handloom vision

8/6/2019 Handloom Vision

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D r . D . N a r a s i m h a R e d d y , e - m a i l : n r e d d y . d o n t h i @ g m a i l . c o m P a g e 1

VISION

FOR

Indian Handloom Industry

2009-2014


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Statement Flow

1. Executive Summary

2. Introduction

3. Estimates of Opportunities for

the Handloom Industry4. Investments and growth

5. Agenda for Growth


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Handloom Industry poised for significant growthIndian handloom industry is working on a vision to capture market worthUSD 15 bn by FY2014

The domestic household market potential is estimated to be USD 60 bn and

FOB value of exports at USD 50 bn by FY2012

The principal drivers of growth would be

World-wide recession slowing down non-handloom production

5.7% p.a. growth in world trade in textiles and clothing from USD479 bn in 2005 to around USD 700 bn in 2012

Indias share in the export market to increase from current 4% toaround 7% by FY2012

Domestic household market growth to be driven by increase inpenetration of organised retail, favourable demographics andrising consumption & income levels

In order to achieve the above growth, the production output of the handloomindustry would need to almost double by FY2014 from current levels. Thehigher growth in value would result from manufacturing of more value addedproducts

Need to increase the output would call for investments to the tune of just Rs.5,000 Cr. (USD 1 bn)

during FY2009-2014

Consequently the industry could potentially generate additional employment

for 10 million people of poor rural classes and skill. Indirect employment of 5million are expected through the allied sectors.


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Agenda for stakeholders

After a series of suicides across the country, handloom production hasstabilized through market support and cluster development programmes.However,

Key segments such as cooperatives have lagged behind in

response

Investments under cluster development programmes have had a

positive impact on productivity as is evident from rising

production without significant addition in working capacity

The following areas require support from Government, in collaboration

with the industry, in order to enable the sector to become globally

competitive and aid in achieving the Vision targets

Facilitating capital investment through

Extension of TUFS to handloom industry until FY2012 Reducing the cost of procuring working capital from institutional sources Establishing handloom parks Attracting IDI into the sector Accelerating investments in the marketing segment

Strengthening the domestic textile market regulation throughIndian Textile Labelling Act

Addressing infrastructural constraints and reducing transactioncosts

Ensuring adequate availability of fibre for domestic consumption

Facilitating manpower training

The agenda for the handloom producers (master weavers, cooperatives andcompanies) is to drive competitiveness and customer acceptance through focuson strengthening supply chains, developing innovative designs, compliance withquality requirements, brand promotion and acquiring scale


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Handloom sector continues to employ large number of people in rural, semi-urban and urban areas of India. In some states such as Andhra Pradesh,Tamilnadu, Kerala and Karnataka, Uttar Pradesh, Gujarat, Rajasthan, NorthEastern States, Madhya Pradesh, Orissa, West Bengal, this sector is visibly largeand dominant in certain categories of clothing.

Market for handloom products is still large and wide. There is good domesticmarket as well as international market. There are die-hard consumers whowould support handloom products for every reason they can hold onto.

Handloom sector continues to provide direct and indirect employment. Thereare estimatedly 32 other sectors which are dependent on handloom production,in various ways, including transportation, financial services, marketingservices, service and maintenance services, hotels, etc. Many handloomcentres are well known tourist spots, drawing visitors from far places of Indiaand foreign countries as well. Thus, part of the tourism industrys fortunes isalso influenced by handloom sector and its fame.

Handloom sector has umbilical linkage with cotton farmers and rural farmeconomy. Agricultural labour gets employment in handloom sector in non-agricultural seasons.

Handloom sector has self-sustaining mechanisms, including training for youngweavers, irrespective of gender. The inheritance of skills, resources andcapacities is beyond the realm and reach of any modern training andeducational institution. It is a facilitation process, which is not dependent onthe government and or any modern formal institution. There is also sufficientflexibility for all types of communities to take up handloom production as aprofession.

Handloom sector is part of the culture and ethos of India and its glorious past.It has emotional bondage with nationalism and the champions of nationhood. Ithad a principal role in public opinion formation during the Independencestruggle against the imported goods and imposed industrialisation.

Handloom production has significant contribution to the national GDP andexport earnings. Thus, it has some influence over the foreign exchange levelsand the well-being of the economy.


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DEVELOPMENT OF HANDLOOM INDUSTRY

Employment to 30 million

Mainstay of rural and semi-urban employment

Exports reaching Rs.4,000 crores

Annual turnover of Rs.50,000 crores

Market demand of Rs.1 lakh crores

The per capita purchase of cotton textiles in handloomsector is 0.88 metres and aggregate consumption at allIndia level is estimated to be 989 million metres.

National level consumption of pure silk textiles producedon handlooms was 116 million metres and 6 million metresin woollen in 2006

DEFINITION OF THE SECTOR

The handloom industry comprises:

the treatment of raw materials, i.e. the production and preparation ofvarious textiles fibres

o "Natural" fibres include cotton, wool, silk, jute, etc.

the weaving of various products:

o carpetso body wraps (sarees, dhotis, etc)o dress materials

the transformation of fabrics into products such as:


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o garmentso home textiles (such as bed linen, table linen, toilet linen, kitchen linen,

curtains, etc)

The distribution sector constitutes the last element of the sector and is

therefore important for all handloom products which are sold to the finalconsumer. Although some handloom companies have set up their owndistribution networks in the framework of their vertical integration strategy,the manufacturing and distribution sectors remain very different in theircharacteristics and nature, and should therefore be treated separately.

ECONOMIC AND SOCIAL IMPORTANCE OF THEHANDLOOM INDUSTRY

A few years in the last decade were very difficult for the handloom industry

with significant declines in production and employment.

The handloom sector is predominantly a household-based industry. Enterprisesof less than 4 employees account for 60% of the workforce in the handloomsub-sector and produce almost 50% of value added.

In India, the handloom industry is concentrated in about 15 States, accountingfor about three quarters of Indian production of handmade textiles, includingAndhra Pradesh, Tamilnadu, Kerala, Karnataka, Rajasthan, West Bengal, UttarPradesh, followed by Gujarat. On average, the handloom sector plays a moreimportant role in the economy and employment of various Indian states.

As regards the performance, more than 80% of handloom production in value issold on the domestic market and about 10 percent in external markets despitelimited access to many third markets. However, there remain significantimpediments to trade in handloom products, especially in some of the largestand more competitive countries, and the handloom industry could increaseproduction and exports to those parts of the world when the impediments arelifted. By comparison with manufacturing as a whole, it is worth noting thatdomestic markets are of higher importance for the handloom industry.

In general, on the basis of developments in productivity, labour costs, quality

of products, and international trade performance, it can be said that thehandloom sector remains competitive internationally and has improved itsposition.

Many of the States are very dependent upon the handloom industry in terms ofvalue added and employment, and the existence of a huge productivity gapposes major challenges to policy makers.


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CHARACTERISTICS OF THE HANDLOOMSECTOR

The handloom sector has been subject to a series ofradicaltransformations over the last few years, due to a combination oftechnological changes, evolution of the different production costs, andthe emergence of important international competitors. Such changes arelikely to continue in the foreseeable future, and the definitiveelimination of subsidies which has been applied for the past two decadeswill bring in additional competition.

In response to past competitive challenges, the handloom industry hasundergone a process ofrestructuring and technological progress.Handloom weavers have improved their competitiveness by substantiallyreducing or ceasing mass production and simple fashion products, and

concentrating instead on a wider variety of products with a higher value-added. Moreover, handloom weavers are world leaders in markets forbody wraps (esp. sarees), as well as for high quality textiles with a highdesign content.

Competitiveness has also been retained by sub-contracting, orrelocation of production facilities, to semi-urban and urban areas.The competitive advantages of the handloom sector are now found ina focus on quality and design, innovation and technology, and highvalue-added products.

At the same time, globalisation and technological progress have led tothe need to think ofclustering strategy. Still playing an important role

for some activities, cooperation at local, district or regional level hasincreasingly proved adequate to ensure that the chain of productionremains at close geographical proximity to the markets. Therefore,clustering of its diversified activities is now also based on a widergeographical area.

Handloom products generally have a positive quality mark-up. Equallythe handloom industry has a leading role in the development of newdesigns. These trends towards higher value-added products need to becontinued and accelerated, if the handloom sector in India is to remaincompetitive.

Dayanidhi Maran, Domestic consumption is what can drive any industry, it is not veryparticular to textile, be it any industry. Today if India is surviving the economicslowdown is because of the domestic consumption.


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Rising power costs

Rising production cost for non-handloom textileproducts

Slow down in imports, esp. fabric and clothes

Slow down in raw material exports, esp. cotton andcotton yarn

Environmentally-acceptable production methods

Skilled labour at low wages and growing marketdemand

No major investments on infrastructure is required

Estimates of Opportunities for theHandloom Industry


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D r . D . N a r a s i m h a R e d d y , e - m a i l : n r e d d y . d o n t h i @ g m a i l . c o m P a g e 1 0

Market size potential for the Textile Industry isUSD 110 bn by FY 2012

Overall market size to grow at more than 13% p.a.

Export market growth would be driven by a 5.7% p.a. growth inworld trade to USD 700 bn by CY2012 (USD 677 bn in CY2011)from USD 479 bn in CY2005

Indias share to increase to around 7% by FY2012 from current 4%

Domestic market growth to be driven byfavourable demographics, rising income levelsand increased penetration of organised retail

Increasing retail penetration

Textiles and clothing retail comprise 40% of organised retailing inIndia

Share of organised retailing is expected to increase from 3.5%currently to 8% by FY2010

Higher disposable income levels

Proportion of major consuming class (population with annual income

> USD 2,000) has risen from 20% in FY 1996 to 28% in FY 2002; and isexpected to move up to 35% by FY 2006 and to 48% by FY2010

Higher level of working women

Propensity to spend in the case of working women is higher by around1.3 times as compared to a housewife. According to census report,population of working women has increased to 26% in FY 2001 from22% in FY 1991

Increase in nuclear families

Average household size has decreased from 5.57 in 1991 to 5.36 inFY2001. Per household consumption increases as a result of formationof nuclear families this in turn would drive consumption and boostthe retail industry

Baby boomer effect

The percentage of earning population (15 to 60 years) in the totalpopulation is rising. In FY 2000, the 15-60 age group boasted of 593mn people i.e. 58.3% of the total population and over the next 15


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years, the strength of 15-60 age group is expected to increase to 782mn, a share of 62.8% in the total population

Higher growth & income levels in urban population

At present, organised retailing is focused on metros and graduallyexpanding in Tier-2 cities. Over the next 10 years, growth in retailingis largely expected to take place in urban areas.

Urban population in 15-60 age group is expected to grow from 164 mn(18% of total) in FY 2000 to 287 mn (23% of total) in FY2015

Increased usage of credit cards

Use of credit cards (plastic money) has increased significantly in last3-4 years. Number of credit cards issued has grown at 26% p.a. inpast 5 years while debit cards have grown by 113%. Increase in theinstallations of card machines will provide fillip to impulse apparelpurchases


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Investments have lagged expectations

because of

Low returns

Decreasing government budgetallocations (from 23 percent in1997 to 7 percent in 2009)

Raw material shortages and priceescalation

Decreasing access to institutionalworking capital

Unfair market competition


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Utilising opportunities in general

Positive handloom growth public policies are required

Higher budget allocation of Rs.5,000 crores to sustain

employment

Increasing access to raw materials, especially hank yarn

Direct subsidies

Utilising Opportunities in Investment

Moratorium on all loans cooperative and non-cooperative for

two years

Provide interest on all government delayed dues

Infrastructure assistance under TUF scheme Increase institutional credit to atleast Rs.10,000 crores at 3

percent interest

Include handloom sector in textile industry stimulus package

Utilising Opportunities in Markets

Enactment of Indian Textile Labelling Act, for non-handloom

textile products

Mandatory labelling of all textile products, esp. powerloom

Utilising Opportunities: Policy Factors


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Review of National Textile policy 2000

Reform programme for handloom support institutions

Encouragement of efficient handloom co-operatives through

classification

Increase import duty on silk fabric

Decrease duty on silk yarn

Utilising opportunities: International

Inclusion in WTO NAMA and FTA negotiations HS classification for handloom products (already announced)

Representation for appropriate handloom representatives on

all textile decision making bodies

handloom vision

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