Export competitievness of indian textile industry b.govindan kutty nair -2231067

Individual Assignment
Name: B.Govindan Kutty Nair
Course: Global Business Environment
Indian Institute of Foreign Trade – New Delhi
Roll No. : 2231067
Title: Export Competitiveness of Indian Textiles Industry
October 08, 2015

Abstract
This study examines the Export competitiveness and Export performance of
Indian textile Industry with respect to rest of the world. The study focuses on
Export performance and competitiveness of Indian textile industry during the
period of 2010-2014. Export competitiveness is calculated with the help of
Revealed Comparative Advantage (RCA) of eleven different product groups of
Textiles.
The result shows that seven out of eleven products have competitive
advantage and rest four products don’t have competitive advantage. The
commodities which are more competitive in the international market are
Silk; Cotton; Vegetable textile fibers, paper yarn, woven fabric; Manmade
filament; Manmade staple fibers; Carpets and other textile floor coverings
and Special woven or tufted fabric, lace, tapestry etc.
The commodities that are performing fairly well in international market with
the highest value of RCA are Cotton and Carpets and other textile floor
coverings.
Keywords: Export Performance; Export Competitiveness; Revealed
Comparative Advantage.
Objective
1. To examine the competitiveness of Indian Textile Industry for the
period of 2010-2014.
2. To analyze the export performance of Indian Textile Industry and
current scenario of competitiveness.

Methodology
In this study, analyses of export competitiveness and export performance for
eleven products of Indian Textile industry of HS Code 50-60 for the period of
4 years.
These eleven textile product group namely are, Silk; Wool, animal hair,
horsehair yarn and fabric; Cotton; Vegetable textile fibers, paper yarn, woven
fabric; Manmade filaments; Manmade staple fibers; Wadding, felt,
nonwovens, yarns, twine, cordage, etc.; Carpets and other textile floor
coverings; Special woven or tufted fabric, lace, tapestry etc.; Impregnated,
coated or laminated textile fabric and Knitted or crocheted fabric.
Introduction
The Textile industry’s predominant presence in the Indian economy is
manifest in its significant contribution to industrial production, employment
generation, and foreign exchange earnings.
The textile industry is a key area where India has an opportunity for success
on a global scale, given the low cost of labour since it is a labour intensive
industry.
Textile Industry in India is the largest organized and broad-based Industry.
India has traditionally been a front-runner in the textile sector globally. It is
also one of the largest industries in terms of its contribution in India’s
worldwide exports.
The textiles industry has made a major contribution to the national economy
in terms of direct and indirect employment generation and net foreign
exchange earnings.
The sector contributes about 14 per cent to industrial production, 4 per cent
to the gross domestic product (GDP), and 27 per cent to the country's foreign
exchange inflows. It provides direct employment to over 45 million people

second largest after agriculture and accounts for nearly 16.63 per cent share
of the country’s total exports earnings. Thus, the growth and all round
development of this industry has a direct bearing on the improvement of
India's economy.
India has overtaken Italy, Germany and Bangladesh to emerge as the world's
second largest textile exporter, as per recent data released by 'UN
Comtrade'. India's share in Global Textiles increased by 17.5 per cent in 2013
compared to 2012.
The Textiles Vision Document formulated by the National Manufacturing
Competitiveness Council (NMCC) has projected that textiles exports from
India will touch US$ 300 billion by the year 2024-25.
Removal or reduction of trade barriers creates competitive pressures and the
potential for technology transfer so as to lead to productivity gains and
restructuring of an economy toward its comparative advantage. India has
undertaken a series of economic reforms towards opening up of the
economy in the decade of the nineties.
Notable among these has been the extensive effort to liberalize its
international trade. It is therefore expected that trade liberalization in India
would have led to changes in the composition of exports so as to reflect
India’s comparative advantage in the global economy.
Specifically, this study is an effort to examine the structure of comparative
advantage enjoyed by India in the global market, individually and in a
comparative framework. Following this, an analysis of the comparative
advantage according to factor intensity for the two economies is undertaken.
The pattern of comparative advantage is also examined for inter-temporal
variation over the period 2010-2013.

Review of Literature
The countries condition of competitiveness and the geographical and
sectoral structures of world trade reflect in its export performance. Paula
Fonto and Crespo (2010) by using constant market share (CMS) analysis to
measure the variations in the market share found that the geographical
structure of exports is significant in influencing, export performances.
The study show that the performance of India’s exports and the various
economic factors have contributed to the growth of exports, the study also
provides an overview of the export performance of three important
commodities, namely, gems and jewelry, cotton and electronics goods and
highlights key policy changes which could impact local production as well as
international demand for these exports.
The results show that the overall performance of the India manufacturing
sector has widespread implication for various aspects of the economy,
employment, being one of the main areas of gain. Samar Verma (2002)
revealed that export competitiveness leads to greater export share in world
market.
The relation of competitiveness with the productivity is a function of factors
related to cost of products, as well as those related to non-price factors such
as delivery schedules, reliability of producer and image of country/company
and brand equity.
There is great potential of Indian Textile and Garment industry for global
performance as the demand side factors of Indian clothing and textile
exports of the identified products in US and supply side factors of Indian
clothing and textile exports in EU Markets are vital.
The Indian government can trust the entrepreneur for making the Indian
Textile and Garment industry globally competitive. Paul.S and Mote.V.C
(2014) drew a conclusion that India should improve the level of export in
global market to raise the level of competitiveness of Indian products and

there are different prices quoted by the Indian manufacturers and their
competitors for identical products.
The study found that the improvement in the wage productivity relationship
could have reduced the fixed cost of Indian mills and therefore their needs
for realizing a higher contribution.
Data Sources
The export performance is found on the basis of growth rate of exports in
2013. Compound annual growth rate of exports from 2001 to 2013, share of
exports of particular product group in total exports of India (exports are in
values) and relative share of the given production global market.
The main data source is International Trade Centre. Data for exports is taken
in values in US dollar from International Trade Centre. The analysis of
comparative advantage has been undertaken using the Balassa (1965) using
Revealed Comparative Advantage (RCA) index.
Balassa’s index of relative export performance by country and commodity,
defined as a country’s share of world export of a commodity divided by its
share of total world exports. The index for country i commodity j is calculated
as follows:
RCA =
(𝑋𝑖𝑗 /𝑋𝑖)
(𝑋𝑎𝑗/𝑋𝑎)
Where,
Xij = Export of product j from country i
Xi = Total exports from country i

Xaj= Total export of product j from the world
Xa = Total exports from the world
The index of Revealed Comparative Advantage (RCA) is a measure of export
performance that shows comparison of commodities of a country’s market
share compared with the average percentage of exports of the country in
total world exports.
The index of RCA has a very simple interpretation. If it takes a value greater
than unity, the country has a revealed comparative advantage in that
product.
Analyses of Export Performance and Export Competitiveness
Table 1: Export Performance of Indian Textile Industry
In Percentage
Source: author’s own computations based on International Trade Centre data and UN Comtrade

Export performance of Indian textile industry has been shown in table 1.
Compound annual growth rate for all the products level is significantly
positive except Silk (in case of silk it is negative).
Two products grew at more than 20 percent and five more than 10 per cent
but less than 20 per cent out of total eleven products. It indicates a strong
performance of Indian textile in terms of exports. All the products have
grown in 2013 except Wool, animal hair, horsehair yarn and fabric (it has
negative growth rate).
Two products have more than 10 per cent shares in their relative exports of
world and four products have more than 5 but less than 10 per cent. Only
two products have less than 1 per cent shares in world exports relative to
their product group. Cotton is the highest contributor to Indians exports in
textile industry.
Table 2: Export Competitiveness of Indian Textile Industry
In Percentage
Source: author’s own computations based on International Trade Centre data and UN Comtrade

As indicated in Table 2, Seven products out of total Eleven products of Indian
Textile industry enjoys value of Revealed Comparative Advantage greater
than one (RCA>1),it means they are more competitive in the world market as
compared with the rest of the four commodities.
The commodities which are enjoying more comparative advantage are: Silk;
Cotton; Vegetable textile fibers, paper yarn, woven fabric; Manmade
and Special woven or tufted fabric, lace, tapestry etc. For products whose
value of Revealed Comparative Advantage less than one (RCA<1) are: Wool,
animal hair, horsehair yarn and fabric; Wadding, felt, nonwovens, yarns,
twine, cordage, etc.; Impregnated, coated or laminated textile fabric and
Knitted or crocheted fabric.
Conclusion
Compound annual growth rate for all the products level is significantly
positive except Silk (in case of silk it is negative). Exports of all the products
have grown well in 2013 except Wool, animal hair, horsehair yarn and fabric
(it has negative growth rate).
Two products have more than 10 per cent shares in their relative exports of
world and four products have more than 5 but less than 10 per cent. Only
two products have less than 1 per cent shares in world exports relative to
their product group. Cotton is the highest contributor to Indians exports in
textile industry.
Seven products out of total eleven products of Indian Textile industry enjoy
value of Revealed Comparative Advantage greater than one. The
commodities which are enjoying more comparative advantage are: Silk;
Cotton; Vegetable textile fibres, paper yarn, woven fabric; Manmade
and Special woven or tufted fabric, lace, tapestry etc.

In conclusion it can be say that, Most of the products of Indian textile
Industry have performed better in world markets as calculated by the
Revealed Comparative Advantage. It clearly indicates that most of the textile
industry products have comparative advantage in world market. And there is
still a huge scope for Indian textile industry in world market as most of the
products exports growth is positive.
References
1. Balance, Robert H, Helmut Forstner and Tracy Murray (1987), “Consistency
Tests of Alternative Measures of Comparative Advantage”, the Review of
Economics and Statistics, Vol. 69, No. 1, pp. 157-161.
2. Balassa, Bela (1977), “'Revealed' Comparative Advantage Revisited: An
Analysis of Relative Export Shares of the Industrial Countries, 1953-1971”,
The Manchester School of Economic & Social Studies, 1977, vol. 45, issue 4,
pp. 327-44.
3. Bhavani T.A (2001), “Determinants of firm-level export performance: a case
study of Indian Textile garments and apparel industry”, The Journal of
International Trade & Economic Development.10:1, 65-92.
4. Crespo Nuno and Paula Fontoura (2010), “What determines the export
performance? A comparative analysis at the world level”, School of
Economics and Management Working paper no. 27/2010/DE/UECE.ISSN
No.0874-4548.
5. Elbehri,Hertal and Martin(2003): “Estimating the Impact of WTO and
Domestic reforms on the Indian cotton and Textile sectors: a general
equilibrium approach”, Review of development economics 7(3),343-359.
6. Montobbio Fabio and Rampa Francesco (2005), “The impact of Technology
and structural change on Export performance in nine developing countries”.
World development vol 33, No.4, 527-547.

7. Mukherjee Shameek and Shahana Mukherjee (2012), “Overview of India’
export performance: Trends and Drivers”, Working paper No.363,
Economics & Social Science, Indian Institute of Management, Bangalore,
April.
8. Naresh .K.Malhotra, “Marketing Research. An applied orientation” (5th
Edition).
9. Papola.T.S. (2012), “Structural changes in the Indian economy emerging
patterns and implications”. Working paper no.02, ISID.
Thank you

Export competitievness of indian textile industry b.govindan kutty nair -2231067

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