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Step up private equity in textiles: Assocham

Step up private equity in textiles: Assocham
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First Published: Wed, Dec 05 2007. 03 52 PM IST
Updated: Wed, Dec 05 2007. 03 52 PM IST
New Delhi: Recognizing the need for fresh investment in capacity expansion, modern technology and machine installation in the Indian textile sector, industry chamber, Assocham strongly recommends global manufacturers and private equity funds to invest in partnership with the small-scale textile units based in the country.
Textile sector contributes 10.9% in IIP and 13.73% in manufacturing. These have grown at a compound annual rate of 4.6% during the FY01 to FY07 while IIP and manufacturing index grew by 6.9 and 7.4%.
Impacted by a strong Rupee, and suffering from rigid labour laws, technology obsolescence, fragmented structure, infrastructure constraints and lack of iconic brand which has disabled its growth potential and competitiveness in international market, a report on Rs.Indian Textiles - weaving a global spin’ says that the Government should provide appropriate fiscal incentives to the parties interested in investing in textile and clothing to enhance the attractiveness of the sector.
* Textile exports declined by 22% since April ‘07 and around 20 lakh jobs were cut by the textile enterprises unable to bear the Rupee brunt
* Textile sector is struggling with declining exports due to strong domestic currency; Indian textile and garment exports are highly concentrated in US and EU but huge opportunities lie for strategic expansion of export market in regions of Middle East & North Africa and Sub-Saharan Africa. High risk nature, massive investments and unstable economic conditions in the short term period calls for special fiscal and monetary incentives to be given for new ventures for a specified time period
* SEZ for textiles and boom in retail industry are expected to provide necessary boost to domestic demand and production
* Highly fragmented nature of the industry calls for gearing of M&A activity which could pull through investment and facilitate technology modernization and market expansion
* Textile SEZs would help in growth of the sector by providing better pricing option due to cost efficiency, brand promotion, reach to wider market network in international markets and by showcasing India’s textile and garment products
* India has maximum installed capacity in looms of 60.39% of the world and production of fibre and yarn constitute only 12.36% of the world production
* While demand has grown at CAGR of 27% in last six years, their production has risen by 12%. Textile manufacturers have to bear high cost of inputs due to the expensive imported machinery
* Focus of government as well as textile manufactures should be on enhancing competitiveness by developing long-term distinctive capabilities
* Textile sector suffers from high transaction cost for lack of adequate air and maritime transport, power, logistics facility
* The report warns against removal of export restriction on China’s textile exports by 2008 which would further intensify competition in international market.
* Government should give additional incentives to small and medium enterprises investing in manufacturing and export operations in textile SEZs in order to harness their full potential
* The government should draft a five-year agenda and work jointly with industry and labour unions to refine these laws in a phased approach towards the integrated development of industry and workforce
* Government should build national level textile education and training institutes imparting technical education following the model of National Institute of fashion Technology (NIFT)
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First Published: Wed, Dec 05 2007. 03 52 PM IST