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Turning back to textiles

Arvind Singhal

The Indian industry has shown a unique proclivity towards taking investment decisions on the basis of "fashion" statements of the period.

Over the past 25 years, the fashion cycles have included polyester fibre, fertiliser, steel, cement, petrochemicals, aviation, cotton spinning, power, telecommunication, and software. The current flavours include IT-enabled services, bio-technology, education/training and entertainment. Packaged food staples like flour, salt, edible oils and rice seem to be getting a rather unusual attention! Retail has also been in the news but for some inexplicable reasons, investments have lagged way behind the hype generated.

The largest industrial sector in India (and the second largest overall in terms of impact on the economy) - textile and clothing - has been pushed deeper into the background. The irony of the situation is that India is perhaps the only major economy with a ministry for textiles (and countless trade promotion and textile promotion associations and organisations)!

To put it in perspective, the size of the textile and clothing industry (domestic and export) is in excess of Rs 1400 billion (about $28 billion), i.e. almost 7 per cent of the GDP of the country.

It accounts for more than 30 per cent of the country's exports and generates the highest quantum of net foreign exchange for India on account of the fact that almost all the inputs (raw materials as well as manufacturing) are indigenous. It employs more people directly than any sector other than agriculture, and the employment is far more evenly distributed across the country (and more rural than urban) than in any other sector.

The global trade in textile and clothing has been growing at a very healthy clip of over 5 per cent for several decades, and WTO-related developments are likely to add another $200 billion to the annual trade value over the next five years.

The demand recession at the consumer-end, which showed signs of accelerating in 2001, and which seems to be even deeper for many categories of consumer goods in the current year, cannot be turned around if the largest industrial sector in India continues to be ignored.

The textile and clothing sector has the best potential in the short and medium term to generate employment at the grassroots level, add substantial purchasing power for rural India (farmers and processors down the chain), and earn billions of dollars in foreign exchange.

A start can be made by both the government and various chambers of commerce to take up the revival of this sector without waiting for the budget. Both the CII (Confederation of Indian Industry) and Ficci (Federation of Indian Chambers of Commerce and Industry) have been putting in some effort, but perhaps much more needs to be done and can be done.

Industry and entrepreneurs have a lot to do. The textile and clothing sector has suffered because of the fact that it is the oldest industrial sector in India.

The fortunes of major business houses in India have been built on the textile sector but unfortunately, many of them treated the textile business as a cash generator for diversification into other industries. Fresh investment, as well as reengineering of the mindset and business practices, has been in woefully short supply.

The textile industry also has to be made more consumer-oriented. An exercise by a leading consulting firm says apparel prices at the consumer-end have risen substantially ahead of inflation in the past five years even as many other consumer product categories, e.g. consumer electronics, automobiles, and even food products have shown a decline (inflation adjusted).

This can only be done by benchmarking with the best practices of other consumer product organisations in the country.

The textile and clothing sector cannot do well if it is not able to attract and retain the best professional talent. Thus, the sector has to do the requisite PR effort to woo this talent.

Finally, the financial institutions, as well as the investor community, have to lend their support to this sector. While many of the investments made in the past 15 years have not yielded rich dividends, the operating environment for the industry is far better now.

Therefore, investment proposals have to be considered in the light of the current and future potential rather than only past performance.

Overall, I would like to reiterate that while there is a lot of promise shown by the sunrise sectors of the new economy, the textile and clothing sector still remains crucial for the core of India's economy and we can continue to disregard this fact only at our own peril!

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