The Textile Industry – Part III – Industry Investing

Investment in Indian Textile IndustryThe introduction of the special ‘Textile Package’ during the 2003-2004 budgets became the turning point in the history of the Indian Textile Industry. The proposals made in the budget spoke of reforms to be undertaken to attract investment in this industry. The outcome of the budget being: setting up of a fund in accordance with the recommendations of the aforesaid budget with an initial principal amount of Rs.3000 crores. The fund was especially meant for restructuring the textile sector.Reasons responsible for attracting investors in Indian Textile Industry• The size of the Indian textile industry is enormous.• The industry has been doing good since the start of this century• India’s cheap labor force has been one of the prime drivers of the industry.• India’s foreign direct investment policies are flexible in comparison to all developing countries.• 100 percent foreign direct investment permitted in the textile industryFDI is permitted via automatic route, hence offering a trouble-free way of investment. The investment does not call for approval from the government, or apex body of India. The foreign capitalists, however, have to make a notification to the regional office of the apex body after receiving the receipt of the remittance.The Ministry of Textiles has launched a special cell for attracting FDI in this sector. Objectives of the special cell for attracting FDI include:• This cell attempts to help foreign companies find partners intending to float a joint venture company to produce textile products.• FDI special cell acts as a negotiator between the foreign investors and different organizations for setting up and structuring the textile industry. The cell offers both advisory support and assistance.• A textile industry set up with the help of a foreign investor might probably lead to some problems in the future. These problems are solved by the FDI cell.Also FDI cell maintains data with total production of the textile sector. The cell also maintains classified data of production by both domestic as well as by the foreign investor. The sector is targeting US$ 6 billion foreign direct investment (FDI) by 2015 to be invested in textiles machinery, fabric and garment manufacturing, as well as technical textiles.One of the most remarkable developments took place in the month of July 2007 when Blackstone, an investment management company of USA bought 50.1 stakes of Gokaldas Exports- a local manufacturing company. The stake transfer left the promoters of Gokaldas Exports, the Hindujas with a share amounting to 20 percent.Even Indian companies are spreading their wings and making investments in a monumental manner. Arvind Mills is constructing two new industrial set ups in Bangalore and AhmedabadGlobally renowned terry towel producing company called Welspun India Ltd is building a textile plant in the state of Gujarat with the initial capital investment of US$220 million.The investment climate is becoming better and better day by day, the only hindrance being the constant appreciation of the Indian rupee against the US dollar. As a result the textile industry’s profit margin has considerably plummeted since large quantity of textile product is basically export-oriented.