THE VALUE CHAIN IN TEXTILES
India’s Presence in Textile Value Chain
India is one of the few countries which have a presence across the entire value chain of the Textile and Apparel Industry.
Textile, a versatile basic necessity turns into a luxury brand having a long value chain, where some are direct actors of the chain and others are non value chain actors, which are also equally important. We will discuss both here in brief, later issues a broader spectrum.
Value Chain Actors
Input Suppliers
Farmers (Natural fibers like Cotton, Jute)
Farmers are backbone of Agriculture industry, and textile base started by agriculture: Natural fibers derived from plant, crops, trees etc.
Farmer’s rights are protected through federation, Government Organization, unions. In order to pursue alternative income, some farmers have been incorporated into fair trade markets and others have adopted organic practices and become certified in order to sell their product at higher prices. Other natural resources may also be used as inputs for weaving and other activities in the textile sub-sector, such as alternative fibers (sisal, bamboo, wild silk, natural dyes, etc.), but additional research is needed to provide recommendations for improved
Petrochemicals for Polymer fibers
Petrochemical industry is relatively young – it did not start to take off until the 1940s. However, its origins go back to the 18th century when coal began to be mined and cheap energy became available. In the next century it was from gas works and coal tar could become an important source of chemicals. In Britain and Germany new industries sprang up making dyes, solvents and rubbers. Polymer fibers are a subset of man-made fibers, which are based on synthetic chemicals (often from petrochemical sources) rather than arising from natural materials by a purely physical process. These fibers are made of phenol-formaldehyde (PF), polyvinyl alcohol fiber (PVA) vinylon, polyvinyl chloride fiber (PVC) vinyon, polyolefins (PP and PE) olefin fiber, etc. Easy-care clothing, carpets, curtains and furnishing fabrics are made from man-made fibres derived from petrochemicals.
Industrial Cotton Ginning
Cotton Ginning factories and associations play important role in textile and garment industry. While they note that they are at capacity in terms of meeting export demand, they express serious concern regarding losses when selling at world commodity prices.
Small-Scale Cotton Ginning/ Spinning
A very limited number of processors are engaged in spinning cotton on a traditional cottage-industry basis. Few businesses have performed small-scale experiments in sourcing handspun yarn, developed vertically integrated operations that include the processing of cotton, through to the finished value-added product with labor-intensive processes and with relatively low capital investments. This activity found venue for increasing income in rural areas and implementing appropriate technology practices. Many weavers expressed interest in being able to source raw materials directly from processors, particularly if it allowed them more choices in terms of dyes or fiber content (organic and/ or fair trade, etc.).
Industrial Spinning
Manufacturers of yarn sell their products both to distributors and weaving workshops in cases where a long-term purchasing agreement has been established. Due to the ever-increasing pricing pressures imposed on imported goods, Government has invested in a range of diversified income-generating activities in order to support their cash flow. These include: screen-printing (on imported apparel), weaving mops from waste fibers, importing synthetic thread, etc. They have also invested in direct marketing to end-users, employing their marketing team to promote their products directly to the weaving community. While serving as a survival technique, these activities are not necessarily in the best long-term interest of the company because they do not build on inherent strengths or comparative advantage, and are not able to achieve efficiencies due to insufficient domestic market demand.
Importers/Vendors
Importers and local retailers provide an essential supply of goods to the sub-sector which includes dyes (for yarn and imported fabrics), fabric (basin/jacquard weaves, commercial cloth for apparel, wax prints, etc.), yarn and thread, tools and equipment, and notions (manufactured zippers, clasps, etc. for finishing). There are no protective measures supporting the price of finished goods from local firms.
WEAVERS
Majority of the weavers are engaged in their work either informally or with the backing of many more additional participants. Weaving activities may not be acknowledged by the statistics due to seasonal employment, migration, and informal employment. Many looms are produced locally, and located outdoors to accommodate the length of the traditional warp. Production is therefore weather-dependent and limited by the season. Informal weavers traditionally provide for the needs of special events and do not extend their efforts to markets outside and do not see a need to educate customers or invest in marketing activities.
However this demand is declining as more options become available in modern markets. Several weaving enterprises and associations have formalized their processes, and their workshop sites to provide more regular working conditions and consistent quality control. Most looms continue to be an evolved version of pit-looms, although floor looms have been adopted by few workshops, and some workshops have incorporated fly-shuttle handlooms to increase productivity. Many workshops also convert the hand-woven fabric into home and fashion accessories, including an abundance of handbags and tabletop items.
Several weavers expressed interest in developing horizontal linkages to increase capacity in order to respond to larger orders and to buy inputs in bulk to reduce costs, but it is unclear if there is sufficient demand for such arrangements and if workshops can maintain consistent quality standards. Weaving studios sell their fabric to others for incorporation into leather trimmed products or finished home accessories or finish product collections themselves for on-site retail shops or retail buyers.
Textile Manufacture / Producer / Converter
Manufacturer include various Leading Actors and activities, including: formal and informal micro, small and medium-size enterprises, Corporate, independent designers, cooperatives, and nonprofit associations. This part of the value chain encompasses the processes of adding value to, or transforming unconverted fabric (e.g. dyed or woven cloth) finished/converted textile products (apparel, fashion accessories, upholstered furniture, etc.) to final end-users. While some actors hold distinct positions along the value chain (such as informal weavers, small dyeing units used as subcontractors), many operations often driven by design have incorporated embedded services into their internal operations, covering multiple functions in the chain ‘under one roof’. Examples include fashion designers who integrate weaving, printing, and pattern-making into their workshop for prêt-a-porter apparel, and interior designer-weavers who have established vertically-integrated production that includes custom dyeing yarn, furniture framing for upholstered goods, all the way to direct retail sales, as part of their businesses. Many of these businesses are owned and operated by women who have established national and international reputations for their work.
Textile Treatment Actors
Textile treatment includes chemicals, dyes, batik, printing etc.A number associations, SME companies are involved in treating predominantly imported fabrics, including such practices as dyeing and hand calendering basin/jacquard textiles for local formal apparel such as resist dyeing (tie-up and batik) or embroidering fabric for fashion and home accessories, crochet, and screen-printing for local consumption and high-fashion. These businesses many times sell their material to tailors, while fashion studios often maintain internal dyeing processes or subcontract for custom orders.
Designer-Entrepreneurs
Indian designers working in high fashion, home décor, and fashion accessories, play an essential role in textile sub-sector, linking market demands to production and international design sensibilities. Most designers manage their own boutiques and maintain proprietary workshops with in-house production capacity in weaving and other material treatment processes (tailoring, dyeing, embroidery, etc.) with established agreements for specific outsourcing needs. They are heavily engaged in the promotion of Indian design and the development of their industries, and have established several noteworthy venues such as fashion reviews and participated in international exhibitions.
- Market Players
Wholesalers/Retailers
At first glance the market is dispersed and divided. Traditional Wholesalers have many clusters across India Eg. M.J. Market in Mumbai. Recently Organized Wholesalers presence in India due to FDI interest in this segment eg. Metro Cash and Carry. , Retailers have 2 segments, Traditional retailers and Organized Retailer which flourished from last decades. eg. Big Bazar. Most relationships along the textile value chain, wholesaler and retailer functions overlap. Many producers retail their own product lines directly and retailers who stock a variety of products (such as hotel shops) commonly buy direct from producers at ex-factory prices.
Exporters
Many producers export value-added products directly to international clients Few independent exporters have established their own international clientele and others act as an arm of a foreign importer, providing embedded services to the value chain, such as preparing orders for shipment, providing quality assurance on location and prior to shipping, and implementing new designs requested by the buyer. Individuals also export on a regular basis to world developed as well as developing countries. These direct export operations may be due to conditions that leave no room for the cost of agents, which typically average an additional 5-15%.
Agents/Shippers
They are intermediaries commonly known as “Transitaires” who play an essential role in export, processing export forms and clearing shipments through Customs, Many exporting producers acknowledge indiscernible and complicated logistics (e.g. related to Customs), and the cost of some of these transactions (formal and informal), but accept the procedures and the intermediary as a necessary part of the export.
Importers
Importers of textile products have proactively sought to flatten the distribution chain by bringing items direct to retail due to the FOB costs of finished goods. These importers often provide embedded services to designers and producers by guiding new product development, providing trend and market information, and assisting with shipping logistics. Many invest in sourcing visits in order to make product selections and merchandising suggestions directly.
Non Value Chain Actors
Government:
Government plays major role in development in any industry. Especially whole textile is more semi government industry. Government policy related to textile and garment is not only earn foreign income abut give employment to large population. But industry is not happy with movement of Govt. policy in textile, as per industry view: proper education, resources, research and development is not properly focused in the sector as compare to other sectors.
Educational Institution
Educational institute’s plays major role in whole chain, as skilled labor is produced in educational factory. So course content should be matched and updated with industry requirement. Students to employee journey require soft skills, technical knowledge, industry exposure, many more. This all needs will be fulfilled by educational industry.
Associations/ Cooperatives/ NGOs
Institutional interests are several regional and national forums beyond governmental agencies and chambers, including a national membership association Textile activities are often supported through or implemented in collaboration with NGOs in efforts to improve economic conditions and employment opportunities in India.
International Institutions
Aid to textile industry, an international non-profit organization, could not perform a comprehensive survey of all international programs operating in India with plausible links to the artisan textile sector as part of this assessment. However, there appears to be several initiatives offering services to the textile sector, but with a primary focus on apparel/fashion and industrial production. Other services are provided in human resource development, internet and technology development, agriculture, natural resource management, cultural preservation and the arts, and community development – there are possibilities for collaboration within each of these focus areas.
Macro Environment factors influencing Textile Industry
The infrastructure and conditions which comprise the enabling environment in India provide both support and constraints to economic growth.
Energy
All actors along the value chain are affected by poor quality energy and weekly power cuts which dramatically increase their costs. Energy accounts for the equivalent of 20% of total costs in production and decreases their productivity and timely delivery. Alternative energy sources such as solar and bio-diesel need to be not been developed sufficiently for larger scale needs.
Legislation/Policy
Labor laws – More concern was voiced in regards to the difficulty of formal employment, required taxes and payments related to that process, and erratic labour laws that forced enterprises to work more informally than they would choose. World Bank data suggests that in relation to other countries, it is difficult, yet inexpensive, to license workers
Export/Import – Most value chain actors seemed ambivalent about export processes and requirements and seemed to have found a way to work around some of the constraints related to bureaucratic procedures and corrupt practices in import and export processes.
Capital/Credit/Financing
Established medium-size businesses, as well as micro enterprises, find it difficult to find appropriate financing for their business ventures. Interest rates are high and banks are resistant to extend credit to value chain actors, even when they are formal companies with decades of performance history. Many stakeholders also noted that if money is easily obtainable for infrastructure investments, it would greatly enhance their capacity.
Infrastructure and Resources
Transport, internet technology, and other infrastructural resources impact the growth of the textile sub-sector. Limited resources, such as packing and packaging materials, apparel labels and a broad selection of quality notions impose high costs and compromise the quality of final products delivered to buyers.
Sector Organization
The textile sector has formal representation through the national association. However, the lack of coordination between textile value chain actors and support services severely compromises the effectiveness of the sub-sector. Informal weavers have no formal representation even though they make up for the majority of producers in the industry. Producers noted that minimal communication between actors, including raw material suppliers, was the cause for stagnation and even decline in the sub-sector.
Capacity/Skills/Human Resources
The textile sector represents a range of substantial human resources, including talented technicians, skilled designers, knowledgeable traders, and dedicated service providers.
Tertiary Training – There is limited support in our tertiary system to guarantee the supply of trained individuals in design and applied trades – many of the leading entrepreneurs in the sector have obtained a significant amount of their education in other countries.
Language – Due to the innumerous Indian languages, dealing with uneducated laborers, and little know-how of legal language, it is difficult to access broader markets.
Private Sector Services
Value chain actors noted the marked development of private sector services in recent years that support the growth of their businesses, including graphic arts and technology providers. These services are the key to the development of commercially-viable solutions to challenges in the textile sector.
