FW
GST is expected to help micro, small and medium enterprises (SMEs). Since all compliance procedures will now only be online, these enterprises need not worry about interacting with department officers for carrying out these compliances, which was earlier a cumbersome task. Other advantages are an easy process of availing input credit, single point tax, elimination of cascading tax system and simpler taxation, an unified market and lower logistical costs.
Further, they would be able to compete with competition from cheap cost centers such as China, Philippines, and Bangladesh. Toys, low-priced electronics, computer components, crockery, mobile accessories, lightings, stationary, plastic wares, building material like floorings and wallpapers, ceramics are some of the cheap Chinese imports into India.
The GST regime is also expected to usher in lower taxes, seamless input tax credit, logistics savings and market share swings from unorganized to organised players. Among the negative implications of GST for small, medium and micro enterprises are a lower threshold, time limit for return of goods sent on sale or return basis, excess working capital requirement, no tax differentiation for luxury items and services, increase in product cost, tax on stock transfers and deemed supplies, selective tax levying, and higher tax rate for service provider.
To meet the rising demand for composites in wind energy sector Turkish reinforcement fabrics specialist Metyx has agreed to a deal with long-time partner Karl Mayer Textilmaschinenfabrik (Obertshausen / Germany; for the supply of additional warp knitting production lines.
The new lines will provide 12,000 t/y of extra glass and carbon fibre multi-axial fabric knitting capacity that Metyx will install at its main factory in Manisa/Turkey, and at other overseas facilities. The company also has a plant in Hungary, where it recently completed an expansion.
The recent growth of the technical fabrics division and the successful qualification programmes with key OEM customer’s globally producing composite wind generator blades has given Metyx the confidence to place this multi-machinery order with Karl Mayer, says Ugur Üstünel, managing partner of Metyx composites.
Since 2011 the company has stated it has responded rapidly to the Turkish wind industry’s significant growth in the Aegean region, from both wind blade manufacturers as well as other composites sectors in Turkey.
Mali, which produces eight lakh tons of cotton a year, is looking at direct exports of cotton to the Indian textile industry. Niankoro Yeah Samake, Mali’s Ambassador in India, says about 20 per cent of Mali’s cotton is consumed by India. However, most of the trade is through foreign companies. So, there are opportunities to trade directly. Currently, Europe and China are the biggest buyers of the West African nation’s cotton.
Mali produces long staple cotton and only 5 per cent of it is processed in that country and the rest is exported. Mali’s government is offering incentives for investments in the textile sector and there are opportunities for joint ventures too. The government agency buys cotton from all the farmers. Annual cotton production in Mali in the last two years increased from five lakh tonnes to eight lakh tonnes.
Currently, there are no investments from Indian textile sector in that country. Those who start textile production in Mali will have duty-free access to the U.S. and some of the European markets too, he added. In the short-term, Mali is looking at increasing trade with India in the cotton sector and in the long term it will look at other investments.
J Thulasidharan, Chairman, Indian Cotton Federation, says that the price of Indian cotton goes up during the second half of the season and hence, importing cotton could be viable. On an average, about 10 lakh bales of cotton is imported from African countries annually.
India’s apparel exports to the US rose 5.3 per cent y-o-y in May 2017. With this, India’s share in the US apparel import expanded 30 basis points to 5.3 per cent. The country maintained its position as the fifth largest apparel exporter to the US. Growth in India’s export value to the US was mainly due to an increase in volumes. During the month, export volumes increased five per cent. Export realisation grew by 0.3 per cent.
On a cumulative basis, India’s apparel exports to the US grew by a mere 0.3 per cent during April-May 2017. The country’s market share remained unchanged at 5.6 per cent. India shipped out 191.4 million square meters of apparels, a decrease of 0.3 per cent. Average realisation improved by 0.6 per cent.
Among the top four apparel exporting countries to the US, all except Vietnam registered a decline in their export value in May 2017. Vietnam reported a 2.1 per cent increase in its exports in May 2017. The country’s market share expanded 20 basis points to 14 per cent.
China, the leading exporter of apparels to the US, saw a decrease of 0.6 per cent in exports. The country’s share in the US apparel import market fell by 30 basis points to 30.4 per cent. Apparel exports of Bangladesh and Indonesia declined by 1.7 per cent and 9.6 per cent. Bangladesh’s market share contracted by 10 basis points to 6.6 per cent and that of Indonesia fell by 70 basis points to 5.7 per cent.
"India’s current apparel market is estimated at $63 billion out of the $80 billion domestic textile and apparel market and is expected to grow at a CAGR of 12 per cent for the next 10 years to touch $180 billion. The domestic and export market is poised for double-digit growth owing to structural changes in the country and international events shaping global trade. There are many factors that have a strong impact on growth. One, is the strong population base with the largest GenY population in the world, coupled with a growing economy."
India’s current apparel market is estimated at $63 billion out of the $80 billion domestic textile and apparel market and is expected to grow at a CAGR of 12 per cent for the next 10 years to touch $180 billion. The domestic and export market is poised for double-digit growth owing to structural changes in the country and international events shaping global trade. There are many factors that have a strong impact on growth. One, is the strong population base with the largest GenY population in the world, coupled with a growing economy. Urbanisation and rurbanisation are other important factors shaping the Indian consumer spending habits. Citizens are migrating from rural to urban areas in search of job opportunities and better amenities, while steps are also being taken to improve facilities in rural India. The ballooning middle class is also boosting Indian consumption patterns. Increasing brand awareness and penetration of brands to tier-II, tier-III and tier-IV cities have largely contributed to a shift in buying pattern from need-based to aspirational buying.
Gaining strength in global market
The Indian textile industry is witnessing positive growth not only in the domestic market but also in the internationally. Currently, India has a share of around five per cent in global textile and apparel trade, which stood around $765 billion in 2016, while China has a share of 36 billion. The Chinese apparel market is expected to grow at a CAGR of 10 per cent over the next few years and become $615 billion market by 2025 from the current market size of $237 billion. The focus of the Chinese industry is expected to shift from exports to catering to the increasing domestic market. Given the shift in Chinese focus, India has the opportunity to expand its presence in the international market as well.
Changing landscape of Indian economy
The government allowed 100 per cent FDI in the retail sector under the automatic route with a clause to source around 30 per cent of the merchandise locally. This has not only attracted international brands but also boosted domestic manufacturing. The GST will further catalyse in making the unorganised segment of this industry more organised and will bring it under the GST ambit to avail input tax credit. This will help in streamlining the Indian textile value chain. The textile industry has also been recognised as a priority sector under the ‘Make in India’ initiative.
Competitive manufacturing landscape
India enjoys several advantages when it comes to textile and apparel manufacturing compared to competing nations like China, Vietnam, Bangladesh, Ethiopia, Myanmar, Kenya and others. India is the largest producer of cotton and the second largest producer of polyester in the world, after China. Under the ‘Make in India’ campaign, the government has also put a lot of focus on increasing the skill level of the workforce to not only ensure the quantity but also the quality of the workforce. India has well established production facilities in the textile value chain from fibre to the finished products (apparel, home textiles and technical textiles). There are around 74 Integrated Textile Parks dedicated for manufacturing textile and apparel items.
Investment scenario
Though the Indian textile industry has a strong presence in the entire value chain, there are still some structural weaknesses in the manufacturing value chain. The fundamental issue within the value chain lies with the fabric manufacturing and processing sector, which suffers from lack of capacity and use of obsolete technologies to an extent that the upstream and downstream processes are not able to utilise their full potential. In order to make strong positioning in the global market, there is a need to bring about structural transformation in the value chain. Vast opportunities lie in high-end weaving, fabric processing and manufacturing of finished products, viz., apparel and home textiles. The government has realised the same and has been providing support through schemes like ATUFS, IPDS, etc.
In order to ramp up the weak links in the value chain, investments are needed from both international companies and domestic players. Countries like China, South Korea and Taiwan among others who have become global players in fabric manufacturing and processing. India can go for joint ventures with these players to bring the requisite know-how and economies of scale in the country. India can also look to bring in technical experts from these countries to reduce the learning curve in these segments.
India has put up a strong presence at the ongoing Hong Kong Fashion Week from July 10 to 13, 2017. The Indian Pavilion has some 20 participants. Exhibitors are enthused and are keenly looking to the show. They feel there is a lot of elbow room for Indian exporters as long as they can harness their fundamental capabilities and strengths. Million Exporter is participating for the first time. This they are showcasing cotton and recycled polyester with a reasonable scale and consistency. They have also been able to provide garments at unbeatable prices and successfully exporting to Hong Kong and a few other
places in this part of the world. Indian manufacturers can capitalise on their primary strengths such as cotton garments and fashion looks to take on the competition. Hong Kong is a hub for exports to Mainland China, emerging Asean countries, Taiwan, Korea, Japan and even southern hemisphere countries.
About 1100 exhibitors from 20 countries and regions are taking part at the HKFW. There will be insights into latest market trends. These include a presentation by international trend forecasting group Fashion Snoops unveiling its autumn/winter 2018/19 fashion forecasts, a seminar jointly organised with the Hong Kong Research Institute of Textiles and Apparel on Wearable Technologies for Future Fashion, and a session with Woolmark sharing the latest technology applied in wool denim and wool sneakers.
Exporters in Tirupur want details about the tax implications of GST. The industry has numerous workers and units involved in different parts of the value chain such as printing, embroidery, washing, dyeing etc, which are taxed at 18 per cent while jobs related to yarn and fabric enjoy a five per cent rate.
They are still coming to terms with the new system and are caught between buyers and suppliers. Tirupur is India’s biggest knitwear hub and does exports of Rs 25,000 crores every year. At Tirupur, apart from the massive export orders, domestic knitwear sales amount to another Rs 12,000 crores.
Unlike exports, manufacturers don’t get input credit for domestic sales. So the 18 per cent tax for job works will have to be borne by the manufacturer, which naturally will raise the manufacturing cost and affect the fund flow. Manufacturers say that unless all the works are brought under a single slab of five per cent, they have no option but to pass it on to the consumer.
The industry was expecting a sales boost after the GST for readymade garments below Rs 1000 was fixed at five per cent. Higher cost of Tirupur garments may push big retailers turn to cheaper options in Bangladesh.
Islamic Fashion and Design Council (IFDC) launched a modest fashion category at Torino Fashion Week, Italy from June 26 to July 3, 2017. This was a first for a mainstream fashion week. The event was saw stylish modest fashion that rocked the runway as talented modest fashion designers mesmerized the mainstream fashion world.
Thirty IFDC designers showcased from over 23 countries. Islamic Fashion and Design Council is the world’s leading modest fashion and design council representing the Islamic economy and its stakeholders. IFDC, a leading advocate for modest fashion, art and design professionals and aspiring talent, has an array of products, services, and effective training programs for all levels.
Its platform is designed to ensure the success of modest fashion and design in the global marketplace. IFDC aligns itself with leading and budding mainstream and modest fashion and design brands, government organizations, institutions, corporations, media, global conferences, events, and fashion weeks to ensure a powerful, sustainable and supportive presence. With headquarters in the US, IFDC currently has offices in ten countries.
Torino Fashion Week brings together companies, fashion designers, agents, retailers and buyers, producers, distributors, brands and e-commerce agencies active in fashion and textiles to facilitate the creation of potential business and technological partnerships.
Egypt aims to double production of its most famous export, the silky soft cotton once known as ‘white gold’, after a period of slumping output. Production should rise to 1.4 million qintar (160 kg) in the 2017-18 fiscal that started in July from 700,000 qintar a year earlier. All the cotton will be exported. The government aims to increase the price of long staple cotton to more than 3000 Egyptian pounds ($168.07) per qintar, which will all be exported.
Egypt's sunny skies and superior seed help it grow cotton known for unusually long fibres that produce a light durable fabric with an attractive sheen and soft touch. Production, used in luxury bedding, has fallen sharply since 2011, a year of political upheaval that coincided with looser regulations that degraded the quality of local cotton. Long-staple sells at 155 US cents per lb, about twice the price of common short-staple cotton. Its return to world markets could provide a lucrative export opportunity at a time when Egypt has a huge trade deficit and is seeking to relaunch its stagnant economy.
In 2016, Egypt banned all but the highest quality cotton seed, dramatically shrinking the area under cultivation but restoring quality, in a bid to save its historic crop. This year Egypt grew about 220,000 acres (89,000 hectares) of long-staple cotton compared with 130,000 acres (52,600 hectares) in 2016-2107. Farmers, spinners, and exporters say the weakness of the Egyptian pound following its flotation in November and a scandal over the alleged sale of falsely labelled Egyptian cotton have increased demand for the real thing, injecting life into a historic industry on its deathbed.
Cambodia is the fifth biggest supplier of garment and textile products to the European Union. It’s behind China, Bangladesh, Turkey and India. Cambodia’s garment exports to the EU grew 14 per cent in 2016. EU market growth was largely as a result of preferential treatment under the ‘Everything But Arms’ (EBA) agreement, which allows garment products to enter the EU market duty-free due to its status on the list of least developed countries.
The EU’s Everything But Arms arrangement (EBA) was born in 2001 to give LDCs duty-free and quota-free access to the EU for all their exports with the exception of arms and armaments. This makes it the most generous form of preferential treatment to LDCs globally. There are currently 49 beneficiaries under this arrangement.
Entry into the EBA is automatic and, unlike other GSP arrangements, the EBA has no time-limit. With the per capita income of Cambodia already surpassing the middle income economy’s threshold, sooner or later Cambodia will lose its LDC status as classified by the United Nations. Once Cambodia loses this status, it will surely affect the garment industry. Therefore Cambodia will have to diversify its economic foundations as well as increase its productivity.
