INVESTMENT IN INDIAN FASHION INDUSTRY

One of the omnipotent segments of Indian economy is the apparel industry. Indian fashion
industry contributes to 4 percent of the GDP of the nation and also yields 20 percent of industrial
output. Until recently the production of clothes used to be reserved for small-scale industry
sector. The apparel units which had larger investments were meant to operate just as export-
oriented ones.
There are certain policies of the Government of India which favor small firms and have thus led
to the emergence of small independent units. It is believed that these policies actually deter the
investments in the new forms of manufacturing technology. At the same time, the small units
produce apparels with low quality which are not at par with the global standards owing to their
low technological foundation. The government policy restricting apparel production for the small
scale industry sector creates a situation where the indigenous producers hardly benefit from the
economies of scale.
There is inadequacy in the supply of good fabrics in India which mars the competitiveness of the
sector in the world. High duty rates and other taxes which are imposed in the domestic domain
enhance the price of imported fabrics. Lack of product specialization is another blow to the
Indian fashion industry and all of this cumulatively affects the exports of these goods.
In a bid to triumph over the global market, the government has implemented certain programs
which aim at increasing Indias share in world apparel and textile export.
Since 2000 the government has excluded ready-made apparels from the reservation list of the
SSI sector. This enables the foreign firms to invest up to 100 percent sans any obligation of
export. It now takes only 2 weeks to approve foreign equity which can go up to 51 percent in the
production waterproof textiles and composite mills.
The Technology Upgradation Fund which was introduced in 1999 enables eligible firms to
receive loans to upgrade the technological basis. These firms are offered 5 percent points less
than normal debt rates of these specified financial units in the nation. Moreover, a cotton
technology mission of 16 million dollars has been created by the government which aims to
enhance the productivity and quality of cotton. The modernization of the Indian industry is also
promoted by the Export Promotion Capital Goods (EPCG) scheme which has been undertaken
by the Indian government.
India with its huge population has paramount scope for business in this domain. If the purchasing
power parity is taken into account, India is actually the fourth-largest economy in the entire
world and the second largest one among the emerging countries across the world. Thus, the
consumer culture will aid the fashion industry in the process of growth and this is indeed a great
encouragement for investment in the domain. The domestic market has enormous prospect of
growth in domestic apparel and textile consumption, which in turn would increase foreign
investment and trade. Joint ventures with foreign firms and import of machinery and technology
are effects of liberalization of Indian economy.
The demand for branded textiles has seen a huge spurt in the recent years which the increase in
affluence among the masses. There are ample opportunities for growth of branded products in
the business. India is the supplier of 8 percent of the denim fabric which satiates the global
demand. The domestic demand for this is also going to increase owing to the acceleration in the
economic growth of India. The entering of the large apparel firms in the Indian market will also
enhance the domestic demand for denim.
India has dismantled the World Trade Organization (WTO) commitments and will hence face
great competition in the field of low-cost export and import. To counter this competition the
government has taken certain measures which include the removal of structural anomalies of
industry, improvement of quality and technology, elimination of market access barriers,
provision for incentives to investors and exporters and reduction in textile tariffs.
Thus, the holistic approach to strengthen the fashion industry would enable the nation to have a
stronger economy. This would catapult the nation at the paramount position in the hierarchical
structure of the economically powerful nations.