03/06
A good begining for Indian Textiles

Post WTO, India was predicted to be only second to China in terms of gains from global textile trade. China has retained its number one position in the first year of quota-free textile trade. India is clearly at distant second but faces intense competition from countries like Pakistan, Bangladesh and Sri Lanka.

The YarnsandFibers’ fourth consecutive survey on Business Confidence of Indian textile companies reveals mixed experience in the first year. Three scenarios emerge. First, the ignorance about opening up of trade and its benefits. Second, complacent with imposition of limits by US and Europe on China. And third, those tuned-in reaped the benefits of this development.

A sizeable 37% of the respondents to the survey said that they did not experience any change in their businesses during the year. While 10% felt that they had worse experience during the year. Together 47% of the respondents are of the opinion that they did not benefit from the opening of trade from 1 January 2005.

The reasons are diverse. Some felt that China was better prepared for non-quota regime, but this was not the case in India. Competition from China came unexpectedly. China in desperation to gain WTO membership had agreed to let importing countries to impose special safeguard measures against Chinese textile exports till 2008.

Few companies indicated that they were unable to take advantage of the opportunities while a few had bad experience as they had no direct relation with global trade. Among the few who had bad experience blamed inadequate infrastructure impeding them to take advantage of the opportunities. Nevertheless, these companies are hopeful to see some better changes in the coming quarters. Developed economies have started placing initial orders and it will take a while to fully derive the benefits.

The remaining 53% of the respondents had a good experience in the first year of quota-free textile trade. These companies saw orders trickling and exports increasing. The orders were better than quota regime and gains from Europe were more pronounced in the first year. Capacities were fully utilized but there was some price cutting. In the first year, Indian textile companies also experienced changes in demand pattern and they were able to price their products better.

The Business Confidence Index for the quarter January to March 2006, computed by Yarnsandfibers based on the fourth survey is at 87.5. On the scale of 0 to 100, where the highest is 100, at 50 the confidence is same as today and below 50 implies lower than the current level. The March 2006 index is the peak of all the four surveys conducted hitherto by YarnsandFibers. It is higher than the 81.6 of December quarter. The optimism can be attributed to taking forward the better than expected performance of October-December 2005 quarter and overall economic growth. The Indian economy is poised to growth over 8% this year, thus clocking an annual GDP growth rate of 7.5% for three successive years on an average. This in itself would provide major thrust to the textile industry. However, the upheaval in global oil price is the only prospective dampener to this euphoria.

Of the respondents, 75% were of the opinion that their performance would be better in the January–March 2006 quarter. The remaining 25% respondents believe that their performance would remain unchanged compared to the preceding quarter. Significantly, none of the respondents see their performance turning worse in coming quarter.

source: Yarnsandfibers.com