India to emerge as major supplier for textile ind.

NEW DELHI: Foreign firms are likely to play a key role in the future growth of the Indian cotton and textile industries with the emergence of the country as a competitive clothing supplier in the global arena, a recent report from the US government's agriculture department said.

While China has remained a preferred supplier so far, global firms are also becoming increasingly interested in India-- "both to reduce risk through diversification and because of the growing perception of India as a competitive clothing supplier with domestic sources of fabric," the US Department of Agriculture's Economic Research Service said in a report.

Global retail giants like Wal-Mart, JC Penney, Gap and branded apparel marketers such as Calvin Klein, Lacoste and Sara Lee are among the major companies which have been attracted to India because of its potential to provide one-stop shopping.

While, Wal-Mart has expressed willingness to buy goods worth 7-10 billion dollars from India over the next 2 years, J Penney also plans to make India an important sourcing hub for apparel and recently expressed its intention to buy 2 billion dollars worth of products annually, the report added.

The global clothing market is dominated by the buyer-driven commodity chains today, in contrast to the auto, computer, and aircraft industries that are driven by producer commodity chains where manufacturers exert control over raw material suppliers as well as distributors and retailers. In the buyer-driven structure, large retailers and branded marketeers play pivotal roles along global supply chains by setting up decentralised production networks linked to the countries in the developing world and by coordinating the range of activities like design, production, and marketing.

The removal of Multifibre Arrangement quota constraints has also led to intensified interest in the Indian market over the recent past, the USDA said.

On January 1, 2005, developed countries removed import quotas on textile products previously sanctioned by 1974 Multifibre Arrangement (MFA) of 1974. This change provides a major opportunity for India to expand production and exports of textiles and apparel to developed country markets, it added.

According to a recent World Trade Organisation study, with the elimination of MFA quotas India could nearly quadruple its share of the US import clothing market to 15 per cent, while share in the EU import clothing market could increase 1.5 fold to 9 per cent.

Cotton is an important raw material for the Indian textile industry, constituting about 65 per cent of its requirements, commodity brokerage firm Religare said.

Assuming a normal monsoon in 2006, production is forecast to increase 5 per cent over the last season due to a higher sown area and a record yield forecast, the traders said. As per the Religare report cotton sowing in India's major producing states of Gujarat and Maharashtra has been progressing well on monsoon rains after a record crop last year. About 50 per cent of sowing in Maharashtra, the country's second-largest producer, has been completed while some sowing has taken place in Punjab and Haryana also.

According to a World Bank analysis, India is the third largest cotton producer with 17 per cent of worldwide cotton output.

However, it is not clear if India's cotton production would keep pace with the quantity and quality needs of an expanding textiles and apparel industry, despite being a major cotton producer with significant potential to expand its output, the USDA said.

While domestic production has increased 2.4 per cent annually since 1990, the progress in raising yields towards levels achieved by other major producers has been slow. In addition to low yields, the quality of India's cotton is often poor because of various technical, economic, and institutional factors, it added.

The extent, to which these productivity and quality factors get addressed would be critical in determining India's competitiveness in the global textile market, the report said.