Tamil Nadu’s yarn manufacturers are making investments to go one notch up in fabrics and win better deals from Indian and foreign buyers. Nearly 25 mills have either installed knitting machines or moved towards complete garmenting. The mills have been encouraged by the Center's recent export incentive push.

Textile items such as fabrics and synthetic textiles, which are facing Chinese import onslaught in India, have been included in the export incentive list that includes pharmaceuticals, auto components, telecom and transport equipment. In Tamil Nadu, big garment makers are into reverse expansion to set up their own yarn units. But the reverse was not happening much, because there was a risk of holding inventory without knowing whether there would be a buyer. But now the central government incentive has brightened possibilities of forward integration.

Tamil Nadu boasts of a yarn manufacturing capacity of 2.25 crore spindles but only a handful have pumped in money to become fabric manufacturers. In terms of expenditure for a textile unit that wants to diversify, a knitting machine from Taiwan costs Rs 15 lakh while an European import will cost Rs 25 lakh. With additional costs into labor, power, marketing and so on, a bid to move up for an average textile mill will cost Rs 3 crores.