Indian Textiles on Recovery Trajectory!!!!!

The Textile Industry in India is predominantly domestic oriented with a balanced exposure to exports unlike china which has built massive export oriented industry. Of course china and India are the two large economies which will recover faster than other economies.

We could already see the confidence of the Industry in weathering the downward trend in the liquidation of textiles stock. The overall sentiments and fear of future is holding back retail growth. However the rural economy being very strong and robust will assist the industry recover much faster than earlier estimated.

The overall sentiments could change with the new government in place in India and additional stimulus packages to the labor intensive industry like textiles could be a boost to the Industry.

The Industry and all its stake holders’ behavior will be of utmost caution and hence the growth will be slow to come about. Innovation and cost effective solutions will have to be the mantra of the Industry.

The commodities and currency is on the boil once again and the economic recovery of United States of America and Europe appears not happen soon will have tremendous effect on emerging economies. Adding to these are the political tensions across the globe, in particular in the Korean peninsula and Asia.

Indian textile indutry - 2009 the year of Innovation & Marketing

The Indian Industry is slowly and steadily adjusting to the turmoil of Global slow down and finacial crisis. The large domestic demand with prosperous middle and rural class will sustain the textile Industry. The Governament of India stimulus packages and favourable RBI monetory policies should encourage the Banks to ease their lending norms to the industry. However overall growth will be under pressure. The recession and financial crisis in US and Euro zone will effect the exports,which form a large portion of our export basket.

The loss of jobs cannot be avoided in the garment and apparel sector. Innovation and marketing is need of the hour and industry should find ways and means to sustain and wait for the upturn.

Key to sucess will be Innovation in marketing and productmix. The year 2009 will be a a period of consolidation and Innovation

Indian Industry

Dollar Liquidity - Where is it heading in India?

The fast depleting foreign exchange of nearly $50 billion within a short period must be of concern to Reserve Bank of India. We could see less aggressive participation by RBI in the market and the depreciation of rupee to an all time low. The shortage of dollars across the globe is the result of flight of dollars from emerging markets.

India may not realize the expected exports of goods and services and inflow by way of Foreign direct Investment and re entry of Foreign financial Institutions in stock market may fall short considerably in the coming months. Even though nearly $ 40 billion is expected by way of remittance from overseas Indians the trade gap is expected to be nearly $ 50 billion, which need to be offset with short term borrowings and other inflows. Will this happen?

Government of India may have to float sovereign bonds overseas to augment dollar depletion.

Unfortunately the exports which can be very competitive in this environment are affected by lack of demand and buyers overseas are already in serious financial constraints. The anticipated sector specific assistance by Government of India will help the industry to sustain and avoid loss of jobs.

The spending will be slow to come out due to lack of sentiments across the globe and in India even though the liquidity has been pumped into the banking system, there is no demand to avail the loans as the interest rates are ruling still high. The bankers who have mobilized deposits at higher rate will be reluctant to lend at lower than deposit rates and are more cautious to whom they are lending. This can adjust over time and immediate results cannot be expected.

The stock market is very critical barometer for the industry to move forward as the sentiments of stock market reflect the global volatility and fear across the globe and Indian Industry is no exception. The Industry mantra is now to consolidate and curtail spending.

Therefore Government higher spending in infrastructure projects like power, roads etc and other social schemes will stimulate consumption across sectors. To meet the short term need to sustain the industry the sector specific approach of the Government is correct move.

The likely scenario for the industry could be:

- The import could be expensive and advantageous to domestic industry.
- The exports will be more competitive due to rupee depreciation
- Higher investment cost for import oriented projects.
- The reduced foreign direct Investment.
- The mismatch of supply and demand

India with large domestic market can maintain the present production levels and avoid job losses with suitable policy initiatives by the Government. Even in this crisis there is an opportunity for the Industry.

Indian Textile Industry - End of Tunnel ?

The easing of commodaties price including cotton prices , the unprecedent ruppee depreciation, lower inflation and even easing of interest rate is negated by the global recession. The measures now being intiated by RBI to ease liquidity should reverse back the sentiments . India unlike other global economics with huge domestic demand will continue to fair better than other economics . The precarious power situation now being faced in parts of India is of more serious threat than other factors. The huge domestic demand for textiles and consumtption should help the textile industry's's revival within a short period once the power situation eases in many parts of the country. It is time for the industry to get ready for upturn by revisiting their capex and other cost factors.

Cotton - Prefered Crop

The high prices of crude oil and the resultant impact on the economy is compelling the promotion of Bio Fuel. The diversion of food grains and cotton acreage for producing Ethanol will have serious socio economic crisis in the developing and underdeveloped countries.

Many of the traditional Cotton producing countries becoming net importers is of serious concern to the industry at large, United states of America being a major exporter of cotton , the diversion of cotton acreage in US to other crops like corn ,soya etc.. to meet the demand of Ethanol will only reduce the availability of cotton in the world market. This will bring more pressure on price of cotton.

The pressure on food grains is also on the increase as many of traditional export countries have restricted exports and are facing deficit for their consumption.

We have seen a similar trend already in India, diversion of cotton acreage for more remunerative crop like soya for export.

India and China consume over 50 percent of world cotton , the cotton year 2008-2009 will see a decrease in carry over stock for the year.

There fore it is very essential that we encourage farmers to grow cotton and make cotton as a prefered crop with attractive remuneration.

The government policies should ensure that there is no large disparity between international and Indian prices of cotton with appropriate reduction of import duties or impose export duty.