Strategy for Making India a Global Leader in Textiles and Apparels 7 th April 2015 Stimulating Investments in MMF and Fabrics Indian Textile Industry Market Size 110 billion Domestic Consumption 70 ID: 436722
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Slide1
Conference on “Strategy for Making India a Global Leader in Textiles and Apparels”
7th April 2015
Stimulating Investments in MMF and Fabrics Slide2
Indian Textile IndustryMarket Size : $110 billion
Domestic Consumption : $70 billion
Exports: $40 billion
Contribution of the Industry
14% of the industrial production
6% of the country’s GDP
13% of export earnings
35 million-strong workforce- 2
nd
largest employer after agriculture
The National Textile & Apparel Vision document envisions a target of $650 billion by 2025 (domestic $350 billion and export $300 billion), from the current $110 billion.
This requires investment of around $180-200 billion and is expected to create 35 million additional jobsSlide3
Indian Textile IndustryIndian textile industry is cotton based. In contrast globally, MMF enjoys bigger share as shown below.
Fibre Consumption Pattern Profile (in %)
Non - Cotton
Cotton
World
Non - Cotton
Cotton
IndiaSlide4
China- the World LeaderChina- industry size of $532 Billion; exports
of $260 Billion cornering 36% of the global textile trade. MMF forms a staggering 80% of the total exports
China Exports
MMF Exports
Other Exports
India Exports
MMF Exports
Other ExportsSlide5
OPPORTUNITIES- China FactorChina is expected to vacate nearly $100 billion of global trade space over the next 5-6 years due to:
Rising labour
costs, appreciating currency, energy costs and focus on domestic market
Countries including India, Vietnam, Bangladesh and Sri Lanka potential gainers
Cotton consumption is expected to fall from the current 40% of the global fiber consumption, to nearly 25%.
To reach the target of $650 billion with exports of $300, quantity of textile fiber needs to be increased multifoldSlide6
OPPORTUNITIES
In India, Cotton consumption represents around 60% of the total fiber consumption
However, due to some factors, such as frequent fluctuation in cotton prices and push by global brands towards polyester filament, MMF is gaining momentum.
India accounts for less than 0.5% of the global trade of MMF
fibres
-based textile and apparel products which indicate huge opportunity
In domestic market too, preference for apparel made from MMF, is fast changing, in the ladies wear, active wear, kids wear and uniforms, automotive furnishings, protective and medical applications, etc.
This is expected to boost demand for fiber to around 19 million tons by 2025Slide7
India Growth Potential
Kg/Capita
All Fibre/Capita
MMF/Capita
North America
36.9
22.5
Australasia
28.6
18
South Korea
23.3
16.3West Europe
23.116.2
Taiwan
23
17.3
Japan
21
13.2
Turkey
14.8
7.6
East Europe
14.1
9.3
China
14
12
Latin America
8.94.9South Asia7.14.3India5.53.1Africa/Middle East4.73.3World11.27.7
Low consumption
centres point at scope to grow towards the global averageIndia’s high GDP growth and rising income levels would catalyse textile consumptionYoung demography and changing fashion trends would favour MMF consumption
7Slide8
Fibre Mix Needs to Change Dramatically
Volume: 10 Bn kg; Value: $110 Bn
Volume: 20 Bn kg; Value: $220 Bn
Even with conservative growth estimates
fibre
dynamics have to change dramatically
Availability of cotton in India with a global best yield of 750 kg/ha will take Indian cotton production to ~8
Billion
kg.Slide9
REQUISITES
This requires increased investment and MMF production from about
4.3 billion kg
to
11.8 billion kg
This implies increasing the consumption of MMF from the present
40%
to
60%
of total
consumption
This target is achievable if provided right fiscal policies to encourage investment in the sectorPast experience shows reduction in MMF duty results in increasing the demand for the same thereby neutralizing the impact on revenueSlide10
Key ProposalsAn intermediate Excise Duty regime
of 6%
for MMF and Yarns
The
present duty of
12% should be reduced to 6% on MMF
Certain excise duty on cotton with
e
ntire
textiles chain
under CENVAT
Duty
Rationalisation
needed to treat MMF gradually at par with cotton.
The growth in revenue collection will be
in the range of
Rs
8000-10000
crores
.
Prepare the industry for GST regime
India
China
Pakistan
Bangladesh
Sri Lanka
Indonesia
Thailand
Cotton
Nil
17%
Nil
Nil
20%
10%
7%
MMF
12%
17%
Nil
Nil
20%
10%
7%
Cotton Yarn
Nil
17%
Nil
1.5 Tk/kg
20%
10%
7%
MMF Yarn
12%
17%
Nil
1.5 Tk/kg
20%
10%
7%Slide11
Scenario 1- Only Cotton Yarn Under ExciseAssumptions
Excise duty was calculated based on production . Imports and exports are not considered in this calculation as any excise duty collected in export will be refunded as duty drawbackThe volume of cotton fabric has been assumed based on 25% of cotton yarn is exported out of the countryGarment
volume has been
assumed
based apparel market size of USD 40 Billion
Scenario 1-Existing
Scenario II
(Current excise rate)
( Excise rate @ 2-6% -Cotton Yarn included)
Excise Duty Rates
Naptha
14%
14%
PX
6%
6%
PTA
12%
6%
MEG
12%
6%
ACN-
12%
6%
PSF
12%
6%
VSF12%6%Asf12%6%Polyester Filament Yarn12%6%VFY12%6%100 % Non Cotton Yarn0%6%PV Yarn0%
2%
PC Yarn0%2%Cotton Yarn0%2%Cotton Fabric0%0%Blended Fabric0%0%100% non cotton0%
0%
Garment
0%
0%
Excise collection (Rs-Crs)
7744
8214Slide12
Scenario II- Entire Chain Under ExciseAssumptions
Excise duty was calculated based on production . Imports and exports are not considered in this calculation as any excise duty collected in export will be refunded as duty drawbackThe volume of cotton fabric has been assumed based on 25% of cotton yarn is exported out of the countryGarment
volume has been
assumed
based apparel market size of USD 40 Billion
Scenario 1-Existing
Scenario II
(Current excise rate)
( excise rate @2- 6% -Cotton yarn ,Fabric & Garment included)
Excise Duty Rates
Naptha
14%
14%
PX
6%
6%
PTA
12%
6%
MEG
12%
6%
ACN-
12%
6%
PSF
12%
6%
VSF12%6%Asf12%6%Polyester Filament Yarn12%6%VFY12%6%100 % Non Cotton Yarn0%6%PV Yarn0%
2%
PC Yarn0%2%Cotton Yarn0%2%Cotton Fabric0%2%Blended Fabric0%2%100% non cotton0%
2%
Garment
0%
2%
Excise collection (Rs-Crs)
7744
9312Slide13
Proposals (contd.)
Customs duty on Catalysts and Chemicals used for manufacture of synthetic fibers/fabrics should be on par with raw materials
.
Customs
duty structure should be a cascading structure, i.e. the duty differential should be progressive at each stage of value chain. To encourage the domestic industry, following model is proposed:Slide14
Thank You