.mjunction.in). Dowling (2008) also adds that, due to
poor port infrastructure, the exports of textiles of India are at 10% loss with
US as compared to other countries like China, Thailand, South Korea and Indonesi
a (Dowling 2008, p477). Along with this other transportation ways, such as roadw
ays and railways also needs to be a lot more developed. As Mr Ravinder Khanna, T
he managing director of Sheena exports puts that due to enormous increase in pri
ces of land (expansion of real estate market) in India and the appreciation of r
upee, the economys overall size is constantly increasing. This gives India advant
age over its

biggest competitor China, as the properties are controlled by the state governme
nt only. This restricts foreign investors to setup new industries there. Consequ
ently, it acts as an opportunity for India. 7.2.2 Labour reforms: The labour ref
orms in India are extremely stringent which hampers the growth of textile manufa
cturers to a great extent. Mr Manan Saluja, The export manager of Mansarover Ove
rseas comments that China as compared to India has cheap labour, which is why it
attracts maximum developed countries for their manufacturing activities. He adds t
hat undoubtedly India also has a vast pool of unskilled labour, but overall prod
uction of India goes down due to obsolete technology base and unskilled human la
bour. China also has a history of extreme employment security which has reformed
its labour relations drastically and has created a new labour market, in which w
orkers are highly mobile (http://www.financialexpress.com) Though, there is a ch
ange in this scenario taking place, with increase in the rate of labour wage in
China. India should take advantage of this situation and should also take seriou
s measures to expertise their labour force. An interviewee Mr. Nimish Arora, The
managing director of Dicitex Dcor says that the government should also take some
measures to amend its inflexible contractual labour laws. As mentioned before, th
at China has various facilities for its labour force like heath and medical cent
ers, India too should make efforts to develop these areas for a better labour fo
rce.

7.2.3 International trade trends: The author during her research realized that t
here are two economies, India and China that have gained the maximum after aboli
tion of quotas in 2005. Both the countries have paved towards a very glorious fu
ture. However, the strategic competencies used by both the countries have been v
ery different from each other. Mr Avinash Palival, The managing director of Pali
val Exports who is dealing in cotton rugs and mats said that, the foreign trade s
trategy which China follows, is that it import semi-finished goods from outside
and export the complete and refined product to countries like US, Europe and Jap
an. This elucidates the situation more clearly, that China soon after abolition o
f quotas in 2005 attracted huge amount of FDI which offered the country a good v
alue of exchange rate. This helped the Chinas economy to excel at the platform of
textile exports. But very soon the US and European markets realized that the Ch
ina is becoming the biggest foreign exchange reserve holder. Therefore they impo
sed import barriers from China to safeguard their economy. This again is an adva
ntage for Indian export market to capture. But Mr Ravinder Khanna believes that I
ndia too should follow the footsteps of China to an extent, to attract foreign d
irect investment, which will help the economy to grow and should also enter into
joint ventures with international firms. The textile exporters in India are ver
y positive about this industrys potential in near future, both in domestic as wel
l as in global market. It has also been found that the Indias domestic market is
emerging drastically giving competition to nations like Pakistan and Sri Lanka.

7.3 SWOT analysis of Indian Textile Industry: Today the world textile industry i
s worth $400 billion and is likely to grow by 25 percent between 2002 and 2010 a
nd Asian region will largely contribute in this regard. (www.economywatch.com).
India being the second largest producer of cotton in the world has great opportu
nities to make the most of it on a much bigger portion, for this industrys growth
. Though China enjoys sustained rapid expansion in exports due to many competiti
ve advantages, India is still giving a cut throat competition to China in produc
tion as well as in exports. Therefore the Indian textile industry should boldly
respond to this challenge. This section will now elucidate Indias strengths, weak
ness, threats and opportunities, based on the primary and secondary researched b
y the author. It will help in focusing on these key factors which are affecting
Indian textile industry and will provide a comprehensive platform in examining t
he performance and future prospects. 7.3.1 Strengths: There are several key stre
ngths which Indian textile industry posses. The first being low cast labour forc
e, which is the most distinct competitive advantages that India has. The country
have abundant manpower at very low prices as added by Mr. Sahil Guglani the Manag
ing Director of Savoy Creations. Since, labour wages in this country are very lo
w, the overall manufacturing cost of the finished products cut down. A research
by KPMG in fig. 7 shows the same:

Fig. 7 India: One of the lowest labour costs in the world

Source: KPMG, 2003 Another strength, due to which India enjoys advantage over it
s competitors, is the availability of rich resources of raw material in abundanc
e for textile industry. Since, the industry is largely cotton based it also hold
a competitive edge there as it is one the largest cotton producing country in t
he world. It is also rich in many other resources like, silk, jute, viscose, lin
en, wool, polyester etc. The third strength is Indias growing domestic and intern
ational market. Today this sector is highly self-reliant and holds 17 percent to
the countrys export earnings (Texsummit, 2007). The sector also provides employm
ent to more than 35 million people. Therefore, the overall growth and developmen
t of this sector has a direct impact on the expansion of the nations economy. Las
tly, comparing India to its competitors, it is highly competitive in spinning se
ctor, and therefore has its presence in many value chain processes. It has acces
s to all excellent ports in the world (www.economywatch.com).

7.3.2 Weaknesses: India, despite of being so self sufficient in factors like che
ap labour, raw material, still comes across many problems to compete in the inte
rnational market. This is due to its weaknesses like, fragmented infrastructure
which leads to lower ability and hinders the industry to expand. Large section o
f the industry is even today engaged in the unorganized sector i.e. powerloom an
d handloom sectors (KPMG Report, 2003). The following Fig. 7 shows the degree of
fragmentation in Indian textile industry. Fig. 7 Degree of fragmentation in Ind
ian Textile Industry
Source: KPMG Report, 2003 As commented by Mr Manan Saluja, the export manager of
Mansarover Overseas, the industry also lacks because of its cost competitiveness
is relatively low due to unskilled labour force and inadequate economies of sca
le. Mr. Dev Rai, the managing head of Baldev Overseas further adds that, technolog
y obsolesce is one of the biggest reasons why this industry is still labour inte
nsive. The Government of India should aid SMEs of this industry

with
special
loans,
with
which
the
later
can
invest
in
latest
machines.
7.3.3 Opportunities: Though this industry lacks in many areas, but has several o
pportunities as well, such as focusing towards research and development in this
sector to focus onto new product development. It will help the Indian companies
to grab the larger market share. As commented by Mr. Ravinder khanna, managing d
irector of Sheena exports that more innovation should be done to develop smarter
fabrics, by using various specialized treatments. Abolition of quotas is another
opportunity for the nation, as it was a complex system of bilateral restraints w
hich came to an end. The textile trade post 2004, offers many opportunities as v
arious restrictions in the trade system are removed and it has offered the impor
ting countries to have a wider access to the world as a consumption marketplace.
Also, the industry is moving towards branded products, which will help India in
improving its brand value. 7.3.4 Threats: As discussed earlier, China is one of
the major threats to the Indian textile industry. Apart from that the structure
of the industry in itself is something that needs to be worked upon. The big In
dian players are trying to incorporate the integrated working models of supply c
hain as the fragmented structure stands in the way of competing efficiently. The
location of India and its distance from the western countries that it sells to,
is another factor that pulls India back in delivering the best in terms of cost
and timeliness. Neighboring countries like Pakistan, Bangladesh and Srilanka ar
e giving India a tough competition owing to their still cheaper labour. Though C
hina so far has been considered the only major competition, but the other neighb
oring countries mentioned above are also catching

up fast. Lastly, the expiry of the quotas have made the trade free and hence put
the firms in an uncertainty as to the amount of market share they would get. 7.
4 Limitations and Challenges faced: Now after evaluating the competitive perform
ance of India with China, the challenges that are being faced by Indian firms, c
an now be identified. The Indian textile industries largely compete on the follo
wing factors: i. ii. iii. iv. Quality of products Cost effectiveness Effective s
upply chain management Designing and innovation
Though, it has been recognized that India is not utilizing its resources to the
fullest and is not acting upon the above mentioned areas optimally. Therefore th
ere is a dire need overcome these challenges for India to become the textile lea
der. 7.4.1 Appreciation of rupee value: At present, the Indian textile industry
is highly disturbed due to economic recession in United States. The rupee apprec
iation has taken a toll on the existing thin margins of textile players. Due to
this slowdown in the economy they are bearing huge losses. The hardening of rupe
e has also affected the overall textile earnings to a great extent. Many SMEs ar
e laying off their workers. The chairman of the Clothing Manufacturers Associati
on of India, Mr . Premal Udani said that around 5, 00,000 jobs are at risk and t
he export target of $25.06 billion for the year 2008 seems beyond the reach (kno
wledge.wharton.upenn.edu). Mr. P.D. Patodia, chairman of the Confederation of In
dian Textile Industry reveals in a conference that "Our competitiveness for the
time being has gone away". It has been estimated

that for every 1% fall in the value of the dollar compared with the rupee, profi
t falls by 1.2%. (www.knowledge.wharton.upenn.edu). Subir Gokarn, chief economis
t for Standard & Poor s Asia-Pacific also comments, "Some exporters will be perm
anently damaged and not all will survive. Authors recommendation: Since, it has be
en realized that the Indian exporters are a lot dependent on US buyers, which ha
s given rise to this terrible situation. Therefore the Indian textile firms shou
ld aim towards expanding their clients portfolio in terms of other countries as w
ell. It will help the firms in diversifying their risk to a great extent. Along
with this the Indian government should take measures to protect their exporters,
so that they do not bear the whole risk. For e.g.: The government of China has
created artificial fixed exchange rates, in which if such situation arises, it i
s the government who bears the fluctuations in exchange rates. 7.4.2 Labour refo
rms: As mentioned earlier, poor labour productivity in India has been killing ec
onomys cost advantage since very long. One of the biggest factors for deterred FD
I is unfavorable labour policies. Because of this the industrys total output has
been very low as compared to other countries like China. Government of India is n
ot taking enough initiatives to formulate the labour reforms in India Mr Ravinder
Khanna, the managing director of Sheena exports. .Authors recommendation: Establ
ishment of flexible labour market can only help this sector, by protecting the w
orkers from exploitation and catering to their needs. As, the political, social
and demographic structure of India prevent fundamental changes to take place in
the existing labour laws. Therefore, to organize the workforce of this industry
the government should develop five year

plans to accomplish this agenda. Along with technical skills, managerial strateg
ic support should also be provided. For a firm to deliver effective supply chain
management, it is very important to hire people with knowledge in all the relat
ed fields. Therefore, fashion and textile institutes like NIFT should be opened
up by the government to provide detailed textile knowledge to the generation app
roaching. Government should establish more textile parks, which will not only pr
ovide employment to a huge number of people but it will also provide those worke
rs with basic health and education facilities. 7.4.3 Fragmented infrastructure:
There are many exporters who outsource their raw material and other inputs from
outside suppliers. They often face many problems regarding late deliveries, impr
oper transportation, which disturbs the entire organization (Source: Interviews)
. However, textile parks and SEZs are in progress, still there exists, huge tran
sportation cost. Authors suggestion: Foreign buyers will always prefer vertically
integrated firms instead of firms with dispersed production units. Therefore to
develop the infrastructure of this industry, government should invest more in t
his sector. Special loans should be provided by the government to uplift this se
ctor. The Indian ports should be given special attention along with other transp
ort facilities. 7.4.4 Obsolete technologies and strategies: The Indian textile i
ndustry is far from being sophisticated and up to date. The industry is still la
rgely dependent on traditional methods of production and dyeing. The handloom an
d powerloom sector comprises a huge percentage of the industry. Though these spe
cialized products help India form a niche in the overseas market, these methods
are not the best and

optimal methods of production. This prohibits India to match the production capa
city of competitors like China. The power and water costs in India too are much
higher than China and hence enable China to surpass India in terms of being cost
competitive. Authors suggestion: Upbeat about the positive trend in the Indian t
extile sector, the time is ripe for this sector to attract higher FDI. Once a fe
w overseas players enter the Indian market it would trigger the momentum for mor
e players to draw closer. Collaboration of Indian firms with international compa
nies will attract FDI, which can be used in upgrading the technological status o
f India. Technology upgradation will therefore help in launching new products of
superior quality into the market. Bu doing so, it will help Indian firms to han
dle custom made orders, thus helpful in catering to a niche market. Other produc
t categories in which it needs to enter effectively is technical textile, which
includes, conveyor belts, automobile seat covers. Apart from this, India should
also tap the market of medical textiles (bandages and surgical gloves). It will
help the country improving its global market share. To reform the existing value
chain modern strategies should be adopted. Value added goods should be exported
more rather than exporting just the raw materials (Chaterjee, 2005). 7.4.4 Indi
as Brand Value: At the moment the Indias brand value is not at a very influential
position. It badly needs to uplift its image by venturing its products and servi
ces in the international market. Not a single Indian brand recognized at the inte
rnational level (Trivedi, 2007) Authors suggestion: In the present scenario, the t
rend of industrialization heads towards rising demand structure, in places like
India. Therefore the industry in return should take advantage of its domestic ma
rket.

It will help in promoting the brand image of India. Many foreign brands like Man
go, Gap, Esprit, Reebok, and Tommy Hilfiger have already ventured in India. Ther
efore big Indian players of textile sector should expand themselves in foreign m
arkets as well. This will help them in establishing niche market for their (Indi
an) products, which will encourage India as a textile economy. To conclude, this
sector needs immense investment for modern technology installation, which will
lead to overall capacity expansion. To enhance the attractiveness of this sector
, Indian government should endow with suitable fiscal incentives to the interest
ed parties. Government should also encourage, both global manufacturers and smal
l scale manufacturers, to work together into partnership, as it will help in fur
ther boost up in this industry.

Chapter 8: Conclusion
The purpose of this dissertation was to highlight the international competitiven
ess of Indian textile industry, which is one of the oldest sectors and hold grea
t significance for its economy. This has been achieved by assessing the literatu
re that exist on this subject and relating that theory to the practical world. U
ntil the economic liberalization took place in the country, this sector was pred
ominantly unorganized. Post 1990s the opening up of this economy led to a stupen
dous expansion in this sector. With termination of Multi Fibre Arrangement (MFA)
on January 1, 2005 a plethora of opportunities came in front of the industry. T
he competitiveness of this industry can be studied in both the ways, positively
as well as negatively, considering various factors along with it. The industry b
eing so massive in size and geographically so diverse has immense potential for
development and expansion in the near future. The author, in this study, has exa
mined the international competitiveness of India in textile sector. She has eval
uated the competitiveness of India with other countries in terms of its producti
on and performance. There have been several factors (strengths and weaknesses) i
nfluencing the performance of Indian textile firms. Various inherent strengths i
nclude availability of cheap unskilled labour, strong raw material base (cotton,
jute, silk), growing domestic as well as international market, effective supply
chain management and variety of distinct local structure. Whereas the weaknesse
s which has affected the productivity and have constrained the growth of this in
dustry includes, highly fragmented infrastructure, rigid labour laws, low foreig
n investment, poor domestic policies and usage of obsolete technology. But with
government taking several initiatives to overcome the bottlenecks that hinders t
he industrys growth, not only the

infrastructure will be improved but with increasing education scenario the produ
ctivity will also be increased as more skilled labour will be available. Conside
ring the global scenario, for Indian textile industry its major marketplaces are
Europe and US. But, India to be the market leader needs to surpass China, which
is its biggest competitor. It also needs to provide an edge to cater niche mark
et. To cater this type of market, there is a requirement of continuous innovatio
n process and product differentiation. Since the Indian industry is dominated by
small scale firms, it can optimally cater small orders, whereas, China is predo
minantly concentrating only on the mass production. Another added advantage that
India has, is quota restrictions on China that has been applied by US and other
countries in the European market. Earlier, the industrys growth was quite submis
sive in overall participation in the world textile market. It was in mid 1990s w
hen it started receiving orders actively from other countries, but the experienc
e was at nascent stage. But today, this industry has a very contemporary outlook
, with many effective strategic policies to compete the global market. The futur
e prospects of the Indian domestic market are also very promising, with strong i
ncrease in GDP, rapid expansion of middle income group accompanied with increasi
ng purchasing power of consumers. There are many Indian companies planting their
subsidiary units outside the country i.e. US, EU, and UAE. Many mergers and acq
uisitions are taking place to draw the attention of foreign investors for better
infrastructure and technology. By summing it all, India is now completely geare
d up and is propelling towards humongous growth of the overall industry. The Ind
ian textile industry is presently worth $ 47 billion and its continual expansion
has led the government to lengthen the Technology Up gradation Fund Scheme in i
ts Texsummit,

2007. This will help the industry to achieve world class quality due to upgraded
technology. According to Ministry of Textiles, (2008) Indias export target of $ 5
5 billion [will be] achieved by 2012 keeping following factors [ in consideration
]; end of quota regime, growing world economies, with rising per-capita income, s
purring consumption, increased trade in apparel, driving the demand for fiber, y
arn and fabrics, a surge in demand for technical textiles, a shift from manufact
uring/stitching to design-cum-manufacturing and increasing penetration of high f
ormat retail stores. There are various opportunities knocking the doors of this i
ndustry with which it can be the market leader worldwide. Therefore, to effectiv
ely tackle the weaknesses of this sector the country needs to put high investmen
t in R&D to launch new products and by reducing transaction cost per unit. It al
so needs to move towards middle or high end market from low end market scenario
basically to improve their international standards. Another focus area is organi
zing the human resource. For higher productivity it is imperative that the workf
orce should be skilled and educated. India should also reduce its dependency on
the US market, as it will help it to diversify the possibility of risk. Abovemen
tioned all the factors will help the country to become a highly competitive play
er in global textile market.

References:
Arksey, H. & Knight, P. (1999), Interviewing for social scientists, London: Sage
Arnold, D. J. & Quelch, J. A. (1998), New strategies in emerging markets, Sloan Ma
nagement Review, Vol. 40, Issue. 1, pp. 720.
Assocham, (2007). Ministry of Textiles: Indian Textile - weaving a global spin
Ben-Porath, Y. (1980), The F-Connection: Families, friends, and firms and the org
anization of exchange. Population and Development Review, Vol. 6, Issue. 1, pp.
130. Besanko D. Dandrove, D. Shanley M. & Schaefer S. (2003), The Economics of Str
ategy, John Wiley and Sons, New York.
Bhushi, U.M. Pharsiyawar, S.M. (2004), Some perspectives in Handloom and Powerloo
m Textile Industry- A Case Study, International Engineering Management Conference
, Working Paper. Blake, A. & Sinclair, M. T. (2003), "Tourism Crisis Management:
Responding to September 11", Annals of Tourism Research, Vol.30 , Issue. 4, pp.
813-832. Cavusgil, S. T. (1997), Measuring the potential of emerging markets: An
indexing approach, Business Horizons, Vol. 40, Issue. 1, pp. 8791. Jones, G., & R
ose, M. B. (1993). Family capitalism. Business History, Vol. 35, Issue. 4, pp. 11
6. Chandra.P (2006), The Textile and Apparel Industry in India, Oxford University
Press Church, R. (1993), The family firm in industrial capitalism: International
perspectives in hypotheses and history. Business History, Vol. 35, Issue. 4, pp.
1743. Dowling, J.M (2008), Future Perspective on the Economic Development of Asia,
Advance Research in Asian Economic Studies, Vol.5, pp. 10-50
Drozdow, N., & Carroll, V. P. (1997). Tools for strategy development in family fi
rms. Sloan Management Review, Vo. 39, Issue 1, pp. 7588.

Dunning, J.H (1998), Explaining International Production, Unwin Hyman, London. p

p. 140-168. Enders, A. & Knig, A. (2004), Towards an Integrated Perspective of Str
ategy: The Value-Process Framework, Working Paper, pp. 1-22. Fox, N. (2006) Using
Interviews in a Research Project, National Institute for Health Research, Trent R
esearch and development Support Unit, Working paper, pp. 1-40 Francis, June & Co
llins-Dodd, Colleen (2000), The Impact of Firms Export Orientation on the Export
Performance of High-Tech Small and Medium-Sized Enterprises. Journal of Internat
ional Marketing, Vol. 8, Issue 3, pp. 84-103 Harish Ahuja Interview, (2007) Home
fashion India, Vol. 6, Issue. 3, p-62
Havard University, Working paper, pp. 1-62 Home Fashion India (2007), Vol.6, Iss
ue. 3, pp. 19
IBEF, ICRA
Garten, J.
, Vol. 75,
ondon; New

Management Consulting Services Limited(2006); Indian textile industry,

E. (1997a). Troubles ahead in emerging markets. Harvard Business Review
Issue. 3, pp. 3850. Gillham, B. (2000), Case Study Research Methods. L
York: Continuum.

Jayalaxmi J. Shah (1985): "A comparative analysis of two major cotton textile ce
ntres of India: Bombay & Ahmedabad". Treballs de la Societat Catalana de Geograf
ia, Vol 3, pp. 87-106 Karagozoglu, N. & Lindell, M. (1998), Internationalization
of Small And Medium-Sized Technology-Based Eirms: An Exploratory Study, Journal O
f Small Business Management, Vol. 36, Issue 1, pp. 44-59. Kathuria & Bhardwaj (1
998), Export quotas and Policy constraints in the Textile and Clothing market, Pol
icy Research Working Paper; The World Bank. Vol.1, pp. 24.
Kim, D. Kandemir, D. & Cavusgil, T.S. (2004), The Role of Family Conglomerates in
Emerging Markets: What Western Companies Should Know, Thunderbird International
Business Review, Vol. 46, Issue. 1, pp. 1338.

Khanna, T. & Palepu, K. (1997). Why focused strategies may be wrong for emerging
markets. Harvard Business Review, Vol. 75, Issue. 4, pp. 4151.
Kock, C. J. & Guillen, M. F. (2001). Strategy and structure in developing countri
es: Business groups as an evolutionary response to opportunities for unrelated d
iversification. Industrial and Corporate Change, Vol. 10, Issue. 1, pp. 77113.
Landes, M. MacDonald, S. Singh, S.K. Vollrath, T. (2005) Growth Prospects for Ind
ias Cotton and Textile Industries, Economic Research, United States Department of
Agriculture, Working paper. Leadbeater, (1993), The Indian Cotton-Mill Industry a
nd the legacy of Swadeshi, The Politics of Textiles, pp. 14-15. Liu, H. & Sun, L.
(2003), "Beyond Phase-out of Quota in Textile and Clothing Trading: WTO-Plus Ru
les and the Case of US Safeguards against Chinese Exports in 2003", Centre for F
inancial and Management Studies, pp. 1-20
Lund, A.M. (2001), Measuring Usability with the USE Questionnaire Vol 8, Issue. 2
Mayor, J. (2005), Not Total Naked: Textile and Clothing Trade in Quota Free Envir
onment, Journal of World Trade, Vol. 39, Issue. 3, pp 393-426. Nords, H.K. (2004),
The Global Textile and Clothing Industry post the Agreement on Textiles and Clot
hing, World trade Organisation, Working Paper.
(2007), Overview of the textile industry in India, The Indo-Italian Chamber of Com
merce and Industry. Report Panthaki, M.K, (2008), Organic Cotton and Natural Dyes
to take over Cotton and Synthetic Dyes, Home Textile Views, Vol. 11, Issue. 4, p
p. 8. Porter, M. (1979) How Competitive Forces Shape Strategy, Harvard Business Re
view, Vol. 57, Issue. 2, pp. 137-145. Porter (1985) Competitive advantage: Creati
ng and sustain superior performance, pp. 4-7. Porter (1990) The competitive advant
age of Nations, pp. 3-100. London: Mcmillan

Porter, M. E. (1998), The Competitive Advantage of Nations (with a new foreword)

, The Free Press, New York.
Poter, M.E. & Ketel, C.H.M (2003), UK Competitiveness: moving to the next stage Ec
onomic and Social Research Council. Vol. 3, pp. 1-55.
Prasad & Ghauri (2004), Global Firms and Emerging Markets in an Age of Anxiety, pp
. 121-136
Ramachandran, V. (2001) Export Competitiveness and the Market for Textiles: key i
ssues, evidence from firm interviews, and policy suggestions, Center for Internat
ional Development, pp. 1-62 Ramachandran, V. & Himes, M. (2001), "EXPORT COMPETI
TIVENESS AND THE MARKET FOR TEXTILES: key issues, evidence from firm interviews,
and policy suggestions", Center for International Development, pp. 1-62 Rangara
jan, C. Annual Report (2007) Tex summit
Reinert, K.A., (2000), Give us virtue, but not yet: Safeguard actions under the A
greement on Textiles and Clothing, The World Economy, Vol. 23, Issue. 1, pp. 25-5
5.
Report (2006), Indian brand equity foundation, KPMG. Tewari, M. (2006), Post-MFA
adjustments in Indias textile and apparel industry: emerging issues and trends, In
dian council for research on international economic relations, Working Paper no.
167 Texsummit (2007), Home fashion India, Vol. 6, Issue. 3, pp. 19. United Nati
ons (2006), Diverging growth and Development, World Economic and Social Survey. Ch
apter 3, pp. 54. United Nation Conference on Trade and Development (2005), TNCs a
nd the Removal of Textiles and Clothing Quotas Utamsingh, V. (2003), "SWOT Analys
is of the Indian Textile Industry: Implications for Maharashtra", Textile Confre
nce-2003, Seminar

Verma, S. (2002), Export Competitiveness of Indian Textile & Clothing Industry, In

dian Council for Research on International Economic Relations, Working paper no.
9
Ward, J. L. (2000). Reflections on Indian family groups, Family Business Review, V
ol, 13, Issue. 4, pp. 271278.
Web References: Bharat Textiles (2007), Textile news 2007, Available from: http:
//www.bharattextile.com/newsitems/2007821) [Accessed: 20.08.2008] Bombay Dyeing,
Company Profile, International activities and exports, Available from: http://ww
w.bombaydyeing.com/company.htm, [Accessed: 25.08.2008]. Datamonitor (2007), The T
extile Industry Global Profile, Available from: http://search.ebscohost.com/login
.aspx?direct=true&db=buh&AN=25766813&site=ehost-live. [Accessed: 09.09.2008]
Dhanabhakyam, M. & Shanthi, A. "Indian textile industry An overview", Available
from: www.fibre2fashion.com [Accessed 07.08.2008]
Domain-b (2008), India s post-quota textile exports to EU, US decline, Available f
rom: http://www.domain-b.com/industry/Textiles/20080620_textile.html, [Accessed:
23.08.08]
Dutta, D. (2003),Insight into India - part I, Available from: http://www.3isite.co
m/articles/insight1.htm, [Accessed: 15.09.2008]
Emerging SMEs of India textile, Available from: http://www.dnb.co.in/SMEstextile/
overview.asp, [Accessed: 13..08.2008]
Fibre2Fashion, (2006), India Textile weaves success stories, Available from: http:
//www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=11520. [Acces
sed: 05.09.2008].

Fibre2fashion (2006), Textile exports excel registering 22% rise, www.fibre2fash

ion.com/news/textile-news/newsdetails.aspx?news_id=10961, 24.08.09]
Available from: [Accessed:
Jute Fabric Manufacturers & Exporters. Available from: http://www.fabrics manufa
cturers.com/industry-overview.html [Accessed: September 13, 2008].
Kanungo, A.K. (2007), World textile market India must weave new designs, Available
from: [Accessed: http://www.thehindubusinessline.com/2007/06/13/stories/2007061
300490900.htm, 01.09.2008]
India Brand Equity Foundation, Textiles & Apparel: Market & Opportunities, Avail
able from: http://www.ibef.org/artdisplay.aspx?cat_id=172&art_id=19785. [Accesse
d:19.09.2008]. Infoline News, Textile sector investment, on Available from: http
://www.indiainfoline.com/news/innernews.asp?storyId=76063&lmn=1&cat=19.[Accessed
: 12.09.2008].
Kavitha, N. (2007), Textile Industry in Indian Scenario, on the Fibre2fashion, Ava
ilable from: www.fibre2fashion.com/industry-article/8/728/textile-industry-in-in
dian-scenario1.asp. [Accessed: 10.08.2008]
Ministry of Textiles, Foreign Direct Investment Policy in Textiles, Available from
: http://texmin.nic.in/fdi/fdi_main.htm, [Accessed: 14.09.2008]
Myiris, Investment Newsletter Business Profile For Bombay Dyeing Company, Availa
ble from: http://myiris.com/shares/company/writeDet.php?icode=bomdyemc#fut [Acce
ssed: 31.08.2008].
Reuters India (2008), Welspun eyes home textile firms abroad, Available from: ht
tp://in.reuters.com/article/businessNews/idINIndia-31298820080108, [Accessed: 19
.08.2008]
Reuters India, Textile Exports Report, Available from: http://in.reuters.com/art
icle/domesticNews/idINBOM3068620080508?pageNumber=1&virtualBran dChannel=0. [Acc
essed: 18.09.2008]

Trident Group, Home Textiles, Company Profile, International activities and expo
rt, Available from: http://www.tridentindia.com/irj/portal/anonymous, [Accessed:
03.09.2008]. Saheed, A.H.H. (2007) Quota-Free Era: Changes in the Last Two Years,
Asian Textile Business, Available from: http://findarticles.com/p/articles/mi_q
a5358/is_200704/ai_n21286518?tag=content;col1, [Accessed: 13.09.2008] Srinivasan
, G. (2005), Textile industry holds promise with removal of quota regime Available
from:http://www.thehindubusinessline.com/2005/12/08/stories/2005120802290800.ht
m, [Accessed: 12.08.2008] Trivedi, D. (2007), Brand building in textiles importan
t, says Plan panel, Available from: http://www.thehindubusinessline.com/2007/10/1
0/stories/2007101051190500.htm, [Accessed: 15.09.2008] Vardhman groups of compan
ies, Available from: http://vardhman.in/, [Accessed: 07.09.2008]
Welspuntowels, The yearly Turnover, Available from: www.welspuntowels.com [Accesse
d: 01.09.2008]
World Textile Industry, Available from: http://www.economywatch.com/world-industri
es/textileindustry.html, [Accessed: 02.09.2008]
(2008), A Stronger Rupee Tests the Fabric of India s Textile Exporters, Available
from: http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4258, [Acc
essed: 15.08.2008]
(2008), Cotton Textiles India, Available from: www.texprocil.com, [Accessed: 30.08
.2008]
(2008), Textiles: textile and Apparel Sourcing, Available from: http://www.ibef.or
g/artdispview.aspx?in=73&art_id=18085&cat_id=123&page=3, [Accessed: 02.09.2008]
(2008), Textile, 15.09.2008] Available from: http://www.ibef.org/industry/textiles
.aspx, [Accessed:
(2007), Bombay Dyeing & Mfg Company Limited, Available from: http://myiris.com/s
hares/company/writeDet.php?icode=bomdyemc#fut, [Accessed: 06.09.2008]

(2007), Logistics firms suffer due to poor port facilities, The Financial Express,
Available from: http://www.mjunction.in/market_news/logistics_1/logistics_firms
_suffer_due_to.php, [Accessed: 08.09.2008]
(2007), Special Economic Zones for textiles in India, Available from: http://www.y
arnsandfibers.com/revamp_ir/report_fullstory.php3?id=408&p_type=45&story_type= F
[Accessed: 15.08.2008]
(2006), Indias Textile and Apparel Industry: Opportunities for Sourcing and Collab
oration, Textiles Intelligence, Available from: http://www.researchandmarkets.com
/reportinfo.asp?report_id=358514, [Accessed: 20.08.2008]
(2006), Crying need for labour reforms, Economic Survey, Available http://www.fina
ncialexpress.com/news/Crying-need-for-labour-reforms/48409/.[Accessed: 23.07.200
8]
from:
(2006), India : Textile exports excel registering 22% rise, Available from: http:/
/www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=10961, [Access
ed: 12.08.2008]
India: Textile weaves success stories, fibre2fashion, (2006), Fibre2fashion, Text
ile exports excel registering 22% rise 2006, on the Fibre2fashion Available from:
www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=10961;[Accesse
d 12.09.2008
(2006) Indian textile industry: Porter analysis..., Available from: http://www.equ
itymaster.com/detail.asp?date=3/31/2006&story=1, [Accessed:24.08.2008]
(2008), Vietnam, Pakistan outdo India in US, EU textile markets, Available from: h
ttp://www.ficci.com/news/viewnews1.asp?news_id=1990, [Accessed 12.08.2008]

APPENDIX 1 Indias Cotton Trend in Last Six Decades

Source: Cotton Advisory Board

APPENDIX 2 Sample of the questionnaire used for primary research:

Q.1 How long have you been in this industry?
Q.2 what are the major products you export?
Q.3Who all are your international key clients?
Q.4 According to you what are the strengths and weaknesses of Indian textile ind
ustry?
Q.5 How do you envisage/ foresee the growth of the Indian textile industry?
Q.6 How the industry should organize its capacities to meet global buyer expecta
tions?
Q.7 What are the factors Affecting Competitiveness of this industry? a. Domestic
: b. Global:
Q.8 What has been the growth in revenue (%) of your organization?
Q.9 What are your companys future plans? a. Entering into new market

b. Diversification c. Marketing initiatives d. Capacity expansion e. Modernizati

on f. Any Other, Please Specify
Q.10 Do you observe any effect on the textile industry due to increase in inflat
ion and economic slowdown globally? If yes, please elaborate
Q.11 Which market do you cater more, US or EU and why? If any other please speci
fy
Q.12 How do you observe India vis a vis China?
Q.13 Do you face any hindrances in cross border transactions? If yes, please spe
cify.
Q. 14 How do you think the industry should the industry channelize its skill-bas
e? India lacks technology, but it also has one of the lowest labour costs in the
world, Comment. ,

Q.15 What kind of concessions and rebates government provides you with?
Contact details: Name: Address: Email id:
Thank you for helping me with my research