Industry must adopt automation at all stages

GV Aras, Director, A.T.E. Group

As we stand at the entrance to 2019, how do you think the textile industry in general and particularly the segment you are involved in has done in the last one year?

The calendar year 2018 had been one of the most challenging years for the textile industry due to the impact of GST on the MSME sector (especially on the textile hubs like Surat, Bhiwandi, Ludhiana, Erode and many others), higher raw material prices, severe liquidity crisis post Punjab National Bank scam and subdued fabric demand. The apparel sales had been quite stagnant. While the yarn exports have increased the apparel exports have declined considerably.

The imports of textile and apparels increased significantly as well affecting the domestic industry badly. Many of the corporates from the textile industry have improved their performance mainly aided by GST and increased sales. However, a majority of mills had tougher times due to the factors mentioned earlier. The exporters had been unhappy as the prevailing duty drawback rates have not been aiding them in competing with other countries. Many states have declared their textile policies which are likely to attract some investments in the coming months.

As a result of the strain on the textile industry, the textile machinery sector as well had a negative impact due to a drop in the intake of fresh orders. Majority of the Indian textile machinery manufacturers faced a problem of lower production and sales due to the liquidity issues and delays in reimbursement of loans at customers’ end. Also, the input costs for the industry have increased considerably due to increased commodity prices especially steel, aluminum, and electrical products. There was a considerable impact on the manufacturing cost due to an increase in the cost of imported materials used in the machines. The imports of machinery from Europe
and China got affected due to depreciating Indian Rupee against Euro and Dollar.

Globally, have you come across some extraordinary scenario in the textile industry of other countries, particularly from Asia? Give a comparison of the trends at home.

China, the leading player in textiles, has vacated some space which has been mainly snapped by countries like Bangladesh and Vietnam than India. The US-China trade war has also opened up new opportunities for the textile countries but here as well India could not take much advantage due to many reasons. The Bangladesh textile industry has done very well in 2018 with strong support from their government. They have focused on investing in backward integration like processing, knitting/weaving and spinning thus reducing the dependence on imports from countries like India, China, Vietnam, and Thailand.

A lot of Chinese investors have started investing in creating capacities in Vietnam with an objective of avoiding higher US tariffs and also gaining an easier access to the US market. India continued to be at disadvantage against the competing Asian countries (excluding China) due to higher import tariffs in EU and other importing markets for the Indian goods. A free trade with ASEAN countries and likely finalisation of
a new trade agreement with EU countries will help
in increasing Indian textile goods exports in the
coming years.

Which do you think are the Indian textile industry’s
strengths and which are the weaknesses?

The strengths of the Indian textile industry are
as follows.

• Availability of all types of raw materials,
• Skilled manpower available at reasonable cost
• Strong presence across the textile value chain
• Stronger position in yarn due to fairly modern spinning industry
• Increasing penetration of organized retail and
  also e-commerce
• Growing domestic demand due to rising incomes
• Strong position in home textiles in the global market
• Increasing applications of technical textiles
• Favourable government policies and schemes

Weaknesses of the Indian textile industry are as follows.

• Fragmented manufacturing across the textile
  value chain increasing logistics cost
• Lack of good infrastructure
• A large share of the unorganized sector in
  fabric production
• Structural weakness in manufacturing value
  chain restricting value addition opportunities
• MSME sector is struggling for survival post- GST
• Lack of state of the art capacities in weaving
  and processing
• Not many larger apparel manufacturing capacities which can make apparel exports a growth engine
• Lack of innovation and product development
• Environmental and sustainability issues
  hampering growth

What are your suggestions for the industry and also the Government for improving upon our performance, related
to domestic issues and also exports?

Indian textile industry already possesses majority ingredients required for growth but it needs to work hard on the weaker areas and the gaps if it has to make good for the lost opportunities. Majority of the global trade happens in synthetic and blends while India is having
a larger share of cotton in its production. If we want to increase our share in the global textile market then we must encourage an increase of synthetic fibre usage and its blends in fabric production. For that, the Government also needs to support the industry through rationalisation of multiple layer tariffs. The duty drawbacks for exporters had not been sufficient to compete in the export market and need to be increased. I learn that the textile ministry has just announced an increase in the duty drawbacks on different categories on 11th December. This will certainly help India increase its textile exports.

It is necessary for the industry to adopt automation at different stages of production which will help in improving the productivity and quality as well as will help in tackling the shortage of labour as well. This is more important for a segment like a garment manufacturing which is labour intensive. The textile corporates should invest in innovation and product development which will help them move up the value chain in the global market. They must also invest in building their brands which can compete effectively on the global platform.

The textile industry, in all sincerity, must give due importance to the environment (pollution) and sustainability if it has to be on the international buyer’s list. The government on its part must play an active role of a facilitator in providing good infrastructure, supportive policies and incentivising the exports. The industry needs to give the highest priority to ‘Compliance’, which so far has been neglected.

The textile industry can not grow profitably unless its duly supported by local capital machinery segment. The Indian textile machinery industry needs to be encouraged to bring in new technologies to India through collaborations and joint ventures and make import substitute machines, especially in the weaving, knitting and processing segments where imports are very high. This will not only give a boost to ‘make in India’ initiative but also will help in saving precious foreign exchange. For this to happen, the Government should introduce TUF like scheme for the machinery sector.