SWOT Analysis of Indian Textile Industry

Presently, the world textile industry is worth $400 billion. It is estimated that the world textile production will increase by 25 percent and the Asian nations will play a key role in this regard (Economywatch.com, 2010). The Indian textile and clothing industry is very old and plays a very important part in the Indian economy and is one of the biggest in the world. Except China, no other nation can match the size, spread, depth and competitiveness of the Indian textile and clothing industry. The removal of quotas at the end of 2004 has provided the opportunities for India to use its inherent strength and become the top sourcing and investment destination (Technopak.com, 2009). This section will explain the strengths, weaknesses, opportunities and threats of the Indian textile industry based on the primary and secondary research conducted by the author.

Strengths

The Indian textile industry has several strengths. First is the availability of low cost labour. Interviewee D says that, the nation has skilled manpower at very low prices which in turn reduces the cost of production. Nine interviewees said that India has availability of abundant raw material which helps to control the costs and reduces the lead time. India is very rich in resources like jute, cotton, silk, cotton yarn man-made fibre in the world. India also has large varieties of cotton fibres which make is distinct from other countries. They further add that the Indian textile industry is a self-reliant industry. It has complete value chain from the procurement of raw materials to the production of finished goods.

Another strength which India possesses is flourishing domestic market. This allows producers to mitigate risks and be competitive in the market (Utamsingh, 2003). Interviewee A believes that India is performing remarkably in the spinning sector. As a result the export of cotton yarn to other countries is increasing enormously.

Weaknesses

Presently, the Indian textile industry is facing a problem to compete in the world textile market. This is because of weaknesses like fragmented infrastructure, rigid labour laws, technology obsolescence and many others. Due to fragmented infrastructure, India is unable to diversify. In fabric production large part of the industry is engaged in unorganized sectors like powerlooms and handlooms (Utamsingh, 2003). Many interviewees considered inflexible labour laws of India to be the major reason for the low labour productivity. Another drawback of the Indian textile industry is use of outdated technology which resulted in low production capacities as compared to China says interviewee K and L.

Interviewee H feels that Indian industry has the longest supply chain in the world. The average time taken by all the nations from the procurement of raw material to production of finished goods and finally exporting it is 45 days, whereas India takes around 80 days. Another area where India lacks is cost competitiveness. The Indian industry does not have efficient economies of scale therefore unable it is incapable of competing with China. Also the expenses like indirect taxes, power and interests are comparatively high in India (Utamsingh, 2003).

Opportunities

The Indian textile industry has various opportunities like technical textiles, product development and diversification, FDI and brand recognition. Technical textiles offer the opportunity to the Indian textile industry to maintain the present current growth and flourish in near future. It will also help in advancement of the industry (Rakshit, Hira and Gangopadhyay, 2007). India is not using technical textiles much. Both nonwoven and woven technical textiles will thrive in India in coming years adds Interviewee D. The Indian companies need to focus on product development and diversification in order to capture new markets globally. They need to invest in design centres and investment labs. Specialized and smart fabrics should be introduced (Utamsingh, 2003). Another opportunity for the Indian textile industry is elimination of quotas. Interviewee C and H said that after the removal quotas there is increase in the exports of textiles and clothing to the United States and European Union but not as much as China. Five out of fifteen interviewees said that the industry has also taken some steps to improve the brand value of India.

Threats

China is the biggest threat to the Indian textile industry in the global market says interviewee L. India also has a threat from low cost producing countries like Pakistan and Bangladesh which may hinder India’s exports demand in the future. Another disadvantage of India is its geographical distance from major global markets of US, Europe and Japan in contrast to its rivals like Mexico, China etc which are comparatively nearer. Big geographical distance results in high shipping expenses and lengthy lead-time. The removal of MFA quotas has given the opportunity to all the countries to enter the textile sector. As a result many big players are entering the textile sector (Equitymaster.com, 2006). The Indian textile industry is not able to maintain balance between price and quality. Therefore most of the big companies in the United States and the European Union are shifting their manufacturing orders to China. Hence Indian textile industry is losing its share in global textile market adds interviewee M and N.

Equitymaster.com, 2006. Indian Textile Industry: Porter analysis [online] [accessed 28th May 2010] Available at: http://www.equitymaster.com/detail.asp?date=3/31/2006&story=1

Economywatch.com, 2010. Textile Industry [online] [accessed 27th August, 2010] Available at: http://www.economywatch.com/world-industries/textile-industry.html

Technopak.com, 2009. FDI: A Catalyst for Growth of the Textile & Apparel Industry [online] [accessed 22nd August, 2010] Available at: http://www.technopak.com/Perspective/vol2/FDI%20A%20Catalyst%20for%20Growth%20of%20the%20Textile%20&%20Apparel%20Industry.pdf

Utamsingh, V. 2003. SWOT Analysis of the Indian textile industry [online] [accessed 23rd August, 2010] Availabe at: http://www.kpmg.com/IN/en/IssuesAndInsights/ThoughtLeadership/SWOT%20Analysis%20of%20the%20Indian%20Textile%20Industry%20(September%202003).pdf

Rakshit, A.; Hira, M. And Gangopadhyay, U.K. 2007. Technical Textiles- What India Need to do now [online] [accessed 23rd July, 2010] Available at: http://www.sasmira.org/an%20article.pdf