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Report | January 2017

2016 THE YEAR THAT WAS

Textiles in the first six months grew at an average of 1.4 per cent and in the last six months of the FY, it accelerated at an average rate of 3.4 per cent.

The Index of Industrial Production (IIP), which provides quick estimates of the performance of key industrial sectors, started resurrecting upward movement during FY2015-16. As per IIP, the industrial sector broadly comprises of mining, manufacturing and electricity. In FY2015-16, IIP growth of T&C was bracing and it outstripped the growth of overall manufacturing and general IIP.

As per the latest estimates of IIP, the textile and clothing sector had a positive growth in fiscal year 2015-16 at marginally higher pace compared to 2014-15. On a YoY basis, T&C sector had shown a positive growth of 4 per cent during April-March period of 2015-16 as compared to 3.6 per cent of the last fiscal year. There have been sharp turnarounds in productions of apparel as well textile products like yarn, fabrics and made-ups during 2014-15 and positive growth trends continued in 2015-16 also.

Though the monthly growth trends in production of textile, wearing apparel and T&C have shown faltering pattern. In the first six months of FY2015-16, T&C IIP was growing at an average of 5.4 per cent, which decelerated to 2.8 per cent in last six months of the FY. While textiles and wearing apparel’s IIP, when compared month-wise, shows opposite pattern in the FY2015-16. Textiles in the first six months grew at an average of 1.4 per cent and in the last six months of the FY, it accelerated at an average rate of 3.4 per cent. On the other hand, wearing apparel in the first six month of the FY was growing at an average rate of 13.6 per cent but decelerated to an average rate of 1.9 per cent in the last six months of the FY. Overall, in the FY2015-16, IIP of T&C was up by 4 per cent compared to previous FY while textiles and wearing apparel was up by 2.6 and 6.7 per cent respectively over the previous FY.

Installed capacity in mills

In the FY2015-16, the capacity of spindles in the mill sector increased by 0.92 million and was 2.0 per cent higher than the previous FY. The number of spindles increased from 45.08 million in FY2014-15 to 46 million in the FY2015-16. The number of looms increased by 1,000 in the FY2015-16 and reached about 53,000. Rotors have posted a growth of 2.8 per cent over a previous financial year and now India has 5,81,000 rotors installed in non-SSI sector for spinning.

The number of units in SSI sector was 1,325 in FY2014-15, which stood around 1,335 in the 2015-16. The number of spindles in SSI sector has also increased from 50.6 lakh in FY2014-15 to 52.2 lakh in FY2015-16. In the FY2014-15, in SSI sector 2.67 1akh rotors were installed, which increased to 2.80 lakh in the FY2015-16.

Production of yarn

The provisional production estimates for the FY2015-16 show that spun yarn production has increased from 5,485 million kg in 2014-15 to 5,661 million kg in 2015-16, with addition of 176 million kg in this fiscal. In percentage terms, spun yarn production has increased by 3 per cent over the previous FY. The production of cotton yarn, blended yarn and 100 per cent non-cotton spun yarn has registered positive growth of 2 per cent, 6 per cent and 8 per cent respectively during FY2015-16. The provisional production data shows that cotton yarn production has increased by 79 million kg, blended yarn production by 56 million kg and the 100 per cent non-cotton yarn by 45 million kg in the FY2015-16 compared to the previous year. Cotton, blended and 100 per cent nail-cotton yarn amounted to 4136, 971 and 554 million kg respectively in the FY2015-16.

The share of cotton yarn production in all spun yarn has now slipped to a level of 73 per cent in FY2015-16 for the last five years. On the other hand, share of blended yarn remained stagnant at 17 per cent for the last four years while share of 100 per cent non-cotton yarn (MMF yarn) has increased to a level of 10 per cent in FY2015-16.

Production of fabrics

Since FY2009-10, India’s fabric production in mill sector remained subdued and is bottomed out to -7 per cent in the FY2015-16. Cloth production of mill sector (including all fibres) was negative in FY2015-16 for all fibre categories as compared to previous FY. In the FY2015-16, mill sector produce 2,313 million sq m cloth, which was 179 million sq m lower than the previous FY. Highest decline in mill sector cloth production was registered by cotton fibre (92 million sq m) followed by blended (76 million sq m) and MMF (10 million sq m).

Following the mill sector trend, decentralised powerloom sector also registered negative growth in cloth production during the FY2015-16. Production in the sector was down by 220 million sq m in quantity terms. In percentage terms, productions were down by 1 per cent in the FY2015-16 over the previous year. Fibre-wise production under the powerloom sector was up for cotton and blend sector while MMF registered negative growth in FY2015-16. Cotton, blend and MMF production amounted to 15,717, 7,822 and 13,807 million sq m respectively in FY2015-16.

Decentralised handloom and hosiery were the only cloth production sectors, which have registered increase in cloth production in the FY2015-16 over the previous year. In cloth production, during FY2015-16, handloom sector registered a growth of 6 per cent while hosiery sector registered a growth of 4 per cent. Handloom and hosiery sector produced 7,616 million sq m and 17,641 million sq m cloth respectively in FY2015-16. Sectoral contribution in the total cloth production in the FY2015-16 was mill (4 per cent), handloom (12 per cent), powerloom (57 per cent), hosiery (27 per cent) and KVI (1 per cent).

The share of mill sector in the overall fabric production has gone down marginally in FY2015-16.

The share of all sectors have improved in FY2015-16 over the FY2009-10 except for powerloom and mill sector.

World cotton

Over the course of 2015, cotton prices remained stable, even though oil prices plummeted and other commodity prices declined. World cotton production fell while consumption stayed relatively flat resulting in the first drop in ending stocks since 2009 (2016, the economic outlook for US cotton, NCCA). In 2015-16, world cotton consumption declined by 3 per cent to 23.6 million tonne and will likely remain at the same level in 2016-17 due primarily to low polyester prices and weak global economic growth. After reaching a record level of 10.9 million tonne in 2007-08, cotton consumption in China has declined in each subsequent season with the exception of 2009-10. However, China remains the world’s largest consumer and mill use is estimated at 7.1 million tonne in 2015-16. High domestic cotton prices, particularly compared with those of polyester, are expected to cause China’s cotton consumption to decrease by 5 per cent to 6.7 million tonne in 2016- 17. However, mill use is anticipated to increase in several other large cotton consuming countries, which would offset the decline in China.

After falling by 3 per cent in 2015-16 to 5.2 million tonne, cotton consumption in India is expected to rise by 4 per cent to 5.4 million tonne in 2016-17 due to favourable textile export policies, well integrated downstream industries and competitive prices. After three seasons of growth bolstered by China’s demand for cotton yarn, mill use in Pakistan fell by 12 per cent to 2.2 million tonne in 2015-16 due to the ongoing energy crisis, high costs of production, and weak cotton yarn demand. Mill use in Pakistan is forecast to rise by 1 per cent, to a little over 2.2 million tonne in 2016-17. Bangladesh and Vietnam are projected to see significant growth in 2016-17, with mill use increasing by 16 per cent to 1.3 million tonne in Vietnam and 10 per cent to 1.2 million tonne in Bangladesh.

China began selling cotton from its national reserve last month as part of its efforts to reduce its large cotton stockpile. The total volume sold reached 4,50,000 tonne as at the time of writing, which reduces the total volume in China’s reserve to around 10.6 million tonne. Sales have been robust with nearly all domestic cotton and all imported cotton on offer being purchased. Imports by China are forecast to fall by 12 per cent to 9,60,000 tonne in 2016-17 due to the Government’s desire to reduce its cotton reserve stock and restrict imports. However, imports by the rest of the world are expected to increase by 3 per cent to 6.5 million tonne, with Vietnam and Bangladesh emerging as the world’s largest importers, accounting for 34 per cent of the world’s imports. World cotton imports are forecasted to increase by 1 per cent to 7.4 million tonne in 2016-17. Exports from the USA are anticipated to rise by 11 per cent to 2.2 million tonne in 2016-17, due to increased domestic production and ample carryover stocks.

In 2015-16, world cotton production dropped by 17 per cent to 21.8 million tonne as world cotton area shrank and many countries experienced below-average yield. However, production is forecast to increase by 6 per cent to 23 million tonne as world cotton area expands and yields improve. India is likely to maintain its place as the world’s largest producer in 2016-17. Production in China is expected to fall by 10 per cent to 4.6 million tonne due to reduced subsidies and high-production costs. World ending stocks are expected to decrease by 4 per cent to 19.7 million tonne by the end of 2016-17, which would follow an 8 per cent reduction in stocks to 20.4 million tonne in 2015-16. However, ending stocks outside of China are projected to rise by 3 per cent to 8.8 million tonne in 2016-17.

Indian cotton scenario

The cotton economy of India witnessed sluggishness during 2015-16. This has affected the textile mills badly, and most of the textile mills are now incurring huge losses. The price of cotton kept fluctuating in domestic market during the FY2015-16. The cotton consumption for both non SSI and SSI mills are indicating different scenarios. In case of non-SSI mills, pace of cotton consumption has slowed down and reduced to lowest level for the last five years, though in quantity terms consumption (0.2 per cent) has increased marginally in the FY. On the other hand, cotton consumption by SSI mills has gone up by 5 per cent, which is a very significant growth compared to big mills in FY2015-16. Non-SSI mills consumed around 4,664 million kg of cotton, while SSI mills consumed around 460 million kg of cotton during FY2015-16.

High consumption demand by mills led to increase in imports of cotton during recent times, though cotton import in FY2015-16 were low over the previous year.

The consumption of imported cotton had been fluctuating for the last 10 years. However, cotton imports in FY2014-15 were marginally up; though in FY2015-16, cotton imports were significantly lower over 2014-15.

Man-made fibre (MMF)

Globally, India is ranked second in MMF (synthetic and cellulosic) and man-made filament yarn (MMFY) production. It had around 6.1 per cent share in global production of cellulosic fibres in 2015. India’s share in global man-made filament production was around 3 per cent in 2015, which is stagnant since last five years (figures derived from CIRF website). India’s capacities for MMF and filament yarns currently stand at around 4 billion kg, which is around 8 per cent of global MMF capacities. Consumption of MMF stood at around 1,143 million kg in FY2015-16, of which exports constituted around 33 per cent at 379 million kg and imports constituted around 15 per cent at 176 million kg. India’s MMF industry is largely polyester dominated, which constituted around 66 per cent of its total production in FY2015-16. India’s consumption of MMF has gone up by 1 per cent in the FY2015-16 while production is up only by 0.2 per cent in the FY2015-16. MMF exports and imports have increased by 10 per cent and 25 per cent respectively in the FY2015-16 over the previous year.

India’s MMFY production declined by 6.7 per cent in the FY2015-16, consumptions were also down by 17 per cent in the FY. MMFY production was around 1,164 million in FY2015-16, which was 1,248 million kg in 2014-15, almost 7 per cent lower than the previous FY. Within MMFY, polyester production dominated the production with 92 per cent share. In FY2015-16, amongst the major categories of MMFY, highest production growth was registered by nylon filament yarn (14 per cent) followed by viscose filament yarn (2.6 per cent). Production of polyester and polypropylene filament yarn production were heavily down during the fiscal.

Installed capacity of man-made sector declined by 1 per cent in FY2012-13 over the previous FY, since then capacities have remained constant and now stands at around 4 billion kg per annum.

The major categories of MMF and MMFY have different pattern of the capacities in India. In the MMF sector, industry created around 1,072 million kg per annum production capacity in FY2012-13. Since then, this remained constant and no further capacities have been created till now. On the other hand, in case of MMFY, capacities have reduced significantly from the level of FY2012-13 and remained almost stagnant for the last three FYs. Productions and consumption of others fibres except jute are very low in terms of share in all fibres.

India’s opening stocks for MMF sector have increased in the FY2015-16 compared to previous FY and it stood at around 75 million kg. This is almost 11 million kg higher than the previous FY. In the last four years, India’s all MMF sector has maintained the opening stocks on an average at 77 million kg per annum. In FY2015-16, opening stock of MMF sector was up by 17 per cent over the previous year while on the other hand closing stocks of MMF sectors have gone down by 4 per cent during the year.

MMF sectors closing stocks were around 72 million kg in the fiscal.

India’s trade of MMF sector have gained significant momentum in the last four year. India exported around 909 million kg MMF (both fibre and filament yarn) to world in FY2015-16, which was 12 per cent in up over the previous year, similarly imports were up by 15 per cent in the fiscal over the previous fiscal and stood at around 207 million kg. On an average, India’s exports and imports were around 807 and 160 million kg per annum respectively for the last four years.

Both availability and consumption of MMF in India’s market has been steadily sliding for the last four years and has reached to the newest low level of 1,885 and 1,814 million kg respectively in FY2015-16.

International T&C trade

According to the International Trade Centre (ITC) data 2016, global T&C exports were to the tune of $785 billion in 2015, almost 6 per cent lower than the previous calendar year. T&C exports have declined, from around $835 billion in 2014 to $785 billion in 2015. Global T&C imports were to the tune of $721 billion in 2015, almost 5 per cent lower than the previous year. T&C sector accounted for 4.8 per cent and 4.4 per cent of total global all exports and imports respectively in 2015, which is quite low compared to other sectors, though there is improvement in share which may be attributed to lower level of all goods trade across globe in 2015. Globally, all goods exports and imports in 2015 were to the tune of $16,329 billion and $16,480 billion respectively.

Share of global T&C trade in all goods is depicted both for exports and imports for the last one and half decade. As compared to 2001, share of T&C have decelerated, which indicates that T&C is gradually losing its ground in commodity trade across globe. Though after 2008 and 2012, it has also shown the sign of acceleration. India’s share in global textiles (excluding garments) have steadily increased till 2013. Thereafter share has decelerated, and is now stagnant at 6.1 per cent since 2014. India’s clothing exports have seen fluctuating trend in world clothing share. India’s share kept fluctuating between 2.6 per cent to 3 per cent during 2001 to 2008 and suddenly peaked to 3.6 per cent in 2009. Nevertheless, India was unable to keep the momentum of clothing expo share going up, and again it reduced to 3.1 per cent to 3.4 per cent during 2010-12. However, since 2013, there has been some improvement in India’s share in global clothing exports and it reached to a new level of 3.7 per cent in 2015. Global textile exports were to the tune of $327 billion in 2015 while India’s exports of textile for the same year was $20 billion. On the other hand, global clothing exports were to the tune of $456 billion in 2015 and India’s exports of clothing for the same year was $17.1 billion.

Global textile exports during first decade of 2000s were growing at an average rate of 7.6 per cent per annum, which has drastically reduced during 2010-15 and reached 2.6 per cent per annum indicating slowing of pace of global textile exports growth. The growth trend of global clothing export is not in tandem with the global textile exports. The global clothing exports were growing at 6.2 per cent per annum during 2000-10 and reduced very marginally to 6 per cent during 2010-15.

India’s textile and clothing exports grew at an average rate of 12.6 per cent and 6.4 per cent per annum during 2000-10 respectively. During 2010-15, India’s textile and clothing exports grew at an average rate of 4.8 per cent and 10.8 per cent, suggesting the increasing demand for India’s clothing products in global marketing comparison to textile goods, which are basically intermediary products like fibre, yarn and fabrics.

Major exporters of textiles & clothing

China (34.8 per cent), EU (23.1 per cent), India (4.7 per cent), Bangladesh (4.0 per cent) and Vietnam (3.6 per cent) were the top five global T&C exporters in 2015 as per ITC trade map database. These top five exporters accounted for around 70 per cent share in global T&C exports in 2015. These countries have registered growth on account of increasing demand for their apparel goods in global markets. Moreover, these countries enjoy preferential access in the advanced economies which is helping them to increase their garment exports as compared to other competing countries like India.

China has increased its share in world exports of T&C from 21.1 per cent in 2005 to 34.8 per cent in 2015 while India was barely able to increase its export share in global T&C exports from 3.3 per cent in 2005 to 4.7 per cent in 2015. The other competing countries whose share has gone up in 2015 in global T&C exports as compared to 2005 are Bangladesh and Vietnam.

Major importers of textiles & clothing globally

The European Union (EU) remained on top slot in import of T&C products in the world with a robust share of 34.2 per cent of total T&C imports (when region is counted). The United States was the second largest T&C importer after EU. The US’s imports were worth $119.6 billion of T&C goods, which accounted for 16 per cent of global imports in 2015. Hong Kong imported the highest volume and value of T&C goods to re-export. Therefore, it has a very high trading volume but was not among top consumers of textile goods. Chinese textile imports mostly comprised of apparel intermediary material and other kinds of high value manufacturing finished goods like technical textiles, etc. Global T&C imports were down by 2.9 per cent in 2015 and countries, which registered high fall in imports are Russia (-34.9 per cent), Brazil (-18 per cent), Turkey (-13.4 per cent), China (-10 per cent) and EU (-9.7 per cent). Countries where imports of T&C has increased in 2015 are Pakistan (79.7 per cent), Vietnam (65 per cent), UAE (55.2 per cent) and Saudi Arabia (5.7 per cent). Import of T&C in India has also increased marginally in 2015.

Overview of India’s T&C trade

In FY2015-16, India’s T&C exports were to the tune of $36,737 million while in rupee terms exports were around Rs 2.4 lakh crore. India’s T&C exports have reduced in FY2015-16 in USD terms, though in rupee terms exports were marginally up compared to previous FY. Commodity exports had gone down both in rupee as well as USD terms in the FY 2015-16.

As far as India’s T&C share in all commodity exports are concerned, the indication is of a faltering pattern throughout the last one half decade and has bottomed out at 10.4 per cent in FY2012-13. Although, there has been improvement in share of T&C in India’s all commodity exports from FY2013-14 onwards but still lower than the FY2001-02 level. In FY2015-16, T&C accounted for 14 per cent of India’s all goods exports, which was 1.9 per cent higher than the previous FY.

India’s imports of all goods and T&C have declined in FY2015-16 over the previous FY, though T&C imports in rupee terms have increased which is largely attributed to rupee depreciation. India’s T&C sector accounted for 1.5 per cent of the all goods imported in India for the same fiscal. India’s T&C imports were to the tune of $5,855 million in FY2015-16 while all goods import stood around $3,80,665 million in the same fiscal.

Textiles product exports from India

India’s textile sector is considered one of the robust sectors in India due to its advantage in terms of presence of entire textile value chains and availability of all kinds of raw materials. Besides, catering to domestic market, India has huge surplus production, so as to cater the global demand. Highest positive export growth was registered by jute and jute products (53.1 per cent) followed by handicrafts and carpets (11.8 per cent), garments (0.9 per cent) and handloom (0.3 per cent). Garments and other textile items have the largest share in India’s T&C exports during 2015-16. Garment exports accounted for 46.3 per cent of India’s T&C exports, while other textile items accounted for35 per cent of total T&C exports in the FY2015-16.

India’s T&C goods are exported to almost all economies of the world. India exports textile goods to more than 175 countries across globe. However, most of the advanced, high income and industrial economies have large share in India’s T&C exports. In the preceding fiscal, similar trend continued and among India’s top 10 T&C export destinations, were advanced economies and the rest five were high income and industrial economies. These top 10 economies accounted for 65 per cent of India’s total T&C exports while rest of the destination economies accounted 35 per cent of total exports during the period of 2015-16.

US is India’s top export destination for T&C, which accounted for 20.5 per cent share of India’s total T&C exports. This has increased by 1.4 per cent in the fiscal 2015-16 on percentage basis as compared to previous FY. India’s T&C exports to the US were to the tune of $7,523 million in 2015-16. Other destinations are the UAE (12.1 per cent), Ukraine (6.5 per cent), Bangladesh (5.7 per cent), China (5.4 per cent) and Germany (4.6 per cent).

Textile and clothing imports in India

Textile products import in India was to the tune of $5343 million and in rupee terms was around Rs 39,513 crore in 2015-16. India’s T&C imports in USD terms have decline while is rupee terms have increased during FY2015-16. In FY2015-16, other textiles (45.8 per cent) had the largest share followed by fibres (23.7 per cent), handicrafts and carpets (14.5 per cent), garments (10.9 per cent), jute and jute products (4.9 per cent) and handloorn (0.2 per cent). Amongst the six segments of T&C imports as stated above, imports have increased except for fibres (-11.5 per cent) and other textiles (-10.2 per cent) in USD terms in FY2015-16 over the previous year. In rupee terms, all segments have registered positive import growth in FY2015-16 compared to previous year except for fibres (-5.2 per cent).

China continued to be the largest supplier of textiles to India. China’s textile exports to India was worth $2,517.4 million, with a share of 43 per cent in total T&C imports of India in 2015-16. China’s major textile export items to India are of other textile yarns, fabrics, made-ups and articles thereof. China is also the top supplier in almost all T&C products imported by India from world. This is the only country as a textile trade partner to India, where India imports more textile products than its exports textiles products. Due to high demand of Indian cotton yarn in recent times, India’s textile trade deficit is narrowing down now. Bangladesh is another country from where India’s imports of T&C are increasing, which was largely due to garments which are imported in substantially large quantities due to duty-free status given to Bangladesh by India under SAFTA agreement.

Courtesy: CITI Annual Report

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