Losing shirt to China

Updated: Feb 1 2006, 05:30am hrs

The textiles industry accounts for around 15% of India's industrial production and 15% of its total exports. Besides, it provides employment to over 35 million people.

Cotton accounts for around 55% of the domestic fibre consumption and exports. With over 9 million hectares under cultivation (which is the largest area employed for the purpose throughout the world) and an annual crop of over 3,500 million kg, Currently, India is the third largest producer of raw cotton in the world, after China and the US.

Major Players

The industry is highly fragmented. Even Vardhman group which is the leading player in the cotton yarn segment has only 2% share. Other major players include Forbes Gokak, Madura Coats, GTN Textiles, etc.

The degree of fragmentation is even higher in the fabrics segment, wherein the small scale sector accounts for over 95% of the production. The production of denim fabrics is, however, dominated by large players like Arvind Mills.

Key Issues

Deregulating international textile trade: The quota system has disappeared from January 1, 2005. Although first nine months results show the market increasing for the developing nations (including India), the guarantee of quota is not there, even as competition is increasing. With China being highly competitive in textiles and clothing, and a large exporter of clothing (over 20% share), it has potential to acquire a substantial share of the increase in market for developing countries.

CEO Speak
The thrust given to the textile sector in the last two Budgets should continue. The Technology Upgradation Fund Scheme should be extended to 2010. Exports must be exempt from FBT and service tax. Take measures to cut transaction cost and expedite labour reforms.
BK Patodia

MD, GTN Textiles
Low scale, integration: To profit from the situation, the textile industry, especially the weaving sector will have to increase its productivity considerably. The technology upgradation fund, new textile policy, announced in November 2000 along with various steps in the subsequent Budgets have provided significant incentives to manufacturers to modernise their facilities.

Bias against manmade fibres and the need to increase manmade fibre based apparel exports: The government continues to impose higher excise duties on manmade fibres, especially polyester filament yarn. If India wants to attain larger market share in clothing, manmade fibres need to be used in larger quantities as the world markets use more manmade fibre based clothing than cotton based clothing.


Cut basic customs duty on polyester raw materials Purified terephthalic acid and MEG to 10% or below
Reduce excise duty on synthetic fibres to a reasonable level
Address the issue of untilised Cenvat credit with yarn manufacturers
Retain specific customs duty on textile products.
Allow import of textile machine parts at 5 % customs duty

Reduce excise duty on manmade fibre (MMF) and intermediates from 16% to 8%
Remove 15% customs duty on MMF and inputs
Waive the excise and customs duties on captive power equipment
Reduce customs duty on all machinery covered by TUFS to 5%
Cut excise duty on textile machinery to 8% from 16%