INTRODUCTION

Textile Industry in India is the second largest employment

generator after agriculture. It holds significant status in
India as it provides one of the most fundamental necessities
of the people. Textile industry was one of the earliest
industries to come into existence in India. In fact Indian
textile industry is the second largest in the world, second
only to China.
Textile Industry is unique in the terms that it is an
independent industry, from the basic requirement of raw
materials to the final products, with huge value-addition at
every stage of processing. Textile industry in India has vast
potential for creation of employment opportunities in the
agricultural, industrial, organised and decentralised sectors
& rural and urban areas, particularly for women and the
disadvantaged. Indian textile industry is constituted of the
following segments: Readymade Garments, Cotton Textiles
including Handlooms, Man-made Textiles, Silk Textiles,
Woollen Textiles,
Handicrafts, Coir, and Jute.

Till the year 1985, development of textile sector in India

took place in terms of general policies. In 1985, for the first
time the importance of textile sector was recognized and a
separate policy statement was announced with regard to
development of textile sector. In the year 2000, National
Textile Policy was announced. Its main objective was: to
provide cloth of acceptable quality at reasonable prices for
the vast majority of the population of the country, to
increasingly contribute to the provision of sustainable
employment and the economic growth of the nation; and to
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compete with confidence for an increasing share of the
global market. The policy also aimed at achieving the target
of textile and apparel exports of US $ 50 billion by 2010 of
which the share of garments will be US $ 25-billion.The
textile industry holds significant status in the India. Textile
industry provides one of the most fundamental necessities
of the people. It is an independent industry, from the basic
requirement of raw materials to the final products, with
huge value-addition at every stage of processing.
Today textile sector accounts for nearly 14% of the total
industrial output. Indian fabric is in demand with its ethnic,
earthly colored and many textures. The textile sector
accounts about 30% in the total export. This conveys that it
holds potential if one is ready to innovate.
The textile industry is the largest industry in terms of
employment economy, expected to generate 12 million new
jobs by 2010. It generates massive potential for
employment in the sectors from agricultural to industrial.
Employment opportunities are created when cotton is
cultivated. It does not need any exclusive Government
support even at present to go further. Only thing needed is
to give some directions to organize people to get enough
share of the profit to spearhead development.
The Indian textile industry has a significant presence in the
economy as well as in the international textile economy. Its
contribution to the Indian economy is manifested in
terms of its contribution to the industrial production,
employment generation and foreign exchange earnings. It
contributes 20 percent of industrial production, 9 percent of
excise collections, 18 percent of employment in the
industrial sector, nearly 20 percent to the countrys total
export earning and 4 percent to the Gross Domestic
Product.
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HISTORY OF TEXTILE
INDUSTRY
India has been well known for her textile goods since very
ancient times. The traditional textile industry of India was
virtually decayed during the colonial regime. However, the
modern textile industry took birth in India in the early
nineteenth century when the first textile mill in the country
was established at fort gloster near Calcutta in 1818. The
cotton textile industry, however, made its real beginning in
Bombay, in 1850s. The first cotton textile mill of Bombay
was established in 1854 by a Parsi cotton merchant then
engaged in overseas and internal trade. Indeed, the vast
majority of the early mills were the handiwork of Parsi
merchants engaged in yarn and cloth trade at home and
Chinese and African markets.
The first cotton mill in Ahmedabad, which was eventually
to emerge as a rival centre to Bombay, was established in
1861. The spread of the textile industry to Ahmedabad was
largely due to the Gujarati trading class.

The cotton textile industry made rapid progress in the

second half of the nineteenth century and by the end of the
century there were 178 cotton textile mills; but during the
year 1900 the cotton textile industry was in bad state due to
the great famine and a number of mills of Bombay and
Ahmedabad were to be closed down for long periods. The
two world War and the Swadeshi movement provided great
stimulus to the Indian cotton textile industry. However,
during the period 1922 to 1937 the industry was in
doldrums and during this period a number of the Bombay
mills changed hands. The second World War, during which
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textile import from Japan completely stopped, however,
brought about an unprecedented growth of this industry.
The number of mills increased from 178 with 4.05 lakh
looms in 1901 to 249 mills with 13.35 lakh looms in 1921
and further to 396 mills with over 20 lakh looms in 1941.
By 1945 there were 417 mills employing 5.10 lakh
workers.

The cotton textile industry is rightly described as a

Swadeshi industry because it was developed with
indigenous entrepreneurship and capital and in the pre-
independence era the Swadeshi movement stimulated
demand for Indian textile in the country. The partition of
the country at the time of independence affected the cotton
textile industry also. The Indian union got 409 out of the
423 textiles mills of the undivided India. 14 mills and 22
per cent of the land under cotton cultivation went to
Pakistan. Some mills were closed down for some time. For
a number of years since independence, Indian mills had to
import cotton from Pakistan and other countries.

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 CURRENT STATUS
The textile industry holds significant status in the India.
Textile industry provides one of the most fundamental
necessities of the people. It is an independent industry,
from the basic requirement of raw materials to the final
products, with huge value-addition at every stage of
processing.
Today textile sector accounts for nearly 14.64% of the total
industrial output. Indian fabric is in demand with its ethnic,
earthly colored and many textures. The textile sector
accounts about 30.23% in the total export. This conveys
that it holds potential if one is ready to innovate.
The textile industry is the largest industry in terms of
employment economy, expected to generate more than 12
million new jobs by 2010. It generates massive potential for
employment in the sectors from agricultural to industrial.
Employment opportunities are created when cotton is
cultivated. It does not need any exclusive Government
support even at present to go further. Only thing needed is
to give some directions to organize people to get enough
share of the profit to
spearhead development.
Textile exports are targeted to reach $50 billion by 2010,
$25 billion of which will go to the US. Other markets
include UAE, UK, Germany, France, Italy, Russia, Canada,
Bangladesh and Japan. The name of these countries with
their background can give thousands of insights to a
thinking mind. The slant cut that will be producing a
readymade garment will sell at a price of 600 Indian
rupees, making the value addition to be profitable by 300
%.
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Currently, because of the lifting up of the import
restrictions of the multi-fibre arrangement (MFA) since 1st
January, 2005 under the World Trade Organization (WTO)
Agreement on Textiles and Clothing, the market has
become competitive; on closer look however, it sounds an
opportunity because better material will be possible with
the traditional inputs so far available with the Indian
market.
At present, the textile industry is undergoing a substantial
re-orientation towards other then clothing segments of
textile sector, which is commonly called as technical
textiles. It is moving vertically with an average growing
rate of nearly two times of textiles for clothing applications
and now account for more than half of the total textile
output. The processes in making technical textiles require
costly machinery and skilled workers.
The application that comes under technical textiles are
filtration, bed sheets and abrasive materials, healthcare
upholstery and furniture, blood-absorbing materials and
thermal protection, adhesive tape, seatbelts, and other
specialized application and products.

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 STRUCTURE-AND-
SEGMENTS
The textile sector in India is one of the worlds largest. The
textile industry today is divided into three segments:

1. Cotton Textiles

2. Synthetic Textiles

3. Other like Wool, Jute, Silk etc.

All segments have their own place but even today cotton
textiles continue to dominate with 73% share. The
structure of cotton textile industry is very complex with
co-existence of oldest technologies of hand spinning and
hand weaving with the most sophisticated automatic
spindles and loom. The structure of the textile industry is
extremely complex with the modern, sophisticated and
highly mechanized mill sector on the one hand and hand
spinning and hand weaving (handloom sector) on the other
in between falls the decentralised small scale powerloom
sector.Unlike other major textile-producing countries,
Indias textile industry is comprised mostly of small-scale,
nonintegrated spinning, weaving, finishing, and apparel-
making enterprises. This unique industry structure is
primarily a legacy of government policies that have
promoted labor-intensive, small-scale operations and
discriminated against larger scale-firms:

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♦Composite-Mills.

Relatively large-scale mills that integrate spinning,

weaving and, sometimes, fabric finishing are common in
other major textile-producing countries. In India,
however, these types of mills now account for about only
3 percent of output in the textile sector. About 276
composite mills are now operating in India, most owned
by the public sector and many deemed financially sick. In
2003-2004 composite mills that produced 1434 m.sq mts
of cloth. Most of these mills-are-located-in-Gujarat-and-
Maharashtra.

♦Spinning

Spinning is the process of converting cotton or manmade

fiber into yarn to be used for weaving and knitting. This
mills chiefly located in North India. Spinning sector is
technology intensive and productivity is affected by the
quality of cotton and the cleaning process used during
ginning. Largely due to deregulation beginning in the
mid-1980s, spinning is the most consolidated and
technically efficient sector in Indias textile industry.
Average plant size remains small, however, and
technology outdated, relative to other major producers. In
2002/03, Indias spinning sector consisted of about 1,146
small-scale independent firms and 1,599 larger scale
independent units.

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♦Weaving-and-Knitting.

The weaving and knits sector lies at the heart of the

industry. In 2004-05, of the total production from the
weaving sector, about 46 percent was cotton cloth, 41
percent was 100% non-cotton including khadi, wool and
silk and 13 percent was blended cloth. Three distinctive
technologies are used in the sector handlooms, powerlooms
and knitting machines. Weaving and knitting converts
cotton, manmade, or blended yarns into woven or knitted
fabrics. Indias weaving and knitting sector remains highly
fragmented, small-scale, and labour-intensive. This sector
consists of about 3.9 million handlooms, 380,000
powerloom enter-prises that operate about 1.7 million
looms, and just 137,000 looms in the various composite
mills. Powerlooms are small firms, with an average loom
capacity of four to five owned by independent
entrepreneurs or weavers. Modern shuttleless looms
account for less than 1 percent of loom capacity.

♦Fabric-Finishing.

Fabric finishing (also referred to as processing), which

includes dyeing, printing, and other cloth preparation prior
to the manufacture of clothing, is also dominated by a large
number of independent, small-scale enterprises. Overall,
about 2,300 processors are operating in India, including
about 2,100 independent units and 200 units that are
integrated with spinning, weaving, or knitting units.

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♦Clothing
Apparel is produced by about 77,000 small-scale units
classified as domestic manufacturers, manufacturer
exporters, and fabricators (subcontractors).

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 SWOT ANALYSIS
STRENGTHS
. India enjoys benefit of having plentiful resources of raw
materials. It is one of the largest producers of cotton yarn
around the globe, and also there are good resources of
fibres like polyester, silk, viscose etc...
. There is wide range of cotton fibre available, and has a
rapidly developing synthetic fibre industry.
. India has great competitiveness in spinning sector and has
presence in almost all processes of the value chain.
. Availability of highly trained manpower in both,
management and technical. The country has a huge
advantage due to lower wage rates. Because of low labor
rates the manufacturing cost in textile automatically comes
down to very reasonable rates.
. The installed capacity of spindles in India contributes for
24.44% share of the world, and it is one of the biggest
exporters of yarns in the global market. Having modern
functions and favorable fiscal policies, it accounts about
25% of the world trade in cotton yarn.
. The apparel industry is largest foreign exchange earning
sector, contributing 12% of the country's total exports.
. The garment industry is very diverse in size,
manufacturing facility, type of apparel produced, quantity
and quality of output, cost, requirement for fabric etc. It

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comprises suppliers of ready-made garments for both,
domestic or export markets.

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WEAKNESS
Massive Fragmentation
A major loop-hole in Indian textile industry is its huge
fragmentation in industry structure, which is led by small
scale companies. Despite the government policies, which
made this deformation, have been gradually removed now,
but their impact will be seen for some time more. Since
most of the companies are small in size, the examples of
industry leadership are very few, which can be inspirational
model for the rest of the industry.
The industry veterans portrays the present productivity of
factories at half to as low as one-third of levels, which
might be attained. In many cases, smaller companies do not
have the fiscal resources to enhance technology or invest in
the high-end engineering of processes. The skilled labor is
cheap in absolute terms; however, most of this benefit is
lost by small companies.
The uneven supply base also leads barriers in attaining
integration between the links in supply chain. This issue
creates uncontrollable, unreliable and inconsistent
performance.

Political and Government Diversity

The reservation of production for very small companies

that was imposed with an intention to help out small scale
companies across the country, led substantial fragmentation
that distorted the competitiveness of industry. However,
most of the sectors now have been de-reserved, and major

13
entrepreneurs and corporate are putting-in huge amount of
money in establishing big facilities or in expansion of their
existing plants.
Secondly, the foreign investment was kept out of textile
and apparel production. Now, the Government has
gradually eliminated these restrictions, by bringing down
import duties on capital equipment, offering foreign
investors to set up manufacturing facilities in India. In
recent years, India has provided a global manufacturing
platform to other multi-national companies that
manufactures other than textile products; it can certainly
provide a base for textiles and apparel companies.
Despite some motivating step taken by the government,
other problems still sustains like various taxes and excise
imbalances due to diversification into 35 states and Union
Territories. However, an outline of VAT is being
implemented in place of all other tax diversifications,
which will clear these imbalances once it is imposed fully.

Labour Laws

In India, labour laws are still found to be relatively

unfavorable to the trades, with companies having not more
than ideal model to follow a 'hire and fire' policy. Even the
companies have often broken their business down into
small units to avoid any trouble created by labour
unionization.
In past few years, there has been movement gradually
towards reforming labour laws, and it is anticipated that

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this movement will uphold the environment more
favorable.

Distant Geographic Location

There are some high-level disadvantages for India due to its

geographic location. For the foreign companies, it has a
global logistics disadvantage due the shipping cost is higher
and also takes much more time comparing to some other
manufacturing countries like Mexico, Turkey, China etc.
The inbound freight traffic has been also low, which affects
cost of shipping - though, movement of containers are not
at reasonable costs.

Lack of trade memberships

India is serious lacking in trade pact memberships, which

leads to restricted access to the other major markets. This
issue made others to impose quota and duty, which put
scissors on the sourcing quantities from India.

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 OPPORTUNITIES IN
THE TEXTILE SECTOR
• Global Textile and apparel trade is estimated to be €340
billion
• Indian industry estimated at €35 billion with exports of
€12 billion and employs 35 million people
• India is the third largest producer of cotton, largest
exporter of yarn (25% of world cotton yarn export)
• India is a major player in the home textile segment (61%
of world loom capacity)
It is anticipated that India's textile industry is likely to do
much better. Since the consumption of domestic fibre is
low, the growth in domestic consumption in tandem is
anticipated with GDP of 6 to 8 % and this would support
the growth of the local textile market at about 6 to 7 % a
year.
India can also grab opportunities in the export market. The
industry has the potential of attaining $34bn export
earnings by the year 2010. The regulatory polices is
helping out to enhance infrastructures of apparel parks,
Specialized textile parks, EPZs and EOUs.The
Government support has ensured fast consumption of
clothing as well as of fibre. A single rate will now be
prevalent throughout the country.The Indian
manufacturers and suppliers are improving design skills,
which include different fabrics according to different
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markets. Indian fashion industry and fashion designers are
marking their name at international platform. Indian silk
industry that is known for its fine and exclusive brocades,
is also adding massive strength to the textile industry.The
industry is being modernized via an exclusive scheme,
which has set aside $5bn for investment in improvisation
of machinery. International brands, such as Levis, Wal-
Mart, JC Penny, Gap, Marks & Spencer and other industry
giants are sourcing more and more fabrics and garments
from India. Alone Wal-Mart had purchased products
worth $200mn last year and plans to increase buying up to
$3bn in the coming year. The clothing giant from Europe,
GAP is also sourcing from India.

THREATS OF THE
THEXTILE INDUSTRY
• COMPETITON IN DOMESTIC MAREKT.
• NEED TO IMPROVE WORKING CONDITIONS OF
THE PEOPLE WHO ARE INVOLVED IN THIS
PROFESSION.
• NEED TO REVAMP CONSUMER
CONSCIOUSNESS.
• TACKLE CHINESE AGGRESION OVER THE
INTERNATIONAL MARKET.

17
 ROLE OF TEXTILE
INDUSTRY IN INDIA
GDP
Role of Textile Industry in India GDP has been quite
beneficial in the economic life of the country. The
worldwide trade of textiles and clothing has boosted up
the GDP of India to a great extent as this sector has
brought in a huge amount of revenue in the country.

In the past one year, there has been a massive upsurge in

the textile industry of India. The industry size has
expanded from USD 37 billion in 2004-05 to USD 49
billion in 2006-07. During this era, the local market
witnessed a growth of USD 7 billion, that is, from USD 23
billion to USD 30 billion. The export market increased
from USD 14 billion to USD 19 billion in the same period.

The textile industry is one of the leading sectors in the

Indian economy as it contributes nearly 14.64 percent to
the total industrial production. The textile industry in India
is claimed to be the biggest revenue earners in terms of
foreign exchange among all other industrial sectors in
India. This industry provides direct employment to around
35 million people, which has made it one of the most
advantageous industrial sectors in the country.

Some of the important benefits offered by the Indian

textile industry are as follows:
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• India covers 61 percent of the international textile
market
• India covers 22 percent of the global market
• India is known to be the third largest manufacturer of
cotton across the globe
• India claims to be the second largest manufacturer as
well as provider of cotton yarn and textiles in the world
• India holds around 25 percent share in the cotton yarn
industry across the globe
• India contributes to around 12 percent of the world's
production of cotton yarn and textiles
The Role of Textile Industry in India GDP had been
undergoing a moderate increase till the year 2004 to 2005.
But ever since, 2005-06, Indian textiles industry has been
witnessing a robust growth and reached almost USD 17
billion during the same period from USD 14 billion in
2004-05. At present, Indian textile industry holds 3.5 to 4
percent share in the total textile production across the
globe and 3 percent share in the export production of
clothing. The growth in textile production is predicted to
touch USD 19.62 billion during 2006-07. USA is known
to be the largest purchaser of Indian textiles.
Following are the statistics calculated as per the
contribution of the sectors in Textile industry in India
GDP:
India holds 22 percent share in the textile market in
Europe and 43 percent share in the apparel market of the
country. USA holds 10 percent and 32.6 percent shares in
Indian textiles and apparel.

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Few other global countries apart from USA and Europe,
where India has a marked presence include UAE, Saudi
Arabia, Canada, Bangladesh, China, Turkey and Japan
Ready made garments accounts for 45 percent share
holding in the total textile exports and 8.2 percent in
export production of India
Export production of carpets has witnessed a major
growth of 42.23 percent, which apparently stands at USD
654.32 million during 2004-05 to USD 930.69 million in
the year 2006-07. India holds 36 percent share in the
global textile market as has been estimated during April-
October 2007
The technical textiles market in India is assumed to touch
USD 10.63 billion by 2007-08 from USD 5.09 billion
during 2005-06, which is approximately double. It is also
assumed to touch USD 19.76 billion by the year 2014-15
By 2010, India is expected to double its share in the
international technical textile market
The entire sector of technical textiles is estimated to reach
USD 29 billion during 2005-2010
The Role of Textile Industry in India GDP also includes a
hike in the investment flow both in the domestic market
and the export production of textiles. The investment range
in the Indian textile industry has increased from USD 2.94
billion to USD 7.85 billion within three years, from 2004 to
2007. It has been assumed that by the year 2012, the
investment ratio in textile industry is most likelyto touch
USD 38.14 billion.

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 TEXTILE EXPORTS
OF INDIA
Textile exports continued to witness growth. During April-
December 2008-09, it saw a growth of 8.12 per cent.
Exports were worth US$13042.10 million during the period
as against US$12002.10 million during the same period of
2006-07. In rupee terms however, a similar comparison
shows that exports had declined by 2.41 per cent during the
period as against the same period of the previous year.
Cotton Garments continued to occupy the largest share in
the export basket. During April-December 2008-09, the
share of the segment was a good 43.20, only marginally
down from the share of 43.25 per cent that it had occupied
during the month of November. Comparing the segment's
share during April-December 2008-09 with that of the same
period last year, shows a decline of 1.52 percentage points
during the current period.
In terms of share, Cotton Garments was followed by Cotton
Textiles which occupied a share of 28.12 per cent in total
exports. Exports in the segment was worth US$3375.63
million during April-December 2008-09.
In dollar terms, except for Man Made Fibre Garments, all
segments recorded a gain in exports during April-
December 2008-09 as compared to the same period of the
previous year. The decline witnessed in Man Made Fibre
Garments was to the extent of 12.89 per cent. Exports
declined from US$712.89 million during April-December
2007-08 to US$621.02 million during April-December
21
2008-09. In Rupee terms, the percentage of decline was
22.82 per cent. Among the segments that gained, the
highest growth was that of Manmade Textiles (29.28 per
cent). This was followed by Garments of Other Textile
Materials which gained by 22.64 per cent. The gain in
segments other than these two, were lesser than 10 per cent.
USA continued to be the largest importer of textile
products from India. USA also continued to see a decline in
its imports. USA's imports were worth US$2641.65 million
during April- December 2008-09 as against US$2777.98
million during April-December 2007-08, a decline of 4.91
per cent. The only segment where USA had seen a gain in
its imports was Garments of Other Textile Materials where
it saw imports increase by 11.38 per cent.

22
 TEXTILE IMPORT OF
INDIA
During April-October 2008-09, India's imports of textile
products were worth US$1653.12 million. Imports had
witnessed a gain of 8.29 per cent during the period as
compared to the same period of 2006-07. In Rupee terms,
however, a similar comparison shows a decline to the
extent of 4.05 per cent.
Imports in Other Textiles, the segment that had the highest
share in total imports (46.28 per cent), were worth
US$765.00 million during April December 2008-09. The
segment had seen an import growth of 11.00 per cent
during the period as compared to the same period of 2007-
08. MMF Yarn with imports worth US$444.23 million was
the next biggest segment. The segment occupied a share of
26.87 per cent during the period. MMF Yarn that had
witnessed a decline of 0.37 per cent during last month saw
a gain of 0.37 per cent during the current month.

Since the last few months, the highest growth in imports

had been that of Woolen Textiles. This position was now
occupied by Ready Made Garments which recorded a 56.61
per cent growth during April-December 2008-09 as
compared to the same period of 2006-07. The growth
recorded by Woolen Textiles was 53.13 per cent. Imports
of Ready made Garments were worth US$81.37 million
and that of Woolen Textiles, worth US$41.02 million.

23
The top supplier, China, had exported textile products
worth US$740.31 million to India during April December
2008-09. This was a good 44.78 per cent of India's total
imports.
As compared to its exports during April December 2007-
08, exports made during April-December 2008-09 was a
gain of 18.55 per cent. China continued to export the most
in all segments except Woolen and Cotton Rags. In this
segment, the largest exporter was Bangladesh.
Bangladesh's supplies in the segment were worth US$2.83
million. As compared to its exports during April-December
2007-08, exports made by them during April December
2008-09 were over 200 times higher.

24
 GARMENT
OUTSOURCING

Outsourcing is getting things done from sources other than

own ones.
India provides its source to various international brands of
the world.
• Walmart, Levis, Gap, JC Penny, Marks & Spencer, and
other foreign labels are buying more and more garments
and fabrics from India.
• Singapore based Crocodile International has announced
its plans to invest an additional €.39 million.
• India is also developing design skills that cover different
fabrics and different markets.
• The Indian silk industry, which is known for its finery and
masterly brocades, are also a great strength to the textile
industry.

25
 POSITION IN THE
WORLD TEXTILE
ECONOMY

India contributes 20% to world spindleage capacity, the

second highest spindleage in the world after China. It
contributes 6% to the world rot orage and 62% to the world
loomage. However in High-tech Shuttless Looms this
industry’s contribution is only 4.1% to the world Shuttless
loomage. 12% to the world production of textile fibres and
yarns is from India and is the largest producer of Jute,
second largest producer of silk and cellulose fibre / yarn,
third largest producer of cotton and fifth largest producer of
synthetic fibres / yarns. India’s key assets include a large
and low-cost labour force, sizable supply of fabric,
sufficiency in raw material and spinning capacities. On the
basis of these strengths, India will become a major
outsourcing hub for foreign manufacturers and retailers,
with composite mills and large integrated firms being their
preferred partners. It will thus be essential for SMEs to
align with these firms, that can ensure a market for their
products and new orders.

26
 PROBLEM FACED BY
THE TEXTILE
INDUSTRY IN INDIA
The major problems are the following:

Sickness
Sickness is widespread in the cotton textile industry. After
the engineering industry, the cotton textile industry has the
highest incidence of sickness. As many as 125 sick units
have been taken over by the Central Government.
Sickness is caused by various reasons like the problems
mentioned below.

Obsolescence
The plant and machinery and technology employed by a
number of units are obsolete. The need today is to make
the industry technologically up-to-date rather than expand
capacity as such. This need was foreseen quite sometime
back and schemes for modernisation of textile industry
had been introduced. The soft loan scheme was introduced
a few years back and some units were able to take
advantage of the scheme and modernise their equipment.
However, the problem has not been fully tackled and it is
of utmost importance that the whole industry is
technologically updated. Not many companies would be
able to find resources internally and will have to depend
on financial institutions and other sources.
27
Government Regulations
Government regulations like the obligation to produced
controlled cloth are against the interest of the industry.
During the last two decades the excessive regulations
exercised by the government on the mill sector has
promoted inefficiency in both production and
management. This has also resulted in a colossal waste of
raw materials and productive facilities. For example, the
mills are not allowed to use filament yarn in warp in order
to protect the interest of art silk and powerloom sector
which use this yarn to cater to the affluent section of
society.

Low Yield and Fluctuation of Cotton

Output
The cotton yield per hectare of land is very low in India.
This results in high cost and price. Further, being largely
dependent on the climatic factors, the total raw cotton
production is subject to wide fluctuation causing serious
problems for the mills in respect of the supply of this vital
raw material.

Competition from Man-made Fibres

One of the serious challenges facing the cotton textile
industry is the competition from the man-made fibres and
synthetics. These textures are gradually replacing cotton
textiles. This substitution has in fact been supported by a
28
number of people on the ground that it is not possible to
increase substantially the raw cotton production without
affecting other crops particularly food crops.

Competition from other Countries

In the international market, India has been facing severe
competition from other countries like Taiwan, South Korea,
China and Japan. The high cost of production of the Indian
industry is a serious adverse factor.

Labour Problems:
The cotton textile industry is frequently plagued by labour
problems. The very long strike of the textile workers of
Bombay caused losses amounting to millions of rupees not
only to the workers and industry but also to the nation in
terms of excise and other taxes and exports.

Accumulation of Stock
At times the industry faces the problems of very low off
take of stocks resulting in accumulation of huge stocks. The
situation leads to price cuts and the like leading to loss or
low profits.

Miscellaneous
The industry faces a number of other problems like
power cuts, infrastructural problems, lack of finance,
exorbitant rise in raw material prices and production
costs etc

29
 MAJOR
COMPETITIORS IN
THE WORLD
To understand Indias position among other textile
producing the industry contributes 9% of GDP and 35% of
foreign exchange earning, Indias share in global exports is
only 3% compared to Chinas 13.75% percent. In addition
to China, other developing countries are emerging as
serious competitive threats to India. Looking at export
shares, Korea (6%) and Taiwan (5.5%) are ahead of India,
while Turkey (2.9%) has already caught up and others like
Thailand (2.3%) and Indonesia (2%) are not much further
behind. The reason for this development is the fact that
India lags behind these countries in investment levels,
technology, quality and logistics. If India were
competitive in some key segments it could serve as a basis
for building a modern industry, but there is no evidence of
such signs, except to some extent in the spinning industry.
India’s Competitive Position in Stages of
Textile Manufacture

30
31
 GOVERNMENT
ORGANISATIONS,AG
REEMENTS AND
POLICIES

The-Multi-Fibre-Agreement-(MFA)
The Multi-Fibre Agreement (MFA), that had governed
the extent of textile trade between nations since 1962,
expired on 1 January 2005. It is expected that, post-MFA,
most tariff distortions would gradually disappear and
firms with robust capabilities will gain in the global trade
of textile and apparel. The prize is the $360 bn market
which is expected to grow to about $600 bn by the year
2010 barely five years after the expiry of MFA.

National-Textile-Policy-2000
Faced with new challenges and opportunities in a
changing global trade environment, the GOI unveiled its
National Textile Policy 2000 (NTP 2000) on November
2, 2000. The NTP 2000 aims to improve the
competitiveness of the Indian textile industry in order to
attain $50 billion per year in textile and apparel exports
by 2010.86 The NTP 2000 opens the countrys apparel
sector to large firms and allows up to 100 percent FDI in
the sector without any export obligation.

32
Export Promotion Capital Goods (EPCG)
Scheme
To promote modernization of Indian industry, the GOI
set up the Export Promotion Capital Goods (EPCG)
scheme, which permits a firm importing new or
Secondhand capital goods for production of articles for
export to enter the capital goods at preferential tariffs,
provided that the firm exports at least six times the c.i.f.
value of the imported capital goods within 6 years. Any
textile firm planning to modernize its operations had to
import at least $4.6 million worth of equipment to qualify
for duty-free treatment under the EPCG scheme.

Export-Import-Policy
The GOIs EXIM policy provides for a variety of largely
export-related assistance to firms engaged in the
manufacture and trade of textile products. This policy
includes fiscal and other trade and investment incentives
contained in various programs

Duty-Entitlement-Passbook-Scheme-(DEPS)

DEPS is available to Indian export companies and traders on

a pre- and post-export basis. The pre-export credit requires
that the beneficiary firm has exported during the
preceding 3-year period. The post-export credit is a
transferable credit that exporters of finished goods can
use to pay or offset customs duties on subsequent imports
of any unrestricted products.

33
The Agreement on Textiles and Clothing
(ATC)
The Agreement on Textiles and Clothing (ATC)
promises abolition of all quota restrictions in
international trade in textiles and clothing by the year
2005. This provides tremendous scope for export
expansion from developing countries.

Guidelines-of-the-revised-Textile-Centres-
Infrastructure-Development-Scheme-
(TCUDS)
TCIDS Scheme is a part of the drive to improve
infrastructure facilities at potential Textile growth centres
and therefore, aims at removing bottlenecks in exports so
as to achieve the target of US$ 50 billion by 2010 as
envisaged in the National Textile Policy, 2000.

Under the Scheme funds can be given to Central/ State

Government Departments/ Public Sector Undertakings/
Other Central /State Governments agencies/recognized
industrial association or entrepreneur bodies for
development of infrastructure directly benefiting the
textile units. The fund would not be available for
individual production units.

Technology Upgradation Fund Scheme (TUFS)

At present, the only scheme through which Government
can assist the industry is the Technology Upgradation
Fund Scheme (TUFS) which provides for reimbursing
5% interest on the loans/finance raised from designated
34
 financial institutions for bench marked projects of
modernisation. IDBI, SIDBI, IFCI have been designed as
nodal agencies for large and medium small scale industry
and jute industry respectively. They have co-opted 148
leading commercial banks/cooperative banks and
financial institutions like State Finance Corporations and
State Industrial Development Corporation etc.

Scheme for Integrated Textile Parks (SITP)

To provide the industry with world-class infrastructure
facilities for setting up their textile units, Government has
launched the Scheme for Integrated Textile Parks (SITP) by
merging the Scheme for Apparel Parks for Exports (APE)
and Textile Centre Infrastructure Development Scheme
(TCIDS). This scheme is based on Public-Private
Partnership (PPP) and envisages engaging of a professional
agency for project execution. The Ministry of Textiles
(MOT) would implement the Scheme through Special
Purpose Vehicles (SPVs).

National Textile Corporation Ltd. (NTC)

National Textile Corporation Ltd. (NTC) is the single
largest Textile Central Public Sector Enterprise under
Ministry of Textiles managing 52 Textile Mills through its
9 Subsidiary Companies spread all over India. The
headquarters of the Holding Company is at New Delhi. The
strength of the group is around 22000 employees. The
annual turnover of the Company in the year 2004-05 was
approximately Rs.638 crores having capacity of 11 lakhs
35
Spindles, 1500 Looms producing 450 lakh Kgs of Yarn and
185 lakh Mtrs of cloth annually.

Cotton Corporation Of India Ltd. (CCI)

The Cotton Corporation of India Ltd (CCI), Mumbai, is a

profit-making Public Sector Undertaking under the
Ministry of Textiles engaged in commercial trading of
cotton. The CCI also undertakes Minimum Support Price
Operation (MSP) on behalf of the Government-of-India.

36
 MACRO
ENVIRONMENTAL
FORCES

An organization's macro environment consists of

nonspecific aspects in the organization's surroundings that
have the potential to affect the organization's strategies.
When compared to a firm's task environment, the impact of
macro environmental variables is less direct and the
organization has a more limited impact on these elements
of the environment.
Macro environmental variables include socio cultural,
technological, political-legal, economic, and international
variables. A firm considers these variables as part of its
environmental scanning to better understand the threats and
opportunities created by the variables and how strategic
plans need to be adjusted so the firm can obtain and retain
competitive advantage.
The macro environment consists of forces that originate
outside of an organization and generally cannot be altered
by actions of the organization. In other words, a firm may
be influenced by changes within this element of its
environment, but cannot itself influence the environment.
The curved lines in Figure 1 indicate the indirect influence
of the environment on the organization.
37
 ELEMENTS OF THE
MACRO
ENVIRONMENT

SOCIO CULTURAL FACTORS

TECHNOLOGICAL FACTORS

POLITICAL AND LEGAL FACTORS

ECONOMIC FACTOR

INTERNATIONAL FACTOR

38
SOCIOCULTURAL FACTORS
The sociocultural dimensions of the environment consist of
customs, lifestyles, and values that characterize the society
in which the firm operates. Socio-cultural components of
the environment influence the ability of the firm to obtain
resources, make its goods and services, and function within
the society. Sociocultural factors include anything within
the context of society that has the potential to affect an
organization. Population demographics, rising educational
levels, norms and values, and attitudes toward social
responsibility are examples of sociocultural variables.

POPULATION CHANGES.

Changes in population demographics have many potential

consequences for organizations. As the total population
changes, the demand for products and services also
changes. For instance, the decline in the birthrate and
improvement in health care have contributed to an increase
in the average age of the population in the United States.
Many firms that traditionally marketed their products
toward youth are developing product lines that appeal to an
older market. Clothing from Levi Strauss & Co. was
traditionally popular among young adults. While its
popularity in this market has waned, the firm has been able
to develop a strong following in the adult market with its
Dockers label.
Other firms are developing strategies that will allow them
to capitalize on the aging population. Firms in the health-
care industry and firms providing funeral services are
39
expected to do well given the increasing age of the U.S.
population. They are projected as a growth segment of U.S.
industry simply because of the population demographics.

RISING EDUCATIONAL LEVELS.

Rising educational levels also have an impact on

organizations. Higher educational levels allow people to
earn higher incomes than would have been possible
otherwise. The increase in income has created opportunities
to purchase additional goods and services, and to raise the
overall standard of living of a large segment of the
population. The educational level has also led to increased
expectations of workers, and has increased job mobility.
Workers are less accepting of undesirable working
conditions than were workers a generation ago. Better
working conditions, stable employment, and opportunities
for training and development are a few of the demands
businesses confront more frequently as the result of a more
educated workforce.

NORMS AND VALUES.

Norms (standard accepted forms of behavior) and values

(attitudes toward right and wrong), differ across time and
between geographical areas. Lifestyles differ as well among
different ethnic groups. As an example, the application in
the United States of Japanese-influenced approaches to
management has caused firms to reevaluate the concept of
quality. Customers have also come to expect increasing
quality in products. Many firms have found it necessary to

40
reexamine production and marketing strategies to respond
to changes in consumer expectations.

SOCIAL RESPONSIBILITY.

Social responsibility is the expectation that a business or

individual will strive to improve the welfare of society.
From a business perspective, this translates into the public
expecting businesses to take active steps to make society
better by virtue of the business being in existence. Like
norms and values, what is considered socially responsible
behavior changes over time. In the 1970s affirmative action
was a high priority. During the early part of the twenty-first
century prominent social issues were environmental quality
(most prominently, recycling and waste reduction) and
human rights, in addition to general social welfare. More
than just philanthropy, social responsibility looks for active
participation on the part of corporations to serve their
communities.
The stakeholder approach to social responsibility
demonstrates some of the complexities of incorporating
socially responsible issues into a firm's strategies.
Stakeholders are anyone with a stake in the organization's
existence. Highly visible stakeholders are stockholders,
employees, customers, and the local community. Decisions
to be responsible and maximize the return to stockholders
may require closing an unprofitable plant. However,
employees and members of the local community could
view this move as socially irresponsible since the move
would not benefit the community.

41
 TECHNOLOGICAL
FACTORS
Technology is another aspect of the environment a firm
should consider in developing strategic plans. Changing
technology may affect the demand for a firm's products and
services, its production processes, and raw materials.
Technological changes may create new opportunities for
the firm, or threaten the survival of a product, firm, or
industry. Technological innovation continues to move at an
increasingly rapid rate.

DEMAND.

Technology can change the lifestyle and buying patterns of

consumers. Recent developments in the field of
microcomputers have dramatically expanded the potential
customer base and created innumerable opportunities for
businesses to engage in business via Internet. Whereas
computers were traditionally used only by large
organizations to handle data processing needs, personal
computers are commonly used by smaller firms and
individuals for uses not even imagined fifteen years ago.
Similarly, new developments in technology led to a
reduction in prices for computers and expanded the
potential market. Lower prices allow computers to be
marketed to the general public rather than to business,
scientific, and professional users—the initial market.

42
Technology may also cause certain products to be removed
from the market. Asbestos-related illnesses have severely
limited asbestos as a resource used in heat-sensitive
products such as hair dryers. Further, a number of
chemicals that have been commonly used by farmers to
control insects or plants are prohibited from use or require
licensure as a consequence of those chemicals appearing in
the food chain.

PRODUCTION PROCESSES.

Technology also changes production processes. The

introduction of products based on new technology often
requires new production techniques. New production
technology may alter production processes. Robotics
represents one of the most visible challenges to existing
production methods. Robots may be used in positions
considered hazardous for people or that require repetitive,
detailed activities.
The consequences for other jobs currently occupied by
people are not clear. When production was first automated,
although some workers were displaced, new jobs were
created to produce and maintain the automated equipment.
The impact of robotics on jobs is in large part a function of
the uses made of the technology and the willingness of
workers to learn to use new technology.
In some industries, use of robots during the early 2000s
increased production and efficiency but resulted in
significant numbers of job losses. However, technological
innovation can also result in increased job growth. For
example, Ford Motor Company's $375-million technology
43
update to its Norfolk assembly plant to build its 2004 F-150
resulted in the ability to build more models on its assembly
line and consequently created about 270 new jobs, an 11
percent increase.

EVALUATING TECHNOLOGICAL CHANGES.

There is little doubt that technology represents both

potential threats and potential opportunities for established
products. Products with relatively complex or new
technology are often introduced while the technology is
being refined, making it hard for firms to assess their
market potential. When ballpoint pens were first
introduced, they leaked, skipped, and left large blotches of
ink on the writing surface. Fountain pen manufacturers
believed that the new technology was not a threat to
existing products and did not attempt to produce ball-point
pens until substantial market share had been lost.
Another technology, the electric razor, has yet to totally
replace the blade for shaving purposes. Perhaps the
difference is that the manufacturers of blades have
innovated by adding new features to retain customers.
Manufacturers of fountain pens did not attempt to innovate
until the ballpoint pen was well established.
It is quite difficult to predict the impact of a new
technology on an existing product. Still, the need to
monitor the environment for new technological
developments is obvious. Attention must also be given to
44
developments in industries that are not direct competitors,
since new technology developed in one industry may
impact companies and organizations in others.

45
 POLITICAL AND
LEGAL FACTORS
The political-legal dimension of the general environment
also affects business activity. The philosophy of the
political parties in power influences business practices. The
legal environment serves to define what organizations can
and cannot do at a particular point in time.

ATTITUDES TOWARD BUSINESS

A pro-business attitude on the part of government enables

firms to enter into arrangements that would not be allowed
under a more anti-business philosophy. The numerous joint
ventures between U.S. and Japanese automobile
manufacturers could have been termed anticompetitive by a
less pro-business administration. The release of many acres
of government land for business use (logging, mining)
angered many environmentalists who had been able to
restrict business use of the land under previous
administrations.
Changes in sentiments toward smoking and its related
health risks have altered the public's attitude toward the
tobacco industry. These changes have been reflected in
many organizations by limiting smoking to designated
areas or completely prohibiting it at work. The
transformation in attitude has also caused firms within the
tobacco industry to modify marketing strategies,
encouraging many to seek expansion opportunities abroad.
46
LEGISLATION.

The legal environment facing organizations is becoming

more complex and affecting businesses more directly. It
has become increasingly difficult for businesses to take
action without encountering a law, regulation, or legal
problem. A very brief listing of significant laws that affect
business would include legislation in the areas of
consumerism, employee relations, the environment, and
competitive practices.
Many of the laws also have an associated regulatory
agency. Powerful U.S. regulatory agencies include the
Environmental Protection Agency (EPA), the Occupational
Safety and Health Administration (OSHA), the Equal
Employment Opportunity Commission (EEOC), and the
Securities and Exchange Commission (SEC).
Estimates of the cost of compliance vary widely, but could
well exceed $100 billion annually. Many of these costs are
passed to consumers. However, costs of legal expenses and
settlements may not be incurred for years and are not likely
to be paid by consumers of the product or owners of the
company when the violation occurred. Still, potential legal
action often results in higher prices for consumers and a
more conservative attitude by business executives.

LEVELS OF GOVERNMENT INFLUENCE.

We generally speak about "the government" as referring to

the federal government. It is the federal government that
passes and enforces legislation concerning the entire
47
country. Actions by the federal government affect a large
number of firms and are consistent across state boundaries.
Environmental analysis, however, should not overlook
actions by both state and local governments.
Regulations concerning many business practices differ
between states. Tax rates vary widely. Laws regarding
unionization (e.g., right-to-work states) and treatment of
homosexual workers differ between states.
Local governments have the potential to affect business
practices significantly. Some local governments may be
willing to provide incentives to attract business to the area.
Some may build industrial parks, service roads, and provide
low-interest bonds to encourage a desirable business to
move into the community.
Regulatory measures such as building codes and zoning
requirements differ significantly between communities.
Infrastructure such as electric and sewer services,
educational facilities, and sewage treatment capabilities
may not be able to accommodate the increased demand
associated with certain industries, making that locale
unsuitable for establishing some businesses.

48
ECONOMIC FACTORS
Economic factors refer to the character and direction of the
economic system within which the firm operates. Economic
factors include the balance of payments, the state of the
business cycle, the distribution of income within the
population, and governmental monetary and fiscal policies.
The impact of economic factors may also differ between
industries.

BALANCE OF PAYMENTS.

The balance of payments of a country refers to the net

difference in value of goods bought and sold by citizens of
the country. To decrease the dollar value of goods imported
into a country, it is common practice to construct barriers to
entry for particular classes of products. Such practices
reduce competition for firms whose products are protected
by the trade barriers.
Mexico has limited the number of automobiles that can be
imported. The purpose of this practice is to stimulate the
domestic automobile market and to allow it to become
large enough to create economies of scale and to create jobs
for Mexican workers. A side effect of the import
restriction, however, has been an increase in the price and a
decrease in the quality of automobiles available to the
public.
Another potential consequence of import restrictions is the
possibility of reciprocal import restrictions. Partially in

49
retaliation to import restriction on Japanese televisions and
automobiles by the United States, the Japanese have limited
imports of agricultural goods from the United States.
Lowering trade restrictions as a means of stimulating the
economy of a country may meet with mixed results. The
North American Free Trade Agreement (NAFTA) has
opened the borders between the United States, Canada, and
Mexico for the movement of many manufacturers.
Government officials in the United States argue the results
have been positive, but many local communities that have
lost manufacturing plants question the wisdom of the
agreement.
As discussed in an article by Susan Schmidt in World
Trade magazine, issues that stemmed from regulatory
agencies and national security measures were barriers to
free trade during the early part of the twenty-first century,
demonstrating that NAFTA alone could not clear the path
for companies and countries to take advantage of free trade
benefits.

BUSINESS CYCLE.

The business cycle is another economic factor that may

influence the operation of a firm. Purchases of many
durable goods (appliances, furniture, and automobiles) can
be postponed during periods of recession and depression, as
can purchases of new equipment and plant expansions.
Economic downturns result in lower profits, reductions in
hiring, increased borrowing, and decreased productivity for
firms adversely affected by the recession. Positive
consequences of recessions may include reductions in
50
waste, more realistic perceptions of working conditions,
exit of marginally efficient firms, and a more efficient
system.
Some organizations may benefit from an economic
downturn. Postponed purchases may result in the need to
service existing products. An owner electing to keep a used
automobile rather than buying a new one may need to have
it repaired, thus creating an increased demand for
automobile mechanics and replacement parts. Limited job
opportunities during downturns also encourage individuals
unable to get satisfactory jobs to consider going to college
or joining the armed services.

INCOME DISTRIBUTION.

The distribution of income may differ between economic

systems. Two countries with the same mean (per capita)
income levels may have dramatically different distributions
of income. The majority of persons in the United States are
considered middle income, with only a relatively small
number of persons having exceptionally high or low
incomes.
Many developing countries have citizens who are either
extremely wealthy or extremely poor. Only a few persons
would qualify as middle class. Therefore, although both
countries had the same mean income, opportunities to
market products to the middle class would be greater in the
United States.

TRANSFER PAYMENTS.
51
Transfer payments (e.g., welfare, social security) within the
United States change the distribution of income. Transfer
payments provide money to individuals in the lower
income brackets and enable them to purchase goods and
services they otherwise could not afford. Such a
redistribution of income may not be the practice in other
economic systems. Thus, large numbers of people in need
of basic goods and services do not assure that those people
will be able to purchase such goods and services.
MONETARY AND FISCAL POLICIES.

Monetary and fiscal policies utilized by the federal

government also influence business operations. Monetary
policies are controlled by the Federal Reserve System and
affect the size of the money supply and interest rates. Fiscal
policies represent purchases made by the federal
government.
For example, allocation of funds to defense means
expenditures for weapons and hardware. If appropriations
had gone to the Health and Human Services and Education
Departments instead, much of the money would have
constituted transfer payments. The primary beneficiaries of
such a fiscal policy would be firms in the basic food and
shelter businesses. No matter how government
expenditures are reallocated, the result is lost sales and cut
budgets for some companies, and additional opportunities
for others.
Though unpopular in the United States, another aspect of
government fiscal policy is deficit spending, which may
allow government expenditures to rise, but can also

52
influence interest rates, exchange rates, and other economic
trends.

INTERNATIONAL
FACTORS
A final component of the general environment is actions of
other countries or groups of countries that affect the
organization. Governments may act to reserve a portion of
their industries for domestic firms, or may subsidize
particular types of businesses to make them more
competitive in the international market.
Some countries may have a culture or undergo a change in
leadership that limits the ability of firms to participate in
the country's economy. As with the other elements of the
macroenvironment, such actions are not directed at any
single company, but at many firms.

53
ECONOMIC ASSOCIATIONS.

One of the most recent joint efforts by governments to

influence business practices was NAFTA. The agreement
between the United States, Canada, and Mexico was
intended to facilitate free trade between the three countries.
The result has been a decrease in trade barriers between
them, making it easier to transport resources and outputs
across national boundaries. The move has been beneficial
to many businesses, and probably to the economies of all
three countries. In most economic associations, preference
is also given to products from member countries at the
expense of products from nonmembers.
Probably the best-known joint effort by multiple countries
to influence business practices is the Organization of
Petroleum Exporting Countries (OPEC). The formation of
OPEC, an oil cartel including most major suppliers of oil
and gas, led to a drastic increase in fuel prices. Rising fuel
prices had a significant effect on the demand for
automobiles worldwide. The increases in oil prices also
contributed to inflation all over the world. OPEC's early
success encouraged countries producing other basic
products (coffee beans, sugar, bananas) to attempt to
control the prices of their products.
A more recent example of an economic association serving
multiple countries was the International Coffee
Organization (ICO). The United States rejoined the ICO
2004 in hopes of fostering sustainability and competition
across countries and the industry. The United States works
with the Honduras, Mexico, and Nicaragua, among others,
as part of this organization.

54
INTERGOVERNMENTAL RELATIONS.

Changing relationships between the United States and other

countries may alter the ability of firms to enter foreign
markets. The United States' establishment of trade relations
with China in the 1970s created opportunities for many
firms to begin marketing their products in China.
The rise of Ayatollah Ruhollah Khomeini to power in Iran
altered the lives of many Iranian citizens. Wine, vodka,
music, and other forms of entertainment were prohibited.
Black markets provided certain restricted items. Other
products, such as wine, began to be produced at home.
Anti-American sentiments throughout the country showed
the hostility of many citizens. Non-American firms thus
had an opportunity to capitalize on the anti-American
sentiments and to provide goods and services formerly
provided by U.S. firms.

CULTURAL DIFFERENCES.

In different countries, sometimes even within a country,

there are substantial differences in attitudes, beliefs,
motivation, morality, superstition, and perception, as well
as other characteristics. Geert Hofstede (b. 1928) developed
a model in which worldwide differences in culture are
categorized according to five dimensions. These
dimensions include:
Power distance—the degree of inequality among people
which the population of a country considers normal.

55
Individualism vs. collectivism—the degree to which people
in a country prefer to act as individuals or as members of a
group.
Masculinity vs. femininity—the degree to which values like
assertiveness, performance, success, and competitiveness
are used to guide decisions versus values like the quality of
life, warm personal relationships, service, and solidarity.
Uncertainty avoidance—the degree to which citizens of a
country prefer structured over unstructured situations,
rigidity of procedures, or willingness to accept risk and
potential failure.
Time orientation—the extent to which decisions are based
on long-term orientation versus short-term orientation, past
versus present versus future, and punctuality.
Hofstede argues that U.S. management theories contain a
number of idiosyncrasies that are not necessarily shared by
managers in other cultures. Approaches to motivation and
leadership, for example, differ widely throughout the
world. Citizens of Japan tend to put greater importance on
collective effort and working as a team member. Individual
recognition is not desired. It is viewed as contradictory to
being a good team member.
Similarly, in other countries, high tax rates may make
bonuses and other forms of monetary compensation less
attractive and less motivating than in the United States.
Hofstede argues that employees and products are more
readily transferred between countries sharing similar
cultures.

56
The macroenvironment consists of forces that originate
outside of an organization and generally cannot be altered
by actions of the organization. Dimensions of the
macroenvironment consist of sociocultural factors,
technological factors, political-legal elements, economic
factors, and international elements. A firm needs to study
these elements of its environment, as they have the
potential to affect how the organization should operate to
attain and maintain its competitive advantage.

57
 CONCLUSION
The future outlook for the industry looks promising,
rising income levels in both urban and rural markets will
ensure a rising market for the cotton fabrics considered a
basic need in the realm of new economic reforms (NER)
proper attention has been given to the development of the
textiles industry in the Tenth plan. Total outlay on the
development of textile industry as envisaged in the tenth
plan is fixed at Rs.1980 crore. The production targets
envisaged in the terminal year of the Tenth plan are
45,500 million sq metres of cloth 4,150 million kg of
spun yarn and 1,450 million kg of man made filament
yarn. The per capita availability of cloth would be 28.00
sq meters by 2006-2007 as compared to 23.19 sq meters
in 2000-01 showing a growth of 3.19 percent. The export
target of textiles and apparel is placed at $32 billion by
2006-2007 and $50 billion by 2010.

___________________

58
 MAJOR PLAYERS IN
TEXTILE INDUSTRY
1. RAYMONDS

2. VARDHAMAN SPINNING

3. ARVIND MILLS

59
60
 INTRODUCTION
The Raymond Group was incorporated in 1925 and within
a span of a few years, transformed from being an Indian
textile major to a global conglomerate.In our endeavor to
keep nurturing quality and leadership, we always choose
the path untaken - from being the first in 1959 to introduce
a polywool blend in India to creating the world's finest
suiting fabric the Super 230s made from the superfine 11.8
micron wool.
Today, the Raymond group is vertically and horizontally
integrated to provide customers total textile solutions. Few
companies globally have such a diverse product range of
nearly 20,000 varieties of worsted suiting to cater to
customers across age groups, occasions and styles.
We manufacture for the world the finest fabrics- from wool
to wool-blended worsted suiting to specialty ring denims as
well as high value shirting.
After making a mark in textiles, Raymond forayed into
garmenting through highly successful ventures like Silver
Spark Apparel Ltd. and Regency Texteis Portuguesa Lda
(for fine Tailored Suits, Trousers and Jackets), EverBlue
Apparel Ltd. (Jeanswear) and Celebrations Apparel Ltd.
(Shirts).
We also have some of the most highly respected apparel
brands in our portfolio: Raymond, Raymond Finely Crafted
Garments, Manzoni, Park Avenue, ColorPlus, Parx, Be:,
Zapp! and Notting Hill.
The Raymond Group also has an expansive retail presence
established through the exclusive chain of 'The Raymond
61
Shop' and stand-alone brand stores for Raymond Finely
Crafted Garments, Manzoni, Park Avenue, ColorPlus, Parx,
Be:, Zapp! and Notting Hill.
With a US$500 million turnover we are today one of the
largest players in fabrics, designer wear, denim, cosmetics
& toiletries, engineering files & tools, prophylactics and air
charter services in national and international markets. All
our plants are ISO certified, leveraging on cutting-edge
technology that adheres to the highest quality parameters
while also being environment friendly.

62
 HISTORY
Years ago, when the Singhania family was building,
consolidating and expanding its various businesses in
Kanpur, one Mr. Wadia was in a similar manner setting up
a small woollen mill in the area around Thane creek, 40
kms away from Bombay. The Sassoons, a well-known
industrialist family of Bombay, soon acquired this mill and
renamed it as The Raymond Woollen Mills.

Around the same time, the Singhanias aimed to broaden

their business horizons. The family's sharp business
foresight led to the acquisition of The Raymond Woollen
Mills.
When the grandson of Lala Juggilal, Lala Kailashpat
Singhania took over Raymond in 1944, the mill primarily
made cheap and coarse woollen blankets, and modest
quantities of low priced woollen Fabrics
The vision and foresight of Mr. Kailashpat Singhania
greatly helped in establishing the J.K. Group's presence in
the western region. Under his able stewardship, Raymond
embarked upon a gradual phase of technological
upgradation and modernization; producing woollen Fabrics
of a far superior quality.
Under Mr. Gopalakrishna Singhania, the mill became a
world-class factory and the Raymond brand became
synonymous with fine quality woollen Fabrics
When Dr. Vijaypat Singhania took over the reins of the
company in 1980, he injected fresh vigour into Raymond,
transforming it into a modern, industrial conglomerate. His
son Mr. Gautam Hari Singhania, the present chairman and

63
managing director has been instrumental in restructuring
the group. With the divestment of its non-core businesses,
the group has emerged stronger, with a more focused
approach.
Today, with a 33 million-meter capacity in wool & wool-
blended fabrics, Raymond commands an over 60% market
share in worsted suiting in India and ranks amongst the first
three fully integrated manufacturers of worsted suiting in
the world. We are perhaps the only company in the world
to have a diverse product range of nearly 20,000 design and
colours of suiting fabric to suit every age, occasion and
style. We export these to over 50 countries, including USA,
Canada, Europe, Japan and the Middle East.
A 100% subsidiary of Raymond Ltd., Raymond Apparel
Ltd. (RAL) ranks amongst India's largest and most
respected apparel companies. We bring to our customers
the best of fabric and style through some of the country's
most prestigious brands- Raymond Finely Crafted
Garments, Manzoni, Park Avenue, ColorPlus, Parx, Be:
and Zapp! and Notting Hill. Even as the brand keeps
evolving through its cuts, styles, apparels and collections,
one thing has remained unchanged over time is the
unrelenting pursuit of excellence!

64
 COMPANY OVERVIEW
Company was incorporated on 10th September 1925 at
Mumbai. Raymond Group is a Rs. 2000 crore plus
conglomerate having businesses in Textiles, Readymade
Garments, Engineering Files & Tools, Prophylactics and
Toiletries. The group is the leader in textiles, apparel, &
files & tools in India and enjoys a pronounced position in
the international market. Raymond believes in Excellence,
Quality and Leadership. Raymond Woollen Mills Ltd. was
registered in Kenya for manufacturing knitting yarns and
price goods of wool and wool mixed with synthetic fibres,
and woollen and worsted fabrics. Company also started the
research and development for sheep breeding and wool
production in India with a view to produce indigenously
Merino type wool. Company started a new woollen mill
unit in Jalgaon in Maharashtra. Company also started a
modern Wool Combing Division in collaboration with Sir
James Mill & Sons Ltd., Bradford, U.K. - Company
changed its name from Raymond Woollen Mills Ltd. to
Raymond Limited in 1994. Company acquired the files
division of the A.V. Birla group company i.e. HGI
Industries. The 50:50 joint ventures J K Ansell, between
the Raymond and Australia-based Ansell International
formed. Company has acquired the well-known brand
Color Plus Fashions Private Ltd. Company started to
manufacture suit lengths in the Super 200’s wool category,
which is made by very few companies in the world.
Company set up apparel subsidiary to establish good
presence in the world market. Last year, company signed
JV agreement with Lanificio Fedora, Italy
and with MOB Outillage.
65
Raymond – the frontrunner in innovation

-First to introduce polywool blend in India in 1959

-First to introduce Trovine, a cool fabric for the Indian

summer in 1968

-First to introduce natural stretch worsted suiting

-First in the world to use nanotechnology

-First to develop superfine fabric such as Lineage line,

Renaissance Collection, Chairman’s Collection

66
 GROUP COMPANIES
Raymond Ltd.
Raymond Ltd. is among the largest integrated
manufacturers of worsted fabrics in the world.

Raymond Apparel Ltd.

Raymond Apparel Ltd. has in its folio some of the most
highly regarded apparel brands in India – Raymond Finely
Crafted Garments, Manzoni, Park Avenue for Men &
Women, ColorPlus for Men & Women, Parx, Be: and
Zapp! and Notting Hill.

ColorPlus Fashions Ltd.

ColorPlus is among the largest smart casual brands in the
premium category. The company was acquired by
Raymond to cater to the growing demand for a high end,
casual wear brand in the country for Men & Women.

Silver Spark Apparel Ltd.

A garmenting facility that manufactures formal suits,
trousers and jackets.

Regency Texteis Portuguesa Lda

67
A facility set-up in northern Portugal bordering Spain, in
Caminha for manufacturing suits, jackets and trousers.

EverBlue Apparel Ltd.

A state-of-the-art denim garmenting facility.

Celebrations Apparel Ltd.

A facility set-up for the manufacture of formal shirts.

J.K. Files & Tools

A leading player in the Engineering Files & Tools segment

and the largest producer of steel files in the world.

Ring Plus Aqua Ltd.

A leading manufacturer in the engineering automotive

components.

J.K. Helene Curtis Ltd.

A leading player in the grooming, accessories and

toiletries category.

J.K. Investo Trade (India) Ltd.

68
JKIT is an investment company registered with Reserve
Bank of India as Non-Banking Financial Company.

BRAND

69
 ACHIEVMENTS
The Company received ‘Global HR Excellence Awards
2007-08’ for the outstanding contribution to the cause of
education from ACCOR
Services – International Leaders and India’s foremost in
Employees Benefits, Motivation and Loyalty Solutions.
Textiles Division of the Company received the following
awards during the year:

a) Chhindwara unit received State Environment Award for

the year 2004-05 on February 23, 2008.

b) Jalgaon unit received State Level Award for excellence

in Energy Conservation and Management from
Maharashtra Energy Development
Agency, for the year 2006.

c) ‘Most admired Textile brand of the year’ from Lycra

Images Fashion Award 2008.

d) ‘Most admired Suiting brand of the year’ from Lycra

Images Fashion Award 2008.

e) ‘The Best Branded Readymade Garment and Textile’

from CNBC Awaaz Consumer Awards.
The ‘Park Avenue’ brand of Raymond Apparel Limited
was adjudged the ‘Most Innovative Brand’ of the year at
the Lycra Images Fashion Awards
2007 in succession.

70
Files and Tools Division of the Company received the
following awards during the year:

a) ‘Outstanding Exporter Award’ in the engineering

category in International Trade Awards 2006-07 sponsored
by DHL & CNBC TV18.

b) All India Export Award by Engineering Export

Promotion Council (EEPC) of India for being the Star
Performer of 2005-06 in the Hand Tools Category.

71
 INTERNAL
ENVIRONMENTS
Mission and Objectives:-
• Our business is people and their financial well-being.
Therefore, in the pursuit of our goals, we will conduct
ourselves in accordance with the following precepts:
• Our clients always come first.
• We must provide the highest level of service with
integrity.
• Assisting our clients in the attainment of their
financial objectives is our most worthy enterprise.
• We must communicate with our clients clearly and
frequently.
• Our investments and services must be of superior
quality.
• Teamwork — cooperating with and providing
assistance and support to our fellow associates — is
fundamental to sustaining a quality work environment
that nurtures opportunities for unparalleled service,
personal growth and job satisfaction.
• Continuing education is necessary to maintain the
timeliness of investment knowledge, tax law
information and financial planning techniques.
• Innovation is requisite to our survival in a changing
world.
• To emulate other members of our industry requires us
to continue to work hard; to excel beyond our peers

72
 requires us to provide an even higher caliber of service
to our clients.
• We must give something back to the communities in
which we live and work.

73
 MANAGEMENT
STRUCTURE

BOARD OF DIRECTORS

DR. VIJAYPAT SINGHANIA, Chairman Emeritus

GAUTAM HARI SINGHANIA, Chairman & Managing
Director
B. K. KEDIA
NANA CHUDASAMA
B. V. BHARGAVA
U. V. RAO
I. D. AGARWAL
NABANKUR GUPTA

MANAGEMENT EXECUTIVES

GAUTAM HARI SINGHANIA, Chairman & Managing

Director
DEEPAK KHETRAPAL, Chief Operating Officer
ANIRUDDHA DESHMUKH, President – FMCG & Retail
HARSHAL JAYAVANT, President – Engineering
Business
K. A. NARAYAN, President – HR
ROBERT LOBO, President – Shirting Fabric Business
SHREYAS JOSHI, President – Group Apparel
S. K. SINGHAL, President – Textiles
H. SUNDER, President – Finance, Chief Financial Officer

74
DIRECTOR - LEGAL & COMPANY SECRETARY

R. NARAYANAN

BANKERS

BANK OF INDIA
BANK OF MAHARASHTRA
BANK OF AMERICA
CENTRAL BANK OF INDIA
CITIBANK N.A.
HDFC BANK LIMITED
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED
STATE BANK OF INDIA
STANDARD CHARTERED BANK LIMITED

AUDITORS

DALAL & SHAH

Chartered Accountants

MAHAJAN & AIBARA

Chartered Accountants

75
 COMPANY IMAGE AND JOINT
VENTURES
The Raymond Group today is poised to become a global
player, integrated across various categories like worsted
suiting, denim, shirting etc. The Group has achieved this
through partnerships with companies that are the best in the
world in their business. Raymond has entered into a JV
with Gruppo Zambaiti, Italy’s leading manufacturer of
shirting fabric, Lanificio Fedora, one of the largest
manufacturers of carded woolen fabric in the world. Our JV
with UCO is a merger of equals that will create a global
denim major with transcontinental manufacturing in US,
Europe and Asia along with a combined capacity of 80
million metres. This JV with UCO will create synergies in
sourcing, manufacturing and marketing. All our JVs have
resulted in a unique combination of synergies in
manufacturing, marketing, technology, sourcing etc. and
will reap tremendous mutual benefits in the years to come.
Raymond Ltd. has announced a 50:50 joint venture with
Grotto S.p.A, one of the most important Italian fashion
companies. The joint venture recently launched the highly
successful 'GAS' brand in India. With a total investment of
approximately Rs. 500 million, this joint
venture brings together Grotto S.p.A's proven expertise in
design and managing a successful brand and Raymond
Ltd's expertise in apparel brand building and retailing and
its vast distribution network to give Indian consumers a
new fashion experience. This 50:50 joint JOINT
VENTURES venture company will characterize a distinct
identity in the youth fashion casual apparel category in
India.

76
FINANCIAL-POSITION:-

77
 RISK MANAGEMENT
The Company is exposed to risks from market fluctuations
of foreign exchange, interest rates and commodity prices
and business risk.
Foreign Exchange Risk
The Company’s policy is to systematically hedge its long
term foreign exchange risks as well as short term exposures
in line with its hedging
policies.
Interest Rate Risk
The Company is proactively using derivatives for foreign
currency borrowings to hedge interest rate risk and
minimise interest cost.
Given the interest rate fluctuations, the Company has
adopted a prudent and conservative risk mitigating strategy,
as a result of which interest
rate fluctuations are not expected to pose a significant risk
nor are they likely to have any material impact on the
Company’s profitability.
Commodity Price Risk
The Company is exposed to the risk of price fluctuation on
raw materials as well as finished goods in all its products.
The Company proactively
manages these risks in inputs through forward booking,
inventory management, proactive management of vendor
development and relationships.
The Company’s strong reputation for quality, product
differentiation and service and the existence of a strong
brand image and a strong
marketing network mitigates the impact of price risks on
finished goods.
78
Risk Element in Individual Businesses
Apart from the risks on account of interest rate, foreign
exchange and regulatory changes, various businesses of the
Company are
exposed to certain operating business risks, which are
managed by regular monitoring and corrective actions.

RESEARCH AND
DEVELOPMENT
. The R&D Department of Textile Division strives to
develop and provide exclusive and innovative products
under its brand. Some of
the products developed and introduced during the year
under review were:
1 . Jacketing fabric based on 100 percent exotic and
luxurious Vicuuna fibers.
2 . Range of fabrics based on latest type of elastomeric
polymeric yarn (Dow XLA) imparting unique stretch
properties to poly
wool and wool fabrics.
3 . New range of extra black (deep black) polyester-wool
fabrics with anti-lint finish.
4 . Range of polyester-wool and wool fabrics with silver
based antimicrobial finish.
5 . A range of sparkling fabrics with fine metallic effect for
ceremonial wear.
6. Range of fine soft fabrics, with special wool enzyme
finish

79
In order to maintain the leadership of JKFT in files
business, 13 new SKU’s have been developed for the
Export market for customer
specific engineering and agro applications.

Technology Absorption Adaptation and innovation :

The Files and Tools division introduced automatic VCI
pouch packing and commissioned slim taper files for
enhancing brand
image to the end customer.
Value stream for flat files introduced at Pithampur for
productivity improvement.

HUMAN RESOURCING
Internal Resourcing

The company first scouts for talent within the organization

to provide growth opportunities to its employees. This is
done by notifying vacancies internally. This practice helps
in managerial cross-functional exposure for career
development and learning.

Talent from Campus

Raymond recruits young textile engineering graduates,

textile technologists, chartered accountants, fashion
technologists and MBA's only from some of India's leading
Institutes. They are then rigorously trained for a period of
one year, during which they are placed across different
departments, before being finally placed in their area of
specialization. The objective of the programme is to gauge

80
the recruit's area of expertise and then train them to
independently shoulder their responsibilities. A Mentoring
programme for new inductees in the organization enables
them to adapt themselves to the organization.

81
Lateral Recruitment

'Market-skilled' employees from other companies are

periodically inducted into the organization from time to
time. A combined force of existing talent and induction of
fresh blood helps the company to be competitive in the face
of increasing business complexities.

FUTURE PLANS
=>Raymond is planning to increase its retail stores from
433 to 950 and expects the revenue from the stores to
increase from Rs 7 billion in the present to Rs 11 billion
to Rs 12 billion in 2009-2010. Most of
these stores will come up in small towns.

=>The company is also planning to foray into

automobile furnishing sector by way of a joint venture
with Treves SA.

82
VARDHMAN TEXTILES LIMITED

COMPANY ANALYSIS

83
 INTRODUCTION
Vardhman is a major integrated textile producer in India.
The Group was setup in 1965 at Ludhiana, Northern India.
Since then, the Group has expanded manifold and is today,
one of the largest textile conglomerates in India. The Group
portfolio includes manufacturing and marketing of Yarns,
Fabrics, Sewing Threads, Fiber and Alloy Steel.
The group started its corporate journey with an installed
capacity of 6000 spindles in 1965 under the flagship
company Vardhman Spinning & General Mills Limited
(now known as Vardhman Holdings Limited and is an
investment arm of the Group) in Ludhiana. Over the years
the group has expanded its spinning capacities besides
adding new businesses. The group has also diversified into
yarn processing, weaving, Sewing thread, fabric
processing, acrylic fiber manufacturing and into special/
alloy steels. Today, close to 20,000 people is the
Organization’s most important asset its human capital.

84
 HISTORY
The Vardhman Group, born in 1965, under the
entrepreneurship of Late Lala Rattan Chand Oswal has
today blossomed into one of the largest Textile Business
houses in India.
At its inception, Vardhman had an installed capacity of
14,000 spindles, today; its capacity has increased multifold
to over 5.5 lakh spindles. In 1982 the Group entered the
sewing thread market in the country which was a forward
integration of the business. Today Vardhman Threads is the
second largest producer of sewing thread in India. In 1990,
it undertook yet another diversification - this time into the
weaving business. The grey fabric weaving unit at Baddi
(HP), commissioned in 1990 with a capacity of 20,000
meters per day, has already made its mark as a quality
producer of Grey poplin, sheeting, and shirting in the
domestic as well as foreign market. This was followed by
entry into fabric processing by setting up Auro Textiles at
Baddi, which currently has a processing capacity of 1 lakh
meters/day.
In the year 1999 the Group has added yet another feather to
its cap with the setting up of Vardhman Acrylics Ltd.,
Bharuch (Gujarat) which is a joint venture in Acrylic Fiber
production undertaken with Marubeni and Exlan of Japan.
The company also has a strong presence in the markets of
Japan, Hong Kong, Korea, UK and EU in addition to the
domestic market. Adherence to systems and a true
dedication to quality has resulted in obtaining the coveted
ISO 9002/ ISO 14002 quality award which is the first in
Textile industry in India and yet another laurel to its credit.
85
The Vardhman group comprises of three listed and two
unlisted companies:

Listed Companies

Vardhman Textiles Limited (formerly Mahavir Spinning

Mills Limited)
Vardhman Acrylics Limited
Vardhman Holdings Limited1 (formerly Vardhman
Spinning & General Mills Limited)

Unlisted Companies
• VMT Spinning Company Limited
• Vardhman Threads Limited
• Vardhman Group consists of 5 SBUs spread across 9
manufacturing locations

86
 MANAGEMENT
STRUCTURE
Shri Paul Oswal - Chairman & Managing Director
Ajay Kumar Chakraborty - (Nominee of ICICI Bank Ltd.)
Vinod Kumar Saxena - (Nominee of IDBI)
Arun Kumar Purwar
(Dr.) Triloki Nath Kapoor
Prafull Anubhai
Surinder Kumar Bansal
Subash Khanchand Bijlani
Darshan Lal Sharma
Sachit Jain - Executive Director
Vardhman Holdings Limited
Board of Directors -
Shri Paul Oswal - Chairman
Surinder Singh Bagai
Jagdish Rai Singal
Chaman Lal Jain
Ram Swarup Gupta
Bal Krishan Arora
Sat Pal Kanwar
Sachit Jain
Shakun Oswal
Suchita Jain
Vardhman Acrylics Limited

87
Board of Directors -

Shri Paul Oswal

Sachit Jain
Darshan Lal Sharma
Sudeshkumar Ganpatrai Gulati
Sanjit Paul Singh
Munish Chandra Gupta
(Dr.)Arvind Kumar Bakhshi
Bal Krishan Choudhary - Managing Director

88
 PORTFOLIO

• Yarns
Yarn Manufacturing is the major activity of the group
accounting for 65 percent of the group turnover.
Vardhman is virtually a supermarket of yarns,
producing the widest range of cotton, synthetics and
blended, Grey and Dyed yarns and Hand Knitting
Yarns, in which Vardhman is the market leader in
India. The group has nine production plants with a
total capacity of over 5.5 lakh spindles, spread all over
the country. In many of the yarn market segments,
Vardhman holds the largest market share. Vardhman
is also the largest exporters of yarn from India,
exporting yarns worth more than USD 90 million.
• Sewing Thread

Vardhman is the second largest producer of sewing

thread in the country. The sewing thread
89
 manufacturing capacity is being expanded from
present 17 tons per day to 22 tons per day in its sewing
thread plants located at Hoshiarpur, Baddi and
Ludhiana. Sewing threads contributes 12 percent of
the group turnover.

• Fabrics
The group has created state-of-the-art fabric weaving
and processing facilities in its plant at Baddi, Northern
India. The group has installed 208 shuttleless looms
and a fabric processing capacity of 30 million meters
per annum in collaboration of Tokai Senko of Japan.
Fabrics business contributes 8 percent to the group
turnover.
• Fiber
The group has recently set up an Acrylic Staple Fiber
plant at Bharuch in Gujarat in collaboration with
Marubeni and Japan Exlan of Japan. The plant has
annual capacity of 18000 tons per annum. Fibre
contributes 8 percent to the total turnover of the group.
• Steel
The Group is also present in upper-end of the steel

90
industry. The group has manufacturing capacity of
100000 tons of special and alloy steel. The group
supplies its steel products to some of the most
stringent quality steel buyers like Maruti

91
 MARKET POSITION
• The Vardhman Group is an undisputed market leader
in India and can point to impressive corporate data. It
has the largest spinning capacity in the country and is
the biggest producer of cotton, synthetic fiber and
mixed yarns, as well as a large dyer of fibres and
yarns. The Vardhman Group is also one of India’s
biggest exporters of cotton yarns, the Indian hand
knitting yarn market leader and the second largest
producer of sewing threads.

• Total company sales amount to around USD 500

million and some 20% of all yarns are exported to
countries such as the USA, the EU states, Canada,
China, Japan, Korea, Mexico, Brazil, etc. Vardhman
has a 6% share of Indian yarn exports.

92
 ANALYSIS
The analysis of the company can be divided into the
following ;

• INTERNAL ENVIRONMENT

• EXTERNAL ENVIRONMENT

INTERNAL ENVIRONMENT ANALYSIS

Vardhman aims to be world class textile organization

producing diverse range of products for the global textile
market. Vardhman seeks to achieve customer delight
through excellence in manufacturing and customer service
based on creative combination of state-of-the-art
technology and human resources. Vardhman is committed
to be responsible corporate citizen.
EXTERNAL ENVIRONMENT ANALYSIS
A comprehensive understanding of the external
environments is essential for the firm to understand the
present and predict the future. A firm’s external

93
environment is divided into three major areas: the general,
industry and competitor environment

CAPACITIES
Vardhman has one of the largest spinning capacities in
India with a spindlage of more than 500,000. Vardhman
Threads has emerged as second largest sewing thread
brand in the country. In fabrics, the Group has already
made its mark as a quality producer of grey poplin
/shirting / suiting in the home market and has also
entered the highly competitive export market within this
short span, now exporting fairly large volume of its
production. Vardhman established a modern fabric
process house in 1999 with a capacity of 30 million
meters per annum. This capacity has been expanded to
42 million meters per annum in FY 2005-06. Set up in
technical collaboration with Marubeni and Japan Exlan
of Japan, the acrylic fiber plant has an annual capacity of
16500 metric tonnes annum. The steel mill has been
94
modernized and expanded to a capacity of 100000 metric
tonnes per annum.

STRATEGIC
DIRECTION
• Focus on Value Added yarn

• Improvement in Capacity Utilization

• Focus on high value customers

• Focus on improving yields

• Participation in overseas yarn fairs

• Strategic Alliance with Nisshimbo, Japan

• Putting plants in Central India

• Fabric

• Alliance with a leading Italian Design House to present

our

95
• collections

• Focus on Value Added products esp. cotton Lycra

based fabrics,

• Sheared & compact yarn based fabric

• Reducing cycle time & reducing lead time

• Strategic relationship with key exporters

• High level of Operational performance

• New expansion coming up in M.P. with reduced energy

costs &

• improved logistics

• Thread

• Strategic Alliance with American & Efird, Inc. USA

for manufacturing

• & distribution of A&E branded sewing threads

• Decision taken to consolidate the thread business

under one company,

• which is currently divided into two entities: Vardhman

Threads Ltd &

• Vardhman Textiles Ltd

96
 • This would help to enhance focus & accelerate growth
momentum

• It opens up a possibility of strategic tie-ups or

attracting financial investors

HUMAN RESOURCE
DEVELOPMENT
• Setting up of HRD centers for worker training

• In House Training and Development Centre for

staff and

management MANAV VIKAS

KENDAR

• TQM and TPM (Total quality management & Total

productivity management)
• Quality Circle, Competitions, Suggestion Scheme

97
• Olympiads- Workers competition on skills and
productivity
• Regular benchmarking

98
 RESEARCH AND
DEVELOPMENT
Vardhman’s corporate philosophy attaches great
importance to first class production facilities equipped with
modern technology. Moreover, the R&D focus is on
production sequence optimization. In all areas of the
Group, a large number of people are engaged with the
improvement of existing products and the development of
innovations. Apart from cotton, tests are under way with
bamboo fibres and Lyocell. Mr. S.P. Oswal, "Naturally
enough, we cannot offer everything and this is not our
objective. Nonetheless, our production programme is
growing steadily.

However, the most important factor in a company is formed

by quality employees and some 15-20 are always involved
in further training courses. We also have an in-company
programme in this area, in order to enable employees to
step up into management positions. An MBA is not an
absolute necessity for advancement in our company."

99
Limited

100
 INTRODUCTION
The Arvind Mills was set up with the pioneering effort of
the Lalbhai brothers in 1931. With the best of technology
and business acumen, Arvind has become a true Indian
multinational, having chosen to invest strategically, where
demand has been high and quality required has been
superlative. Today, The Arvind Mills Limited is the
flagship company of Rs.20 billion (US$ 500 million)
Lalbhai Group.

Arvind Mills has set the pace for changing global customer
demands for textiles and has focused its attention on select
core products. Such a focus has enabled the company to
play a dominant role in the global textile arena. With its
presence across the textile value chain, the company
endeavors to be a one-stop shop for leading garment
brands.

Forevision and Technology has brought Arvind to be one

of the top three producers of Denim in the world, and on its
way becoming the Global Textile Conglomerate. Arvind is
already making its presence felt in Shirting’s, Knits and
Khakhis fabrics apart from being all set to create ripples in
the ready to wear Garments world over.

101
 HISTORY
1930 was a year the world suffered a traumatic depression.
Companies across the globe began closing down. In UK
and in India the textile industry in particular was in trouble.
At about this time, Mahatma Gandhi championed the
Swadeshi Movement and at his call, people from all India
began boycotting fine and superfine fabrics, which had so
far been imported from England. In the midst of this
depression one family saw opportunity. The Lalbhais
reasoned that the demand for fine and superfine fabrics still
existed. And any Indian company that met this demand
would surely prosper. The three brothers, Kasturbhai,
Narottambhai and Chimanbhai decided to put up a mill to
produce this superfine fabric. Next they looked around for
state-of-the-art machinery that could produce such high
quality fabric. Their search ended in England. The best
technology of that time was acquired at a most attractive
price. And a company called Arvind Limited was born.
Arvind Limited started with a share capital of Rs 2,525,000
($55,000) in the year 1931. With the aim of manufacturing
the high-end superfine fabrics Arvind invested in very
sophisticated technology. With 52,560 ring spindles, 2552
doubling spindles and 1122 looms it was one of the few
companies in those days to start along with spinning and
weaving facilities in addition to full-fledged facilities for
dyeing, bleaching, finishing and mercerizing. The sales in
the year 1934, three years after establishment were Rs
45.76 lakh and profits were Rs 2.82 lakh. Steadily
producing high quality fabrics, year after year, Arvind took
its place amongst the foremost textile units in the country.
102
In the mid 1980’s the textile industry faced another major
crisis. With the power loom churning out vast quantities of
inexpensive fabric, many large composite mills lost their
markets, and were on the verge of closure. Yet that period
saw Arvind at its highest level of profitability. There could
be no better time, concluded the Management, for a rethink
on strategy. The Arvind management coined a new word
for it new strategy – Renovision. It simply meant a new
way of looking at issues, of seeing more than the obvious
and that became the corporate philosophy.
The national focus paved way for international focus and
Arvind’s markets shifted from domestic to global, a market
that expected and accepted only quality goods. An in-depth
analysis of the world textile market proved an eye opener.
People the world over were shifting from synthetic to
natural fabrics. Cottons were the largest growing segments.
But where conventional wisdom pointed to popular priced
segments, Renovision pointed to high quality premium
niches. Thus in 1987-88 Arvind entered the export market
for two sections -Denim for leisure & fashion wear and
high quality fabric for cotton shirting and trousers. By 1991
Arvind reached 1600 million meters of Denim per year and
it was the third largest producer of Denim in the world.
In 1997 Arvind set up a state-of-the-art shirting, gabardine
and knits facility, the largest of its kind in India, at Santej.
With Arvind’s concern for environment a most modern
effluent treatment facility with zero effluent discharge
capability was also established.
Year 2005 was a watershed year for textiles. With the
muliti-fiber agreement getting phased out and the
disbanding of quotas, international textile trade was poised
for a quantum leap. In the domestic market too, the
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rationalizing of the cenvat chain and the growth of the
organized retail industry was likely to make textiles and
apparel see an explosive growth.
Arvind has carved out an aggressive strategy to verticalize
its current operations by setting up world-scale garmenting
facilities and offering a one-stop shop service, by offering
garment packages to its international and domestic
customers. of Lee, Wrangler, Arrow and Tommy Hilfiger
and its own domestic brands of Flying Machine, Newport,
Excalibur and Ruf & Tuf, is setting its vision of becoming
the largest apparel brands company in India.

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ARVIND INTO VARIOUS
BUSINESSES

Corporate

Lifestyle Fabrics

Lifestyle Apparel

Brands & Retail

Anup Engineering

Telecom Business

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 BEYOND BUSINESS
At Arvind, it is firmly believed that a successful company
must play an active role in the development of the society
from which it springs. Besides pursuing its business goals,
it should also be responsible corporate citizen. It is because
of these beliefs that Arvind is always on the forefront of
extending a helping hand for the needy, downtrodden and
for the society at large.

Arvind has always been actively involved in the

educational institution, hospitals and research institutions
of Ahmedabad, its hometown. It co-pioneered the world
renowned Indian Institute of Management, Ahmedabad
(IIMA), and helped set up the Ahmedabad Textile Industry
Research Association (ATIRA), and The Kasturbhai
Lalbhai Textile Training Center to develop and enhance the
skills of textile workers.

The Narottambhai Lalbhai Rural Development Fund and

The Lalbhai Group Rural Development Fund where
founded to undertake special programs for the
economically deprived. It also assists the nearby villages,
through nutritional programs, food camps and the
harnessing of solar energy.

SHARDA TRUST

At Arvind, we believe in repaying to society in our own

little way through a social arm of ours – Sharda Trust

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Established in 1995 with the support of Arvind Mills,
“Strategic Help Alliance for Relief to Distressed Areas”
(SHARDA), its purpose is to help the urban poor in
improving their quality of life. The Trust has based its
strategy on the premise that a family has five basic needs,
listed below and ranked according to their priority. These
are:
 Basic physical infrastructure for clean potable water
at the door steps in adequate quantity at convenient
hours, individual toilets and hygienic surroundings.
 Primary health-care.
 Access to high quality secondary and tertiary health
care.
 Reading, writing and arithmetic skills (3Rs) for all.
 Skill and ability to compete in today’s environment.
SHARDA Trust joined hands with the Ahmedabad
Municipal Corporation to upgrade the physical
environment and living conditions in a slum pocket called
“Sanjay Nagar.” The Municipal Corporation assigned the
task of implementation to this Trust, which completed the
project within time and budget. So innovative was the
Nations Centre for Human Settlement (UNCHS) included
the Sanjay Nagar project in its "100 Best Practices Global
List".

Subsequently, the Trust has taken several initiatives like

providing secondary and tertiary healthcare to the urban
poor through networking with prominent hospitals in the

107
city. About eight hundred patients have benefited and
approximately Rs.13 lakh have been spent on this activity.

The Trust collaborated with the National Institute of

Fashion Technology (NIFT), Gandhinagar, and helped the
urban poor to train in the area of sewing machine operation.
The Trust also organized placement activity with the local
garment manufacturers and has so far trained and placed
over 300 persons in Ahmedabad.

Spoken English and basic mathematics for the youth

belonging to poor families and providing them with
computer skills is the other activity that the Trust has
undertaken in collaboration with the Chandraprasad Desai
Memorial Foundation. The Trust is poised for a rapid
expansion in all its projects.

Arvind & Environment

A) Environmental Policy:

Arvind Mills commits itself to continually improve our

environmental management. It strives to go beyond the
requirements of the applicable environmental laws & other
regulations through:
 Optimizing usage of cotton, energy, chemicals &
water.
 Adopting preventive strategies to reduce the
generation of effluents, waste & air emissions.
 Maximizing the recycling of inevitable wastes.

108
  Encouraging suppliers & buyers to become
environmentally responsible.
 Maintaining a safe working environment.
 Increasing the green cover.
 Training employees on environmental issues.
B) Effluent Treatment Facilities:

All the production / processing units are provided with

adequate wastewater / water treatment facilities, to meet the
requirements of regulating authorities as well as our
reputed customers like Levis, Nike etc.

Arvind Mills at Santej has one of the largest effluent

recycle plants in Asia with recycling capacity 10,500
m3/day. The latest & best of the technologies available in
water / wastewater treatments can be seen in operation in
this plant.

The Arvind International (division) has Effluent recycling

facilities comprising Chemical, Biological & tertiary
treatment and it is of 800-m3/day capacity. The plant also
has ISO 9000 & ISO 14000 certification.

Arvind Mills @ the main site at Naroda also possess

chemical, biological treatment facilities to treat 10000
m3/day of effluents to meet the pollution control board
norms.

Ankur Mills (division) has Effluent treatment plant of

1600-m3/day capacity with chemical & biological
treatment facility to achieve the pollution board norms.
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Arvind Mills (Garment exports division) is setting up a new
garment unit at Mysore road, Bangalore, along with
Effluent treatment plant of 1450 m3 /day capacity. This
plant also possesses chemical, biological & tertiary
treatment facilities to achieve the State Pollution Control
Board norms. The uniqueness of this plant is – all it’s
process water requirements will be attained through
recycled sewage water of Bangalore City.
C) Air pollution Control

Arvind Mills has switched from liquid fuel to Natural gas

for all their heating & steam requirements in order to avoid
the air pollution.

D) Solid waste Management

All the units believe in waste minimization measures. All

the ETP plants are provided with adequate sludge
Dewatering facilities. Units at Santej, Naroda, Arvind
International & the upcoming Bangalore unit are provided
with Decanter Centrifuges for sludge de-watering. De-
watered sludge is dried in solar evaporation pans for further
volume reduction. Waste oil generated in all the units is
recycled. Polythene liners, Discarded containers are
disposed off to the respective buyers.
E) Afforestation & Rain water Harvesting

Units at Khatrej & Santej have very good afforestation &

green belts.
The Santej unit has more than 1 lakh trees & other
shrubbery. Plants like Jetropha (seeds used for Biodiesel
110
generation) are grown extensively. ETP treated water is
used for this plantation so as to minimize raw water
consumption. Beautiful lawns with Fountains are part of
the landscape.

At the Santej unit ground water recharging facility is also

developed where in yearly about 40 MLD rain water is
recharged in to ground water table. Two recharge ponds
with a capacity of about 4000 m3 are made & Rainwater
during the monsoon is collected in these ponds & recharged
in to Ground water table.

INTERNAL
ENVIRONMENT
MISSION AND OBJECTIVES
The underlying theme running across the broad spectrum of
all business activities at Arvind is that of enhancing
lifestyles of people, across all diversities and
demographics.
To serve that end, the corporate vision for Arvind states:
'We will enable people to experience a better quality of life
by providing enriching and inspiring lifestyle solutions'.

111
COMPANY-BELIEVE
In people and their unlimited potential. In content and focus
in problem solving. In teams for effective performance. In
intellect & its power.

COMPANY-ENDEAVOUR
To select, train and coach people to obtain higher
responsibilities. To nurture talent to build leaders for
tomorrow's corporation. To reward, celebrate and activate
all intellectual business contributions.

COMPANY-DREAM
Of excellence in all endeavours. Of mutual benefit and
prosperity. Of making the world a better place to live in.
We Make Things Happen.

112
MANAGEMENT
STRUCTURE
CHAIRMAN AND MANAGING DIRECTOR
Mr. Sanjay S. Lalbhai

DIRECTOR AND CHIEF FINANCIAL OFFICER

Mr. Jayesh K. Shah

OTHER DIRECTORS

Mr. S. R. Rao (Nominee of EXIM Bank)

Mr. K.M. Jayarao (Nominee of ICICI Bank)
Mr. Sudhir Mehta
Mr. Tarun Seth
Mr. Munesh Khanna
Mr. G.M.Yadwadkar (Nominee of IDBI)

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 COMPANY IMAGE AND
BRAND EQUITY
Arvind Mills is one of the world's largest denim
manufacturers and one of
India's largest textile exporters. Aside from leadership in
denim (a 72% market share) in India, Arvind Mills has a
presence in shirting, knits, khakhis, voiles fabrics and a
wide range of garments. It is an integrated player with a
presence across the textile value chain - global capacity of
154m meters in fabrics, vertical integration to garments,
strong brand franchise and a distribution network for
branded apparels. Arvind's wide product range, scaleable
capacities and ability to offer specialty fabrics and high-end
garments make it a preferred vendor in the domestic market
and to global brands. It is the flagship company of the
Lalbhai Group, which owns a 34% stake.

BRANDS
KNITWARES

Arvind Knits Division has the distinction of being the only

nominated supplier of INVISTA (DuPont) Specialty
Lycra® Fabrics in the Indian Subcontinent. INVISTA has
entrusted Arvind Knits as the only INVISTA accredited
Readymade Garment Vendor (RGV) source for Lycra®
based garments in India. Arvind KBD has tied up with
International Fiber Companies like Celanese (for Acetate),
Lenzing (for Modal), Courtaulds (for Tencel®) and
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Wellman who have approved Arvind knits as a Vendor for
fabrics made from their fiber. Arvind KBD is a nominated
supplier of fabrics to Nike Golf, Marks & Spencer, Arnold
Palmer, Eddie Bauer, Calvin Klein and Columbia
Sportswear.
Labs accredited by:
 Marks & Spencer
 Target
 Invista (DuPont)

DENIM

 ISO 9001:2000 from BVQI

 ISO 14001
 Oeko-Tex-100 from Shirley Tec
 Certified Supplier for GAP
 Lycra Assured Partners of Du Pont
 Labs accredited by:
 Marks & Spencer
 Levis-Strauss & Co.
 NEXT
 INVISTA

KHAKIS
Labs accredited by:
 Marks & Spencer
 Levis-Strauss & Co.
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 NEXT
 INVISTA

SHIRTINGS
Labs accredited by:
 Mark & Spencers
 NEXT
 Levis-Strauss & Co.
 INVISTA

116
 FINANCIAL FACTORS
FINANCIAL HIGHLIGHTS:-
• The earnings of the company continue to be depressed on
account of weak denim markets coupled with rapid rise in
the input cost

• The new economy business of brand and retail continue to

grow in excess of 35%

• The apparel export business has also been showing rapid

growth in terms of profitability primarily due to
productivity gains

117
FINACIAL POSITION

118
 RISK MANAGEMENT
We rate Arvind Mills as Medium Risk, as opposed to the
Low Risk rating assuggested by our quantitative risk-rating
system, which tracks 260-day shareArvindMills
(ARMI.BO) 30 September 2007 price volatility. The key
reasons for our Medium Risk rating include high earnings
volatility due to volatility in denim prices and its
vulnerability to forex fluctuations.
The main upside risks to our
target price include: (1) strong up-tick in denimprices
(greater than assumed 5%) could significantly improve
earnings forecasts; (2) new tie-ups with global retailers for
sourcing garments could put our conservative assumptions
at risk; (3) stronger-than-expected turnaround for its
branded apparel division could contribute towards higher
growth; and (4) any potential unlocking of hidden value in
real estate assets in Ahmedabad and Bangalore would be a
positive.

119
 HUMAN RESOURCES
Human Resources for a business enterprise needs a
conceptual outlay to enable business managers to identify,
plan and implement planning for manpower.
Fundamentally, business situations have changed the world
over. The rise of the intellect has been imminent. Human
resource planning can no longer confine it to the traditional
sources for hiring and retaining. The human resources of
today see their roles having changed from that of a doer to
that of a thinker and on most occasions “a thinker doer”.
HR Vision
Be The Foundation That Integrates Culture, Vision &
Values , Creates an Environment That facilitates The
Maximization of Human Potential.
WE BELIEVE
In people and their unlimited potential. In content and focus
in problem solving. In teams for effective performance. In
intellect & its power.
WE ENDEAVOUR
To select, train and coach people to obtain higher
responsibilities. To nurture talent to build leaders for
tomorrow's corporation. To reward, celebrate and activate
all intellectual business contributions.
WE DREAM
Of excellence in all endeavours. Of mutual benefit and
prosperity. Of making the world a better place to live in.
We Make Things Happen.

120
 BIBLIOGRAPHY
• http://apparel.indiamart.com/indian-textile-policy/
• www.vardhman.in
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Uma Natarajan
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• http://www.indiastat.com/
• http://www.economywatch.com/business-and-economy/textile-industry.html
• http://finmin.nic.in/downloads/reports/repInvestmentGrowth.PDF
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• http://retailindustry.about.com/cs/textilesofindia/
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id=14288&section=&country=Bangladesh&p_type=General
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advisors/newsdetails.aspx?news_id=45986
• http://www.thehindubusinessline.com/2004/12/06/stories/2004120600890200.htm
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players.htm
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