A COMPARATIVE STUDY OF THE HOSIERY INDUSTRY IN

LUDHIANA AND TIRUPUR

Antra Lodha
Knitwear Design Department, National Institute of Fashion Technology, New Delhi-
110049
E-mail: antralodha@gmail.com
Submitted: December 9, 2010

ABSTRACT
This paper reviews the Indian Textile Hosiery Industry. It discusses the two main knitwear cluster, namely
the Ludhiana and Tirupur cluster and their pros and cons. It argues which one has raced ahead and why.
The external and internal factors that go into making a textile cluster a success or a failure have also
been demonstrated. Keeping all these points in mind the next possible cluster has also been
recommended.

1. INTRODUCTION TO THE INDIAN TEXTILE SECTOR

The Indian textile sector plays an exceptionally significant role in shaping the economy
of India notably in terms of employment, foreign exchange earnings and share in value added.
This sector is the second largest sector after agriculture. It has come of age and is gaining
acknowledgment on the world platform with excellent textiles manufacturing base and
availability of massive raw material. India being the second largest producer of cotton in the
world, makes it self sufficient, by providing a competitive edge to its competitors worldwide in
terms of cost of raw material. Along with abundant cotton production, India has availability of
highly skilled labour at very low prices. The Indian economy is fundamentally dependent upon
manufacturing of textiles and its trade. There are many reasons for this industry being so
important for Indian economy as it contributes (4% of GDP) as well as the country‘s export (14%
of India‘s total exports) and provides employment to the masses. It is said that India‘s share in
world textile has reached to 8% in 2010[1]. This sector also enjoys a strategic significance due
to its foremost contribution to exports and existence of enormous small and medium enterprises
(SMEs). Today, in the international textile market, China is the biggest competitor of India,
followed by turkey, Taiwan, Mexico, Bangladesh, South Korea, Indonesia and Pakistan which
are the emerging rivals.
It is assumed that the growth till 2015 will be 8% for Textile exports, 12% for Apparel Exports
and 10% for Textiles and Apparel domestic demand. The Indian Textile & Clothing Industry
envisages to reach US $ 100 Billion by 2015. Global Textile Market has grown @ 5% and
Apparel Market has grown @ 8% in the last 5 years [2].
Table 1.1. Expected growth in the Textile and Clothing Market (Source: CITI Estimates,
http://www.citiindia.com/images/PDF/Indian_TC_at_a_Glance(1).pdf)

1.1. SWOT analysis of Indian Textile Industry

In 2002 the world textile industry was worth $400 billion and has grown by 25 percent between
2002 and 2010[1], the Asian region largely contributing in this regard. India being the second
largest producer of cotton in the world has great opportunities to make the most of it on a much
bigger portion, for this industry‘s growth. Though China enjoys sustained rapid expansion in
exports due to many competitive advantages, India is still giving a cut throat competition to
China in production as well as in exports. Therefore the Indian textile industry should boldly
respond to this challenge. It will help in focusing on these key factors which are affecting Indian
textile industry and will provide a comprehensive platform in examining the performance and
future prospects.
Looking at the importance of the Indian Apparel and Textile Industry, a SWOT Analysis of the
Industry is done in the context of world apparel and textile industry. As such keeping in view this
analysis, managers and public policymakers should thrive on building upon these strengths;
removing the weaknesses by converting them into strengths; should take the advantage of the
available opportunities and finally, should make necessary efforts to reduce or overcome these
threats. The following figure shows the SWOT Analysis of the industry.

1.1.1. STRENGTHS:
There are several key strengths which Indian textile industry posses. The first being low cost
labour force, which is the most distinct competitive advantage that India has. This cuts down the
overall manufacturing cost of the finished products. Another strength, due to which India enjoys
advantage over its competitors, is the availability of rich resources of raw material in abundance
for textile industry. Since, the industry is largely cotton based it also hold a competitive edge
there as it is one the largest cotton producing country in the world. It is also rich in many other
resources like, silk, jute, viscose, linen, wool, polyester etc. The third strength is India‘s growing
domestic and international market. Today this sector is highly self-reliant and in 2007 it held 17
percent to the country‘s export earnings (Texsummit, 2007), this has only been on the rise. The
sector also provides employment to more than 35 million people [1]. Therefore, the overall
growth and development of this sector has a direct impact on the expansion of the nation‘s
economy.

1.1.2. WEAKNESSES:
India, despite of being so self sufficient in factors like cheap labour, raw material, still comes
across many problems to compete in the international market. This is due to its weaknesses
like, fragmented infrastructure which leads to lower ability and hinders the industry to expand.
Large section of the industry is even today engaged in the unorganized sector i.e. powerloom
and handloom sectors (KPMG Report, 2003). Mr. Dev Rai, the managing head of Baldev
Overseas adds that, ―technology obsolesce is one of the biggest reasons why this industry is
still labour intensive. The Government of India should aid SMEs of this industry with special
loans, with which the later can invest in latest machines‖ [1].

1.1.3. OPPORTUNITIES:
Though this industry lacks in many areas, but has several opportunities as well, such as
focusing towards research and development in this sector to focus onto new product
development. It will help the Indian companies to grab the larger market share. As commented
by Mr. Ravinder khanna, managing director of Sheena exports ―that more innovation should be
done to develop smarter fabrics, by using various specialized treatments‖[1]. Also, the industry
is moving towards branded products, which will help India in improving its brand value.

1.1.4. THREATS:
As discussed earlier, China is one of the major threats to the Indian textile industry. Apart from
that the structure of the industry in itself is something that needs to be worked upon. The big
Indian players are trying to incorporate the integrated working models of supply chain as the
fragmented structure stands in the way of competing efficiently. The location of India and its
distance from the western countries that it sells to is another factor that pulls India back in
delivering the best in terms of cost and timeliness. Neighboring countries like Pakistan,
Bangladesh and Srilanka are giving India a tough competition owing to their still cheaper labour.
Though China so far has been considered the only major competition, but these neighboring
countries are catching up fast.

Table 1.2. SWOT Analysis of the Textile industry in a glance

Strengths Weaknesses Oppurtunities Threats

• 2nd Largest Industry • Fragmented • Can become Leader • Strong International

of India infrastructure in World Apparel Competition, from
• Vertically Intergrated • Lack of • Exports neighbouring
Industry Professionalism • Capable of reducing countries
• Largest Exporter to • Obsolete the level of • Chinese Aggression
EU and 2nd largest Technology of Unemployment • Risk of Selling
to US Production • Need to focus on Abroad
• Strong Raw Material • Insufficient Support New Product • Unpredictable
Base provided by Development Currency Exchange
• Cheap Labour Government Risks
• Cost • Lack of Market • Improvement in
Competitiveness Information Quality
1.2. Overview of the Indian Hosiery Industry
Fashion has come a long way and the Textiles have been the integral part of India‘s cultural
heritage. India has made significant program in its export performance of readymade garments
for more than two decades and in the recent years it has established its prominence in the world
scenario.
India, apart from being known for cheap labour, and has now transformed itself to a stage where
supply of high fashion garments with value addition has become its competitive edge.
Indian knitting industry has emerged as a premier supplier of value added items earning high
foreign exchange. The industry is shaping itself and identifies the areas and required changes to
meet the new imperatives of international market. This industry has adapted itself to suit to the
changing market conditions globally.
Fabrics from India executed by untiring loom of generations are used to style some of
international fashion‘s most inspired designs. Fashion designers from all over the world find
Indian fabrics the perfect complement to their style.
Knitwear sector in India grabs major chunk of its share in the country‘s textile exports. Exports
of knitwear items from India have made strides and occupied 50% share of its total readymade
garments exports. The key centers of knitwear are Tirupur, Ludhiana, Delhi, Mumbai and
Bangalore.
Indian knitwear is now being sold to almost every country in the world. Indian knitting industry
has been able to win all the sophisticated world market including Europeans Union, America,
Canada and Japan besides increasing its export growth rate in non quota market. World
renowned labels like Nike, Lacoste, St. Michael, Benneton, Jockey, Cabida, Marks & Spencers
and C & A are now being manufactured in India. This itself is sufficient to prove capability of our
industry.
The hosiery industry in India came into existence with the setting up of a unit in Calcutta in the
year 1893 and has played a significant role in the industry development since then. This
industry is mainly concentrated at Delhi, Mumbai, Tirupur, Ludhiana, Chinnai, Bangalore,
Calcutta, Kanpur, Cochin, Saharanpur, Surat and Ahmedabad. Due to ever increasing
population in the country, the domestic market for hosiery and knitwear items are always been
the most important segment. Supplies to defence and para-military forces also play an important
role in the growth in this industry. The broad and well developed manufacturing and
technological base in this industry has always prompted the entrepreneurs to enter the global
market. The production of good quality cotton in our country, particularly in Punjab State, is a
plus point for boosting export of cotton garments. With the advent of liberalized policies, modern
and efficient machinery and equipment are being added to hosiery industry for the production of
quality items commensurate to the expectations of the global customers. Export of woolen,
cotton and acrylic knitwears, fabrics and readymade garments from the country is the major
source of earning of much needed foreign exchange [3].

2. WHAT IS A CLUSTER
Clusters can be defined as sectoral and geographical concentration of enterprises, in particular
Small and Medium Enterprises (SME), faced with common opportunities and threats which can:
  Give rise to external economies (e.g. specialised suppliers of raw materials, components
and machinery; sector specific skills etc.);
 Favour the emergence of specialized technical, administrative and financial services;
 Create a conducive ground for the development of interfirm cooperation and
specialization as well as of cooperation among public and private local institutions to
promote local production, innovation and collective learning.
An example is the localized knitwear and garment industry, which includes within a small
geographical area knitting firms, cloth-finishing, dyeing and printing units, garment producers,
merchant buyers and exporters, and also producers of specialized inputs such as thread,
buttons up to textile machine suppliers. The SME within efficiently organized clusters have
demonstrated to be particularly innovative and able to compete successfully in the global
economy.

2.1. Clusters in India

In India, it is estimated that there are approximately 350 Small Scale Industries (SSI) clusters
and around 2000 rural and artisan based clusters contributing to almost 60% of the
manufactured exports and 40% of the employment in the manufacturing industry[4]. These
clusters have been in existence in India for several decades and sometimes even for centuries.
Nevertheless, despite these striking figures, the majority of Indian clusters are not fulfilling their
potential. In many cases the firms in these numerous ―lagging‖ clusters are merely surviving on
the basis of low costs of labour. They do not participate in supportive production networks
involving effective collaboration between firms and service institutions neither they compete on
the basis of improvements in their market connections, products, technologies, and skills. Some
of the main obstacles hampering cluster development are the following: the lack of a cultural
attitude towards cooperation both at the firm and at the institutional level; the significance of the
transaction costs that need to be borne to identify suitable network partners and to forge
relationships; the absence of incentives (i.e. financial, fiscal, etc.) to the implementation of
common projects; the imperfect market functioning for the provision of crucial inputs for
networking development such as information and innovation; and the high risk of ―free riding‖
that is especially faced in contexts where the legal framework to back up joint endeavours is
relatively underdeveloped.
Evidence suggests that the intervention of an "external agent‖ (i.e. national/ regional
development agencies, SME support institution, international organizations etc.) that acts as a
catalyst to facilitate the emergence of clusters and networks can greatly reduce the significance
of the above factors. External agents like UNIDO has been promoting cluster development
projects in Latin America, Africa and Asia in the last five years. These projects are characterised
by an emphasis on the ‗promotion of efficient systems of relations‘ between enterprises and
between enterprises and institutions which allow enterprises to overcome their isolation and
reach new ‗collective competitive advantages‘ beyond the reach of individual small firms. The
projects also emphasize the development of local institutions to act as facilitators of the
clustering/networking process (cluster agents). These cluster agents are responsible to support
the emergence of a joint entrepreneurial vision involving the whole business system - composed
by firms, their suppliers, buyers and support institutions - and be able to enact that vision
through common development projects (e.g. joint purchase of raw material, joint marketing,
development of new products, creation of common services such as water treatment plants,
information centers, etc) [4].

Table 2.1. A list of Textile Clusters in India

Source: D&B Research, UNIDO, SIDO
Cluster Location State Product Specialisation
Nagari AP Powerloom
Narsapur AP Crochet lace
Pochampally AP Tie and dyeing
Anantpur AP Jeans/ RMG
Delhi Delhi RMG/ Hosiery
Ahmedabad Gujarat RMG
Jetpur (Rajkot) Gujarat Textile printing
Gandhinagar Gujarat Powerloom
Surat Gujarat Powerloom
Vijapur Gujarat Weaving
Bhiwani Haryana Powerloom
Gurgaon Haryana RMG
Panipat Haryana Powerloom
Bangalore Karnataka RMG
Belgaum Karnataka Powerloom
Bellary Karnataka Jeans
Gadag Karnataka Powerloom
Mysore Karnataka Silk
Ernakulam Kerala Powerloom
Faizlure Kerala Powerloom
Kannur Kerala Handloom
Mallappuram Kerala Powerloom
Palakkad Kerala Powerloom
Burhanpur MP Powerloom
Chanderi MP Handloom
Indore MP RMG
Jabalpur MP RMG/ Powerloom
Maheshwar MP Handloom
Ujjain MP Powerloom
Bhiwandi Maharashtra Powerloom
Ichalkaranji Maharashtra Powerloom
Madhavnagar Maharashtra Powerloom
Malegaon Maharashtra Powerloom
Mumbai Maharashtra RMG/ Hosiery
Nagpur Maharashtra Powerloom, RMG
Pune Maharashtra RMG
Solapur Maharashtra Powerloom
Balasore Orissa Powerloom
Dhenkanal Orissa Powerloom
Ganjam Orissa Powerloom
Nuapatna Orissa Tussar silk
Amritsar Punjab Powerloom
Ludhiana Punjab Woollen knitwear
Jaipur Rajasthan Garments
Jodhpur Rajasthan Hand processing
Kishangarh Rajasthan Powerloom
Sanganer & Bagru Rajasthan Hand block printing
Bhavani & Chennimalai TN Home textiles
Karur TN Home textiles
Madurai TN Tie & dye, hand printing,RMG
Rajapalyam TN Surgical textiles
Salem TN Powerloom
Surampatti TN Powerloom
Tirupur TN Knitwear/ Hosiery
Agartala Tripura Handloom & Loin Looms
Banda UP Powerloom
Gorakhpur UP Powerloom
Jhansi UP Powerloom
Kanpur UP Hosiery
Lucknow UP Chikan embroidery
Mau UP Powerloom
Noida UP RMG
Varanasi UP Powerloom
Kolkata WB Hosiery/ RMG
Ranaghat WB Powerloom

2.2. Profile of Ludhiana District

Ludhiana is known as the "Manchester of India" because it is the industrial hub of Punjab. There
are 8 large integrated knitwear factories, roughly 6,000 small to medium sized knitwear
factories, 10 big hosiery yarn mills and 150 small- to medium-sized worsted and woolen yarns.
There are also firms manufacturing bicycles like Hero Cycles, Avon Cycles, machine tools,
sewing machines, generators, diesel engines, tyres & tubes, and other consumer goods. The
export market in Ludhiana is worth $40 million USD.

2.2.1. KNITWEAR INDUSTRY IN LUDHIANA

The origin of knitwear industry in Ludhiana may be traced back to 1902. It is reliably learnt that
the first knitwear unit with imported hand operated machines was set up in 1903. Requirement
of knitwear's especially from Defence forces during World War I gave some boost to knitwear
industry of Ludhiana. The knitwear industry of Ludhiana did not expand much during pre-
independence period. Knitwear production multiplied during 1950-1980 and real diversification
took place during and after the decade of 1980s [3]. Now Ludhiana contributes to 95% of
country's woollen knitwears. Ludhiana is one of the principal producers of woollen and acrylic
knitwear; it also uses cotton and blended fibre to produce hosiery, knitwear and various
readymade garments. Exports from Ludhiana district amounted to Rs 6624.47 crores as on 31
March 2006 and Rs 8287.13 as at 31 March 2007, according to the state government‘s
website[1]. The website also states that exports of readymade garments and hosiery for the two
years were Rs 984.80 crores and Rs 1305.95 crores respectively. Feedback provided by
Ludhiana hosiery entrepreneurs reveals that the industry is undergoing a major change; the
demand for high fashion garments in domestic market is increasing. There is emerging
influential, neo-rich middle class, which can afford high quality consumer durable goods and
clothing. Number of workingwomen and working couples is increasing rapidly and as a result of
this the per capita income is on the rise. These trends are bound to open up the new
opportunities for Knitted outerwear's.
Market for Ludhiana hosiery products is comprised of basically three segments as under
Domestic market, Global market of exports and the Defence forces and allied government
purchases.
The knitwear industry in Ludhiana is highly decentralized & varied in size. The small knitwear
units are located in residential area around Sunder Nagar, Madhopuri, Brahmpuri, Shivpuri,
Purana Bazar, and Bahadur ke road. The medium and large units are generally located in the
outskirts of Ludhiana in Industrial Area, Focal Point, Chandigarh Road or Jalandhar Road. Most
of the units are based in the residential areas converted into commercial places. Only a few big
units have their production units in the Government promoted industrial estates in Ludhiana
district. There is no exclusive industrial estate in the city for knitwear units[5].

Table 2.2 Size of the Ludhiana Cluster

History of the Cluster 100 years old
Population (as per census 2001) 2428948
Area of the District 4000 Sq Kms.
No. of units in the cluster (Ludhiana) 14000 (Regd. & Un-Regd.)
Investment in Plant & Machinery 330 Crores
Total Employment 4 lakhs (Direct & Indirect)
Per capita employment 28 person
Installed capacity 5000 crores
Production 3100 Crores (2005-06)
No. of exporters 400
Share of Export of Garment from India 1.5 percent
Per piece realization from export Rs. 172.00
Average Per piece realization in the domestic market. Rs. 100.00
Share of the total production of woollen hosiery in the country 95 percent
Generation of the Entrepreneur IIIrd

2.2.2. PROBLEMS FACED BY CLUSTER IN LUDHIANA

External Problems
Currency Exchange Rate fluctuations have been reported as the most important barrier in the
export performance. More than 62 percent of the exporters have reported this problem as ―very
important‖ [5]. Competition as a result of limited financial and human resources is another
problem small firms in the developing economies are venerable to. Competition from other
Asian countries like China, Vietnam, Thailand, etc is also affecting the Apparel industry on a
greater scale. On this note, the owner-manager of K.A. Exports Pvt. Ltd. discusses that:
“The strong international competition from countries like China is affecting the business
specifically on the basis of price. For example, I was meeting a couple of buyers (importers),
and I quoted a certain price to them, and they are carrying pretty much the same thing from
China for half the price I quoted. So, sometimes, it becomes completely impossible to deal with
the competition. One of the main reasons, is that one of the cheapest raw materials used in the
manufacturing are actually imported from China, and the Chinese are manufacturing the same
thing, so obviously the Chinese apparel manufacturers are getting the same raw material for
less than we are getting, so the profit margin decreases due to difference in the manufacturing
cost.” (K.A. Exports Pvt. Ltd.) [6].

Operational Problems
Operational problems are those which emerge within the organization as the result of
procedural, operational or functional constraints. These mostly emerge at micro-level of the
organizational environment and tend to vary with the experience of the particular firm. It has
been rated as the second most important problem, after exchange rate fluctuations, by the
woollen apparel manufacturers of Ludhiana. [6]
As such, the exporters are applying different and innovative ways of dealing with the risks and
minimizing their losses. Most common of them is using Irrevocable Letter of Credit which
assures the exporter the payment for the goods supplied, in case the importer becomes
fraudulent or bankrupt. But still, most of the importers and foreign retailers try to avoid doing
business under Irrevocable Letter of Credit.

Informational Problems
Another important problem perceived by Ludhiana‘s Woollen exporters was relating to
information generation which was measured on mainly two factor problems i.e. insufficient
information about overseas market and difficult in making contacts in the foreign market.
Moreover due to financial, human resource, and managerial constraints, it is impractical for the
firms to get into informational generations activities. Thus, lack of ability of the firms in
information generation makes the firm less market oriented as the firms are not able to into the
basic export-market oriented activities. Now days, these exhibitions, trade fairs, etc. are
organized by various government and non government organizations, trade unions and
associations, etc. so as to bring buyers and sellers from around the world together under the
same roof. In India, many government sponsored exhibitions such as Texstyles India, India
International Garment Fair (IIGF), International Apparel Fabrics & Accessories Trade Fair (Intex
Expo) are organized and have been getting positive response. Moreover, many Indian firms are
also participating in the foreign exhibitions taking place at different world centers such as Paris,
New York, London, Sydney, Singapore, China, etc.[6]

Internal Problems
These set of problems include lack of personnel qualified in export marketing activities, lack of
experts in export consultancy, poor organization of firms export marketing department, inability
to self-finance the exports, difficulty in meeting importers‘ product quality standards and
ineffective communication with overseas buyers—language and culture barriers have been
perceived to be of moderate or low importance by the surveyed managers and owners. It is
evident that these problems have very low impact of the performance of the firm and very rarely
affect their operations of the firm [6].

2.3. Tirupur’s Profile

Tirupur is a textile city located on the banks of Noyya River. It is the administrative headquarters
of the Tirupur district. It forms a part of the ancient Kongu Nadu region of South India, where its
people were the first to establish territorial state. Tirupur is a textile hub and a vast generator of
employment for unskilled temporary workers.

2.3.1. KNITWEAR INDUSTRY IN TIRUPUR

An important trade center of India, Tirupur has gained universal recognition as the leading
source of Hosiery, Knitted Garments, Casual Wear and Sportswear. It has emerged as the
knitwear capital of the country in three decades. Exports from Tirupur, which provides
employment to over five lakh people has crossed the Rs.12,000 crore in 2007 [7].
Tirupur has the largest and fastest growing urban agglomerations in Tamil Nadu. The knitwear
industry which is the soul of Tirupur has created millions of jobs for all class of people. There
are nearly about 3000 sewing units, 450 knitting units, hundreds of dyeing units and other
ancillary units which are un-countable [7].
Tirupur‘s local economy was predominantly agrarian. The growth of knitting industry in Tirupur
can also be attributed to the failure of agriculture crops over a period of time and the availability
of yarn, the basic raw-material for knitting from the nearby mills in Coimbatore. The cultivation
of cotton in large areas in the region created the emergence of a market for raw (unginned)
cotton, thus setting a base for mushrooming of cotton ginning factories. In fact, Tirupur was
basically a cotton ginning cluster before it transformed into a hosiery cluster and finally a
knitwear cluster. In due course, Tirupur cotton market and ginning factories lost their edge to
similar centers that emerged elsewhere in the country, and many of these entrepreneurs
switched to knitwear production for survival. A few 10 people also suggest that the dry climatic
conditions in the area also helped the growth of this industry. Before knitting the agricultural
labourers were already exposed to the hand-woven textiles because of khadi movement started
by Mahatma Gandhi. That also helped them to get into to the knitting process of textiles.
Mr Gulam Kadar in 1937 established ―Baby Knitting Industries‖ in Kaderpet area at Tirupur. He
started with making men‘s vests, known as ‗banians‘. This was followed by the establishment of
second knitting unit by Mrs. Chellammal, named Chellammal Knitting. As a series of strikes in
the late 1930‘s in knitting factories in the neighbouring towns of Salem and Madurai resulted in
the opening of new firms in Tirupur. It emerged as a prominent centre for knitwear, in South
India by 1940‘s. By 1961, the number of units rose to 230 and till 1970 the industry was catering
only to the domestic market [7].
In the later years, the entrepreneurial spirit and heavy competition for the domestic market
forced the manufacturers to look beyond national boundaries. Thus, in 1980s a few units made
sustained efforts to exports and succeeded. The first export of knitted garments was made to
the US and Ghana by Mohan Knits through a Bombay merchant exporter in 1972. However, it
could not be sustained. Till 1978, manufacturers at Tirupur were doing job work only for
merchant- exporters at Mumbai. In 1987 the exports revenue of Tirupur was Rs.75 crores. Since
then, it has not looked back and the exports during the year 2004 touched a figure of more than
Rs. 5000 crores contributing almost 80 percent of country‘s exports in this sector [7].

According to Tirupur Export Association (TEA) there are 1500 knitting units; 700 units related to
dyeing and bleaching; 500 units involved in fabric printing; 300 units are involved in compacting
and calendaring; 2500 units are assembling the final product and these are the exporters;
around 250 units linked to embroidery activities and another 500 units deal in other accessories.
It is estimated that these units in all employ around three lakh people who come from 18
southern districts of Tamil Nadu and Kerela. The cluster produces gents T-shirts, sweat shirts,
track suits, sportswear, ladies and children wear, undergarments, embellishments and
embroidery items. There are very little number of units in Tirupur employing less than 50
workers and the median size in terms of employment are those employing 50 to 100 workers. In
the aggregate 30 to 35 per cent of the produce of Tirupur are fashion garments and the rest can
be considered as basic garments. Although the dynamics of Tirupur is centered around firms
those are 100 per cent export oriented units, there are firms producing for the domestic market
and goods are sold at urban centres of Karnataka, Kerala, Andhra Pradesh, West Bengal and
Delhi [8].

Table 2.3 Spread of Units in the Textile Value Chain in Tirupur Cluster
(Source: Garments Industry in India, Lessons from Two Clusters, Satyaki Roy, Institute for Studies in Industrial Development, 2009)
Value Chain Activities Number of units
Garment Making 2500
Knitting Units 1500
Dyeing and Bleaching 700
Fabric Printing 500
Other Ancillary Units 500
Compacting and Calendaring 300
Embroidery 250
Total 6250

2.3.3. PROBLEMS FACED BY TIRUPUR

The future course of growth of Tirupur depends on how the cluster responds to changing
demands in various segments of the export market vis-à-vis its competitors. Keeping the
infrastructural constraints, policy disadvantages that dampen the competitiveness of the cluster,
the recession and the extent to which that affect the exports in the cluster the following
observations may be drawn:

Size of garment unit

Despite the fact that the share of fashion garments in total turnover of sales from Tirupur is
gradually increasing, nevertheless, most of the exporters survive on the basis of their sales in
the basic segment. Export performance primarily depends upon costs, quality and strict
compliance to delivery time. In the case of mass market it is more of costs and delivery time that
matters assuming that a reasonable level of quality is maintained. In such a scenario economies
of scale becomes important because higher scale of operation provides the opportunity to
reduce per unit costs. In this regard China and Bangladesh is far ahead of India. In Bangladesh
the minimum scale of a garment unit involves 450 machines while in Tirupur an average
garment unit works with only 25 to 30 machines. And this is possibly the reason that Tirupur
bags only 2 per cent of the garments exported to US.

Adjustment of clientele
Tirupur cannot entirely be dedicated to fashion garments because that involves higher risk and
uncertainty and at the same time it is very difficult to go ahead of European firms in designs and
fashions because of obvious reasons. Besides getting appropriate inputs such as fabric and
colours and higher investments for more sophisticated machines and training workers it is the
Western taste that largely conditions the market so in terms of innovating fashions we could
only compete to become best replicators and hence the lag remains. What seems to be
plausible in such a scenario is to carve out a medium stratum which would be more fashion-
intensive and customized than the mass market and not so high-end such that volumes need
not be sacrificed too much. This is the segment for which Tirupur can strive for in its future
trajectory of growth depending on its ability to produce in smaller batches and with higher
variation in designs and fashions. The flexibility of the cluster attained through a dense network
of vertical as well as horizontal subcontracting is the key strength for such a growth path.

Adjustment of Wages
In relatively more value-added segments the competitive advantage based on low labour cost
gradually declines. Rather labour needs to be viewed as human capital in which investments
need to be made both in terms of enhancing their technical capacities through training and also
by materially enriching them through fair wage. This in any case requires an altogether different
approach to the production process in general and to labour in specific. Wages in the garment
sector in different countries may be considered to see that reducing labour costs by reducing
wages and depriving them of the legal benefits could not be a long term sustainable strategy to
grow. In China average wages in the garment sector is 72 cents per hour, in India it is 51 cents
per hour and in Bangladesh average wage comes to 36 cents per hour. However, China is no
longer a competitor of India in the knitwear garment segment. Despite higher wages they could
capture not only a larger segment of the mass market but at the same time could gradually shift
their focus to much higher value added segments than to what Indian manufacturers target.
India‘s competitors are mainly Bangladesh, Vietnam, Combodia, Indonesia and so on and the
biggest plank of competitiveness remained to be price.

Weak Production Processes

In special reference to Tirupur it has been pointed out by many exporters and buying agents
that the greatest weakness in the production process lies in the processing and printing
segments. There also seems to be a disproportionate development in technology in various
parts of the production chain where dyeing, compacting and printing related works lag behind
the rest of the operations. And because of these weaknesses garment producers from countries
such as Pakistan, Honduras, Guatemala, Jordon and Mexico are moving forward much faster
than those in India.

Infrastructural hindrances
Acute shortage in power supply in Tamil Nadu is a huge drawback. The production cost
increases because use of generators raises the power cost per unit from Rs. 4.70 per unit to
Rs.11.50 per unit and the difference is obviously influenced by the rise in diesel price. Besides
the simple escalation in energy costs power cuts interrupt the production process and affect the
delivery schedules. Since in exports there use to be strict delivery schedules it needs to be met
sometimes by sending goods by air that involves huge transport cost. It is also reported that
effective rate of interest in India that need to be paid against loans from both public sector and
private sector banks is around 1.5 point higher that what it use to be in China.

3. WHY TIRUPUR HAS RACED AHEAD?

Ludhiana‘s hosiery industry took off during the 1900s and the exports from Ludhiana district
amounted to Rs 6624.47 crores as on 31 March 2006 and Rs 8287.13 as at 31 March 2007 as
mentioned before. While the hosiery units kick started at Tirupur in 1970s and in 2006-07, its
exports amounted to Rs 12,000 crores. Looking at these figures one can state that Tirupur has
left Ludhiana far behind. One of the reasons for Ludhiana‘s mulish growth is the method of
production and machinery used, which is mostly manually operated. Many units do not own
designing facilities; nor do they exploit computer-aided designing/manufacturing, for the
purpose. Designs for clothes for the domestic market are generally copied from magazines or
from the samples provided by the buyers. Unlike Tirupur, in Ludhiana, the proportion of women
workers in comparison to men workers is awfully low, especially in the factories. It is attributed
to lower availability of skilled women, the poor working environment in industries and availability
of cheap migrant labour. Tirupur boasts of at least 70 per cent women workers in this segment.
Women workers are more sincere, keep away from disputes, are more efficient and promote a
cordial working environment, state the Tirupur entrepreneurs. Even the Ludhiana entrepreneurs
concur with this view. The other two important factors that explain why Tirupur has raced ahead
of Ludhiana are technology and enterprise. Unlike the Ludhiana entrepreneurs, the Tirupur
entrepreneurs upgraded technology as and when warranted and their enterprise led them to
take calculated risks. Unlike their Ludhiana counterparts, the Tirupur entrepreneurs‘ product is
cotton-based to the extent of 85-90 percent. Many of the units have gone in for computerisation
and use state-of-the-art hardware and software technologies.

Tirupur's performance in Textiles originates from its performance in technology and the quality
of its macro economic environment. It also derives much of its ascent from improved perception
of its public service. Buyers from 35 countries frequently visit Tirupur. Tirupur can deliver
customized samples in less than12 hours; half a million pieces in a matter of days. 56% of
India's total knitwear exports come from Tirupur. This has been recognized in the Export Import
Policy, 2002-07 of Government of India which conferred the status of 'Town of Export
Excellence' to Tirupur[9]. The rich availability of Raw materials, being in close proximity to
Coimbatore which is a major centre of cotton spinning industry in the Country makes Tirupur
being able to access its basic raw materials quickly and as and when required; the strong
entrepreneurial skills and personalized management contributes to efficient management of
negotiations and direct control of operations causing cost effective competitiveness of the
Industry; quick delivery and quality products add dimension to the Tirupur's prowess as a centre
to outsource excellent products.
Having discussed this, it cannot be stated that everything is perfect in Tirupur. From time to
time, exports from Tirupur came under threat on issues of environment pollution and child
labour. The slow pace of infrastructure development, which has now fortunately picked up
momentum, has been an obstacle to the town maturing into an international knitwear centre.
Many entrepreneurs are content with catering to the lower end of the market on a contract-
manufacturing basis. Its water sources are heavily polluted or have dried up altogether, unable
to meet the demand. Until recently, water was trucked in for residential use, at a substantial
cost. Fortunately, various projects are underway to improve the town‘s infrastructure, thanks to
the responsiveness of Tirupur‘s entrepreneurs. Things are definitely looking better now. One of
these projects, just commissioned in 2006, is an innovative private / public partnership that has
brought water and sewerage connections to the businesses and homes in Tirupur. A new town,
called New Tirupur has been developed 12 km from the town.
International giants and leaders in apparel marketing, like C&A, Wal-Mart, JC Penny, GAP,
Mark & Spencer‘s, Sara Lee, Tommy Hilfiger, Karstadt Quell acknowledge that Tirupur has
become the capital of fashionable knitwear of India. This phenomenal growth of Tirupur is now
supported by a world-class apparel park, called the Netaji Apparel Park where production
facilities and other infrastructure are on a par with those obtaining in highly developed countries.
More importantly, since wet processing involving dying / printing is not involved no common
effluent plant has been erected. Rain water harvesting, accompanied by suitable arrangements
for sewerage treatment has been enabled.
A well-known columnist and the founder of the Swadeshi Jagran Manch, Gurumurthy, years ago
said words that have been proved prophetic. According to him, ‗the more deprived a place is,
the more hard working its people are‘. He further said that businesses in India are generally
based on community-driven models. Both these are true in the case of Tirupur. He said IITs and
IIMs (Indian Institutes of Technology and Indian Institutes of Management) are not the ones that
generate centers of enterprise in India; it is the communities. ―People who set up businesses
are very ordinary people. Of the 300 families, which export knitwear from Tirupur, 90 per cent do
not even know English. The people of Tirupur had some skills, which they needed to exploit.
First, they were cotton cultivators. From cotton cultivating, they went to ginning, from ginning to
spinning, from spinning to weaving and from weaving to knitting. This is how the entire area
moved ahead. They developed skills in stages, government has recognised that clusters do
good work. Cluster policy recognises that there is an atmosphere for development and growth in
clusters. This is not the work of the market; this is the work of the community.

4. NEW CLUSTER DEVELOPMENT FOR THE INDIAN HOSIERY INDUSTRY-

INDORE
Indore is a major city and commercial center of the state of Madhya Pradesh in central India.
Indore is located 190 km west of state capital Bhopal. Indore has developed as an important
trade and commercial centre for central India. It also has an important manufacturing sector and
is a centre for its agricultural hinterland, in particular cotton and textile mills. In recent years,
there has been a substantial amount of restructuring in the textile industry, which still remains
the main source of investment [10].

4.1 Textiles – Scenario in Madhya Pradesh

A large number of cotton textile mills are clustered around Indore, Ujjain and Burhapur.
Major textile players are Bhilwaras, Indo-Rama, Bhaskar, Oswals, Parasrampuria, Maikal and S
Kumar‘s. The state government has also created Apparel Parks to support the industry.

Textile Infrastructure at a Glance:

Spinning Units 40
Spindles 14,14,000
Export-Oriented Spinning Units 12
Rotors 14,348
Looms 6,500
Exclusive Weaving Units 8
Power Looms 43,290
Power Loom Units 17,524
Handlooms 47,000
Composite Mills 2

Madhya Pradesh is poised to emerge as a leading textile state because of its cluster
development initiatives. The clusters also have significant location advantages. For instance,
Malwa near the Indore cluster is a leading cotton-growing belt and a textile hub. The
government also provides special fiscal and non-fiscal incentives to apparel units [11].
 One of the highest cotton producing state in India – 14.50 lakh bales of production in
2009-10
 Country‘s 6% cotton produced in MP
 More than 55 Textile mills in the State
 Textiles exports from Madhya Pradesh worth US$325 million per annum
 Rich tradition of weaving and knitting

4.2. Why Indore?

 Climatic conducive for cotton production
 Low cost of setting up of business
 Skilled manpower for weaving, knitting and stitching
 Large number of Engineering & Technical graduates passing out every year
 Strategic central location facilitates cost effective logistic
 Policy Support from the State Govt
 Peaceful labour environment
  Very well established air, rail and road network, including national highways. Its
proximity to Mumbai and other textile sectors like Ahmedabad, Baroda, etc has been
among the reasons to choose Indore as a place for creating a garment park.

4.3. Madhya Pradesh Textile Industry Vision 2012 [12]

 To have 7% of spindles capacity in the country by 2012
 Setting up knitting and processing units having capacity to produce 800 tons knit fabric
per day
 To create dyeing and finishing capacity matching to knitting and processing units
 Projecting that 50% of the fabric to be used to produce garments within State would
result into garment manufacturing to the tune of Rs. 60000 million
 Setting up weaving capacity having 3000 shuttle-less looms in the State.

REFERENCES
1. The Indian textile industry: International Competitiveness, Gunja Saluja, (2008)
2. Source: CITI Estimates, http://www.citiindia.com/images/PDF/Indian_TC_at_a_Glance(1).pdf
(accessed on 3/12/2010)
3. Entrepreneurship Development in Hosiery Industry, edited by D.D. Sharma and J.S. Saini,
(Northern Book Center; New Delhi, 2001)
4. Fabio Russo, Strengthening Indian SME Clusters: UNIDO‘s Experience ,Case Study, Project:
US/GLO/95/14, (July 1999)
5. Successful Adjustment in Indian Industry: the Case of Ludhiana's Woolen Knitwear Cluster,
Meenu Tewari, World Development, Vol. 27, No. 9 (1999), pp. 1651-1671
6. Export Marketing Problems of SMEs: The Case of Ludhiana Apparels and Textile Industry, Karan
Vohra (2008), http://edissertations.nottingham.ac.uk/2196/1/08MAlixkv1.pdf (accessed on
4/12/2010)
7. Apex Cluster Development services, Tirupur knitwear and Apparel Cluster, 2009 Prepared for
Small Industries Development Bank of India,
http://msmefdp.net/ResourceBank/Diagnostic%20Study/Tirupur-DS.pdf (accessed on
28/11/2010)
8. Prof. M.R. Murthy et al, SME Clusters in India-Identifying Areas of Intervention for Inclusive
Growth, sponsored by Planning Commission Government of India, ISID Institute for Studies in
Industrial Development, (April 2010)
http://planningcommission.gov.in/reports/sereport/ser/ser_sme1910.pdf (accessed on 3/12/2010)
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Industrial Development, (December 2009).
http://isid.org.in/pdf/WP0901.PDF (accessed on 4/12/2010)
10. Rethinking UK aid in urban India: reflections on an impact assessment study of slum
improvement projects, Philip Amis, Environment and Urbanization Vol. 13:101 (2001),
http://eau.sagepub.com/content/13/1/101.full.pdf (accessed on 4/12/2010)
11. Investment Climate in Madhya Pradesh- Indian Brand Equity Foundation,
http://www.ibef.org/download/IBEF_Madhya_Pradesh_130608.pdf (accessed on 7/12/2010)
12. Destination Madhya Pradesh: Global Investors Summit-II for MPTRIFAC, Madhya Pradesh Trade
and Investment Facilitation Cooperation LTD (2010)
http://www.mptrifac.org/PotSector/Textiles.pdf (accessed on 7/12/2010)