Indian Textile Industry Analysis

Topics: Textile industry, Cotton, Textile Pages: 16 (5430 words) Published: January 4, 2011
Analysis of Indian Textiles and Apparels Industry: A Focus on Market Structure and Competitiveness

Abstract: The Indian textile industry is one of the oldest and most significant industries in the country. It accounts for around 4 per cent of the gross domestic product (GDP), 14 per cent of industrial production and over 13 per cent of the country's total export earnings. In fact, it is the largest foreign exchange earning sector in the country. Moreover, it provides employment to over 35 million people. The Indian textile industry is estimated to be around US$ 52 billion and is likely to reach US$ 115 billion by 2012. The domestic market is likely to increase from US$ 34.6 billion to US$ 60 billion by 2012. It is expected that India's share of exports to the world would also increase from the current 4 per cent to around 7 per cent during this period. India's textile exports have shot up from US$ 19.14 billion in 2006-07 to US$ 22.13 billion in 2007-08, registering a growth of over 15 per cent. This article tries to investigate the underlying market structure that has developed over the years together with the strengths, weakness, opportunities and threats the industry is currently facing. In the course of the analysis the data shows that the industry operates in a monopolistic setup and all the assumptions for a monopolistic economy holds good.

Introduction: The economic history of India cannot deny the contribution of textile industry in effectively changing the social scenario. Its presence in the Indian as well as the world economy is a commendable one. The manifestation of its significance in playing a pivotal role is discerned with its 14% contribution to the total industrial production, 4% to GDP and 16.63% to export earnings as estimated by the Ministry of Textiles, India. The textile industry ranks second in providing direct employment to over thirty five million people after agriculture in our country. It is estimated that the textile industry is growing at a rate of 9% which is again forecasted to increase to 16% in the coming years. The uniqueness of the industry lies in its close blend with the agricultural sector thus providing the industry with the opportunity to produce a wide variety of products to be catered to different market segments in and outside India. This article undertakes a brief and comprehensive analysis of this industry so as to find out the competitiveness and the market structure underlying it. Brief History: The colonial regime virtually decayed the traditional textile industry in India which was well known since ancient times. The birth of the modern textile industry however took place in the nineteenth century with the establishment of the first textile mill near Kolkata in 1818. The beginning of the cotton textile industry was in Bombay in 1850s with the advent of Parsi cotton merchants engaged in internal trade and export of yarn and cloth overseas to Chinese and African markets. Ahmadabad emerged as the next immediate rival to Bombay with the first cotton mill established in 1861. The cotton textile industry rapidly progressed in the second half of the nineteenth century with 178 mills but during 1900 it suffered a setback due to the great famine when a number of mills got closed. The industry received a sudden stimulus during the Swadesi movement and the two world wars. In 1992 to 1937 the industry faced a turbulent situation as several mills in Bombay changed hands. But the surge in the production gained momentum during the Second World War as import of textiles from Japan stopped. Gradually the number of mills grew to 4.5 lakh looms in 1901 to 249 mills with 13.35 looms in 1921 and subsequently to over 20 lakh looms in 1941. By 1945 there were 417 mills employing around 5 lakh workers. Again the industry was affected during independence and partition 14 mills and 22% of the land under cotton cultivation went to Pakistan and India was left with 409 mills. Some mills were...
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