Till not so long ago, the Indian textile industry was one of the key drivers of growth and employment generation for India. As recently as five years ago, its share in India's export basket was as high as 30 per cent.
Due to an inexplicable hubris from the erstwhile industry leaders and select textile and apparel industry associations, and an extraordinarily myopic view on the industry's potential not only from the ministry of textiles but the government of India itself, India -- expectedly for some -- missed the post-MFA opportunity by a mile!
Had both the government and the industry come up with a more pragmatic and aggressive action plan around 1995, there was no reason why the textile industry could not be giving India at least $30-40 billion export earnings alone in 2006, besides creating millions of manufacturing jobs in the country.
However, fortunately, there is a reason to feel very optimistic about the prospects of India's textile and clothing sector. This time, I hope the industry rises to the occasion because fortunately, at this juncture, the role of government has diminished very significantly and it can -- at best -- be required to be a facilitator.
The growth driver, this time, will actually be the domestic market. As per Technopak's estimates, the current size of the textile and clothing domestic consumption is about Rs 88,000 crore (Rs 880 billion). Including home textiles, the market size increases to almost Rs 100,000 crore (Rs 1,000 billion).
Most interestingly, this market is likely to grow to as much as Rs 180,000 crore (Rs 1,800 billion) in the next five years, if not more. The growth is on account of various factors that will take a lot of space to explain but in brief, these include increase in population, demographic and lifestyle shifts, and absolute increase in discretionary spending money at the middle and lower income strata of the population.
This increase in market opportunity by about $18 billion, of course, dwarfs in comparison with the larger global opportunity.
However, if Indian industry can rise to the challenge of successfully giving the Indian consumers a value-for-money affordable fashion solution, it can easily deploy the same strength to approach the global market with renewed vigour and capture another $25 billion in export revenues by 2011, making it a $85-billion industry, if not bigger, comparable to the projections being given for the IT sector.
International retail and consumer trends are such that they now favour "solution" providers rather than just spinners, weavers, and apparel manufacturers. The solutions desired include capabilities in anticipating fashion trends quicker, quicker turnaround times, and a factory to retail store delivery capability.
With the anticipated sea change in the Indian retail sector in the next few years, local retail giants will
Some of these skills include product design and development, information technology orientation, and the existence of various components of the textile and clothing supply chain within India or its close proximity.
What do the key players in this sector need to do? They can start by realising that the so-called core competencies of yesteryear, e.g. production technology, machine and operator costs/utilisation, strong "buyer-seller" relationships, and tracking competitors and technology by visiting trade fairs such as ITMA and Premiere Vision have to be supplemented with newer competencies such as business technology, human capital acquisition and efficient utilisation, value chain optimisation, strategic alliance based relationships, and tracking of consumer and consumption trends.
The industry captains have also to acknowledge that the key success factors of the past, e.g. efficient raw material buying, especially cotton, efficient manufacturing asset utilisation, and production-based economies of scale have been supplanted by newer KSFs, e.g. innovation -- both in products and business processes, migration up the value chain, achieving benefits of scale through better leveraging of financial and human capital, and virtually vertical integration across the value chain.
All of this growth will need very substantial capital formation for the sector. As I have mentioned several times in the last decade, the government has to facilitate this capital formation since unfortunately, almost all the players in the so-called mill sector (or the organised sector) have practically no intrinsic strength in their current balance sheets to raise the hundreds and thousands of crore (billions) needed to expand capacities or create new businesses.
The government (the importance of the sector was, thankfully, acknowledged in the Budget speech this year) also has to facilitate in bringing down the overall cost of production through sensible development of textile specific infrastructure, and perhaps giving adequate policy/fiscal incentive to global producers of textile and clothing machinery to set up production base in India so as to reduce the capital investment cost for the local entrepreneurs.
Finally, the government also has to facilitate large-scale FDI in this sector, which will not only bring capital but also the product and business process know-how.
I hope this time around the industry players and the government do not waste time generating and debating useless reports but actually get down to some urgent, visionary action!
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