The Indian textile industry is facing many problems, and textile companies are worried that life will be more difficult in the next six months.
The textile and apparel export target for 2008/09 is US$26.55 billion. An official from the Indian Federal Ministry of Textiles said that if the current situation does not improve, the export scale may be the same as in 2007 at US$22.13 billion. The industry believes that exports may drop to approximately US$20 billion by the end of 2008.
The value of textile exports increased by 10-14% in the first four months of this fiscal year, but then began to decline. US and EU buyers reduced purchase quantities and lowered purchase prices.
Exports in the first five months of 2008 were orders received earlier. Now that exports are slowing, these conditions will be reflected in the coming months. For some orders that have already been received, buyers hope to postpone delivery or only accept 70-80% of the goods.
The main problem facing the textile industry is reduced global demand. In 2007, the rupee appreciated against the US dollar, cotton prices spiraled, power shortages and interest rates increased. But the main problem now is that production capacity has developed disproportionately and demand is decreasing.
In terms of investment, the 2007/08 technology update capital arrangement project received a special allocation of 199.17 billion rupees. By the end of September 2008, a special allocation of 65.09 billion rupees had been obtained, and it is expected that the projects arranged throughout the year will receive a total investment of approximately 120 billion rupees. Industry believes that investment required is only Rs 900-100 billion.
According to the CITI report, the second quarter reports of 50 major textile companies showed a decline in net profits, and in many cases they suffered losses. The textile industry production index decreased by 0.2% year-on-year from April to October.
Due to the bad situation, investment in the textile industry is now mainly in replacement and repair. About 30% of production capacity is idle, so why expand production capacity? The main problems of the textile industry are that domestic cotton prices are too high and operating capital interest rates are too high. These problems need to be solved.
