Economics in the textile industry:-

The textile industry holds significant importance on both economic and social front globally. Economically, it is a major contributer to GDP, employment and trade in many countries. It provides livehoods for millios of people involved in cultivation, manufacturing, distribution and retail sectors.

Importance of textile industry:-

Economic Contribution:-

It contributes 2.3% to India's Gross Domestic Product (GDP), 7% of Industrial output, and 12% to country's export earnings.

Employment Generate:-

Employing over 21% of total workforce this sector provides livehoods to millions.

Economic factors of the textile industries:-

Major factors are infrastructure volume of productions, labour laws, availablity of manpower, tarifs, fluctuation of currency rates, and government policies. Further bulk production mainly depends on technology of the machine utilisation of the labour resource, financial assistance etc.

Factors affecting the Textile Industry:-

Every industry has its own ups and downs. Textile industry is no exception. There are manyfactors, which influence the market and the growth rate of textile sectors. Major factors areinfrastructure, volume of production, labour laws, availability of manpower, power tariffs,fluctuation of currency rates and government policies. Further, bulk production mainly dependson technology of the machine, utilization of the labour resource, financial assistances, etc.

Global factors influencing textile industry:-

The history of the textile and clothing industry has been replete with the use of various bilateralquotas, protectionist policies, discriminatory tariffs, etc. by the developed world against thedeveloping countries. The result was a highly distorted structure. Despite the fact that GATT was established way back in 1947, the textile industry, till 1994, remained largely out of itsliberalization agreements.

Fiber Agreement (MFA);

On January 1st, 1974, the Arrangement Regarding the international Trade in Textiles, sought to achieve the expansion of trade, the reduction of barriers to trade and the progressive liberalization of world trade in textile products, while atthe same time ensuring the orderly and equitable development of this trade and avoidance of disruptive effects in individual markets and on individual lines of production in both importing and exporting countries.

Agreement on textiles and Clothing (ATC):

The ATC calls for a progressive phasing out of all the MFA restrictions and other discriminatory measures in a period of 10 years. Incontrast to the MFA, the ATC is applicable to all members of the WTO.

Four Step over 10 years.

Steps Percentage of products to be brought under GATT (includingremoval of quotas)How fast remaining quotashould open up, if 1994 rate was 6

Step 1: 1

Dec 1997 16 percent (minimum taking 1990 imports as base)6.96 percent annually

Step 2: 1

Dec 2002 17 percent 8.70 percent annually

Step 3: 1

Dec 2004 18 percent 11.05 percent annually

Step 4:1

Jan 2005: Full integration into GATT andfinal elimination of quotas, ATC terminates 49 percent (maximum) No quotas left.

Macroeconomic factor affecting indian textile industry :

The Indian government has been acting as a catalyst to promote this industry; as it is one of themost significant sectors of the economy. To make the industry more competitive several policieshave been introduced by the Government.

Government regulations.

1. Quality improvement:-

Out of 250 textile companies that have been taken up by theCommission, 136 are certified by ISO 9001.2.

Modernization:

 Recently, India’s inclination towards western designers and other  international brands (from UK, Italy, and France) has been observed to enter into a joint venture to cater the domestic market with more varieties. Carrera invested US$ 252.7 millionin textile projects in India.3.

Setting up of SEZs:

In 2005 the Maharashtra government proposed to setup two specialeconomic zones in Navi Mumbai and Nagpur.4.

 The Technology Upgradation Fund Scheme (TUFS):

This ensures availability of credit atglobal rates for technology upgradation. To an extent, it has also helped in curbing the Chinese export market.5.

 Tex summit 2007:

The Texsummit, 2007 was an initiative taken by ministry of textiles,Government of India, to explore new growth paradigms.6.

FDI Policies:

As liberalization in the economy has gathered up, FDI policies in the textileindustry has reformed to a great extent. However this sector allows 100% FDI, but the firmsare not taking enough initiatives to tap this opportunity.7.

Dismantling of quotas:

 For many years, the world’s textile market was subjected to a trade regime called.

Multi fiber Arrangement (MFA):

. For more than thirty years, many richnations have sheltered their domestic textile industries from low-priced import goods beingcreated in poorer countries. The Indian government has initiated various reforms to meet thechallenges of post-MFA setup, which intended to encourage huge capital investments andtighten up arduous procedures related to the tax regime.

Agreement on Textile andClothing (ATC) was designed to facilitate “the integration of the textiles and clothing sector into GATT 1994” Beyond Phase

-out of Quota in Textile and Clothing Trading.8.

Appreciation of rupee:

 The Government is also trying to construct an environment to drawan investment of Rs 1,40,000 crore in the Eleventh Plan period once the textiles and garmentexports are probable to rise from the current $14 billion to $40 billion. The introduction of such policies led to India’s market presence in world textile market and increased foreign

investment in this sector. Dismantling of quotas has resulted presence of Indian Marketamongst several big brands.

Limitations and Challenges Faced By Textile Industry India:

The Indian textile industries largely compete on the following factors:

1) Quality of products

2) Cost effectiveness

3) Effective supply chain management

4)Designing and innovation1.

 5) Appreciation of rupee value:

At present, the Indian textile industry is thighly disturbed dueto economic recession in United States. The rupee appreciation has taken a toll on theexisting thin margins of textile players. It has been realized that the Indian exporters are a lotdependent on US buyers, which has given rise to this terrible situation.2.

Labour reforms:

 Poor labour productivity in India has been killing economy’s cost advantage since very long. One of the biggest factors for deterred FDI is unfavorable labourpolicies. Establishment of flexible labour market can only help this sector, by protecting theworkers from exploitation and catering to their needs.3.

Fragmented infrastructure:-

 There are many exporters who outsource their raw materialand other inputs from outside suppliers. They often face many problems regarding latedeliveries, improper transportation. Foreign buyers will always prefer vertically integratedfirms instead of firms with dispersed production units.4.

Obsolete technologies and strategies:

The Indian textile industry is far from beingsophisticated and up to date. The industry is still largely dependent on traditional methods of production and dyeing. Upbeat about the positive trend in the Indian textile sector, the time isripe for this sector to attract higher FDI.5.

India's Brand Value;

 At the moment the India’s brand value is not at a very influential position. In the present scenario, the trend of industrialization heads towards rising demandstructure, in places like India. Therefore the industry in return should take advantage of itsdomestic market.The fact remains that India's textile industry is prominent in the country's economy as well as globally. The Government and industry advocates should continue to push the industry to growing new directions, to remain technologically advanced and to make production even moreeconomically viable. By doing so, the industry will be able to adapt to global changes and to take on whatever challenges it faces and competitors that may come its way.

Copyright ( ref)© 2024 Scribd Inc.