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Interactive
Session with Dr S Naryan on Indian Textile Industry
: The Challenge Beyond MFA
November 20, 2002, New Delhi
Welcome Address by Mr. R S Lodha,
President, FICCI
Dr S. Narayan, Finance Secretary, Ministry of Finance,
Government of India
Mr O P Lohia, Co Chairman, FICCI Task Force on Textiles
Members of the FICCI Task Force on Textiles
Distinguished Guests, Ladies and Gentlemen
It is indeed a pleasure for me to welcome you all to
this Interactive Session on "Indian Textile Industry
: The Challenge beyond MFA". Sir, I am happy and thankful
to you for taking out time from your busy schedule for
this interaction.
- Textile industry's predominant presence in the
national economy is manifested in terms of its significant
contribution (14%) to the industrial production and
( 4%) to the GDP.
- It provides direct employment to 35 mn. persons
in the organised sector and contributes 35% of country's
gross export earnings. As a consequence, the growth
and development of this industry has a significant
bearing on the overall development of the Indian economy.
- The international trade in textile and clothing
sectors marked a significant turnaround after the
WTO Agreement on Textile and Clothing (ATC);
- Beginning 1st January 1995, all textiles and clothing
products that had been hereto subjected to MFA-quota,
are scheduled to be integrated into WTO over a period
of 10 years. The dismantling of the quota regime represents
both an opportunity as well as a threat.
- An opportunity because markets will no longer be
restricted; a threat because market will no longer
be guaranteed by quotas, and even the domestic market
will be opened to competition.
- Therefore, all textiles and clothing products would
be traded internationally without quota restrictions.
And this impending reality brings the issue of competitiveness
to the fore for all firms in the textile and clothing
sectors, including those in India.
If we look at the growth in world trade and demand over
a period extending from 1980 to 1998, it is noticed that
the annual growth rates in the MFA phase out period (8.9%
in world trade; and 4.7% in world production in 94-98)
are higher than in the pre MFA period (6.5% in world trade;
and 3.4%in world production in 80-94).Thus the ATC has
led to an increase in world trade as well as demand.
Sir, the question before us is that are we conscious
of this worldwide growth in production and trade of
textile and clothing. And if we are, what are we doing
about it . Is the supply structure of Indian industry
capable to meet the growing demands world-wide.
There are problems of fragmentation at the front end
which does not assist in demand stimulation in the domestic
market.
Supply structure for exports has wide mismatch in terms
of what the international buyer wants and what the domestic
industry can supply due to
- small capacity
- outdated technology
- production inefficiencies
- long delivery time
I am aware that some of our textile companies have
reported stunning performances in the first half of
the current financial year due to demand and price realizations
for yarn and fabrics. But this is all piecemeal and
may not be sustainable in the long run.
I think what we need is
- industry and government should acknowledge their
responsibilities and work in tandem
- corrective action need to be taken on fiscal and
labour front
- in response to governments' commitment to WTO,
corrective action is required on the domestic policy
parameters other than fiscal and labour, like interest
rate structure, encouraging integration of small units,
bringing in new technology so that the competitiveness
of the industry could be enhanced .
Market access conditions arise only after India develops
the competence to survive in the market. It is also clear
that most of the problems are structural in nature, and
emerge from a lack of holistic view about the entire value
chain- from fibre to retail, which in itself is engendered
by the fragmented government policies.
Today at this forum we will discuss and decipher the
problems faced by the industry and their expectation
from the government, in the given scenario. This will
help construct a broad policy framework on which both
the government and the private sector can work together
to reap the benefits of the Post MFA scenario and avoid
the possible pitfalls. I strongly believe that this
session will benefit all people concerned.
I now invite the co-chairman of the FICCI Task force
on textiles to briefly substantiate the key points to
ensure the revival and growth of the Indian textile
sector.
Wishing you all the best.
Thank you
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