16-Aug-2013
CHENNAI: Prospects for India's crises-ridden textiles industry, a labour-intensive sector that contributes 4 per cent to GDP, have brightened for the first time in many years, cheering hitherto wary lenders who could now consider lending more.
A major reason for the change in fortunes of the sector, which in recent years has hurtled from one crisis to another, is the huge appetite that China is showing for overseas yarn.
In the past two months alone, China has bought 140 million kg of yarn from India, about 75 per cent more than usual, says K Selvaraj, secretary general of the Coimbatore-based industry body Southern India Mills Association.
India's neighbour is becoming uncompetitive in yarnmaking with the currency appreciation and high labour costs there. R Rajendran, director of finance at textile machinery maker LMW, says the China factor isn't an aberration.
"Unlike India, China is known to keep its policy consistent longer. So we can expect the import of yarn to continue," he says. The rising Chinese demand is the latest in the rush of recent uplifting news for a sector that had to contend with everything from volatile cotton prices and power crisis, to weak overseas demand and the emergence of new rivals such as Bangladesh.
But it isn't just the China factor that's working to its advantage. The US, a major market, is holding on as a consumer. Bangladesh, which was giving India's textile industry a run for its money, seems to have fallen in the eyes of global buyers after the tragic factory collapse earlier this year there.
The power situation has also improved in the textile hub in Tamil Nadu. LMW's Rajendran also anticipates the finance ministry giving a green signal to the Technology Upgradation Fund Scheme, under which companies can access funds cheap for equipment modernisation. The buoyancy isn't confined to yarn.
A Sakthivel, president of the Tirupur Exporters Association, a representative body of knitwear makers, says exports have gone up to Rs 4,200 crore in the past three months compared to Rs 3,600 crore in the year-ago period. However, it may be too early to conclude that the overall garment exports (made of both 'knitwear' and the 'woven' segments) might be picking up.
Source:- economictimes.indiatimes.com
Data from the Office of Textile and Apparel, US, says Indian exporters have reported lower growth in the first six months of 2013 from the comparable period of the prior year, relative to the growth reported by China, Vietnam and Bangladesh.
It means the effect of the weak rupee and the Bangladesh factor haven't been yet reflected in the available data. However, the biggest garment exporter Gokaldas reported a 15 per cent year-on-year growth in revenue at Rs 258 crore for the June 2013 quarter.
Kitex Garments, another exporter, reported over a 50 per cent jump in revenue at Rs 100 crore. The lenders seem to have noted these changes. Through huge turbulences in the past, the textile industry could manage to get cheap credit from banks due to the Technology Upgradation Fund Scheme. But since the big crash in cotton prices two years back, a near halving that caused mega inventory losses, banks have been loath to lend.
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