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Business opportunities in India

By: / Feature, Markets

Investment-friendly policies are welcoming specialty textile manufacturers to India.

Right now, the timing is excellent for the global technical textiles industry to explore opportunities beyond U.S. and European borders. With the economy hitting many businesses hard in the United States and other developed economies, it’s the right time for industrial fabrics companies and the technical textiles industry to venture into collaborations and joint ventures in countries with growing economies that can open doors for new markets.

President Obama and the U.S. Congress recently passed an economic stimulus package of nearly $800 billion. It is hoped that this stimulus package will create 16 million jobs over the next five years. This package has to be a lifeline of support for beleaguered U.S. industry, in particular the manufacturing sector. In some other parts of the world, such as eastern and southeastern Asia, the economic situation is less dire. These economies are not totally decoupled from those of more developed economies, given the growth scenarios in those parts of the world, but it seems they have weathered the storm fairly well so far.

Asian economies grew approximately 8.7 percent recently. South Africa has been growing, on average, around 5 percent each year. BRIC countries (Brazil, Russia, India and China), south and southeast Asia and South Africa are new markets that may offer needed growth opportunities for the technical textiles industry in the next few years. Some of the Asian countries that would be worthwhile for our industry to explore are China, India, Vietnam and Thailand. In particular, India stands in the “mushy middle” between China and Eastern economies and is ready to aggressively embrace the technical textiles sector.

Although China offers tremendous scope, it has its own established industry and is 15 years ahead of India in the noncommodity textiles sector (nonwovens and technical textiles). Growing Southeast Asian economies such as Thailand and Vietnam are still embryonic in the noncommodity textiles sector, and it may take five to ten years for them to realize the importance of the technical textiles sector as a major contributor in their growth equations. Currently, India is well placed to absorb the technical textiles industry, and it needs input and collaboration from the West to achieve its growth targets

Strong growth platform for technical textiles industry

Politically and demographically, India offers a strong growth platform for the Western technical textiles industry. India is a stable democracy, with rule of law since its independence in 1947. It has a young, educated population with English as the business language. By 2030, the middle class in India is expected to reach roughly half a billion—the customers for end products in the technical textiles industry.

In contrast, China, due to its one-child policy, will be aging quickly, with relatively less youth compared to India. A recent report by the Economic Council of the Prime Minister of India indicates that economic growth in 2008–2009 is expected to be around 7.1 percent. Compare this with today’s U.S. and Western European economies, which are not expected to grow beyond 1.5 percent this year. More importantly, proactive measures by India’s government to boost the textiles sector, due to its employment-generating capability, gives the technical textiles industry in Western countries an opportunity to invest with India and create a win-win scenario.

Currently, the market size of the textile industry in India is $50 billion, of which technical textiles accounts for approximately $5 billion. The goal of the Indian government is to increase the market size of the Indian textile industry to $115 billion by the end of the 11th financial plan period in 2012. To achieve this figure, the contribution from the technical textiles industry in India should be $50 billion—which means a tenfold increase by 2012. Right now this isn’t possible, due to a lack of indigenous technology and industry expertise. India needs resources both in terms of capital and knowledge to boost its technical textiles sector. The situation presents a rare opportunity for established textile companies to explore India for continued business growth.

Opportunities for growth in noncommodity textiles

The scenario is right in India now to venture into noncommodity textiles. Next to software, the export of textile commodity products to North America and Europe has been the main source of foreign exchange for India, but this has become difficult in recent months due to the economic slowdown in the United States and Europe. Also, the competitive advantage that India had—labor—is eroding due to competition from countries including Vietnam and Thailand. In November 2008 alone, the year-to-year overall exports from India dipped by 10 percent, ringing alarm bells in the manufacturing and exporting sectors and expanding the search to diversify and explore new markets.

For the textile industry, one immediate response is to look seriously into technical textiles as an opportunity for growth. Today, India imports more in this sector, and has a deficit in its production capabilities to meet domestic requirements. India lacks raw materials for certain technical textile products, as well as the necessary technology and marketing know-how. This provides many opportunities for the Western fiber-to-fabric supply chain to venture into India. For example, the Indian government sees the need to build roads, seaports and airports to boost its infrastructure capabilities as a means to lure foreign direct investments to India. This provides an opportunity for high-tenacity polyester producers and geotextile manufacturers to venture into India by directly building their manufacturing facilities or by entering into joint venture agreements with Indian partners. The collaborative opportunities are virtually unlimited, and encompass almost the entire spectrum of the technical textiles sector.

The government of India is allowing 100 percent foreign direct investment in the textiles sector. Interested investors should notify the Reserve Bank of India of their interest, which is known as an “automatic route of investment.” In addition, to infuse needed technical textiles know-how, the government is also allowing concessional custom duties on all major machinery pertaining to the technical textiles sector, such as coating and laminating equipment, nonwoven machinery and converting sector machines.

Another program to attract foreign investors is the concept of Special Economic Zones (SEZs). Investment into these specially allotted areas gives investors a number of tax breaks and excise duty concessions. The one requirement is that the investment should be export-oriented from India, and result in net export. Recently, Helsinki-based Ahlstrom Corp. became the first overseas investor in the nonwovens sector to utilize the opportunities that the SEZs are providing in India. Ahlstrom, which will soon begin production in Mundra SEZ in the State of Gujarat, has invested approximately €38 million for the state-of–the-art spunmelt facility to develop medical fabrics.

Investing and forming joint ventures in Indian textile industry

Every major embassy of India, such as those in Washington, D.C., London and Berlin, has streamlined trade and commerce cells to help foreign industry and investors gather current information on the policies and tax structure of India. Textile industry people are encouraged to visit the Ministry of Textiles Web site for specific information on the textile industry. Within the Ministry of Textiles, a foreign direct investment “help cell” exists to bring investments to India.

Indian industry trade bodies, such as the Federation of Indian Chambers of Commerce (FICCI) and the Confederation of Indian Industry (CII), are actively searching for overseas partners for investments and joint ventures. Their Web sites provide extensive information about their programs and projects to help international entities venture into India. In addition to these two general trade bodies, industry-specific organizations, such as the Confederation of Indian Textile Industry (CITI) and the Synthetic Rayon Textiles Export Promotion Council (SRTEPC), will be useful for those who are looking for international collaborations and partnerships. In the United States, the U.S.-India Business Council (USIBC) is charged with fostering business ties between U.S. and Indian companies.

Experts predict growth in Indian textile industry

The investment policies and the growth in consumer numbers in India clearly show the need for technology infusion and capital investments from global businesses. This is particularly true for the nonwovens and technical textiles sectors, which are predicted to show double-digit growth in the coming years, according to a recent government-sponsored survey in India. This industrywide survey, carried out by ICRA Management Consultancy under the direction of the Office of the Textile Commissioner, Ministry of Textiles, India, showed clearly that the technical textiles sector is a “sunrise” industry sector in India, offering wide-ranging opportunities for growth and investments. (Growth rate predictions were published in the June 2008 issue of Specialty Fabrics Review, page 61, entitled “India rising.”)

As the United States struggles to maintain the vitality of its manufacturing base, it’s important to realize that projects worth U.S. $241 billion were inked in the Vibrant Gujarat Global Investors Summit in Ahmedabad, India, this January. This is nearly one-third of the U.S. stimulus package just passed, and a strong indication of where industry-sustaining growth can be.

Seshadri Ramkumar is the supervisor of the Nonwovens and Advanced Materials Laboratory at Texas Tech University, Lubbock, Texas. To comment on this article directly to Ramkumar, contact him at s.ramkumar@ttu.edu.

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