Speech of Shri. Sharad Jaipuria, President DENIM MANUFACTURERS ASSOCIATION
Publish Date :
Sep-09-2016
PRESIDENTIAL ADDRESS OF SHRI SHARAD JAIPURIA AT THE 5th ANNUAL GENERAL MEETING OF D.M.A. TO BE HELD ON 9th September 2016
It gives me immense pleasure to extend a warm welcome to all of you on behalf of the managing committee and myself to D.M.A.’s 5th Annual General Meeting. I am happy to see the presence of our members here. It shows your keen interest and involvement in various programs and activities of D.M.A. I am grateful to every one of you for your valuable contribution towards its growth.
The Annual Report for 2015-16 and Audited Accounts along with the Auditor’s Report for the year ended 31st March 2016 are with you. I do not want to take much of your time to read the same here. With your permission, I take them as read.
I am glad to state that the Economic forecast for India is strong with GDP hovering around 7.5%.Public consumption is likely to be higher because of increase in wages and declining inflation. Also investments is likely to pick up gradually as excess capacity fade and deleveraging continues from banks and corporations, and infrastructure projects mature.
Indian Textile Outlook
The Indian Textile Industry currently estimated at around USD 108 billion is expected to reach USD 223 billion by 2021. The industry is second largest employer after agriculture, providing employment to over 45 million people directly and 60 million people indirectly. It contributes 5% to Indian GDP and 14% to overall index of industrial production.
As per BCG report prepared for CII, textile industry of our country, India has an ecosystem from fibre to fashion both in cotton and synthetic textile with other advantages like, young labour forces and vibrant domestic market. It is in a position to gain tremendously from the rising cost challenges that threaten large scale shift of garment and apparel industry from China to other Asian countries having a potential market of USD 280 billion. If India were to take benefit of this large scale shift it can create new employment to 50 million jobs by 2025 out of which 35-40 million could be women. Further it can get USD 150 billion annually in foreign exchange and spur the apparel, made ups and textile industry to reach USD 300 billion by 2025.
However, as per BCG there are huge challenges including poorscale, fragmented cluster, restrictive laws, unfavourable market access, high working capital cost, limited innovation to mention a few which is making Indian fabric and textile less cost competitive. Only if these challenges are addressed then alone India can become a major player in textile.
International Scenario in the Textile Value Chain
The global economy has been very volatile and we are all functioning in an era where growth in world trade is expected to remain subdued & sluggish. According to economists at the WTO, imports in the developed countries should continue to remain moderate.
If we look at the overall Textile & clothing value chain in the world trade, the share of Yarn & fabrics is gradually decreasing, whereas share of final finished products like Garments is increasing. Between 2002 and 2014, the combined share of trade in yarn & fabrics has shrunk globally from 28% to 22% and whereas final value added products like Garments & made-ups share has increased from 72% to 78%.
Cotton Outlook
In the year 2014-15 India has become number one in cotton cultivation with 32.05 million acres, however, the final cotton output as per C.A.B was only 338 lakh bales as against 380 lakh bales in the year 2014-15. Also the closing stock of cotton reduced to 43 lakh bales.
Drop in cotton crop brought in lot off volatility in cotton prices and the cotton price moved from Rs. 32000 per candy to Rs. 50000 per candy spot, making it the most expensive cotton in the world. It also affected export of cotton yarn& fabric.
It is a matter of great concern that for the year 2016-17 the area under cotton cultivation is likely to fall to a lowest in 7 years as farmers are switching to other crops like sugarcane, pulses etc. It is estimated that the cotton crop for the ensuring year could be close to 335-340 lakh bales but much will depend on the monsoon.
Similarly, projections of world ending stock of Cotton for year 2015-16, are expected to decrease to the level of 21.6 Million Tons and further decrease to the level of 19.5 Million Tons in the end of next year’s season 2016-17. This is due to decrease in world Cotton production from peak of 27 million tons 3 years ago in 2012-13.
However, the world consumption level has remained steady at 24 million tons per annum over last 5 years, and would continue to be at same level next year.
GST
Friends as GST will replace a number of Central and state taxes the impact of GST on the Textile industry is likely to be very significant. As the industry has interstate large movement of goods and services and also there is interface between organized and unorganized sector GST is likely to have a positive impact on the textile industry. However, the final design of the GST and related constitutional amendment are yet to be finalized and the correct picture will emerge after the same is done. Also the rate at which GST will be levied is also important. However, the industry is of the view that GST should cover the entire textile production chain, without any exemption for any segment or group.
TUFS
TUFS launched by government in 1999 is perhaps the best example of policy measures to improve the competitiveness of the industry.
Concerted efforts are being made to get all the pending subsidies. Comprehensive Integrated Software Development (i-TUFS) for TUFS is introduced by TC office.
Indian Denim Market
The Indian Denim fabric manufacturing is growing at a healthy CAGR of 15% over the last decade and is expected to grow at similar compounded rates over next few years. This growth has primarily been on account of tremendous growth in the Domestic Market.
The current installed capacity of denim fabric production stands at about 1.3billion meters per annum. It is operating at roughly 80% capacity utilization at present.
The current domestic consumption of Indian denim fabric is approx. 650 – 700 million meters which is growing at the rate of 12% per annum. Also the denim fabric export is 180 million meters. As per Ministry of Commerce the denim export for the year 2015-16 was USD 318 million which was a drop of 10% over year 2014-15. The major drop was noticed on denim (cotton) which was 15%.
It is important that the denim industry should quickly find ways to increase the export of denim fabric & garment and also take advantage of the new Garment Policy initiated by Government of India and plan to increase garment production.
Government Initiatives
The Government of India has come up with a number of initiatives and export promotion policies for textiles sector. Some of the noteworthy ones are as under:-
-
100% FDI in textile sector on automation route
-
Union Cabinet has cleared a proposal of Rs. 6000 crores ( USD 889.44 million) package for textiles industry aiming to attract investment of Rs. 74000 crores (USD 10.95 billion) and also generating 10 million jobs and increasing textile export by USD 30 billion in next 3 years.
-
Ministry of textile which has plans to enter into bilateral agreements with Africa & Australia
-
Department of Handloom & Textile has tied up with e-commerce player, retailers and social media to increase sale of handloom products in Indian market.
-
Government of India expected to announce a new National Textile Policy with aim of creating investment & jobs.
Suggested New Policy initiatives
Following Policy level initiatives need to be taken by government of India, to boost exports. This will go a long way in solving the present crisis in the Denim Industry:
-
Expedite long pending FTA agreement for Textiles & Clothing with European Union.
-
Amend the current labour laws to make them less restrictive to growth, and make them more conducive to build economies of scale in each sector of the value chain. This will bring lot of labour force into formal employment rather than informal employment.
-
Make policies to encourage manufacturers to integrate vertically across the whole value chain on the lines of Vietnam & Bangladesh. This will cut down the lead times and increase the ability of exporters to increase the “Speed to Market.”
-
Improve ease to Finance, especially the working capital, since this forms a big component in any Textile Operations.
D.M.A.’s Activities
Friends, I would like to take this opportunity to inform you all that D.M.A. managing committee and members have met 5 times during last year for discussing issues and prospects of denim industry.
In May 2015, D.M.A. had also organized a joint delegation visit along with N.I.T.M.A. members to Vietnam for studying the market and opportunities for investment.
Apart from these meetings D.M.A. have sent 6 representations to Central Ministry i.e. Textiles, Commerce, Finance etc, highlighting issues concerning Denim Industry. D.M.A. delegations have also been continuously meeting the concerned officials in the ministry to give views on the industry.
ACKNOWLEDGEMENTS
Before I conclude, I would like to take this opportunity to place on record our sincere thanks to Minister of Textiles, Minister of Commerce & Industry, Minister of Finance, Textile Secretary, Commerce Secretary and Joint Secretaries of Textiles, Commerce, Finance Department & Textile Commissioner taking several steps and for giving us guidance and direction.
I would also like to thank CITI, Texprocil, N.I.T.M.A. and S.I.M.A. for their continued support.
I would also like to convey my sincere thanks to members of managing committee of D.M.A. – Shri. S. K. Gupta, Shri. Akhilesh Rathi, Shri. Atul Singh, Shri. Ashish Shah, Shri Aamir Akhtar and Shri. Aniruddha Deshmukh for sharing my responsibilities and extending their effective help and support in discharging my duties as President, D.M.A. I am equally grateful to all Members for their valuable guidance.
Our special thanks to our statutory Auditors M/s. Doogar & Associates Chartered Accountants for their guidance.
Finally, I would like to thank Secretary, Mr. Gagandeep Singh for carrying out his responsibilities with a sense of dedication and commitment.