FDI in textile need of the hour

In 2018, China will shy away from conventional textiles to concentrate more on branded apparel. This will create a huge demand-supply gap, says Avinash Mayekar.

Yes, 2018 would be the year for textiles and apparels! Let’s change ourselves in this New Year, by becoming positive in our attitude. Let us begin this year with hope. Hope that this year will be the year for the growth of Indian textile industry, hope for positive investments, and hope that the year will turn out to be the watershed year for Indian textile industry. After all, “hopes” alone have the capacity of driving crazy dreams and making them achievable. So rather than just drooling about past failures and downfalls, let us begin the year with positive determination that 2018 has to be the growth year for Indian textile industry.

Since 2012, the Indian textile industry has not been able to fulfill or meet the global expectations on account of various reasons. Despite having strong heads and ample of rich resources, we have somehow not climbed the success ladder as expected. Rather we are just hanging in between. An opportunity like this however doesn’t remain uncaptured very long. The shortcomings of India in global textile market have been fulfilled by other neighbouring countries and are showing tremendous growth. Bangladesh is today the No. 1 garment exporter, and other countries like Sri Lanka, Cambodia and Vietnam have also increased their share of pie. These countries have utilised their resources to maximum and have now reached the saturation level.

The global demands are no longer majorly restricted to the US and European countries but many demands and developments are seen in African nations. The African countries are currently lacking the techno commercial options for their requirements. There are no domestic productions to meet their fashion requirements. This creates a huge demand for imports from Asian countries. Fashion nowadays is changing very fast. It is no longer region or country specific. Fashion trends are globally evolving at the same times. Today, the demands in Africa have shown inclination towards fashionable items than the conventional items. These conventional items like kanga’s and Chitenga’s of African wear are getting replaced by fashionable branded denims and various types of t-shirts.

This particular trend of adapting to other country’s fashion is not only happening in Africa, but is seen globally mainly because of the vast networking and reach across boundaries thanks to the Internet era. Today, due to social networking millions of people are connected at one time. Thus fashion trends are no longer limited to a single locality or country but many countries are having access to the launch of brands that are coming out with latest fashions. A fashion introduced in Milan is visible and viral in any part of the world, to countries like Africa and other remote access countries. Thus, with the fast changing fashion per capita consumption of textile is growing substantially. This is definitely one of the turning points for growth of textile that would lead to a great enhancement in global consumption of textile and apparel sector.

In 2018, India will play a leading role to fulfill their global demands. We all are aware that China having the largest pie in global textiles will shy away from conventional textiles to concentrate more on branded apparel. If this happens and China withdraws from conventional textiles, then there will be a huge demand supply gap generated and other textile driven countries like India will have ultimate chance to grab this large pie from China, which is almost 38 per cent in global textile market.

India, being at distant No. 2 position with global market share of 5 per cent, will have to take big jump of growth and en-capture the biggest possible share to once again regain its golden era. The other advantage for India is that all other textile producing countries at subsequent positions after India are on the verge of saturation as far as their inherent capabilities and infrastructure is concerned. So it is not one single opportunity but a series of opportunities that are expected to knock the doorsteps of 2018 in India, Indian entrepreneurs just have to give it the most warmest welcome and grow substantially now (or else it’s never again) situation for India. It is time to rise and shine on this occasion.

Other countries have made their analysis and tried to pitch in as big contenders for the share of pie given away by China. So India having its own culture, own fashion and large population that gives it huge domestic market, must make its action plan to lead the way in International market.

The globe is looking at India as a great supplier whereas India has not gone beyond its limit. In yarns, we are in two digits, otherwise we are in single digit, and so many things need to happen from the point of view of the entire country. There is lack of interest or lack of concrete efforts to take this particular huge global share. Indian government under the leadership of PM Modi has already announced that they will double or triple the entire share of India. However, if we see the reality there needs to be investments for this from actual investors.

Even though the existing few players are thinking positively towards everything no good amount of investments have happen in last two to three years, which gives negative feedback to the global players. There is a need for foreign direct investment to come quicklyand largely in this particular sector, as these foreign players are having all control on global brands and India with its abundant textile capabilities can supply everything from fibre to finished product. For textile industry to grow in any particular country, it needs to have abundant raw material, skilled manpower, supportive infrastructure and excellent technology.

If we see from the resources point of view, we have abundant availability of raw material. Good thing is that India, which was all the time a S country for fine cotton shirting as well as fine cotton slots, is showing good potential even today to double the existing per hectare yield of cotton as a result of new developments that are taking place. So if India tries and becomes the ultimate producer of cotton, it will give us a leverage and edge against all competitor countries as then we it can spin its own cotton and convert it into finished garments. Similarly in case of polyester, Reliance has a very good capacity, having stated that they will multifold its capacity to meet the increasing demands so there is no doubt as far as growth in polyester is concerned. Also for viscose, Aditya Birla Group has already informed they are ready to come out with larger capacity. All this big fibre producing groups of India have shown their inclination for expanding to meet the global challenges and demands.

The other most challenging factor for the textile industry is the huge skilled manpower requirement. India having the strength of manpower and with launch of skill development programme by the government, is helping the textile giants to train and develop their labours and overcome this biggest hurdle of quality skilled labour. Similarly, there are many textile educational institutes in India, creating a lot many textile engineers. These engineers are as of now switching their jobs to other sectors because the requirement of this industry is not growing in multi-folds whereas per year there are at least 1,000 of textile engineers graduating who are searching for good opportunities.

The next important factor for the growth of textile Industry is good infrastructure. The Government has already planned good infrastructure all over the country and are developing new roads and bridges. All targets of the Five-Year-Plan are being achieved by the government in the span of two years only, proving its seriousness and dedication towards improvement of the country’s infrastructure. Supportive environment and developments in this three major factors, i.e., raw materials, skilled manpower and infrastructure should help the textile industry of India to take the much needed jump of growth.

The only factors that would come in the way of growth of Indian textile industry is the finance, as the interest rate on term loan in the tune of 10-12 per cent is very high, this creates the issue of getting profits back, as it directly hits the bottom line. Second factor is to bring in modern technology.

In case of spinning, we have an in-house good technology developed by many renowned players; but for leveling with Japanese and European technologies in spinning, we need to bring in foreign direct investments (FDIs), joint ventures and initiative by the government to bring everyone on a common platform. However, in case of shuttleless weaving, there is a big dilemma and huge gap in technologies. In case of finishing and garmenting machinery, there are a few good suppliers providing state-of-the-art machinery. Thus, we need to attract FDI for better technologies that will give the technology at reduced rates to entrepreneurs helping them shift for value added goals in the international market.

Conclusion

Indian textile industry has to grow in multi-folds in 2018. It’s time the new Government considers and gives its full attention to the textile industry. It has already lost three big years from their five years tenure and no concrete efforts are being taken for the growth of textile industry. The government must now focus on textile industry as it is largest employment generating industry also giving huge foreign currency. All said and done, being a 100-year-old industry, the change will not happen overnight, but the efforts needs to be seen for improvements of the industry and it is better late to start than never. The existing textile players must now come out of their comfort zone of being followers and grab this opportunity that is knocking the doors. We all know that it takes one year to setup and commercially start production in a textile plant so it is time the entrepreneurs gear up and invest into textile and apparel industry so that we can be on our marks to win this race.

The article is authored by: Avinash Mayekar, MD and CEO, Suvin Advisors Pvt Ltd