The Hindu Business Line : `Rising income level will fuel demand in textile market'

Surging domestic demand, besides the export potential in post-2005 quota abolition phase, is expected to fuel the next round of growth for the textile sector in the country.

The sector will witness the domestic market growth driven by favourable demographics and rising income levels. About 54 per cent of the population is less than 30 years old and 26 million people are moving up the social ladder from lower middle class to middle class; this will prove to be the growth driver, according to Mr Vijay Venkataswamy, former Chairman of the Southern India Mills Association (SIMA)

Market penetration

Mr Venkataswamy, who was speaking at a function organised here for awarding the textile units excelling in `5S' quality management practices, said the anticipated domestic textile market surge would be fuelled by the increased market penetration by organised retail.

Even as the collective investment envisaged by the Indian textile sector by 2012 is projected around Rs 1.94 lakh crore, the share of the organised retailing in the country is poised to go up from the present 3.5 per cent to 8 per cent by 2010.

Mr Venkataswamy said the immediate tasks on hand for the industry is to contain higher transaction costs, ensure adequate indigenous raw material availability and to reign in infrastructural constraints.

Demand pull

"The textile mills in South buy cotton from upcountry and sell yarn in upcountry market, which means they have to additionally spend Rs 4 per kg of yarn produced and this cost has to come out of surplus they generate by way of higher productivity and innovative cost cutting methods," he added.

Currently, the textile market is faced with a demand pull created by lack of cash-flow, even though the cotton prices have remained reasonably stable and part of the squeeze on money supply chain, according to him, has been caused by investment shuffling into stocks and commodity markets by traditional textile dealers.

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