Indian Man Made Fibre Industry

Abstract

The Indian Textile Industry is one of the most important and integrated industries in the Indian economy providing employment to about 35 mn people directly and 50 mn people indirectly. The market size in FY08 is estimated USD 52 bn and accounts for 26% of the manufacturing sector, 20% of the industrial production and 18% of total industrial employment. The industry also contributes 15% to gross export earnings and 4% to national GDP. The textile industry can be segmented into natural fibres and man-made fibres (MMF) based on use of basic raw material, cotton or crude derivate respectively.

• a) Synthetic fibres (derived from petrochemical processing) comprises Polyester, Acrylic, Olefin, Nylon
• Spandex
• b) Cellulosic fibre (derived from cellulose in cotton & wood pulp) comprises Rayon (Viscose), Acetate fibres
• Triacetate.

The domestic MMF industry is dominated by polyester (70%) and viscose (10%) and is valued at USD 4.63 bn FY08. RIL and Grasim are the key players in both the segments respectively. India also ranks amongst the top major producers of polyester in the world. Globally the share of MMF consumption in textiles is 65% compared 45% in India. Due to ample availability of cotton and tropical climate, cotton is considered a preferred choice over MMF, especially polyester.

The Indian MMF industry is characterised by cyclical nature with strong linkages to GDP growth and consumer spending, low per capita consumption at 2 kgs compared to 12 kgs in China and 11 kgs in Europe, higher environmental burden as compared to natural fibres, higher raw material cost and margins dependent on crude price volatility.

The demand drivers of the industry are increasing population & changing fashion trends, higher %age of working women, higher disposable income, use of plastic cards & superior demographic factors. The industry however lacks modernization & economies of scale thereby reducing its export competitiveness.

With the recent downturn in the global and domestic economies, textile sector has been severely hit. GoI has provided various benefits in the form of reduced taxes and export benefits to revive the sector as it generates huge export revenues and provides large employment.

CARE Research expects that going forward the overhang of global recessionary conditions will continue and exports will continue to be affected. However, long term prospects remain positive due to higher domestic demand and switch over from cotton due to higher cotton prices. CARE Research foresees home textiles, technical textiles, accessories to be newer growth areas of MMF.