INDUSTRY PROFILE

The Indian textile industry is one of the largest in the world with masove raw material and textiles
manufacturing base. Our commy is gely dependent on the textile manufacturing and trade in her
major industries. About 27% of the foreign exchange earnings are on account of export of textiles
and clothing alone. The levilera clothing sector contributes about 14% to the industrial production
and 3% to the gross domestic product of the country. Around 8% of the tot excise revenue collection
is contributed by the textile industry. So much so the textile industry accounts for as large as 21% of
the total employment generated in the economy. Around 35 million people are directly employed in
the textile manufacturing activities. Indirect employment including the manpower engaged in
agricultural based raw- material production like cotton and related trade and handling could be
stated to be around another 60 million.

A textile is the largest single industry in India (and amongst the biggest in the world), accounting for
about 20% of the total industrial production. It provides direct employment to around 20 million
people. Textile and clothing exports account for one-third of the total value of exports from the
country. There are 1,227 textile mills with a spinning capacity of about 29 million spindles. While
yarn is mostly produced in the mills, fabrics are produced in the power loom and handloom sectors
as well. The Indian textile industry continues to be predominantly based on cotton, with about 65%
of raw materials consumed being cotton. The yearly output of cotton clothe was about 12.8 billion
(about 42 billion The manufacture of jute products (1.1 million metric tons) ranks next in importance
to cotton weaving. Textile is one of India's oldest industries and has a formidable presence in the
national economy inasmuch as it contributes to about 14 per cent of manufacturing value addition,
accounts for around one-third of our gross export eamings andprovides gainful employment to
millions of people. They include coton And jute growers, artisans and weavers who are engaged in
the organteed as well as decentralized and household sectors spread across tremized country.

Indian textile industry structure and growth

India's textile industry is one of the economy's largest. In 2000/01, the textile and garment industries
accounted for about 4 percent of GDP, 14 percent of industrial output, 18 percent of industrial
employment, and 27 percent of export earnings (Hashim). India's textile industry is also significant in
a global context, ranking second to China in the production of both cotton yarn and fabric and fifth
in the production of synthetic fibers and yarns.

In contrast to other major textile-producing countries, mostly small- scale, monintegrated spinning,
weaving, cloth finishing, and apparel enterprises, many of which use outdated technology,
characterize India's textile sector. Some, mostly larger, firms operate in the "organized" sector
where firms must comply with numerous government labor and tax regulations. Most firms,
however, operate in the small-scale "unorganized" sector where regulations are less stringent and
more casily evaded.

The unique structure of the Indian textile industry is due to the legacy of tax, labor, and other
regulatory policies that have favored small-scale, labor-intensive enterprises, while discriminating
against larger scale, more capital-intensive operations. The structure is also due to the historical
orientation towards meeting the needs of India's predominately low-income domestic consumers,
rather than the world market. Policy reforms, which began in the 1980s and continued into the
1990s, have led to significant gains in technical efficiency and international competitiveness,
particularly in the spinning sector.

Structure of India's Textile Industry

Unlike other major textile-producing countries, India's textile industry in comprised mostly of small-
scale, nonintegrated spinning, wes finishing, and apparel-making enterprises. This unique industry
structure is primarily a legacy of government policies that have promoted labor intensive, small-
scale operations and discriminated against larger scale firms:

• Composite Mills. Relatively large-scale mills that integrate spinning, weaving and, sometimes,
fabric finishing are common in other major textile-producing countries. In India, however, these
types of mills now account for about only 3 percent of output in the textile sector. About 276
composite mills are now operating in India, most owned by the public sector and many deemed
financially "sick."

Spinning. Spinning is the process of converting cotton or manmade fiber into yarn to be used for
weaving and knitting Largely due to deregulation beginning in the mid-1980s, spinning is the most
consolidated and technically efficient sector in India's textile industry. Average plant size remains
small, however, and technology outdated, relative to other major producers. In 2002/03, India's
spinning sector consisted of about 1,146 small- scale independent firms and 1,599 larger scale
independent units. Weaving and Knitting: Weaving and knitting converts cotton, manmade, or
blended yarns into woven or knitted fabrics. India's weaving and knitting sector remains highly
fragmented, small- scale, and labor-intensive. This sector consists of about 3.9 million handlooms,
380,000 "power loom" enterprises that operate about 1.7 million looms, and just 137,000 looms in
the various

composite mills. "Power looms" are small firms, with an average loom capacity of four to five owned
by independent entrepreneur or weavers. Modern shuttle less looms account for icas thum percent
of loom capacity.

Fabric Finishing: Fabric finishing (also referred to as processingi, which includes dyeing, printing, and
other cloth preparation prior to the manufacture of clothing, is also dominated by a large number of
independent, small scale enterprises. Overall, about 2,300 processors are operating in India,
including about 2,100 independent units and 200 units that are integrated with spinning, weaving, or
knitting units.

• Clothing, Apparel is produced by about 77,000 small-scale units classified as domestic

manufacturers, manufacturer exporters, and fabricators (subcontractors).

Growth of Textile Industry

India has already completed more than 50 years of its independence. The analysis of the growth
pattern of different segment of the industry during the last five decades of post independence era
reveals that the growth of the industry during the first two decades after the independence had
been gradual, though lower and growth had been considerably slower during the third decade. The
growth thereafter picked up significantly during the fourth decade in each and every segment of the
industry. The peak level of its growth has however been reached during the fifth decade Le the last
ten years and more particularly in the 90s. The Textile Policy of 1985 and Economic Policy of 1991
focusing in the direction of liberalization of economy and trade had in fact accelerated the growth in
1990s. The spinning spearheaded the growth during this period and wing made fiber industry in ure
organized sector and decentralized weaving sector.