• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

G. Srinivasan

NEW DELHI, May 20

AN official committee has plumped for special economic zones exclusively for the textile industry besides encouraging foreign direct investment (FDI) through non-resident Indians (NRIs) by liberal and conducive Government policies if the objective is to achieve the export target of $50 billion per annum in textiles and clothing by 2010.

A draft report prepared by the Textiles Committee, Mumbai, said technological obsolescence and slow rate of modernisation remain two key obstacles for the Indian textile industry, which is in urgent need of financial and technological investments.

As the domestic investment is not coming as desired, the gap could be filled by the FDI. But, textiles has not been the favoured sector for investors as its share in total FDI inflow is 1.53 per cent during 1991 to 2002.

While FDI proposals worth Rs 3,410 crore were approved in textiles during 1991to 2002, the actual inflow was much lesser (one-third of approved). A sum of Rs 65,592 crore came through the RBI automatic route taking the total inflow into textiles to Rs 1,020 crore during 1991-2002.

The Committee said around 50 per cent of the total FDI inflow in textiles and clothing is in the spinning sector with spinning of artificial/synthetic fibres alone accounting for around 45 per cent of the total inflow; and if this is combined with inflow in cotton spinning which is around 6 per cent, the share of spinning goes beyond 50 per cent. Another 10 per cent has come into the manmade fibre sector.

In India, cotton has been the dominant raw material. Considering the increasing shift in global demand towards manmade and blended fibres, it is important that India has them in sufficient quantities, the committee observed.

Even as India has been catering to the lower side of the value chain, the fact that one fourth of the inflow in textiles is in manufacture of textile products would definitely see India making a transition towards high value-added items. As such, a lot needs to be desired as the investment in clothing, processing, knitting and garmenting has been nominal. Other sectors where FDI should flow include processing industry, apparel manufacturing, technical textiles, medical textiles, home textiles and knitting.

The major factors for the low volume of FDI flows into India's textile industry include, low profitability (low rate on investment in textiles), no assured returns, poor infrastructure, inflexible labour laws, unorganised sector, global recession, government polices, multiplicity of taxes, low/uncertain domestic demand, besides `Made in India label'.

Stating that the industry and the Government must perforce take a serious view of the situation,

the report makes specific recommendations for attracting higher FDI.

(i) simplify the procedures and remove bureaucratic hassles in handling of approvals; (ii) single window clearance for land, building plans, environment, power supply, safety Board, exemptions; iii) a need to have large-scale global capacities with a capability of delivering and liaisoning with the very large scale buyers in the export markets.

At the micro level, improved infrastructure is important which cover power supply, labour laws, cost and availability of capital for the textile industry should be ensured.

Major textile centres of the industry should have their own lending bodies specifically meant for textile industry. There should be banks chartered to exclusively to cater to textile industry adopting different realistic criteria to calculate working capital requirement.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Rain, rain come along!

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line