CRISIL Limited: FDI to Boost Export Growth in Textiles, Textile Exports to Grow at 19% CAGR

Mumbai, July 03, 2006.

CRISIL Infrastructure Advisory, the consulting arm of CRISIL Limited, recently organised a Seminar - 'Spurring Investment Growth in Textiles through Foreign Direct Investment (FDI): Needs, Issues & Challenges' - in Mumbai, aimed at facilitating future policy making in this direction and bringing forth a perspective to the industry on the ingredients of successful joint ventures, structuring arrangements and how they can benefit from increased FDI.

Key speakers at the seminar included Smt. Asha Swarup, Hon'ble Additional Secretary and Financial Adviser, Ministry of Textiles, Government of India, Mr. J. N. Singh, Commissioner, Textiles, Government of India, Mr. Vivek Jacob, CEO, Carrera Holdings Inc. (Italy), Mr. Michael Rechsteiner, COO, Sultex Limited (Switzerland), Mr. Bill Mills, MD, NW Texnet (UK), Mr. Pradeep Bhandari, Group President, Raymond Limited, Mr. Sanju Shishodia, Head, CRISIL Research and Mr. K. Raghuram, Head, CRISIL Infrastructure Advisory. Mr. David Wyss, Chief Economist - USA, Standard and Poor's joined in with his comments on the global economy, growth and why India would be a preferred investment destination.

Speaker after speaker re-iterated the need for foreign direct investment in the textile sector. India, which currently is at the cusp of a demographic boom, will see a humungous demand for several lifestyle goods. Textiles stand to gain the maximum from the domestic market opportunity, and the local market presents a fantastic opportunity for foreign investors.

CRISIL Infrastructure Advisory estimates that India's textile exports will increase from around USD 17 billion last year (FY 2006) to around USD 40 billion by FY 2011 (CY 2010, 18.7% CAGR). The last one year of quota-free trade has seen India become the third largest supplier of textile and clothing to the USA from being the fourth largest in 2005, while in the extra - EU-25 market, India has retained its third position behind Turkey. The trade competitiveness factors of multi fibre base, value chain integration and low labour cost provide a globally competitive cost structure for operations, driving relocation of international industry.

Key trends to watch for, according to CRISIL Infrastructure Advisory, are the growing share of organised retail and media exposure driving consumerism that can result in a 10-15% growth per annum in the branded goods segment alone, boosting in particular the clothing industry as well as the significant increase expected in India's exports. Growth opportunities exist in the equipment industry, where nearly 70% of machinery & accessory requirements are currently met through imports as per a recent CRISIL Infrastructure Advisory estimate, and the area of technical textiles in which the global market opportunity is over USD 107 billion in 2005 and expected to grow at 4% per annum over the next five years. India is currently a net importer of items like industrial fabrics, waddings, felts, non-wovens, special fabrics, high tenacity yarn, etc., thereby presenting an opportunity to foreign firms with technological prowess to set-up base in India for such products.

Mr. K. Raghuram, Head - CRISIL Infrastructure Advisory, added that, "An enabling environment for FDI is in place: Indications from the Union Textile Minister on creating a separate FDI cell within the ministry to mobilise Rs. 50 crore worth of FDI per day on an average for next five years are a welcome move. Also the passage of the SEZ Act offers a fantastic opportunity to keep aside traditional objections and issues impacting entry of a new business. A recent survey of global executives by AT Kearney puts India as the 2nd most preferred location for FDI behind China. With plans to set-up 25 integrated textile parks under the SITP, and undertaking modernisation of around 29 mills of NTC through the joint venture route with private sector enterprises, the enabling environment for attracting FDI is being created. To conclude, as per the conditions of its entry into WTO, developed countries can apply for selective quotas on China until 31st December 2008. This provides us, perhaps, with a last window of opportunity to establish credentials and put the industry on a firm footing."

Concluded.

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