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Textiles: Mixed signals - Views on News from Equitymaster
 
 
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  • Aug 23, 2000

    Textiles: Mixed signals

    The Indian textiles sector seems to be coming out of the recessionary trend. Exports of fabrics and readymade garments have been consistently showing a positive trend for the last three to four months. However, cotton yarn exports is on a declining trend due to stiff competition and falling prices in Pakistan and Turkey.

    Hints of revival
    (Rs m) FY99 FY00 change
    Cotton Fabrics 3,629 4,225 16.4%
    Millmade 1,647 2,013 22.2%
    Knitted 212 238 12.3%
    Cotton Yarn 5,838 5,484 -6.1%
    Sewing Thread 6 2 -66.7%
    Madeups 3,429 5,121 49.3%

    Yarn prices have also firmed and are infact, higher compared to May 2000 (by 4.4%). Though spun yarn production grew by 7% in May 2000, the cumulative production growth for FY01 is slightly lower compared to respective period of the previous year.

    Supply of cotton in international markets is expected to be tight this year, given the fact that overall world production is expected to be lower. This should bring some respite to the domestic textile industry in terms of demand and price realisations. Moreover, the Technology Upgradation Fund (TUF) that aims at providing funds for modernizing the domestic textile industry has shown some positive indications. The amount sanctioned has gone up to Rs 23 bn (for 289 cases). Spinning and composite mill sector proved to be the biggest beneficiary of the TUF so far. This should help in reviving the domestic textile sector, which has been suffering from lack of technology and infrastructure facilities for quite some time.

    However, increasing aggressiveness amongst players in the absence of adequate demand, is expected to put pressure on realisations. Moreover, if exports have to grow consistently the quality of the final products have to be improved, which is possible only by upgrading technology. Even this is unlikely to happen given the mature nature of the existing industry.

     

     

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