AN EMPIRICAL STUDY OF EXPORT MARKETING PRACTICES OF TEXTILE

EXPORTING UNITS IN INDIA

SUMMARY

SUBMITTED TO

MAHARSHI DAYANAND UNIVERSITY, ROHTAK

FOR THE AWARD OF THE DEGREE OF

DOCTOR OF PHILOSOPHY IN

MANAGEMENT

Under the Supervision of Submitted by

DR. ASHUTOSH NIGAM VARSHA RANI Associate Professor Regn. No. 98-DERJH-494 Department of Management Studies, Vaish College of Engineering, Rohtak

INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH

MAHARSHI DAYANAND UNIVERSITY, ROHTAK

2014

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India’s textiles industry is one of the mainstays of the national economy. It is also one

of the largest contributing sectors of India’s exports worldwide. It plays important

role in terms of generating revenue and employment. In the liberalized post-quota

period, India has emerged as a major sourcing destination for buyers from all over the

globe. As a measure of growing interest in the Indian textiles sector, a number of

reputed houses opened their sourcing offices in India. The government has been

continually supporting the textiles exports sector through various policy initiatives to

enable the sector to increase market share in the global textiles markets.

The aim of present study was to evaluate the export marketing performance of textile

exporting units operating in India and develop export marketing framework in the

light of incentives provided by government with special focus on scheme like

technology up-gradation and integrated textile park schemes and prevalent marketing

practices adopted by textile exporter considering export marketing barriers faced

textile exporting units. Indian textile sector is predominantly based on cotton, fiber,

yarn, wool, silk, handlooms, handicrafts and jute. The study was focused mainly on

the industry possessing different profiles to develop an effective and efficient

framework for textile exporters.

1. Organization of the Study

The present work is divided into six chapters.

Introduction, the problem and factor influencing trade of textile export marketing of

the study are included in first chapter.

Second chapter is on the literature concerning several key variables, which have been

found to influence the textile performance, factor influence trade in textile, and textile

export framework.

Third chapter portrays the research methodology, objectives and briefly describes

the research instruments developed, sample items selected, research design and

method of conducting the present study.

Fourth chapter would focused on Textile Export Marketing Framework.

Fifth chapter presents the analysis of the data and the results and the discussion of

the findings.

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Sixth Chapter presents the managerial implications, recommendations and summary

and conclusion drawn.

2. Significance of the Study

The review of the literature identified inherent strength of textile industries on

account of the lower labour costs prevailing in India. Textile industries was

traditionally were highly protected vulnerable in the globalised era. Government of

India has initiated a variety of reforms across a wide spectrum of activities calculated

to user in a more competitiveness and deregulated open economic system in the

country. In spite of having competitive advantages many bottlenecks continue to exist

in export procedural policy frameworks. The study is a deliberate attempt to provide

the significant information to the economists, planners, exporters and policy makers

to develop a conducive environment with a realistic and sound policy, procedural and

infrastructural support system, enabling Indian export units to take advantage of their

core competencies to capture global competitive advantage. Hence the present study

is a step towards probing of the problem and bottlenecks in the export sector and will

suggest the remedial measures to ensure Indian exports shine in the global scenario in

terms of their unique competitiveness. Moreover this would aid in bridging the gap

between policy makers expectations and the export sector demands to enhance

competitiveness. This new dimension will unfold various issues and will make

recommendations on key parameters. Thus the need to conduct this fresh study has

emerged as the economist has a perception that the dismantling of MFA quotas would

throw up immense opportunities for the Indian textile industry. This changed

international scenario requires analyzing the Indian textile industry in terms of its

potential advantages, key success factors, preparing dues to meet the challenges.

3. Objectives of the Study

The study has the following concise objectives:

i. To determine export marketing performance of textile exporting units in India.

ii. To study the factors influencing trade in textile exports from India.

iii. To study the impact of the technology up-gradation scheme and scheme of

integrated textile park on textile exporting units.

iv. To analyze existing export marketing practices adopted by textile exporters.

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v. To design export marketing practices for textile exporting units in the light of

foreign trade policy.

4. Research Methodology

The research methodology followed to discuss the research objectives and procedure

which include the overall research design, sample design, universe and survey

population, data collection, analysis methods and statistical techniques used for data

analysis is discussed as below.

4.1 Research Design

The present study was descriptive cum diagnostic in nature. It was descriptive as the

researcher made an attempt to express the experiences of textile exporters by

examining the different components of export marketing strategies being adopted by

them. It was diagnostic in a sense that export marketing bottlenecks were identified in

the light of foreign trade policy. The focus of the studies was on developing effective

and efficient frame work for textile exporters.

4.2 Sample Design

The sampling design was combination of non-random purposive sampling in case of

senior export marketing managers and random in case of consumers. In all, data was

collected from a sample size of 200 respondents for the purpose of this research study.

Exporters selected were from large, medium and small segments to make the sample

representative.

4.3 Universe and Survey Population

The universe of the study was confined to major textile exporters based in Panipat and

National Capital Region dealing with different sub segments i.e. Cotton, fiber, yarn,

wool, silk, handlooms, handicrafts and jute industry, possessing different profile. The

survey population included senior level export marketing managers or the

owners/exporters dealing with overseas clients.

4.4 Data Collection

Primary sources and secondary sources were used for collecting the data of present

study. A self administered questionnaire was developed for data collection. However,

personal interviews were also conducted of the subjects in the light of the same

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questionnaire. Primary data was collected through structured questionnaire which

included items on demographic information of respondents, export marketing

strategies adopted by the textile exporting units, export marketing barriers, and the

impact of foreign trade policy and trade incentives provided to exporting units. The

secondary data was collected from publications of ministry of textiles, annual reports

of various textile export promotion councils, various articles that appeared in journals

and newspapers. The statistics for the exports were gathered from publications of

Centre for Monitoring Indian Economy (CMIE), National Council for Applied

Economic Research (NCAER), Indian Trade Promotion Organization (ITPO),

Reserve Bank of India (RBI) and Export and Import bank of India (EXIM). The

survey data were also compensated by journal publications like Economic and

Political Weekly, Foreign Trade Review, Yojana, Federation of Indian Exporter

Organization etc.

4.5 Data Analysis and Statistical Tools

The study was designed to evaluate the export marketing performance, examine the

impact of foreign trade policy on textile exporting units, and design export marketing

strategy on different sub components of the textile. The questionnaire was analyzed

on the basis of the 5 point Likert scale. The collected data were analyzed using the

Statistical Package for Social Science (SPSS) Version 17.0. The mean scores were

computed by assigning weights as 5, 4, 3, 2 and 1 (e.g. Strongly Agree, Agree,

Neutral, and Disagree and Strongly disagree). Statistical tests like Crosstabs Chi

square test and ANOVA were applied for analysis of the field data. The analysis and

discussions of results were made for understanding the factors influencing textile

exports in the light of foreign trade policy and for designing of the marketing strategy.

4.6 Hypotheses

After an interdisciplinary theoretical investigation of the subject under research and

an analysis of the extant literature, hypotheses were developed which are as shown

below.

H0 (a): There is no significant difference between small, medium and large textile

exports units in terms of promotional channels used by them.

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H0 (b): There is no significant difference between small, medium and large textile

exports units in terms of distribution channels used by them.

H0 (c): There is no significant difference between small, medium and large textile

exports units in terms of pricing policy used by them.

H0 (d): There is no significant difference between small, medium and large textile

exports units in terms of documentation problems in custom clearance experienced by

them.

H0 (e): There is no significant difference between small, medium and large textile

exports units in terms of strategy adopted for creating the brand in international

market.

H0 (f): There is no significant difference between small, medium, and large exports

units in terms of using primary sources for collecting market information.

H0 (g): There is no significant difference between small, medium, and large exports

units in terms of using secondary sources for collecting market information.

H0 (h): There is no significant difference between small, medium and large textile

exports units in terms of insurance policy used by them.

H0 (i): There was no significant difference between small, medium and large textile

exports units in terms of risk in currency fluctuation.

5. Data Analysis and Findings of Present Study

With regard to the survey conducted, this study entangles over 150 (out of 200)

recorded responses (through questionnaire) from 150 respondents who were

approached by the researcher with a useable response rate of 75 per cent. These 150

respondents were related to 150 textile exporting units in Panipat and National

Capital Region dealing with different sub segments i.e. Cotton, fiber, yarn, wool, silk,

handlooms, handicrafts and jute industry, possessing different profile. These exporters

deal in overseas as well as domestic market and hold the largest market share among

all the textile exporting units operative in the region. Present study has been divided

into sections and sub-sections that exhibit the demographic profile of the respondents;

client-base; type of textile products for export market; export marketing practices;

problems/ issues influencing trade in textile exports; constraints of the technology up-

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gradation scheme and benefits of integrated textile park on textile exporting units; and

evaluation criteria to assess export market potential.

5.1 Demographic Profile

The findings of the study revealed that out of the total sample, female textile exporters

were only 11.33 per cent and the rest 88.67 per cent were male counterparts. This

supports the fact that the gender ratio is skewed in the exporting business of textile

and hence the number of women textile exporters is still very low. Also, it was

observed that most of the respondents were owners of textile exporting units. Majority

of the respondents surveyed were having exporting experience of their textile units

below 15 years and amongst more than 15 years of experience, majority was of

having 16-30 years of experience. None of the sampled textile units was having more

than 50 years of experience.

5.2 Client-base/ Market and Exporting Regions for Textile Products

Across the regions (Europe, Middle east, Asia, Africa and other countries) for

exporting the textile products (silk, cotton, woolen, jute, ready-made garments, man-

made, coir, handy craft or any other), the textile exporting units having client-base

(home or overseas) market. The findings of the revealed that textile units more

attentive towards exporting cotton (54.67 per cent of the units), readymade garments

(32 per cent of the units), man-made (28 per cent of the units), jute (26.67 per cent of

the units), silk (16 per cent of the units), handicraft (15.33 per cent of the units),

woolen (13.33 per cent of the units), coir (12 per cent of the units) than for any other

textile products (49.33 per cent of the units). Analysis of the present study shows that

there is correlation visible between cotton and overseas market – the highest the

export of the cotton, the highest the percentage of textile exporting units operating in

the different regions. Interestingly, textile units under study also have a big chunk of

home market for cotton, whereas 32 per cent (48 out of 150) of the textile units for

readymade garments are operating in home (31.25 per cent) and overseas (68.75 per

cent) market. Contrary, among 26.67 per cent (40 out of 150) of the textile units,

almost half of them exports jute in overseas (52.50 per cent) market. Such results are

very natural – jute industry is more appealing to Indian market, and cotton industry is

more appealing in overseas market than any other country. The study concludes that

Indian textile exports heavily dependent to European and the US markets.

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5.3 Export Sales Turnover

Present study show that in order to categorize the textile units in terms of small,

medium and large scale collected data of their sales turnover for three consecutive

financial years i.e. up to 2011-12. Sales turnover per year in 74 units was less than 50

crore in each financial year and were considered small scale textile units whereas 61

units were with a sales turnover from 50 to 250 crores in each financial year and were

accounted as medium scale textile exporting units. Only 15 were crossing their sales

turnover to 250 crores in each financial year and termed as large scale textile

exporting units for the purpose of the study. So India’s performance in textile in world

market is substantially inferior as compared to other European countries. Reason

being, poor capabilities and resources that inhibited it from moving beyond the level

of other competing developing countries and limited size of the Indian textile

companies due to which they had neither the resources and capabilities to respond to

the global market requirements nor the orientation to strategize with a long run view,

to develop new geographical or product markets and to sustain competitive efforts in

spite of initial market difficulties.

5.4 Marketing Practices of Textile Exporting Units

For the purpose of this objective present study included various items of export

marketing strategy adopted by textile exporters. Analysis of these marketing practices

given below.

5.4.1 Promotional Channels for Overseas Markets

All the respondents were asked to indicate the type of promotional channels being

used in their organizations and how much importance is attached by them to various

channels for promotion of the textile products in overseas market. Present study found

that most widely used promotional channels in all type of textile units are export

promotion cells/councils, international trade fairs, and through internet, and TV

commercials in foreign media, sponsoring international events/games are least

approved by all textile units. Based on the ranks given by the respondents from small,

medium and large scale textile exporting units international trade fairs and export

promotion councils for small and medium size textile units whereas internet

websites/social media and international trade fairs for large size units, are the first and

second choice for promotion of textile products in overseas markets. TV commercials

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in foreign media is least approved by small and large scale textile exporting units and

sponsoring international events/games is not considered by medium size units for the

promotion of their products in overseas markets. So it can be established that small

and medium industries give first preference to international trade fair and large

industries give first preference to internet for their promotional activities. One way

ANOVA result show that there was significant difference between small, medium,

and large textile units with regards to the variables ‘outdoor ads like at international

airports’, ‘sponsoring international events/games’, and ‘through internet (websites,

social media) (F=5.946; p=.003, F=7.100; p=.001, and F=3.016; p=.052). There is no

significant difference between small, medium, and large textile units for variables

‘export promotion cells/councils’, ‘International trade fairs’, ‘one to one meeting with

overseas customers’, ‘catalogues’, ‘through agents/buying houses’, ‘TV commercials

in foreign media’ and ‘international newspapers/magazines’.

5.4.2 Distribution Channels for Overseas Markets

All the respondents were asked to indicate the type of distribution channels being

used in their organizations for distribute the product in overseas market. Present study

found that most widely used distribution channel in all type of textile units are selling

directly to overseas customers followed by agents or buying agencies, and

manufacturing setup in any overseas market, franchise mode, company owned

showroom, overseas distribution networks are least preferred distribution channels for

the type of product they sell in overseas market. However, based on the three

categories of textile units, it has been observed that small and large industries give

first preference to agents/buying agencies but medium type of industries give their

first preference to directly selling products to overseas customer. One way ANOVA

result show that there was significant difference between small, medium, and large

textile units with regards to variables ‘company owned Showroom’, ‘franchise mode’,

‘manufacturing setup in any overseas market’, and ‘liaisoning network’. There is no

significant difference between small, medium, and large textile units for variables

‘directly to overseas customers’, ‘through agents or buying agencies’ and ‘through

overseas distribution network’.

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5.4.3 Pricing policy to Determine Price of the Textile Products

The Indian textile exporters use different types of pricing policy for determining the

price of their products in international market such as Keep out pricing , Skimming

pricing, Penetration pricing, Psychological pricing, Price lining, One price versus

variable price policy, Discrimination pricing, Competition oriented pricing, Cost

oriented pricing. When the researcher asked the respondents to select appropriate

pricing policies adopted by the textile exporting units for determining pricing of their

products. Present study found that most of the respondents preferred discrimination

pricing policy (95), and competition oriented pricing policy (10) were the least

preferred among all the policies as considered under the study by the respondents.

Present study found that all the pricing policy variables in small, medium, and large

units are same, so it can be said that there is no significant difference between small,

medium and large units in term of pricing policy used by them. One way ANOVA

result show that there was significant difference between small, medium and large

textile units for all variables except competition oriented pricing policy.

5.4.4 Strategies for Creating Brand in International Market

When the researcher asked the respondents about strategies adopted for creating brand

in international market such as multi product brand strategy, single brand product

strategy, mixed brand strategy, private brand strategy, and manufacturer’s brand.

Present study found that mixed brand strategy was the first choice of all the textile

exporters followed by single brand product strategy and multi product brand strategy.

The respondents also opted for private brand strategy and manufacturer’s brand as a

strategy to face the competition in the international market environment. The findings

of the study also revealed that all branding variables in small, medium, and large

textile units are same, so it can be said that there is no significant difference between

small, medium and large units in terms of strategy adopted for creating the brand in

international market. This is proved using Chi-square test on the respondents views

about the brand strategies used by them. Chi-square result show that there was

significant difference between small, medium and large textile units for all variables

except private brand strategy, and manufacturer’s brand.

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5.4.5 Primary Sources used for Collecting Market Information

When the researcher asked the respondents about primary sources used for collecting

market information such as telephone interview, personal interview with individuals

or group, mail survey, electronic survey and personal survey. Present study found that

electronic survey, followed by personal survey and mail survey method as the top

three measures adopted by all the three categories of textile exporting units. Personal

interview with individuals and telephone interview are the other methods taken into

consideration by the small, medium and large size textile units. The findings of the

study also revealed that all primary sources variable in small, medium, and large

textile exporting units are same, so it can be assumed that there is no significant

difference between small, medium and large units in terms of using primary sources

for collecting their market information. However, before reaching to conclusion it was

checked statistically using One-way ANOVA.

5.4.6 Secondary Sources used for Collecting Market Information

When the researcher asked the respondents about express their agreement or

disagreement on type of secondary source used for collecting the market information

in textile export, such as: Personal files/internal documents, Public libraries, On-line

databases, Government records/publication, Trade associations, Press and media

directories, Academic journals and newspaper. Present study found that on-line

databases, followed by personal files/ internal documents and press and media

directories were the top three methods adopted by all the three categories of textile

exporting units. Academic journals and newspapers, public libraries, Government

records/publications and trade associations were the other techniques taken into

consideration by the small, medium and large size textile units. The findings of the

study also revealed that all secondary sources variable in small, medium, and large

textile exporting units are same, so it can be assumed that there is no significant

difference between small, medium and large units in terms of using secondary sources

for collecting their market information. However, before reaching to conclusion it was

checked statistically using One-way ANOVA. One-way ANOVA result show that

there was significant difference between small, medium and large textile units with

regards to the variables ‘personal files/internal documents’, ‘On-line databases’ and

‘press and media directories’. There was no significant difference between small,

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medium, and large textile units for variables public libraries, Government

records/publication, Trade associations, Academic journals and newspaper.

5.4.7 Insurance Policy adopted by Organization in Textile Exports

When the researcher asked the respondents about insurance policies opted by their

exporting units such as open policy, special declaration policy, duty insurance policy

and seller’s contingency policy, it was found that open policy was the first choice of

all the textile exporters followed by duty insurance policy and special declaration

policy. The respondents also opted for seller’s contingency policy as an insurance

policy for their textile products. Present study also found that all insurance policies

opted in small, medium, and large textile units are given same preference, so it can be

said that there was no significant difference between small, medium and large units in

terms of insurance policies opted by them. Chi square test was applied to know

whether the type of insurance policies differ significantly in various types of units.

Chi-square result show that there was significant difference between small, medium

and large textile units for all variables except open insurance policies.

5.4.8 Competitive Advantages over other Exporters

When the researcher asked the respondents about competitive edge over others,

present study found that Indian exporters were having a number of competitive

advantages. It was observed that good product quality, followed by always on-time

delivery are the top indicators to take competitive advantage as expressed by the

respondents, and close (or old) association with your customer, well established brand

name in overseas market were not found significant predictors of getting competitive

advantage in textile exports. On the basis of the ranking given by the respondents

belonging to the small, medium and large size textile units. The study could not reveal

any significant difference in considering the factors under study for getting

competitive advantage in export business among the three categories of textile units.

Good product quality, always on-time delivery, lowest cost of production, wide range

of products manufacturing capability and fast product development capability were

the top most five factors considered by small and medium size units whereas always

on-time delivery, followed by good product quality, wide range of products

manufacturing capability, lowest cost of production, and fast product development

capability were the factors given top five ranks by the respondents belonging to large

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scale textile units for taking competitive advantage. Surprisingly, well established

brand name in overseas market was the least considered factor leading to competitive

advantage by all the textile exporting units over the rivals.

5.5 Marketing Barriers in Textile Exports

The aim of the present study identifies export marketing barriers face by textile

exporters. For the purpose of this objective present study included various items of

export marketing barriers. Analysis of these marketing barriers given below.

5.5.1 Infrastructure Problems in Exporting Textile Products

When the researcher asked the respondents about infrastructure problems in textile

exports in overseas market. Present study found that cost of electricity (Rank score

455), followed by un-availability of good quality fabric/ raw material (Rank score

683) as the biggest infrastructure problems. Telecommunication network and IT

(Rank score 1319) was given the tenth rank as infrastructure problem in textile

exports by the respondents. Movement of goods to sea ports and airports, inland

container depots, air cargo complexes (Rank score 1325) and augmentation of

transport facilities especially for decongestion (Rank score 1343) were also

highlighted as the infrastructure related issues in textile export business. Further, the

infrastructure problems were analyzed on the basis of the ranking given by the

respondents belonging to the small, medium and large size textile units. The study

found significant differences in experiencing infrastructure problems among the three

categories of textile units. Cost of power was ranked as the first and foremost problem

in textile industry by all the respondents from these three types of exporting units.

Product development capability was the second largest infrastructure problem for

small and large size textile units whereas un-availability of good quality fabric/raw

material was the second largest problem for medium size textile units. Outdated

garmenting technology was the third largest infrastructure problems by medium and

large size units whereas un-availability of good quality fabric/raw material was the

third largest problem for small size textile units. Augmentation of transport facilities

especially for decongestion was considered at eleventh positioned infrastructure

problem by all the textile exporters. Movement of goods to sea ports and airports,

inland container depots, air cargo complexes etc. by small size, Telecommunication

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network and IT by medium size and Red-tapism by the large size textile exporting

units were indicated as the least significant issue among the infrastructure problems.

5.5.2 Trade Barriers for Textile Exports

The textile exporters also face various type of trade barrier in exporting their products

to overseas countries. It was observed from the survey that regulation and standards

(Rank score 380), followed by environmental requirements (Rank score 430) were the

chief trade barriers for textile units. Other trade barriers were testing and certification

(Rank score 524), corruption and theft (Rank score 549), quality, label and packing

(Rank score 593), and transport cost (Rank score 674). Further, the trade barriers were

also analyzed on the basis of ranking given by the respondents belonging to the small,

medium and large size textile units, the present study found significant differences in

facing the trade barriers among the three categories of textile units. Regulations and

standards and environmental requirements of the countries where the textile products

are to be exported, are first and second big barrier for all type of textile units.

Transport cost is the least significant barrier for small and medium size textile units,

whereas testing and certification was the least significant barrier for large textile units.

5.5.3 Tariff and Non-Tariff Barriers for Textile Export

Indian textile exporters face various types of tariff and non-tariff barriers. These are

import quota, licensing, exchange and other financial controls, prohibitions,

discriminatory bilateral agreement, advance deposit requirement, antidumping duties,

subsidies and other aids, government procurement policies, and competition. Present

study found licensing (Rank score 421) and import quota (Rank score 470) as two big

tariff and non-tariff barriers in textile exports. Whereas advance deposit requirement

(Rank score 1109) and prohibitions (Rank score 1036) were least significant barriers

as indicated by the respondents in textile export. Further, these barriers were analyzed

on the basis of the ranking given by the respondents belonging to the small, medium

and large size textile units. Overall, the present study indicated that licensing is the

biggest barrier for small and medium type of textile units, whereas import quota is the

largest barrier for large type of textile units.

5.5.4 Problems in Cross Border Transactions for Textile Export

The textile exporters face various types of problems related to cross border

transactions in textile exports. The findings of the study revealed that currency

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convertibility (Rank score 485), followed by Political instability (Rank score 680) and

unfavorable attitude towards the foreign buyers (Rank score 789) were the three big

hurdles in cross border transactions faced by the exporters. However, professional

service (Rank score 1699), memorandum of understanding and treaties with the

destination countries (Rank score 1599) and local management and partner (Rank

score 1594) were the three cross border transaction problems least bothered by these

sampled exporters. Based on the analysis, the researcher establishes that political

stability and currency convertibility are the top most problem related to cross border

transaction for all type of textile units, whereas economic growth is largest problem in

cross border transaction for small and large units, and attitude towards the foreign

buyers is biggest problem for medium textile units. Local management and partner

was the least significant problem in cross border transaction for small and medium

textile units, whereas Memorandum of understanding and treaties with the destination

countries was the least viewed problem by large textile units. The problem related to

professional service was least significant problem for all type of textile units.

5.5.5 Commercial Risk for International Transaction in Textile Export

Indian textile exporters also face various types of commercial risks in textile exports.

Such as government regulation, country financial risk, currency interest rate volatility,

political and social disturbances, spread of epidemics like world flu etc. Product

quality and safety problem was the other commercial risk in international transaction

in textile exports. It was observed that government regulations (Rank score 387),

followed by country financial risk (Rank score 491) and political and social

disturbances (Rank score 528) were the three major commercial risks as indicated by

the exporters under study, whereas currency interest rate volatility (Rank score 550),

product quality and safety problem (Rank score 798), activist attack on global brand

(Rank score 913), natural disasters (Rank score 965), terrorist attacks (Rank score

975) and spread of epidemics like world flu (Rank score 1143) etc. were other

commercial risks in textile exports in their respective order. Government regulation

was found largest commercial risk for small and medium size units, whereas Political

and social disturbances for large textile units as a major commercial risk.

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5.5.6 Documentation Problems Experienced in Custom Clearance

The textile exporters faced various types of documentation problems while exporting

in overseas countries. Present study found that issuance of commercial invoice (26.9

per cent) and issuance of photo copy of income tax registration certificate (32.8 per

cent) as the major documentation problems in textile exports. The other

documentation problems were issuance of copy of export license (15.5 per cent),

issuance of packing list (13.9 per cent), issuance of foreign exchange declaration

forms (11.9 per cent). Based on the ranks given to these problems by the respondents

from small, medium and large scale textile exporting units, issuance of commercial

invoice for small and large size units was the first and for medium size units the

second problem encountered in their custom clearance process. Whereas issuance of

copy of export license was ranked first by medium size and second rank was given to

the problem by the small size textile units. Issuance of photo copy of income tax

registration certificate was realized as documentation problem at second rank by the

large size units under study which was at third position as experienced by the small

and medium size textile exporting units. The present study establishes that issuance of

commercial invoice was the biggest documentation problem for small and large

textile units whereas issuance of copy of export license for medium textile units.

Issuance of custom declaration forms was the least considered documentation

problem for medium and large textile units whereas issuance of certificate of origin

for small textile units.

5.6 Trade Incentives Provided by Indian Government

Government of India is determined to establish India as global sourcing destination

for textile and clothing industry. In this regard various steps are taken by government

of India and state government to promote textile exports from India. The government

of India has been continually supporting the textiles exports sector through various

policy initiatives to enable the sector to increase market share in the global textiles

markets. Government is also implementing various schemes in the foreign trade

policy 2009-14 for development of the textile industry in India. Government of India

has also introduced several exports promotional measures in the union budget 2012 -

13 for promote textile exports from India.

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5.6.1 Export Finance Schemes Availed/Offered by the Government of India

When the respondents were asked to indicate various types of export finance schemes

offered by the Government of India to textile exporters which they preferred. Present

study was found that on line credit to exporters (56.67 per cent respondents), finance

scheme for export of goods for exhibition and sale (54.67 per cent respondents), and

advance against retention money (42 per cent respondents) were the three top most

schemes rated by the textile exporters). Interest rate subvention scheme (38.67 per

cent respondents), advance against export bills purchased, discounted, or negotiated

(29.33 per cent respondents), rediscounting of export bills abroad scheme (23.33 per

cent respondents), export credit guarantee corporation maturity export factoring

scheme (20.67 per cent respondents), advance against for duty drawback receivable

from government (16.67 per cent respondents), International export factoring scheme

(6.67 per cent respondents), advance against undrawn balances on export bills (4.67

per cent respondents), gold card scheme (2.67 per cent respondents) and factoring/

forfeiting scheme for conversion of credit sale into cash sale (1.33 per cent

respondents) were the other schemes considered by the respondents for getting export

finance assistance in their export business .

5.6.2 Market Access Initiative Schemes Availed/Offered by the Government of

India

Market Access Initiative Schemes included Focus Market Scheme, Focus Product

Scheme, Market Linked Focus Product Scheme for textile products, and Vishesh

Krishi and Gramudyog Yojana (VKGUY) etc. Survey revealed that 84 per cent

respondents agree with Focus Market Scheme (FMS), 42 per cent with Market Linked

Focus Product Scheme (MLFPS), 29.33 per cent with Special Focus Market Scheme

(SFMS), 26.77 per cent with Vishesh Krishi and Gramudyog Yojana (VKGUY), and

25.33 per cent with Focus Product Scheme (FPS) .

5.6.3 Schemes Availed/Offered by the Government of India for boosting the

product

The respondents were asked to express their agreement or disagreement on getting

assistance from the Government of India in boosting the product. Majority of the

respondents (82.7 per cent) accepted that they have availed the Government assistance

for boosting the product and only 26 respondents (17.3 per cent) were not getting the

17

Government assistance for boosting the product. Further, to those who availed the

Government assistance, a list of various schemes offered by the Government of India,

such as Export promotion capital goods scheme, Duty drawback scheme, Duty free

replenishment certificate scheme, Duty entitlement passbook scheme, Annual advance

license scheme, Generalized System of Preferences (GSP) scheme, Development of

Mega Cluster (DMS) scheme, and Textile Worker’s Rehabilitation Fund (TWRF)

scheme was presented and asked to mark only those, availed by the exporters .The

respondents indicated Export Promotion Capital Goods (EPCG) Scheme (95.16 per

cent) and Duty Drawback Scheme (73.39 per cent) as the most important schemes

provide by the Indian Government. Other important scheme offered from Government

of India to textile exporters are Development of Mega Cluster (DMS) Scheme (43.55

per cent respondents), Generalized System of Preferences (GSP) Scheme (39.52 per

cent respondents), Annual advance license scheme (28.33 per cent respondents),

Duty entitlement passbook scheme (14.52 per cent respondents), and Textile

Worker’s Rehabilitation Fund (TWRF) scheme (10.48 per cent respondents), and

Duty free replenishment certificate scheme (5.65 per cent respondents). Based on the

findings of present study, it can be concluded that EPCG was one of the most

successful comprehensive schemes which facilitate the import of new and second

hand machines.

5.7 TUFS Scheme and Constraints Associated with TUFS Scheme

When asked the researcher to the respondents about availing the technology up-

gradation fund scheme for the modernization and up-gradation of their textile units.

Present study found that 57.3 per cent exporters admitted that TUFS has served the

purpose of modernization in their organizations. However, 42.7 per cent respondents

were not of the view that TUFS served the purpose. All the respondents were asked to

rate the constraints such as: information on TUFS, processing of case by the

Government, availability of funds from financial institution, documentation

requirements, interest grant/subsidies from Government, and processing of case from

financial institutions in the successful implementation or failure of TUFS. The study

observed that complexities in interest grant/subsidies from Government (32.1 per

cent), followed by documentation requirements (28.4 per cent) and availability of

funds from financial institution (15.2 per cent) were the three main constraints where

maximum exporters strongly agree to and the Government must consider improving

18

the situation. Many of the respondents agreed to that obtaining information on TUFS

(3.28 per cent) and processing of case from financial institutions (00 per cent) is still a

difficult task. Surprisingly, many respondents were also found neutral in perceiving

the constraints of the scheme. Based on the ranks obtained from the mean scores as

given by the respondents from small, medium and large scale textile exporting units,

complexities in interest grant/subsidies from Government was found the main

constraint in successful implementation of TUFS as viewed by all the exporters.

Further, the six constraints as presented in the study were used to test whether

statistically the views of respondents belonging to small, medium and large size

textile units are significantly different or not. ANOVA result show that no significant

main effects for the three categories of textile units (F = 0.239 and F=1.483) for the

variables ‘documentation requirements’ and ‘interest grant/subsidies from

Government’. With regards to the variables ‘information on TUFS’, ‘processing of

case by the Government’, ‘availability of funds from financial institution’, and

‘processing of case from financial institution’, statistically significant main effects

were found for the three categories of textile units. The above results indicate that

differences among small, medium and large scale units were detected for some of the

constraints as recognized in the success or failure of TUFS.

5.8 ITP Scheme and Benefits of the Integrated Textile Parks (ITP) Scheme

When asked the respondents about availing the Integrated Textile Parks (ITP) scheme

for the growth of their textile units. Present study found that only 38 per cent

exporters admitted that they opted for the ITP scheme whereas, 62 per cent

respondents were not of the view that ITP serves the purpose of growth in their

organizations. Further, all the respondents were asked to rate the benefits such as:

identification and procurement of suitable land, exemption of stamp duty etc. for the

units located in the ITP, flexible and conducive labour environment for the units

located in the ITP, power, water and other utilities to the ITP, financial support from

different financial institution, assistance in project formulation and implementation for

the growth of textile industry. Study observed that power, water and other utilities to

the ITP (15.1 per cent), followed by tax exemptions (10.9 per cent) were the two main

benefits where maximum exporters strongly agree to for the growth of textile

industry. Identification and procurement of suitable land (3.6 per cent), exemption of

19

stamp duty (9.62 per cent) and flexible and conducive labour environment (5.56 per

cent) for the units located in the ITP were the other benefits as viewed by many of the

respondents. Surprisingly, many respondents were also found neutral in perceiving the

benefits of the scheme. Further, the ten benefits of ITP scheme as presented in the

study were used to test whether statistically the views of respondents belonging to

small, medium and large size textile units are significantly different or not. ANOVA

result show that significant main effects for the three categories of textile units for the

variables ‘identification and procurement of suitable land’, ‘buildings for common

facilities’, ‘financial support from different financial institution’, and ‘Assistance in

project formulation and implementation’. With regards to the other variables,

statistically no significant main effects were found for the three categories of textile

units. The above results indicate that differences among small, medium and large

scale units were detected for some of the benefits as recognized for the growth of

textile industry.

5.9 Evaluation Criteria to Assess Potential of Export Market

Indian exporter were also asked to assess different types of criteria for evaluating the

potential of export market such as market selection criteria, market potential, shipping

cost and time, potential competition, service requirement, and product fit. The finding

of the study revealed that market potential (Rank score 338), market access (Rank

score 431), were the major criteria for evaluating the textile export market. Market

selection (Rank score 530), potential competition (Rank score 645), shipping cost and

time (Rank score 694), and service requirement (Rank score 753) are the other criteria

used by these exporters. Surprisingly, product fit (Rank score 809) was given the last

rank (seventh) as evaluation criteria for assessing the market potential in textile

exports. Further, the evaluation criteria were analyzed on the basis of the ranking

given by the respondents belonging to the small, medium and large size textile units.

Present study found that there were differences in using the market potential

evaluation criteria among the three categories of textile units. Market potential and

market access were assumed the first and second evaluation criteria by the small and

medium size units whereas large size textile units considered market access firstly,

followed by the market potential. However, market selection criteria were ranked at

third position by all the respondents from these three types of exporting units.

Potential competition and shipping cost and time were recognized at fourth and fifth

20

position by small and medium size units whereas shipping cost and time, followed by

potential competition were on these positions as rated by the large size textile units.

Again, service requirement and product fit were the last evaluation criteria (i.e. at

sixth and seventh position) of all the respondents from these three types of exporting

units.

6. Conclusions

Present study concludes that in the post MFA phase era, Indian textile firms are

becoming competitive in the changed business environment. It has evoked diverse

reaction from different textile exporters. While majority of exporters were happy with

the development, other is getting cautious. Some are branching out while others are

concentrating on niche products. However, a majority of the exporters perceive that it

will be positive outlook to India, as well as to their organizations.

Present study also concludes that Indian textile exports heavily dependent to

European and the US markets. Sector-wise analysis of the export performance of

Indian textile sector revealed that cotton is the most important fiber from India in

overseas market. So to achieve these priorities with appropriate technology is a must.

India has an inherent advantage in this sector because of abundant availability of raw

material, long tradition of craftsmanship and design and presence across the entire

value chain. The export competitiveness of this sector is very significantly affected by

the cost and reliability of power supply, logistic and transaction costs. Indian textile

Industry some inherent advantages like excellent resource base, availability of cheap

labor, presence in the value chain which is making textile exports globally

competitive in comparison to other countries. Indian government is promotional in

boosting textile exports from country through various export promotion schemes like

Scheme of Integrated textile scheme, Technology Up-gradation Fund, Export

Promotion Capital Goods (EPCG) scheme, Duty draw back scheme and Export

Oriented Units (EOUs)/SEZs Scheme yet there have been certain constraint in

implementation issues that had restricted the ability of Indian textile industry to

harness its potential globally. The study outlines the view of textile export units in

terms of difficulty faced by them that restricts their ability to compete globally.

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6.1 Infrastructure

The most prominent problem existing for Indian textile export industry is of

infrastructure mainly due to scarcity and cost of electricity, distance from sea port,

unavailability of frequent freight trains, congestion at the port or procedural hassles at

different levels, there is definitely lack of coordination and commitment from

government department who provide vital support services to promote the export

from country. There is definite need to provide single window for all logistic

problems. Although private participation is initiated in this direction but results are

awaited and can only hope for better future prospects.

6.2 Supply Chain Management (SCM)

The Indian textile industry has one of the longest and most complex supply chains in

the world, with as many as fifteen intermediaries between the farmer and the final

consumer. Each contributes not only to lengthening of lead times, but also adding to

costs. By the time cotton reaches from farmer to the spinning unit, its cost inflates

many folds. By the time it reaches to the final consumer in overseas market, its costs

increased substantially. This creates hindrance factor to penetrate global market. The

industries would need to develop this SCM perspective and rationalize costs at every

stage in the entire supply chain, and not only within their firms, or between

themselves and their vendors and suppliers.

6.3 Cost of Raw Material

Indian cotton prices have been lower than international cotton prices of comparable

varieties due to ban on imports and control on exports of cotton. Indian prices

reported to be lower than their international counterpart. This gave a cost advantage to

Indian textile exporters. Major issue with the textile exporters include uncertain

demand from clients, product life cycles are short and competitive intensity is high.

6.4 Low Labor Cost

India textile sector enjoys favorably across the developing countries in terms of low

labour costs and skilled workforce. Quite often high wages are paid to skilled laborers

as remuneration for the high levels of skill and productivity which, in turn are

important factors of export competitiveness. It is identified that export oriented

garment unit pay higher wages to their labour than the domestic market oriented units.

22

This difference in wage rates is attributed to the unique and Indispensable skills of

designers, pattern makers and craftsmen, as well as to better-trained cutters and tailors

employed by exporting firms.

6.5 Labor Laws Relates Issues Affecting Textile Exports

Strict labor laws in India make it virtually impossible for companies to shed labor. It

also introduces unfair discrimination against large companies who are forced to

comply with the labor laws relating to minimum wages, social security, contractual

obligations, nature of terminations, internal transfers/job rotation, right to leaves and

regulations regarding working hours etc., while the smaller ones (like powerloom)

manage to evade compliance with such regulations. This introduces a competitive

edge to powerloom compared to organized mills, and has led to decline of mills and

proliferation of powerloom in India, with all its attendant adverse implications for

competitiveness of the textile and clothing sector chain.

6.6 Government Policy Framework for Textile Sector

Many researchers have recognized that the origin of a substantial number of exporting

problems is rooted in the external environment. The nature of these problems tend to

vary widely: distinctive foreign consumer preferences, unfamiliar business protocols

and practices, the imposition of tariff barriers and regulatory import controls by

overseas governments, fierce competition, exchange rate fluctuations and limited hard

currency for international trade. Government of India is focusing toward textile export

products to make them globally competitive. Some of the government policies that

have a bearing on global competitiveness of the Indian textile sector are briefly

outlined below.

6.6.1 Excise Duty

The excise duties applicable to the textile industry are the Basic Excise Duty (BED),

Additional Excise Duty (AED) at the rate of fifteen per cent applicable on cotton

yarn and on all man-made/ blended yarn and fibre and AED in lieu of sales tax

applicable on power processed fabric. However, the duty structure is biased since duty

incidence falls disproportionately on different segments of the Indian textile and

clothing sectors. However, Government of India is looking to reform the excise duties

in textile sector in the current Union Budget.

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6.6.2 Technology Up-gradation Fund

Owing to the impact of globalization, Indian textile exports have been forced to

compete with global players in terms of quality and pricing of products. While

abundant human resources have helped the industries to survive to a certain extent,

Indian textile manufacturers are realizing that product quality and economies of scale

can be reaped only with sophisticated manufacturing facilities. The TUF scheme has

helped overcome technological obsolescence in the textile industry by infusing capital

for modernization of the infrastructure and machinery, which in turn enhances local

sourcing options for foreign apparel retailers. Under the TUF scheme, manufacturing

units are eligible for long and medium term loan from IDBI, SIDBI and IFCI, at

interest rates that are 5 per cent lower than the normal lending rates of banks. The

utilization of funds under this scheme has been disappointing. However, the one

positive observation is that processing sector-which is the least modernized in the

entire value chain- is also among the largest recipients of the loans. In textile exports

special preference for the small scale industries prevents units for making significant

investments and expanding their businesses and during recession the large textile

exporting firms were not willing to expand capacity. However exporters availing the

scheme issues in documentation and getting necessary documentation for the same.

6.6.3 Scheme for Integrated Textiles Parks

Though the Indian textile industry has its inherent advantages, infrastructure

bottleneck is one of the prime areas of concern. To provide the industry with world-

class infrastructure facilities for setting up their textile units, the Scheme for

Integrated Textile Park (SITP) was availed by small and medium firm to locate their

units in textile parks of international standards and project tit as potential growth

centers. Taking into consideration the response to the scheme and the opportunities

for the growth of textile industry in the quota free regime but documentation, red

tapism, rentals and stringent non flexible norms for the units located in the parks are

acting as bottleneck to generate its truly potential.

7. Suggestions

Even after the implementation of various textile policies in India, textile sector is

facing increased competition from the multinational companies and survival of the

24

fittest has been the buzz-word against the backdrop and in the light of the present

study, the following strategies are recommended for the promotion of the textile

sector in India for achieving the export targets for each of the product groups as

outlined below.

7.1 Government Level Initiatives

A substantial increase in production capacities is required to avail economies of scale.

Hundred per cent depreciation may be allowed on capital expenditure on textile

machinery for income tax purpose so as to encourage fresh investment. Rising input

costs are a factor affecting exports of garments worldwide. Since India has the

advantage of having its own source of raw material, this advantage needs to be

leveraged so as to gain a competitive edge over other countries. The exports of cotton

and cotton yarn need to be regulated in a manner which protects the domestic

industries from the major fluctuations in raw material prices. A huge potential exists

for increasing exports by undertaking capacity building in this sector. The high

custom tariffs in the importing countries is an important limiting factor in expanding

our exports. Efforts are required to negotiate with these countries to reduce the tariff

structure. Dispense with the requirement of maintaining the average export

performance under the EPCG scheme. Exempt capital goods supplied indigenously

under the EPCG scheme from Terminal Excise Duty (TED). One of important

problem faced by textile sector is that of finance. In order to overcome the problem,

specialized bank branches for textile industries are to be opened by the banks to

facilitate operation of large number of textile loan/credit account. Specialized

branches have to be set up in clusters having concentration of textiles. In this

connection Government of India has to establish the modernization program

assistance of soft loan schemes. Most of the entrepreneurs are not aware of the

incentives; assistance and subsidies provided to the various networking banking sector

units by the Central and State Government. The government should give wide

publicity to ensure better awareness. There is also a need to encourage large-scale

production, particularly in manmade and garment sectors. Disbursement of credit,

supply of cheaper raw materials, supply of electricity at reasonable rates, promoting

better capacity utilization, flexible labor laws, easy entry exit norms for the firms are

some of the basic policy measures which would help the Indian textile industry

become more cost effective. Further, it would be prudent to focus on selected states

25

having comparative advantage in a specific industry. Such measures could help

convert the post MFA challenges into an opportunity rather than a threat.

Infrastructure plays a very important role in export of textile industry. The

government should give top priority for creating basic infrastructural facilities like

road, power, transport and communication to the backward areas of our country. The

problem of shortage of power is wide spread throughout the country and the textile

units are hit hard by this. The government should take care of this and assure

uninterrupted power supply as provided to the large scale units. State government

should ensure uninterrupted supply of electricity to these textile parks. For this state

government may invite private players for power generation and distribution. This

will ensure continuous supply to industry and government can concentrate on

domestic and agriculture sector. Also, power theft is very high in industry. State

government can shed off this segment and give it to private players. There are various

power generation companies in India who can do this job and sometimes the tariff is

even lesser than government tariffs due to better management practices. Almost all

units in textile sector carry on production with outdated and obsolete technology.

Another major problem, facing the industry is the procurement of raw materials. Open

market purchase by the textile units leads to high cost of production and competitive

inefficiency. Allocation of raw materials to textile industries should be based on

capacity utilization. In a competitive environment the share of labor input is higher in

most of the product groups followed by capital, therefore the results emphasize the

importance of skilled labor component for the industry. Foreign direct investment

should be allowed through automatic route in textile sector. This is must for up

liftment for the textile industry. Although inviting FDI in textile sector would not be

an easy task. Indian infrastructure is too poor to build confidence in overseas

investors. International certification or textile industry is going to be compulsion in

times to come. In order to export textile products to Europe and US, it is likely to be

must to have certain international certification. Ministry of textile must encourage

textile units’ or rather whole textile industry to obtain this international certification.

This will build confidence in overseas buyers on compliance of various sensitive

issues. Ministry of textile should constitute an agency of international repute to

provide complete package on consultancy, audit and certifications. There must be a

series of awareness programs among textile exporter on various hedging tools and

techniques to cover transaction risks and ensure safeguard from exchange rate

26

fluctuation. Banks could be major participant in this program. This will help exporters

enter into long term agreements and provide price stability which is must in

international trade. Governments do not solely impose these procedural requirements.

Also independent organizations such as banks, shipping organizations and insurance

companies, have their own procedures. As the intense competition in the international

textile product market grows each year, the high quality advantage and brand

advantage of textile exports will be a major element in marketing strategy. Under

TUFS scheme spinning sector has played dominant role in modernization process.

International certification recognized globally is required the industry create

confidence and trust among foreign clients. In order to export textile products to

Europe and US, it is likely to be must to have certain international certification.

Ministry of textile must encourage exporting to obtain these international

certification. This will build confidence in overseas buyers on compliance of various

sensitive issues. Ministry of textile should constitute an agency of international repute

to provide complete package on consultancy, audit and certifications.

7.2 Firm Level Initiatives

Small and medium textile exporting firms need to focus on quality of products to

survive in global market. For the firms selling in the mature market where product

differentiation is small, the cost reduction will be acting as important differentiator.

Small and Medium enterprises need to focus on quality to act as important

differentiator. Large exporting firms can focus on subcontracting to make them more

competitive and will act in terms of cost reduction , quality and availability. Firms can

explore the opportunity to customized the textile product as per client required and

accordingly the localization of products should be done by exporting firms. Marketing

knowledge should be developed as it is dependent on the relevance and depth of

marketing information available to the firm. Textile firms that use relevant, accurate

and timely information are in a better position to respond to export problems.

Information about exporting and more specifically market information was mentioned

as the most serious problem of manufacturing firms in developing countries. Getting

concrete information on prospective foreign markets is essential before exporting can

occur. The study identified several other marketing barriers that can inhibit exporting,

for instance, pricing of the product in the international market. Textile exporters rely

on international competitive prices as a benchmark and do not ask for premiums for

27

exchange and extra ordinary risks so premium can be charged by the firms to compete

globally and earn foreign earnings. Deficient advertising and promotion programs are

also mentioned as other factors that constrain export activities which needs to be

explored. There is significant cultural distance between Indian and western countries

so to be successful in a foreign market textile exporters should choose a lower control

entry mode when country risk is high. The textile firms exporting in overseas market

need to focus on cultural distance, making it a less salient challenge. Indian textile

exporters needs innovative in product and production techniques. This is the greyest

area of Indian textile industry. They need to be more innovative and start designing

new product mix right from the yarn stage. They must learn the chemistry of colors

combinations, adopt designs from nature, understands themes of designs which are

hot topics these days for designers. International designers do not speak the language

of designs; but of themes and follow the nature. Then they must respond at the speed

of electricity so that customers feel attended and must get your attention. Then third is

the quality consciousness. Manufacturers must consider the retail price at which this

garment will be sold to ultimate consumer and not the price at which they are selling

it to retailer. There is huge difference in the retail price and buying price. Most of

times the price of garment at which garment is sold to retailer are mere forty per cent

or less than the retail price at which it is sold to consumer. The consumer must get

value for money it must be delivered through delivering optimum quality standards.

Lack of information about export procedures has been mentioned as an export barrier

in many studies. A firm that wishes to enter the export market or intends to increase

its export activity will have to acquire the knowledge and skill to deal with

administrative procedures. Exporting requires knowledge about export procedures.

One of the most cited obstacles with regard to exporting concerns the time and

paperwork required to comply with foreign and domestic market regulations.