Conference on Strategy for Making India a Global Leader in Textiles and Apparels
Dive into the potential opportunities for India in the textile industry, exploring the shift towards MMF fibers and the goal of reaching a market size of $650 billion by 2025. Discover how China's evolving trade landscape presents a significant opening for countries like India, Vietnam, Bangladesh, and Sri Lanka to capitalize on the changing dynamics.
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Conference on Strategy for Making India a Global Leader in Textiles and Apparels Stimulating Investments in MMF and Fabrics 7thApril 2015
Indian Textile Industry Market Size : $110 billion Domestic Consumption : $70 billion Exports: $40 billion Contribution of the Industry 14% of the industrial production 6% of the country s GDP 13% of export earnings 35 million-strong workforce- 2nd largest employer after agriculture The National Textile & Apparel Vision document envisions a target of $650 billion by 2025 (domestic $350 billion and export $300 billion), from the current $110 billion. This requires investment of around $180-200 billion and is expected to create 35 million additional jobs
Indian Textile Industry Indian textile industry is cotton based. In contrast globally, MMF enjoys bigger share as shown below. Fibre Consumption Pattern Profile (in %) India World Non - Cotton Non - Cotton Cotton Cotton
China- the World Leader China- industry size of $532 Billion; exports of $260 Billion cornering 36% of the global textile trade. MMF forms a staggering 80% of the total exports India Exports China Exports Other Exports MMF Exports MMF Exports Other Exports
OPPORTUNITIES- China Factor China is expected to vacate nearly $100 billion of global trade space over the next 5-6 years due to: Rising labour costs, appreciating currency, energy costs and focus on domestic market Countries including India, Vietnam, Bangladesh and Sri Lanka potential gainers Cotton consumption is expected to fall from the current 40% of the global fiber consumption, to nearly 25%. To reach the target of $650 billion with exports of $300, quantity of textile fiber needs to be increased multifold
OPPORTUNITIES In India, Cotton consumption represents around 60% of the total fiber consumption However, due to some factors, such as frequent fluctuation in cotton prices and push by global brands towards polyester filament, MMF is gaining momentum. India accounts for less than 0.5% of the global trade of MMF fibres-based textile and apparel products which indicate huge opportunity In domestic market too, preference for apparel made from MMF, is fast changing, in the ladies wear, active wear, kids wear and uniforms, automotive furnishings, protective and medical applications, etc. This is expected to boost demand for fiber to around 19 million tons by 2025
India Growth Potential Kg/Capita All MMF/Capita Fibre/Capi ta Low consumption centres point at scope to grow towards the North America Australasia South Korea 36.9 22.5 global average 28.6 23.3 18 16.3 India s high GDP growth and West Europe Taiwan Japan Turkey East Europe China Latin America South Asia India Africa/Middl e East World 23.1 23 21 14.8 14.1 14 16.2 17.3 13.2 7.6 9.3 12 rising income levels would catalyse textile consumption Young demography and changing 8.9 4.9 fashion trends would favour 7.1 5.5 4.3 3.1 MMF consumption 4.7 3.3 11.2 7.7 7
Fibre Mix Needs to Change Dramatically Even with conservative growth estimates fibre dynamics have to change dramatically Availability of cotton in India with a global best yield of 750 kg/ha will take Indian cotton production to ~8 Billion kg. 0.3 2020 2014 0.1 MMF 8.0 Cotton MMF 4.3 Others Cotton 5.3 11.8 Others Volume: 10 Bn kg; Value: $110 Bn Volume: 20 Bn kg; Value: $220 Bn
REQUISITES This requires increased investment and MMF production from about 4.3 billion kg to 11.8 billion kg This implies increasing the consumption of MMF from the present 40% to 60% of total consumption This target is achievable if provided right fiscal policies to encourage investment in the sector Past experience shows reduction in MMF duty results in increasing the demand for the same thereby neutralizing the impact on revenue
Key Proposals An intermediate Excise Duty regime of 6% for MMF and Yarns The present duty of 12% should be reduced to 6% on MMF Certain excise duty on cotton with entire textiles chain under CENVAT Sri Lanka 20% 20% 20% India China Pakistan Bangladesh Indonesia Thailand Nil 12% Nil 17% 17% 17% Nil Nil Nil Nil Nil 10% 10% 10% 7% 7% 7% Cotton MMF Cotton Yarn MMF Yarn 1.5 Tk/kg 12% 17% Nil 1.5 Tk/kg 20% 10% 7% Duty Rationalisation needed to treat MMF gradually at par with cotton. The growth in revenue collection will be in the range of Rs 8000-10000 crores. Prepare the industry for GST regime
Scenario 1- Only Cotton Yarn Under Excise Scenario 1-Existing Scenario II ( Excise rate @ 2-6% -Cotton Yarn included) (Current excise rate) Excise Duty Rates Naptha PX PTA MEG ACN- PSF VSF Asf Polyester Filament Yarn VFY 100 % Non Cotton Yarn PV Yarn 14% 6% 12% 12% 12% 12% 12% 12% 12% 12% 0% 0% 14% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 2% PC Yarn Cotton Yarn Cotton Fabric Blended Fabric 100% non cotton Garment Excise collection (Rs-Crs) 0% 0% 0% 0% 0% 0% 7744 2% 2% 0% 0% 0% 0% 8214 Assumptions Excise duty was calculated based on production . Imports and exports are not considered in this calculation as any excise duty collected in export will be refunded as duty drawback The volume of cotton fabric has been assumed based on 25% of cotton yarn is exported out of the country Garment volume has been assumed based apparel market size of USD 40 Billion
Scenario II- Entire Chain Under Excise Scenario 1-Existing Scenario II ( excise rate @2- 6% -Cotton yarn ,Fabric & Garment included) (Current excise rate) Excise Duty Rates Naptha PX PTA MEG ACN- PSF VSF Asf Polyester Filament Yarn VFY 100 % Non Cotton Yarn PV Yarn 14% 6% 12% 12% 12% 12% 12% 12% 12% 12% 0% 0% 14% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 2% PC Yarn Cotton Yarn Cotton Fabric Blended Fabric 100% non cotton Garment Excise collection (Rs-Crs) 0% 0% 0% 0% 0% 0% 7744 2% 2% 2% 2% 2% 2% 9312 Assumptions Excise duty was calculated based on production . Imports and exports are not considered in this calculation as any excise duty collected in export will be refunded as duty drawback The volume of cotton fabric has been assumed based on 25% of cotton yarn is exported out of the country Garment volume has been assumed based apparel market size of USD 40 Billion
Proposals (contd.) Customs duty on Catalysts and Chemicals used for manufacture of synthetic fibers/fabrics should be on par with raw materials. Customs duty structure should be a cascading structure, i.e. the duty differential should be progressive at each stage of value chain. To encourage the domestic industry, following model is proposed:
