A study by Assocham reveals that about 30 per cent of all the textile mills in India were non-operative in the period 2000-2010. The organized textile sector in India employs over 1.4 million people, contributing about 4 per cent to the country’s GDP and 10.1 per cent to total exports earnings. India possesses competitive advantages in textile manufacturing compared to the West. However, China and Bangladesh kept their edge in the global textile market. While China almost trebled its global market share to over 30 per cent in the last decade, India’s share crept up marginally from 3.5 per cent to nearly 6 per cent.

A host of factors have contributed for India’s poor show in terms of growth, productivity and competitiveness. These include: high cost of borrowing, rigid labour laws, inadequate infrastructure, slow modernisation and sluggish foreign investment. All these shape the financial condition of companies in the form of low operating margins, high debt levels and low return on capital. Of late, the tide seems to be turning for the textile industry including yarn manufacturers. Even though cotton prices hit the roof in 2010-11, a relatively stable period in cotton prices over the last two years has helped the sector recover. Further rupee depreciation provided the much-needed boost to Indian textile exporters, especially given the rising wages in China and appreciation of the yuan.

Despite the current buoyancy experienced by certain segments of the textile sector, India’s long term ability to compete effectively in the global market is still being questioned. This situation could worsen in the immediate future due to interest rate risk issues among others.