The Hindu Business Line : Indian textile sector in running for foreign investment pie

WITH a number of big textile players winding up manufacturing operations in the US and Europe, India figures among a handful of countries vying for the rerouting of investments and idle capacities from these companies.

According to the industry, in the quota-free textile regime, foreign players are keenly watching the sector and could, in the medium to long run, be looking at picking up equity in Indian textile firms or setting up their own manufacturing base here.

Major US textile players, including the likes of Burlington Industries, West Point Stevens, Pillowtex, Fruit-of-the-Loom and Malden Mills, have already wound-up operations during the last couple of years, while others such as Tommy Hilfiger Corporation has streamlined its production base in the US and has closed its `Young Men's' jeans division earlier this month. A number of big processing units in European countries have also shut shop during the last one year.

"A number of these players are looking at alternate investment destinations. As Asia becomes the hub of textile production, India stands a good stead to attract some of these investments if the existing bottlenecks that prevent investment into highly labour intensive industries are ironed out," a textile sector analyst said.

While the US and European retailers are already sourcing from India in a big way, western textile manufacturers have stopped short of actually investing in manufacturing units in the country so far largely due to stringent labour laws, high exit barriers and bureaucratic hurdles. According to a Crisil estimate, the Indian textile sector needs Rs 1,40,000 crore investment across the value-chain in the next five years to exploit the post-quota opportunities. "The Indian textile industry has the potential to reach a size of Rs 8,500 crore by 2010 from around Rs 3,600 crore at present provided domestic and foreign entrepreneurs pump in money," an industry analyst said.

Over the next few years, whatever remains of the US and European textile manufacturing base is predicted to be wiped-out and much of the investments could get routed to more efficient producers of textiles items. Also, sourcing arrangements in the textile sector that the US had with NAFTA countries and the EU had with East European nations, largely based on preferential access treaties, is likely to eventually come to the Asian manufacturing hub.

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