Clothing industry in India: Perspective 2005 - I

M K Panthaki

The textile industry in India (including the garment industry) is vital to the economy
of the country. It contributes to over 6 per cent of the gross domestic product of
India and earns 18 per cent of the total foreign exchange earnings of the country.

The textile industry consists of three distinct sectors, viz, spinning, weaving and
processing. The industry is the largest employer next only to agriculture which is the
mainstay of the economy. Over 50 per cent of the employees are women who help to
sustain the family income. The garment industry alone employs four million workers
and helps to support labour working in ancillary manufacturing buttons, zippers,
sewing thread, embroidery thread, metal studs, polybags, cartons, cardboard sheets,
etc.

The country follows very strict labour laws which govern inter alia safety, lighting,
working conditions, age at entry, restriction on storage to prevent fire hazards,
emoluments, and welfare services, supervised by ever-vigilant labour officers of the
state governments.

The country has the largest acreage under cotton in the world but is atmost totally
dependent on monsoon, yielding a poor 308 kgs/hectare. The country has a well-
developed textile industry of cotton as well as synthetic fibres/yarn supported by
silk, wool and jute.

The textile industry is diversified with an unorganized sector inter-mingled, with the
organized sector.

The organized mill sector of the textile industry (excluding garments) which is over a
century old, is currenly a decimated lot with the bulk of the production of fabrics
having been taken over by the powerloom sector which purchases yarn from
spinners. Each unit of the organized cotton mill sector consists of departmens
ranging from the opening and mixing of cotton, upto spinning of yarn which is
subsequently reeled into larger packages preparatory to the weaving of grey fabric
for further processing in its processing section for final finishing. Textile production of
fabrics on hand-operated looms make a significant contribution to fabric production.
The industry produces 42,000 million square metres of fabrics, of all fibres, per
annum.

While the spinning sector is very well-organised producing yarn as coarse as 6s to as

superfine as 160s, both in singles and multiples, the weaving sector, especially the
powerloom sector has considerable leeway to make good with upgradation in
technology. Even as of today, the powerloom sector is keenly interested in setting up
automatic air-jet/water-jet looms which are of vintage variety with a balance life-
span of 10 to 15 years. On the other hand, the organized mill sector is keen to keep
in touch with the latest technology. It is currently passing through a phase of
rehabilitation partly from its own resources and partly with the help of finances made
available by government and through public investment.

The processing sector is the weakest link in the chain of the textile industry. This
sector too has an organized as well as unorganized sector. While the unorganized
sector concentrates only on certain processes, the organized sector concerns itself
wih the processing of fabric from the grey stage upto its finished state. It may be
noted that this organized sector is independent of the sector installed by the
organized mill industry. This sector concerns itself only with processing of fabric
(from start to finish).

The garment indutry in India is a $23 billion industry (at the current rate of
exchange of Rs 44 = $). Like its textile counterpart, this industry also comprises the
organized and unorganized sector. The unorganized sector largely consists of job
workers who carry out jobs given by their principals, under their supervision. The
organized sector generally consists of units having a minimum of 10 sewing
machines under one roof. This sector also covers large brands having in the vicinity
with overseas partners. The organized sector is, by and large, update with modern
technology, has economies of scale, is cost-competitive and is in a position to
execute orders on time.

The garment industry produces over 100 varieties of garments for different end-
uses. Additionally, a section of the industry concentrates on manufacture of ethnic
garments, or what are traditionally called “India Items”.

Exports

Exports of textiles (including garments) from India are worth around US $14 billion
of which the share of garments is close to US$. 6.5 billion. The country is aiming at
an exchange earning of $.50 billion by 2010. At the current rate, the country bids
fair to reach the target. A break-up of export earnings for various arms of the textile
industry is given below:

Per capita avalability

For people of a country of the size of India, the per capita consumption of garments,
even after accounting for ethnic garments consumption is barely 6 pieces per annum
whereas in countries like US (much smaller in population than India), it is close to
100 pieces per year.

Thus, the scope in India is vast.

Reforms and the future

The Indian textile industry (including garments) is just emerging from the shadows
of a debilitating quota system, a system which only skewed production for as long as
ten years without any reward in return.

Government of India is going full steam on economic reforms. To begin with,

government has steadily raised the ceiling for investment in plant and machinery of
a unit from Rs 1 crore (i.e. US $0.23 million) to Rs 4 crore (i.e. US$. 0.91 million) for
the unit to be considered as a unit in the small-scale sector. Insofar as garments are
concerned the government, realizing its potential, has removed both the woven and
knitted sectors from the limits fixed for the small-scale sector. This has resulted in
investments flowing into this sector. Expansion of units by adding to capacity or by
mergers are in full swing.
Amalgamations are the order of the day in the woven garment sector. Backward and
forward integrations in the spinning and knitted garment sectors are in evidence,
both with the object of ensuring a steady supply of inputs as well as to add value.

Foreign Direct Investment (FDI) has been permitted in the garment sector in the
shape of joint ventures. FDI in retail is almost on the cards but, for the present, the
franchise route is favoured.

Economic reforms have increased the spending power of the middle-income group
which is growing bigger by the day. Consequently, purchasing power is on a high
with malls, department stores, discount stores, all springing up in various parts of
the country.

The consumer today demands value for money. Quality is of prime importance and
the consumer is prepared to pay a price for it.

Government has been divesting of its resources sunk into various state-owned
companies and utilizing the released resources to improve infrastructure, reform
rural economy, undertake electrification of villages, provide clean drinking water to
rural folk and generally uplift the rural economy and rural agriculture . Considering
the fact that almost 60 per cent of India’s population lives in the villages, this new-
found thrust will generate a demand for goods on a scale which cannot be fathomed.
Industry has to move in syn to meet this growing demand.