Dressing The World With Indian Textiles

Large firms are already showing a lot of interest in Indian textiles. This is likely to increase when the quota regime is dismantled in January 2005. It''s not only the Wal-Mart factor that will boost the Indian textiles industry majorly. The potential for Indian companies is huge, especially with the end of the quota regime in 2005, and with Indian cotton prices favourably placed. Moreover, many other leading retailers like J C Penny, Tommy Hilfiger and GAP have expressed interest to outsource from India.

S Jayaraj, research analyst at Cholamandalam Securities, pointed out that though the Wal-Mart opportunity is indeed a big one, one must also look at the larger picture. He said, "Last year, we exported about $14 billion of textiles. So Wal-Mart forms about 7% of all exports made last year. But going ahead, there are opportunities which are much bigger than this. There are so many other companies like JC Penny, Tommy Hilfiger and GAP, that have expressed interest to outsource from India. Look at the potential... The US imports about $72 billion worth of clothing from India, EU is a much bigger market at $85 billion. In the Asian region players from China and India will benefit primarily. The opportunity is big, and we are just waiting for the quota regime to go up."

The world''s biggest corporation, the $247-billion Wal-Mart, is expected to buy goods worth $7-$10 billion from India in the next two years, provided local companies deliver quality products, make timely delivery and offer products at competitive prices. Wal-Mart, has asked for a list of 20 Indian suppliers to source every category of products in which it is present. It has asked for the list to be submitted by January 15.

What has perhaps fuelled Wal-Mart''s interest is the dismantling of the textile quota regime from January 1, 2005, which means there will be no restrictions on India''s textile exports. Besides this, Wal-Mart wants to spread its risk by not being too dependent on China. Last year, it imported $12 billion worth of goods from China, which is 1/10th of American imports from that country, while Wal-Mart''s imports from India have just touched $1 billion.

However, only the big textile companies might be able to cash in on this opportunity. Firms like Alok Industries, Arvind Mills and Raymond have capabilities to export to these companies in US and Europe. But there are other unlisted companies, which export too. For them it might be little tough because the demands of quality, quantity and timeliness might be very stringent.